Corporations

Elon Musk Takes Twitter, and Tech Deals, to Another Level

Forget about the endless drama, the bots, the abrupt reversals, the spectacle, the alleged risk to the Republic and all we hold dear. Here is the most important thing about Elon Musk’s buying Twitter: The moguls have been unleashed.

In the old days, when a tech tycoon wanted to buy something big, he needed a company to do it. Steve Case used AOL to buy Time Warner. Jeff Bezos bought Whole Foods for Amazon. Mark Zuckerberg used Facebook to buy Instagram and WhatsApp and Oculus and on and on. These were corporate deals done for the bottom line, even if they might never have happened without a famous and forceful proprietor.

Mr. Musk’s $44 billion takeover of Twitter, which finally became a reality on Thursday, six months after he agreed to the deal, is different. It is an individual buying something for himself that 240 million people around the world use regularly. While he has other investors, Mr. Musk will have absolute control over the fate of the short-message social media platform.

It’s a difficult deal to evaluate even in an industry built on deals, because this one is so unusual. It came about whimsically, impulsively. But, even by the standards of Silicon Valley, where billions are casually offered for fledging operations — and even by the wallet of Mr. Musk, on most days the richest man in the world — $44 billion is quite a chunk of change.

the midterm elections’ most prominent campaign contributor, pumping tens of millions of dollars into right-wing congressional candidates. Two of his former employees are the Republican nominees for senator in Ohio and Arizona.

Richard Walker, a professor emeritus of economic geography at the University of California, Berkeley and a historian of Silicon Valley, sees a shift in the locus of power.

“In this new Gilded Age, we’re being battered by billionaires rather than the corporations that were the face of the 20th century,” he said. “And the tech titans are leading the way.”

bought The Washington Post for $250 million. Marc Benioff of Salesforce owns Time magazine. Pierre Omidyar of eBay developed a homegrown media empire.

Deals have been a feature of Silicon Valley as long as there has been a Silicon Valley. Often they fail, especially when the acquisition was made for technology that either quickly grew outdated or never really worked at all. At least one venerable company, Hewlett-Packard, followed that strategy and has practically faded away.

$70 billion-plus acquisition of Activision Blizzard, which is pending, has garnered a fraction of the attention despite being No. 2.

said in April after sealing the deal. “I don’t care about the economics at all.”

He cared a little more when the subsequent plunge in the stock market meant that he was overpaying by a significant amount. Analysts estimated that Twitter was worth not $44 billion but $30 billion, or maybe even less. For a few months, Mr. Musk tried to get out of the deal.

This had the paradoxical effect of bringing the transaction down to earth for spectators. Who among us has not failed to do due diligence on a new venture — a job, a house, even a relationship — and then realized that it was going to cost so much more than we had thought? Mr. Musk’s buying Twitter, and then his refusal to buy Twitter, and then his being forced to buy Twitter after all — and everything playing out on Twitter — was weirdly relatable.

Inescapable, too. The apex, or perhaps the nadir, came this month when Mr. Musk introduced a perfume called Burnt Hair, described on its website as “the Essence of Repugnant Desire.”

“Please buy my perfume, so I can buy Twitter,” Mr. Musk tweeted on Oct. 12, garnering nearly 600,000 likes. This worked, apparently; the perfume is now marked “sold out” on its site. Did 30,000 people really pay $100 each for a bottle? Will this perfume actually be produced and sold? (It’s not supposed to be released until next year.) It’s hard to tell where the joke stops, which is perhaps the point.

Evan Spiegel.

“What was unique about Twitter was that no one actually controlled it,” said Richard Greenfield, a media analyst at LightShed Partners. “And now one person will own it in its entirety.”

He is relatively hopeful, however, that Mr. Musk will improve the site, somehow. That, in turn, will have its own consequences.

“If it turns into a massive home run,” Mr. Greenfield said, “you’ll see other billionaires try to do the same thing.”

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Peter Thiel, Major U.S. Political Donor, Is Said to Pursue Maltese Citizenship

A spokesman for Mr. Angermayer, who has based his family office and other business ventures in Malta, did not respond to requests for comment.

In early 2021, Thiel Capital also became a shareholder in a Malta entity through a byzantine series of developments. The deal involved Coru, a Mexican online financial advice start-up, which has a parent company incorporated in London.

Entities controlled by Mr. Thiel and Mr. Danzeisen, his husband, were among Coru’s biggest owners, corporate filings show. The start-up needed additional funding in late 2020, but its investors could not reach an agreement to put more cash in, said two former investors. The company went into administration, the equivalent of bankruptcy.

Around that time, Mr. Thiel, Mr. Danzeisen and several other Coru investors established a company in Malta called EUM Holdings Melite Ltd., Maltese records show. That company bought Coru’s shares out of administration for about $100,000, according to British records. The records do not detail EUM’s business activities.

Now Coru is owned by EUM. Its shareholders include Mr. Thiel, Mr. Danzeisen, Richard Li — a son of Hong Kong’s richest man, Li Ka-shing — and a group with a former Nicaraguan government official and a scion of the Spanish family that made a fortune selling Lladró porcelain figurines.

Mr. Thiel began exploring Maltese citizenship around that time, said people familiar with the process. By late 2021, documents show, he was far along in the application process and retained an agency that fielded questions from the Maltese government about his businesses and political activities.

The questions included Mr. Thiel’s role with Palantir Technologies, a data analytics company he founded that works with governments and corporations, and his political activity supporting Mr. Trump.

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Strong Dollar Is Good for the US but Bad for the World

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.

On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.

Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.

the International Monetary Fund.

Japanese yen has reached a decades-long high. The euro, used by 19 nations across Europe, reached 1-to-1 parity with the dollar in June for the first time since 2002. The dollar is clobbering other currencies as well, including the Brazilian real, the South Korean won and the Tunisian dinar.

the economic outlook in the United States, however cloudy, is still better than in most other regions.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

A fragile currency can sometimes work as “a buffering mechanism,” causing nations to import less and export more, Mr. Prasad said. But today, many “are not seeing the benefits of stronger growth.”

Still, they must pay more for essential imports like oil, wheat or pharmaceuticals as well as for loan bills due from billion-dollar debts.

debt crisis in Latin America in the 1980s.

The situation is particularly fraught because so many countries ran up above-average debts to deal with the fallout from the pandemic. And now they are facing renewed pressure to offer public support as food and energy prices soar.

Indonesia this month, thousands of protesters, angry over a 30 percent price increase on subsidized fuel, clashed with the police. In Tunisia, a shortage of subsidized food items like sugar, coffee, flour and eggs has shuttered cafes and emptied market shelves.

New research on the impact of a strong dollar on emerging nations found that it drags down economic progress across the board.

“You can see these very pronounced negative effects of a stronger dollar,” said Maurice Obstfeld, an economics professor at the University of California, Berkeley, and an author of the study.

central banks feel pressure to raise interest rates to bolster their currencies and prevent import prices from skyrocketing. Last week, Argentina, the Philippines, Brazil, Indonesia, South Africa, the United Arab Emirates, Sweden, Switzerland, Saudi Arabia, Britain and Norway raised interest rates.

World Bank warned this month that simultaneous interest rate increases are pushing the world toward a recession and developing nations toward a string of financial crises that would inflict “lasting harm.”

Clearly, the Fed’s mandate is to look after the American economy, but some economists and foreign policymakers argue it should pay more attention to the fallout its decisions have on the rest of the world.

In 1998, Alan Greenspan, a five-term Fed chair, argued that “it is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress.”

The United States is now facing a slowing economy, but the essential dilemma is the same.

“Central banks have purely domestic mandates,” said Mr. Obstfeld, the U.C. Berkeley economist, but financial and trade globalization have made economies more interdependent than they have ever been and so closer cooperation is needed. “I don’t think central banks can have the luxury of not thinking about what’s happening abroad.”

Flávia Milhorance contributed reporting from Rio de Janeiro.

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How the Car Market Is Shedding Light on a Key Inflation Question

In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.

Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.

Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.

data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.

Ford Motor said on Monday that it would spend $1 billion more on parts than it was planning to in the third quarter because some components had become more expensive and harder to find.

By contrast, the supply of used cars has rebounded after plunging in the pandemic, and prices have begun to depreciate at a wholesale level, where dealers buy their stock. But, so far, those dealers aren’t really passing those savings along to consumers. The price of a typical used car has stabilized around $28,000, up 9 percent from a year ago, based on Cox Automotive data. Official used-car inflation data is easing, but only slightly.

Why consumer used-car prices — and dealer profits — are taking time to moderate is something of a mystery. Jonathan Smoke, chief economist at Cox Automotive, said dealers might be basing their prices on what they paid earlier in the year, when costs were higher, for the cars sitting on their lots.

“Dealers are feeling it,” Mr. Smoke said of the price moderation. “But because they price their vehicles based on what they pay for them, the consumer isn’t seeing the price discounts yet.”

Some early instances of discounting are showing up. At the Buick and GMC dealership that Beth Weaver runs in Erie, Pa., demand for used cars has begun to slow down, and the business has sold a few vehicles at a loss.

rolling lockdowns in China.

The Fed could raise rates so much that it snuffs out demand, but given how much pent-up car-buying appetite exists, Mr. Murphy thinks it would take a lot.

“You probably would have to go farther on rates than they have so far, or even than they are expected to go,” he said. “There may be a point at which you have enough pain that you see a pause on demand.”

If demand continues to outstrip new-car supply and dealers continue to reap big profits, that could limit how quickly inflation will ease. If the mismatch is large enough for sellers to keep pushing up prices without losing customers, it could even continue to fuel inflation.

While the car market is just one industry, the uncertainty of its return to normal holds a few lessons for the Fed. For one thing, new-car production makes it clear that supply chain disruptions are improving but not gone.

More hopefully, the car industry could offer evidence that the laws of economics are likely to reassert themselves eventually. Used-car prices have at least stopped their ascent as inventory has grown, and experts say discounting is likely around the corner. If that happens, it could be evidence that companies won’t be able to keep prices and profits high indefinitely once supply catches up with demand.

But cars reinforce the prospect that the readjustment period could last a while.

Automakers are flirting with the idea of keeping production lower so there are fewer cars in the market and price cuts are less common. Mr. Smoke is skeptical that they will hold that line once it means ceding market share to competitors — but the process could take months or years.

“I’m hesitant to say that we won’t have discounting again,” Mr. Smoke said. “But it’s going to take a while to get back to that world.”

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Railroads’ Strategy Thrilled Wall Street, but Not Customers and Workers

America’s first commercial railroads were built almost two centuries ago. Freight rail has been a symbol of the nation’s economic might and ingenuity ever since.

In recent years, some of the biggest names on Wall Street have made significant investments in railroads, reaping big stock gains as railroads reported higher profits. But the underlying strategies that strengthened railroads’ bottom lines have caused friction with customers, regulators and particularly workers — giving rise to a contract dispute that threatened a nationwide shutdown of the railway system.

After losing ground to trucking in the mid-20th century, the rail industry managed to recover through decades of consolidation and a push for efficiency. Critics say those same dynamics created a system with thin staffing and minimal competition, making it particularly vulnerable to shocks like the coronavirus pandemic.

Those complaints were at the center of the contract impasse that left tens of thousands of workers prepared to walk off the job last week. A strike could have been economically devastating, paralyzing shipments of grain, chemicals and other cargo.

It was averted with less than a day to go when the Biden administration helped to broker a tentative agreement that addresses some of those issues and will be put to a vote of the rail unions’ members in the coming weeks.

The freight rail industry says it has worked hard to adapt to rapid changes — including the pandemic and, before that, a decline in demand for coal, a critical source of business.

“The industry has had to continually evolve to grow its other services,” said Ian Jefferies, the president of the Association of American Railroads, an industry group. To make up for the decline in coal, freight shippers have tried to transport more grain, truck trailers, shipping containers and other goods, he said.

according to the Surface Transportation Board, which monitors and regulates rates.

Prices started to increase in the early 2000s, driven by rising costs for labor, fuel, materials and supplies as well as a growing focus on profitability. From 2002 to 2019, long-distance trucking rates increased by 40 percent, according to a Transportation Department report published this year, while rail rates grew by 96 percent, though they are still well below historical levels, adjusted for inflation.

won a proxy battle for Canadian Pacific in 2012 and installed Mr. Harrison to lead the company.

Mr. Harrison brought his approach to Canadian Pacific, then to CSX in 2017, before his death that year. Other freight carriers and Wall Street increasingly took notice, and the practice has spread throughout the industry.

Many freight rail experts say P.S.R. brought necessary reforms to the industry, but they also say some practices, which can differ greatly among carriers, went too far or were poorly executed. Unions say the system has created miserable working conditions.

letter to shareholders.

“I’ll venture a rare prediction,” he wrote in February. “BNSF will be a key asset for Berkshire and our country a century from now.”

Peter S. Goodman and Clifford Krauss contributed reporting.

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Possible Railroad Worker Strike Could Upend U.S. Supply Chain

There are 60,000 workers in two unions still demanding pay and time off concessions from rail lines, with no deal on the table yet.

As trains barrel across rail lines coast to coast, a labor dispute is barreling toward an end-of-week deadline that could derail the country’s shipping industry and upend commerce in a multi-billion-dollar strike.

Rail lines and the country’s two largest rail unions still can’t agree on pay and time off, leaving some 60,000 workers ready to leave the job Friday unless they get a deal.

“The companies have very demanding schedules,” said Andy Borchers, business professor at Lipscomb University. “There will be a variety of products that’ll be affected, and we may not even know for sure exactly which ones those are until the breakdown happens.”

At the White House Tuesday, Press Secretary Karine Jean-Pierre said the Biden administration is working on contingency plans to keep moving whatever goods they can, but still pushing aggressively to avoid a strike altogether.

“A shutdown is not acceptable,” Jean-Pierre said. “That is not something that we want. It risks harming families, farming, harming businesses and whole communities. We have made that clear, empathetically and repeatedly to both parties.”

The Association of American Railroads, a trade group that represents the major freight lines, says a strike could cost the country more than $2 billion a day.

The unions say BNSF and Union Pacific’s attendance policies make it difficult for workers to take time off, especially for medical appointments. The rail lines reject that argument.

The threat of strike comes as the U.S. supply chain grapples for ways to address the effects of the pandemic.

“The problem is there’s only one way in, and there’s only one way out, and it’s not efficient,” said Pete Buttigieg, Transportation Secretary.

Just last week, Buttigieg hailed plans for a new bridge in Los Angeles that would allow more freight to leave the city’s log-jammed port.

“These improvements are expected to reduce trucking delays by almost 2,500 truck hours every single day,” Buttigieg said. “It’s going to allow freight trains to move goods more rapidly, and yes, that’s part of the fight against inflation because it can help reduce shipping costs and the cost of goods.”

But port leaders have said for months a shortage of rail workers has made getting containers off their terminals difficult.

The fight is part of a larger, global trend as rail workers in the U.K. forced a strike late last month, likely to resume after Queen Elizabeth’s state funeral.

“Before we even get onto pay, we have to sort out job security, which we haven’t done,” said Mick Lynch, secretary-general of the Rail, Maritime and Transport Union.

Airlines, trucking lines and major corporations from retail to commerce are now used to a new era of workers demanding higher pay and better working conditions, plus the workers are ready to unionize and strike if they don’t get what they want.

: newsy.com

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The Changing Tide For Unionizing In The U.S.

Unionizing has been making an unusual comeback in the U.S. as the economy roars back from pandemic lows, but efforts don’t always mean success.

There’s a surge of high-profile unionizing and union activity going on in the U.S. workforce, from media to food and retail industries.

A labor union is an organized group of workers who make decisions about working conditions like retirement plans, insurance and wages. They bargain with the employer on behalf of its employees.

A recent Gallup poll found that 71% of Americans approve of labor unions. That’s the highest percentage recorded since 1965, and according to data from last year, there was near unanimous approval among Democrat respondents, reaching a record high of 90%.

So, what’s behind all this unusual, sudden union activity, and is this really a sign of lasting change?

“Our social welfare system is employer provided, and what I mean by that is we get our health care, we get our private pensions, etc., through our employers,” said Lane Windham, associate director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University. “In other countries, a lot of that comes through government, through the state, and that sets up a system in the United States that gives corporations a heavy incentive to stop workers from forming unions.”

Union membership rates have actually been on a steady decline since the 1960s. At their height, nearly a third of Americans were in a union. By 2021, that’s down to about 10%. That drop is particularly stark for the private sector. While about a third of public sectors jobs have consistently belonged to unions, private sector jobs have declined, down to about 6% last year.

There are a few reasons for why this could be. Some industries where unions dominated in the 1950s, like manufacturing, declined over the next few decades. But also over time, employers gained newfound empowerment in disrupting any organizing. Much of that has to do with the changing political winds in the 70s and 80s.

“In the 1970s, employers begin to have to make a profit within a globalized capitalism,” Windham said. “They are now competing with corporations all over the globe, and so where are they going to be able to make a profit margin?”

“What you see in the 1970s is that corporations began to bend and break labor law at a whole new level,” Windham said. “The number of unfair labor practice charges against employers in the 1970s doubles, and you also see the rise in this time of the anti-union consultant industry.”

In 1981, things came to ahead with a strike of federally employed air traffic controllers. There, former President Ronald Reagan threatened to fire the workers and ban them from the industry unless they return to work within 48 hours, saying, “But we cannot compare labor management relations in the private sector with government. Government cannot close down the assembly line.”

To be clear, a strike is technically illegal for air traffic controllers in the U.S. without going through the proper steps, and the process to authorize a strike is purposefully complicated to keep airlines from shutting down. But, it wasn’t until this moment that those rules were enforced on such a massive scale. Reagan ended up firing and banning more than 11,000 workers who refused to cross picket lines.

“The fact that Ronald Reagan fired the air traffic controllers sent a message that workers both in the public and private sector did not really have a full freedom to form unions,” Windham said. “It chilled any radicalism. It chilled any effort to effectively build their movement.”

In the following years, the average number of major strikes per year plummeted.

Employers became emboldened to replace striking workers, so the downward trend of union membership continued to the record-lows now showing up in the past couple of years.

So, what turned the tide in recent years?

“Think about the early days of the pandemic,” Windham said. “Remember we celebrated essential workers, we banged pots and pans for them, we waved at the delivery truck drivers. Then, we watched as all those essential workers went back to the same kind of dead-end jobs, and people really saw how unjust our system is.”

Going into 2021, companies started recording record profits as the economy came roaring back from pandemic lows, growing to the fastest full-year rise since 1984. There was also a historic job shortage, as employers struggled to recruit and retain workers. This combination of things made a perfect storm for unionization efforts: For workers, suddenly, the bargaining ball was in their court.

That’s especially true for industries dependent on so-called “essential workers,” like retail or food and restaurants.

Though there is a visible jump in the number of workplaces starting to organize — that number doubled from 2020 to 2021 — that doesn’t necessarily translate to unionization successes.

Earlier this year, two Apple stores filed paperwork to begin organizing. The momentum fizzled out, however, after Apple hired anti-union lawyers, sent out warnings against unionizing and eventually gave a pay raise to retail workers.

Four Amazon warehouses have recently held elections to form a union, but all but one have decisively voted against it. Those losses include a second warehouse on Staten Island in New York.

Starbucks is embroiled in a number of legal battles after allegedly firing workers for organizing unions and being accused of shutting down stores that successfully voted to unionize.

In the U.S., it’s a long, long road from generating momentum for union efforts to actually winning that victory.

: newsy.com

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Ex-Barista Says Starbucks Is Engaging In ‘Unprecedented Union-Busting’

Starbucks is fighting to squash a unionizing movement, claiming it’s disruptive, but employees say the chain has fired over 85 pro-union workers.

A Starbucks in Chicago’s Hyde Park neighborhood may look no different from any of the 15,000 other Starbucks stores in the U.S., but as a new union location, it’s part of a growing organizing movement.

The movement is growing so fast it’s prompting Starbucks to engage in what critics call an unprecedented union-busting campaign.

Jasper Booth-Hodges lives five minutes away from the union store in Hyde Park where he used to work.

“I have worked 40 hours a week for over two years at this company,” Booth-Hodges said. “I am one of the main openers.”

The former barista said he loved his job, for the most part.

“I had such good rapport with so many customers,” he said.

Then last month, Booth-Hodges said he was fired in retaliation for leading the union push.

“The fact that I was a really active part of the union organizing committee meant that they were going to find anything they could to get rid of me,” he said.

Starbucks denies that, telling Newsy that Booth-Hodges was terminated for violations of the company’s time and attendance policies.

Nationwide, more than 230 locations have voted to join the Starbucks Workers United union since last December, with six of them being in Chicago.

In total, nearly three-quarters of all votes cast have been in favor of unionizing.

Labor experts say the speed and success of the movement is unheard of.

“There’s just no historical comparison to what they have achieved by winning election after election after election,” said John Logan, professor of labor studies at San Francisco State University.

But Starbucks is fighting tooth and nail to squash it, arguing that unions are disruptive to its relationship with employees.

Meanwhile, Starbucks Workers United tells Newsy the coffee chain has fired over 85 pro-union workers.

“I remember saying, ‘I’ve been here for 13 years. You can’t even explain to me why I’m being separated or provide me any details?'” said Sam Amato, former Starbucks employee.

When Amato was fired last month after 13 years on the job, all of his colleagues at his store near Buffalo, New York walked out in solidarity. A TikTok video of the incident, posted by the Union, has been seen nearly 30 million times.

A month later, Amato and his former colleagues are still on strike, picketing at the store every day.

“It just makes me a little emotional thinking about it,” Amato said. “But they’ve been so incredibly supportive, and I know that they they’re behind me 100%.”

Starbucks has racked up hundreds of labor violation complaints at the National Labor Relations Board, a federal enforcement agency.

Last week, the NLRB said Starbucks has been illegally withholding wages and benefits from thousands of union workers. In response, Starbucks is accusing the agency of being biased and colluding with union organizers to rig elections.

For labor expert John Logan, the problem lies with weak union protection laws that are too easy for giant corporations to ignore.

“The penalties for violating the law are not sufficient punishment for companies who are egregious lawbreakers like Starbucks,” Logan said.

Back in Chicago, Booth-Hodges is appealing his termination, while open to the possibility of getting his job back.

“I do plan on going back if I get reinstated, but regardless of that, this is so much bigger than just me getting reinstated or not,” Booth-Hodges said. “This is about letting corporations know that they can’t get away with this, that they need to be held accountable when they break labor laws.”

: newsy.com

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Pace of Climate Change Sends Economists Back to Drawing Board

Economists have been examining the impact of climate change for almost as long as it’s been known to science.

In the 1970s, the Yale economist William Nordhaus began constructing a model meant to gauge the effect of warming on economic growth. The work, first published in 1992, gave rise to a field of scholarship assessing the cost to society of each ton of emitted carbon offset by the benefits of cheap power — and thus how much it was worth paying to avert it.

Dr. Nordhaus became a leading voice for a nationwide carbon tax that would discourage the use of fossil fuels and propel a transition toward more sustainable forms of energy. It remained the preferred choice of economists and business interests for decades. And in 2018, Dr. Nordhaus was honored with the Nobel Memorial Prize in Economic Sciences.

Inflation Reduction Act with its $392 billion in climate-related subsidies, one thing became very clear: The nation’s biggest initiative to address climate change is built on a different foundation from the one Dr. Nordhaus proposed.

offers tax credits, loans and grants — technology-specific carrots that have historically been seen as less efficient than the stick of penalizing carbon emissions more broadly.

The outcome reflects a larger trend in public policy, one that is prompting economists to ponder why the profession was so focused on a solution that ultimately went nowhere in Congress — and how economists could be more useful as the damage from extreme weather mounts.

A central shift in thinking, many say, is that climate change has moved faster than foreseen, and in less predictable ways, raising the urgency of government intervention. In addition, technologies like solar panels and batteries are cheap and abundant enough to enable a fuller shift away from fossil fuels, rather than slightly decreasing their use.

Robert Kopp, a climate scientist at Rutgers University, worked on developing carbon pricing methods at the Department of Energy. He thinks the relentless focus on prices, with little attention paid to direct investments, lasted too long.

California. But a federal measure in the United States, setting a cap on carbon emissions and letting companies trade their allotments, failed in 2010.

At the same time, Dr. Nordhaus’s model was drawing criticism for underestimating the havoc that climate change would wreak. Like other models, it has been revised several times, but it still relies on broad assumptions and places less value on harm to future generations than it places on harm to those today. It also doesn’t fully incorporate the risk of less likely but substantially worse trajectories of warming.

Dr. Nordhaus dismissed the criticisms. “They are all subjective and based on selective interpretation of science and economics,” he wrote in an email. “Some people hold these views, as would be expected in any controversial subject, but many others do not.”

Heather Boushey, a member of the White House’s Council of Economic Advisers who handles climate issues, says the field is learning that simply tinkering with prices won’t be enough as the climate nears catastrophic tipping points, like the evaporation of rivers, choking off whole regions and setting off a cascade of economic effects.

“So much of economics is about marginal changes,” Dr. Boushey said. “With climate, that no longer makes sense, because you have these systemic risks.” She sees her current assignment as similar to her previous work, running a think tank focused on inequality: “It profoundly alters the way people think about economics.”

To many economists, the approach pioneered by Dr. Nordhaus was increasingly out of step with the urgency that climate scientists were trying to communicate to policymakers. But a carbon tax remained at the center of a bipartisan effort on climate change, supported by a panoply of large corporations and more than 3,600 economists, that also called for removing “cumbersome regulations.”

speech in 2018, Dr. Nordhaus pegged the “optimal” carbon price — that is, the shared economic burden caused by each ton of emissions — at $43 in 2020. Gernot Wagner, a climate economist at Columbia Business School, called it a “woeful underestimate of the true cost” — noting that the prize committee’s home country already taxed carbon at $120 per ton.

another tack. Carbon prices, they reasoned, tend to hit lower-income people hardest. Even if the proceeds funded rebates to taxpayers, as many proponents recommended, similar promises by supporters of trade liberalization — that people whose jobs went offshore would get help finding new ones in a faster-growing economy — proved illusory. Besides, without government investment in low-carbon infrastructure, many people would have no alternative to continued carbon use.

“You’re saying, ‘Things are going to cost more, but we aren’t going to give you help to live with that transition,’” said Rhiana Gunn-Wright, director of climate policy at the left-leaning Roosevelt Institute and an architect of the Green New Deal. “Gas prices can go up, but the fact is, most people are locked into how much they have to travel each day.”

At the same time, the cost of technologies like solar panels and batteries for electric vehicles — in part because of huge investments by the Chinese government — was dropping within the range that would allow them to be deployed at scale.

For Ryan Kellogg, an energy economist who worked as an analyst for the oil giant BP before getting his Ph.D., that was a key realization. Leaving an economics department for the public policy school at the University of Chicago, and working with an interdisciplinary consortium including climate scientists, impressed on him two things: that fossil fuels needed to be phased out much faster than previously thought, and that it could be done at lower cost.

Just in the utility sector, for example, Dr. Kellogg recently found that carbon taxes aren’t meaningfully more efficient than subsidies or clean electricity standards in driving a full transition to wind and solar power. And as more essential devices can be powered by batteries, affordable electricity becomes paramount.

more useful for policymakers than broad, top-down economic models.

begun to look at the relationship between extreme weather and federal revenue. But because it’s still not clear how best to do that, other institutions are trying as well.

Carter Price, a mathematician at the nonprofit RAND Corporation, is working on a budget model that will incorporate the latest social science research, as well as climate science, to inform long-term policy decisions.

“This is a space where having more models early on would be better,” Dr. Price said. “Rather than someone has an assumption, that assumption goes into a model, nobody questions it and, 10 years later, we realize that assumption is pretty powerful and maybe not right.”

The larger lesson is that modern climate policy is a complex endeavor that calls for large, interdisciplinary teams — which is not historically how the economics field has operated.

“You can only do so much by writing things down on a single sheet of paper from your office at Yale,” said Dr. Kopp, of Rutgers. “That’s not how science gets done. That’s how a lot of economics gets done. But you run into limits.”

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Sen. Sinema Took Wall Street Money While Killing Tax On Investors

The revelation comes after Sen. Sinema single-handedly thwarted her party’s long-standing goal of raising taxes on such investors.

Sen. Kyrsten Sinema, the Arizona Democrat who single-handedly thwarted her party’s longtime goal of raising taxes on wealthy investors, received nearly $1 million over the past year from private equity professionals, hedge fund managers and venture capitalists whose taxes would have increased under the plan.

For years, Democrats have promised to raise taxes on such investors, who pay a significantly lower rate on their earnings than ordinary workers. But just as they closed in on that goal last week, Sinema forced a series of changes to her party’s $740 billion election-year spending package, eliminating a proposed “carried interest” tax increase on private equity earnings while securing a $35 billion exemption that will spare much of the industry from a separate tax increase other huge corporations now have to pay.

The bill, with Sinema’s alterations intact, was given final approval by Congress on Friday and is expected to be signed by President Joe Biden next week.

Sinema has long aligned herself with the interests of private equity, hedge funds and venture capital, helping her net at least $1.5 million in campaign contributions since she was elected to the House a decade ago. But the $983,000 she has collected since last summer more than doubled what the industry donated to her during all of her preceding years in Congress combined, according to an Associated Press review of campaign finance disclosures.

The donations, which make Sinema one of the industry’s top beneficiaries in Congress, serve a reminder of the way that high-power lobbying campaigns can have dramatic implications for the way legislation is crafted, particularly in the evenly divided Senate where there are no Democratic votes to spare. They also highlight a degree of political risk for Sinema, whose unapologetic defense of the industry’s favorable tax treatment is viewed by many in her party as indefensible.

“From their vantage point, it’s a million dollars very well spent,” said Dean Baker, a senior economist at the Center for Economic and Policy Research, a liberal-leaning think tank. “It’s pretty rare you see this direct of a return on your investment. So, I guess I would congratulate them.”

Sinema’s office declined to make her available for an interview. Hannah Hurley, a Sinema spokesperson, acknowledged the senator shares some of the industry’s views on taxation, but rebuffed any suggestion that the donations influenced her thinking.

“Senator Sinema makes every decision based on one criteria: what’s best for Arizona,” Hurley said in a statement. “She has been clear and consistent for over a year that she will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness.”

The American Investment Council, a trade group that lobbies on behalf of private equity, also defended their push to defeat the tax provisions.

“Our team worked to ensure that members of Congress from both sides of the aisle understand how private equity directly employs workers and supports small businesses throughout their communities,” Drew Maloney, the organization’s CEO and president, said in a statement.

Sinema’s defense of wealthy investors’ tax treatment offers a jarring contrast to her background as a Green Party activist and self-styled “Prada socialist” who once likened accepting campaign cash to “bribery” and later called for “big corporations & the rich to pay their fair share” before launching her first campaign for Congress in 2012.

She’s been far more magnanimous since, praising private equity in 2016 from the House floor for providing “billions of dollars each year to Main Street businesses.” After her election to the Senate, Sinema interned during the 2020 congressional recess at a private equity mogul’s boutique winery in northern California.

The soaring contributions from the industry to Sinema trace back to last summer. That’s when she first made clear that she wouldn’t support a carried interest tax increase, as well as other corporate and business tax hikes included in an earlier iteration of President Biden’s agenda.

During a two-week period in September alone, Sinema collected $47,100 in contributions from 16 high-ranking officials from the private equity firm Welsh, Carson, Anderson & Stowe, records show. Employees and executives of KKR, another private equity behemoth, contributed $44,100 to Sinema during a two-month span in late 2021.

In some cases, the families of private equity managers joined in. David Belluck, a partner at the firm Riverside Partners, gave a $5,800 max-out contribution to Sinema one day in late June. So did three of his college-age kids, with the family collectively donating $23,200, records show.

“I generally support centrist Democrats and her seat is important to keep a Democratic Senate majority,” Belluck said, adding that his family has known Sinema since her election to Congress. “She and I have never discussed private equity taxation.”

The donations from the industry coincide with a $26 million lobbying effort spearheaded by the investment firm Blackstone that culminated on the Senate floor last weekend.

By the time the bill was up for debate during a marathon series of votes, Sinema had already forced Democrats to abandon their carried interest tax increase.

“Senator Sinema said she would not vote for the bill .. unless we took it out,” Senate Majority Leader Chuck Schumer told reporters last week. “We had no choice.”

But after private equity lobbyists discovered a provision in the bill that would have subjected many of them to a separate 15% corporate minimum tax, they urgently pressed Sinema and other centrist Democrats for changes, according to emails as well as four people with direct knowledge of the matter who requested anonymity to discuss internal deliberations.

“Given the breaking nature of this development we need as many offices as possible weighing in with concerns to Leader Schumer’s office,” Blackstone lobbyist Ryan McConaghy wrote in a Saturday afternoon email obtained by the AP, which included proposed language for modifying the bill. “Would you and your boss be willing to raise the alarm on this and express concerns with Schumer and team?”

McConaghy did not respond to a request for comment.

Sinema worked with Republicans on an amendment that stripped the corporate minimum tax on private equity from the bill, which a handful of vulnerable Democrats also voted for.

“Since she has been in Congress, Kyrsten has consistently supported pro-growth policies that encourage job creation across Arizona. Her tax policy positions and focus on growing Arizona’s economy and competitiveness are longstanding and well known,” Hurley, the Sinema spokesperson, said.

But many in her party disagree. They say the favorable tax treatment does little to boost the overall economy and argue there’s little compelling evidence to suggest its benefits are enjoyed beyond some of the wealthiest investors.

Some of Sinema’s donors make their case.

Blackstone, a significant source of campaign contributions, owns large tracts of real estate in Sinema’s home state, Arizona. The firm was condemned by United Nations experts in 2019 who said Blackstone’s financial model was responsible for a “financialization of housing” that has driven up rents and home costs, “pushing low-income, and increasingly middle-income people from their homes.”

Blackstone employees, executives and their family members have given Sinema $44,000 since 2018, records show.

In a statement, Blackstone called the allegations by the U.N. experts “false and misleading” and said all employee contributions are “strictly personal.” The firm added that it was “incredibly proud of its investments in housing.”

Another significant financial services donor is Centerbridge Partners, a New York-based firm that buys up the debt of distressed governments and companies and often uses hardball tactics to extract value. Since 2017, Sinema has collected at least $29,000 from donors associated with the firm, including co-founder Mark Gallogly and his wife, Elizabeth Strickler, records show.

In 2012, Centerbridge Partners purchased Arizona-based restaurant chain P.F. Chang’s for roughly $1 billion. After loading the struggling company up with $675 million of debt, they sold it to another private equity group in 2019, according to Bloomberg News. The company received a $10 million coronavirus aid loan to cover payroll, which the federal government later forgave, but shed jobs and closed locations as it struggled with the pandemic.

Centerbridge Partners was also part of a consortium of hedge funds that helped usher in an era of austerity in Puerto Rico after buying up billions of dollars of the island government’s $72 billion debt — and filing legal proceedings to collect. A subsidiary of Centerbridge Partners was among a group of creditors who repeatedly sued one of the U.S. territory’s pension funds. In one 2016 lawsuit, the group of creditors asked a judge to divert money from a Puerto Rican pension fund in order to collect.

A Centerbridge representative could not provide comment.

Liberal activists in Arizona say they plan to make Sinema’s reliance on donations from wealthy investors a campaign issue when she is up for reelection in 2024.

“There are many takes on how to win, but there is no universe in which it is politically smart to fight for favorable tax treatment of the wealthiest people in the country,” said Emily Kirkland, a political consultant who works for progressive candidates. “It’s absolutely going to be a potent issue.”

Additional reporting by The Associated Press.

: newsy.com

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