iOS app Android app More

Mark Gongloff   |   September 8, 2014   11:06 AM ET

America's capitalists take every chance they get to remind us that they are our "job creators," but it turns out that their least-favorite thing on earth to do is create jobs.

Most U.S. business leaders would rather build robots, outsource work or use part-time employees than hire workers full-time, according to a new Harvard Business School survey. Here's a nice infuriating graphic from the smarty-pantses at Harvard Business School, who are educating all of our future non-job-creators in the art of not creating jobs:

hiring decisions

As you can see from the chart, 46 percent of our job creators would rather spend money on technology than employ humans, compared with a sad 26 percent who prefer people to robots, and another 29 percent who were confused or indifferent about the question or fell asleep while the survey taker was talking. Forty-nine percent would rather outsource than hire, compared with 30 percent who'd rather hire.

Ever notice how the stock market and corporate profits are at all-time highs, while our wages are flat and roughly half of us still think the economy is in recession? This chart helps explain it, and helps explain why workers' share of those corporate profits is near its lowest since the Truman administration.

This is also bad news for the future of the economy because it means fewer workers are getting the training they need for our super-awesome, high-tech, no-job economy, Harvard pointed out:

"Firms invest most deeply in full-time employees, so preferences for automation, outsourcing, and part-time hires are likely to lead to less skills development," the study authors wrote.

This will give business leaders, who already think we lack the necessary skills for their precious jobs, even less reason to hire us in the future.


Mark Gongloff   |   September 5, 2014    8:29 AM ET

If you ever get to wondering why roughly half of America thinks we're still in a recession five years into the recovery, and after one of the longest stock-market rallies in history, just look at this chart:

workers share

This is a chart of how much of the corporate-income pie that workers get for themselves in wages and benefits. It was made by the Economic Policy Institute, a think tank focused on labor issues. That share hit a peak of nearly 84 percent right around the turn of the millennium. It is currently at about 74 percent, near its lowest point since 1950.

The chart says pretty much everything about how ridiculously uneven this "recovery" has been. It exposes how most of the benefit of the recovery has gone to employers, not employees. Corporate profits have hit record highs, and so have stock prices. Wages have stagnated, meanwhile, and low-wage jobs have accounted for most of the job growth in the recovery.

This isn't just happening in the U.S. -- it's a problem around the world. It's partly due to technological advances, partly due to jobs being shipped to where labor is the absolute cheapest, and partly due to policies designed to shovel more income to the top 1 percent, to name a few. The end result is that more wealth keeps flowing to the owners of capital, rather than to labor, just as French economist Thomas Piketty warned us.

These trends have made income inequality grow wider and widespread economic hopelessness grow deeper. That sets us up for more economic trouble ahead.

Thousands of low-wage workers are protesting today for better pay, benefits and working conditions. They're risking jail to do it. This chart is a reminder that their cause is no joke.

Mark Gongloff   |   September 4, 2014    1:54 PM ET

Europe's central bank just slashed interest rates and launched emergency stimulus measures -- but six years too late, and not enough to counter the austerity that has Europe in a worse mess than the Great Depression.

The European Central Bank surprised markets on Thursday by cutting its target short-term interest rate to basically zero. ECB also plans to buy a bunch of bonds to push longer-term rates lower, too -- an echo of the U.S. Federal Reserve's many rounds of "quantitative easing," used in recent years to goose the economy (or at least the stock market).

Good job, good effort, ECB, except this comes nearly six years after the Fed cut its own rates to zero and launched QE. In other words, the ECB is way behind the game. That's one reason the U.S. recovery, unsatisfying as it has been, looks like the 1990s economic boom compared to the crap hoagie that is Europe's economy.

Europe's current slump is worse than the Great Depression, as Paul Krugman and many others have pointed out. Here's a chart for evidence, via Professor Nicholas Crafts at the University of Warwick:

ecb depression

The red line represents Europe's current GDP growth and the forecast for the next year or so. As you can see, it's flatlined. The black line shows the growth of European countries that wisely dumped the gold standard during the Great Depression of the 1920s and '30s. The yellow line shows the countries that stuck with gold for too long. Europe is currently doing just about as well as those miserable countries.

In fact, this chart is about eight months old, and the red line's end should probably be lower than it is. Europe's GDP has relapsed lately, raising fears of a triple-dip recession, as this graph from Trading Economics shows:

U.S. GDP hasn't exactly been gangbusters, but it's at least managed to stay positive (mostly):

Europe's unemployment rate, meanwhile, is 11.5 percent, compared with 6.2 percent for the United States. European inflation is also dangerously low, near zero percent, while U.S. inflation isn't far from the Fed's target of 2 percent.

Low inflation sounds great, unless you consider the case of Japan, or the U.S. in the Great Depression. In those cases, prices kept falling, so people stopped buying stuff because they expected prices to fall -- which they did, which made people continue to not buy stuff. All the while, the economy got worse.

That's the path Europe is on. It's largely the fault of Europe's fiscal policy makers, who have stubbornly refused to spend money to stimulate the economy, aside from a paltry stimulus package that amounted to just 1.5 percent of GDP in 2008. By comparison, the U.S. stimulus plan in 2009, though probably not nearly big enough, was worth more than 5 percent of GDP. Europe has also imposed strict austerity measures on Greece and other countries struggling with high debt loads.

The ECB hasn't helped by waiting too long to act aggressively. And now it's playing catch-up in the middle of a depression.

Mark Gongloff   |   August 13, 2014   12:47 PM ET

Kim Kardashian has been accused of MURDER, everybody. Murder of a video game. But she is innocent. Innocent, I say!

The victim is Candy Crush, the super-fun game of, um, crushing candy that simply everybody was playing in August... of 2013. The crime scene is the New York Stock Exchange, which was splattered on Wednesday with the blood and guts of Candy Crush maker King Digital, whose shares were down 24 percent shortly after the opening bell. It turns out that not quite everybody is playing Candy Crush any more, and King Digital hasn't yet come up with a new game that everybody wants to play.

So who killed Candy Crush? According to this Business Insider headline, Kim Kardashian done it. The BI story is about a fairly dull Deutsche Bank analyst note that mentions Kardashian's ridiculously popular app, Kim Kardashian: Hollywood, as one competitor for Candy Crush. The note says the game 2048 is another competitor, but the headline "2048 Is Killing Candy Crush" is not nearly as clickable. (Believe me, I am not hating: This is how the headline game is played. When you can put Kardashian in a headline, you do it.)

Deutsche Bank points out that Candy Crush is a ridiculously expensive game (if you go for its in-app purchases to keep the game going). But then so is Kim Kardashian: Hollywood, which makes an estimated $700,000 a day from in-app purchases, on its way to an estimated $200 million for the year. It is so expensive that parents are calling Kardashian & Co. "vile scumbag pigs" and Kardashian has been forced to defend it.

Aha, you might be saying, here is more proof that Kardashian is the murderer: All of the life-giving moneys are going to her instead of to Candy Crush. But I submit to you, ladies and gentlemen of the jury, that Candy Crush was dead long before Kardashian arrived.

Exhibit A: Look at how the air started hissing out of the Candy Crush bubble a year ago:

Exhibit B: When King Digital priced its IPO in March, people were already declaring it over. Here's a particularly brilliant piece of analysis that AV Club's John Teti wrote at the time:

King, the future one-hit wonder responsible for the cellular telephone game Candy Crush Saga, announced today that it will pretend to be worth up to $7.6 billion before the studio inevitably collapses.


The Candy Crush firm may be taking notes from its competitor Zynga, which is in the more advanced “collapse” stage of the game-studio collapse cycle after executing its hilarious “People will never get tired of FarmVille” strategy to perfection.

King's IPO priced at $22.50 and promptly collapsed at the opening bell on its first day of trading in March. It has hit that IPO price just once since -- just one opportunity in almost five months for people who bought the stock at the IPO price to cut their losses.

king stock

The stock was just above $14 a share on Wednesday.

If the stock price is for shit, you must acquit. (In other words, Kim Kardashian is innocent.)

Mark Gongloff   |   August 6, 2014    1:02 PM ET

The Great Recession ended more than five years ago, but good luck trying to convince many Americans of that.

Nearly half of all Americans, 49 percent, think the recession never ended, according to a new NBC/Wall Street Journal poll. And that number actually represents progress, since 57 percent felt that way in March. In fact, many polls have consistently shown that most Americans have long thought the recession, which officially ended in June 2009, is still ongoing.

The new NBC/WSJ poll has a chart that helps illustrate why this might be: Despite record levels of hiring and record highs in the stock market, huge numbers of people say they're still feeling the recession's effects. Here's the poll data:

lingering pain

As Josh Barro noted in March, this attitude is mainly a result of wages that continue to be flat and terrible, even as the rest of the economy is improving.

Mark Gongloff   |   August 1, 2014   10:54 AM ET

The job market is still not the greatest, but we just got one hopeful sign that it might be improving a bit.

The economy added 209,000 jobs in July, and the unemployment rate ticked up to 6.2 percent from 6.1 percent, the Bureau of Labor Statistics said Friday. Believe it or not, both of those numbers are encouraging.

The reason the first number is encouraging is because, duh, jobs. The encouraging part of the second number, the unemployment rate, is less obvious. Normally, higher unemployment is bad news, and people seeing HIGHER UNEMPLOYMENT on the evening news tonight will naturally assume the worst. But this time, unemployment actually rose for a good reason.


Source: BLS data

Here's why: Technically speaking, unemployment is the percentage of people in the "labor force" who don't have a job. To be counted in the labor force, you have to be looking for a job. One reason unemployment has fallen so quickly in recent years, from a peak of 10 percent back in 2009, is that a lot of people stopped looking for work. They took themselves out of the labor force. Once they stopped looking for work, they stopped being counted as "unemployed." Voila, the unemployment rate goes down.

But in July, 329,000 people jumped into the labor force, and that's the main reason the unemployment rate ticked higher. This is a hopeful sign: It could mean that people are hearing there are more jobs, and so they're starting to look again. They're just not finding those jobs right away, or at least not enough jobs for all 329,000 people. That's why unemployment rose, as it sometimes does at times like this.

Here is a caveat salad: These labor-force numbers jump around a lot. We could easily see 500,000 people leave the labor force in August. A steadier number, the percentage of the working-age population in the labor force, is still dismally low. It ticked up a tiny bit in July. But at 62.9 percent, the labor-force participation rate is still near the lowest level since the 1970s:

labor pool

Source: BLS data

More importantly, wages are still dead in the water -- average hourly earnings for all employees are up just 2 percent in the past year, basically keeping pace with inflation. We're still far from a fully healthy job market.

Mark Gongloff   |   July 31, 2014   12:48 PM ET

America is arguably the most advanced economy in the world, but today it resembles a toddler who just accidentally pulled down the Christmas tree and set the house on fire.

That's hyperbole, sure. But the fact is that one conservative American billionaire and a handful of American judges have just pushed Argentina, a nation of 43 million people with an economy bigger than that of the Netherlands or South Africa, into defaulting on its debt. It's a move that threatens not only chaos for the Argentinian people, but potential chaos for other countries hoping to borrow money in the future.

"This is America throwing a bomb into the global economic system," Columbia University economist Joseph Stiglitz told The New York Times on Thursday in a front-page story about the battle.

paul singer

Billionaire Paul Singer

The conservative billionaire is Paul Singer of the hedge fund Elliott Management. Singer has given millions of dollars to George W. Bush, Mitt Romney and Swift Boat Veterans For Truth, to name a few causes (including, to his credit, support for gay marriage and LGBT rights). He has waged a years-long war with Argentina over its debt, driven by his fervent, conservative belief that debtors should pay creditors all of the money they owe, according to the NYT.

Elliott Management did not immediately respond to a request for comment.

Here's a quick sketch of the background on this complicated story: After Argentina defaulted on its debt in 2001 amid an economic depression, it forced most of its creditors to take a lot less money than they had loaned to Argentina in the first place. In bond-market lingo this is known as a "haircut," and it is sort of like The Moe on the Spectrum of Desirable Haircuts.

But the Moe is arguably better than getting scalped (to continue the metaphor) -- unless you are Paul Singer. He and a handful of other investors would rather get nothing, and pay millions of dollars to lawyers along the way, than settle for The Moe.

Through a Cayman Islands subsidiary, NML Capital, Singer had bought up a bunch of Argentinian debt on the cheap after the country defaulted. Then he and other holdout investors, including other "vulture funds" like his, began demanding Argentina pay them in full.

moe howard

The original Moe haircut (left)

Argentina refused to pay these vulture funds, on account of their being vultures, but kept on paying its Moe-coiffed bondholders. Singer said this sort of behavior made the ghost of Ayn Rand cry -- I'm paraphrasing -- and he fought and fought and fought it in court.

Then in 2012, a federal judge, Thomas Griesa of the Southern District of New York, got the gospel of Paul Singer. He decreed that Argentina could not keep paying its Moe-coiffed bondholders if it wasn't paying Singer and the other holdouts. Not only that, but he also declared that any banks playing middle-man between Argentina and aforementioned Moe-coiffed bondholders would be in trouble with the law.

This was a radical decision. Worse, it might have been kind of stupid. Times columnist Floyd Norris pointed out recently that Griesa "had not completely understood the bond transactions that he had been ruling on for years."

But the Second District Court decided that Griesa's ruling was A-OK, leading Felix Salmon to call them "poltroons." Poltroons, I say!

And then finally in June, the U.S. Supreme Court, led by Associate Justice Antonin Scalia, declined to hear Argentina's appeal. Last-ditch negotiations to end the dispute failed Wednesday night, and Argentina did not make a scheduled bond payment -- again, because Griesa had ordered it not to do so. Bada bing, bada boom, Argentina is in default and nobody gets paid.

Some of the blame for this is arguably Argentina's. Maybe it should have weighed its disgust with Singer against the need to protect its citizens from another financial crisis. Forbes' Agustino Fontevecchia suggests that maybe it didn't protect itself well enough legally.

Fontevecchia also notes that Argentina still has time to cut a deal and forestall all of this. The nation has not reached the point of no return, beyond which it can't borrow any more and its economy devolves into turmoil. But they're closer to that point than they should be.

Singer's victory stands to make it a lot harder for other debt-burdened countries to cut deals in the future, the International Monetary Fund warned last week. After all, what creditor is going to want to take The Moe when there's hope some court will let them get ... The Fabio?

The Fabio (Source: Giphy)

Mark Gongloff   |   July 29, 2014   10:39 AM ET

After wrecking the U.S. economy and sucking hundreds of billions of dollars from American taxpayers for their own survival, what can our patriotic big banks do for an encore? Why, help American companies flee the U.S. to avoid taxes, of course. For America!

Andrew Ross Sorkin had a must-read New York Times column on Tuesday about how some of our biggest bailout recipients also have the biggest share of the nearly $1 billion banks have made in the past few years helping U.S. companies do "inversions." That's when an American company buys a company in an foreign country that has a lower tax rate and then moves its headquarters to that country to shave a few points from its tax bill, possibly costing the U.S. government $19 billion over the next decade. For America.

And you'll never guess which bank has made the most money on this patriotic activity! OK, you'll probably guess: It is Goldman Sachs:


Yes, the Vampire Squid has made more than $200 million advising companies on 10 different inversion deals since 2011, according to the NYT's crunching of Thomson Reuters data. The second-busiest inversion handmaiden is Morgan Stanley, with 8 deals at nearly $98 million. JPMorgan Chase has made more than $184 million on 6 such deals, and JPMorgan CEO Jamie Dimon has taken the extra step of publicly defending the practice, Sorkin noted.

“We have a flawed corporate tax code that is driving U.S. companies overseas,” Dimon recently said on a conference call. “Even if you stop and say, ‘Don’t invert,’ capital will move away.”

And then Dimon added this hilarious kicker: "I'm just as patriotic as anyone." Which is a little like the "some of my best friends are black" racism defense.

I dare say that Jamie Dimon might not be exactly as patriotic as anyone, like, say, a soldier holding it down at a forward operating base in Afghanistan or, I don't know, maybe the CEO of a company that decides against doing an inversion for reasons of actual patriotism.

But Jamie Dimon is not the first person in a Sorkin column to declare their undying love of country while doing the opposite thing. In a recent column titled "Reluctantly, Patriot Flees Homeland for Greener Tax Pastures," Heather Bresch, the CEO of drug maker Mylan, called herself a patriot as she reluctantly packed her bags to reluctantly move her company forever to the Netherlands, in order to reluctantly cut her company's tax bill from 25 percent to the "high teens."

Dimon and other defenders of inversions claim they keep U.S. companies competitive and so are truly patriotic. If only the U.S. would cut corporate tax rates, they say, then these companies would stop running away. But most of these companies already pay far less than the statutory tax rate of 35 percent. And one tax professor told Sorkin that the U.S. would have to cut its corporate tax rate to less than 10 percent to have any real effect.

Unlike Dimon and Bresch, many bankers involved in inversions apparently have normal human shame responses and thus declined to comment to Sorkin on the record about inversions. One told Sorkin, anonymously:

“This is going to sound cynical, but as much as I may hate these deals and the ramifications for our country, if I don’t do the deal, my competitor across the street will be happy to do it."

Pro tip: If you ever hear an investment banker start a sentence off with "This is going to sound cynical," you'd better brace yourself for a blast of weapons-grade cynicism right in the face.

President Obama has called for Congress to stop inversions, so of course they will probably go on forever. But if even Andrew Ross Sorkin, who usually struggles to find reasons to criticize Wall Street, is angry about them, then maybe the chances are a little better than we thought.

Mark Gongloff   |   July 29, 2014   10:27 AM ET

Rich people have been wondering why everybody is so mad at them when all they do is create jobs and have better genes and work harder than the rest of us schlubs. But it's no mystery.

The answer to why everybody is mad at rich people (who actually do not create jobs, have better genes or work harder than the rest of us) can be found in a new study by the Russell Sage Foundation, a New York research group, on how the Great Recession affected Americans' wealth. The typical household's wealth has been slashed by 43 percent since 2007, the year the recession began, tumbling from $98,872 to $56,335, according to the study.

For the top 5 percent of Americans, however, the story has been much different: Their net worth fell, too, but only by 16 percent, to $1.36 million from $1.63 million.

And looking at the slightly longer term, over the past decade, median household wealth is down 36 percent, while the household wealth of the top 5 percent is up 14 percent.

Here's another way of looking at it, an even longer-term view. This chart, from the Russell Sage report, tracks the change in wealth for various groups of Americans going all the way back to 1984.

wealth change

As you can see, for people at the very top of the wealth pile, their net worth has nearly doubled in the past 30 years. Median wealth, on the other hand, is lower than it was 30 years ago. The Reagan Revolution mostly benefited a lucky few, helping widen wealth inequality, a trend that seems likely to continue for the foreseeable future.

Meanwhile, at the bottom of the wealth pile, net worth has been more than cut in half over the past decade. The rich have benefited from a soaring stock market in the past five years. Some middle-class homeowners have scratched back some wealth thanks to a partial rebound in home prices. The poor, on the other hand, have no such assets, and their debts have piled higher -- debts, in many cases, owed to the wealthy.

Mark Gongloff   |   July 22, 2014   11:56 AM ET

Have you recently eaten a Chipotle burrito in front of the TV while binge-watching one of your shows on Netflix? Maybe? Probably? If so, then you, my sloppy TV friend, just might have the secret answer to the mystery of the future of America's economy.

Here is what I mean: Both Chipotle and Netflix announced their quarterly profits on Monday. Both reported that they had annihilated all of the competition, with quarterly profit gains of eleventy gazillion percent or some such ridiculous figure.

And here is the twist that opens the key to the cupboard with the secret knowledge of the future: Both of these companies managed to add customers despite having recently jacked up prices. Chipotle and Netflix both asked us to pay more for burritos/videos, and, instead of fleeing, we gladly gave them extra money for more of their sweet, sweet burritos/videos.

If we get a few more companies reporting this sort of behavior, then it could be a sign that companies have developed what is known in fancy economics textbooks as "pricing power." And pricing power can lead to inflation.

You've probably always thought of inflation as a bad thing, but in some cases inflation can be a good thing. Let's say, oh I don't know, your economy has been a Lovecraftian nightmare hell for workers for the past five years, with nobody ever getting raises, aside from evil, hairless-cat-stroking CEOs. Does that sound like an economy you might know personally?

If companies can raise prices and get away with it, then maybe they'll feel better about raising wages. And/or if wages start rising, then that gives people more money, which they can then spend on stuff, which could also cause prices to go higher.

So how high are we on the wage-price-spiral staircase to higher inflation and/or wages? Not very high. Here is a chart of the Fed's favorite inflation measure:

Do you see the runaway inflation? Me neither, unless you look at the chart backwards.

And here is a chart of wages (h/t The Week's John Aziz):

Going the wrong way!

It could just be that, instead of a sign that wages and prices are on a fast train to Inflation Town USA, Chipotle and Netflix being able to raise prices is just a sign that we really, really, really love us some Chipotle and Netflix. McDonald's, in comparison, also raised prices and had a terrible quarter.

Mark Gongloff   |   July 10, 2014    8:36 AM ET

Bubbles are filled with air, so it is only fitting that in our new tech bubble we buy companies that are mostly made of air.

One of the hottest stocks in the universe right now is a social-networking company called Cynk Technology, ticker symbol CYNK. As of Thursday morning, the stock had soared more than 30,000 percent in less than one month, shooting from 6 cents on June 16 to $18.21 Thursday morning, taking Cynk's market value from about $17 million to more than $5 billion. That makes it worth more than HuffPost parent company AOL or JetBlue, both valued at about $3 billion.

Here's how the stock looked as of Wednesday afternoon, when it was up a mere 24,000 percent:

cynk stock

Minor technical note: It is not entirely clear that Cynk actually, how do you say, exists.

Some parts of it do exist on the Internet, at least: Cynk Technology, formerly known as Introbuzz, is a social-networking company that runs a bare-bones website called IntroBiz. IntroBiz is apparently "a marketplace [where] you may both buy and sell the ability to socially connect to individuals such as celebrities, business owners, and talented IT professionals." It has pictures of Leonardo DiCaprio, Angelina Jolie and other celebs, suggesting that your dream of becoming besties with Leo and/or Brangelina will finally come true, thanks to IntroBiz.

So far, so legit. Now's when things get weird!

Cynk is headquartered in Belize, but was incorporated in Nevada in 2008. Its main contact number is in a Miami area code.

As Business Insider points out, the company warned the Securities and Exchange Commission in March that it wouldn't be able to file its annual report on time this year.

Signing that document was one Marlon Luis Sanchez, who happens to be the company's President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary and Treasurer.

A 1-800 number listed for Sanchez in the SEC filing is "unassigned," according to a phone-company recording. The company's Miami number reached a voicemail message for Cynk Technology. The company didn't immediately return a request for comment.

According to Cynk's most recent quarterly financials, the company has no revenue. What it does have is $39 in assets and nearly $52,000 in liabilities. It loses money every year.

So who the devil is buying up all of this company's stock? Hard to tell. It could be an instrument for one heck of a pump-and-dump scheme. Or it could just be that we live in a world where a Kickstarter for potato salad raises $44,000 (and counting) and car-service Uber is worth $17 billion. Who are we to judge who buys what in such a world?

Business Insider, Zero Hedge, TheStreet's Herb Greenberg and many others gave Cynk stock the stink-eye Wednesday, but that didn't seem to slow it down at all: At the time of publishing this story, about two hours after the market open Thursday morning, the stock was up 24 percent on the day.

Praise the Lord and pass the potato salad. On late Thursday morning Cynk was still going:

cynk intraday

Update: The Wall Street Journal managed to track down some of the people involved in the company, but its reporting does not make this situation any less shady. Apparently Sanchez no longer works for the company, which is now on its fourth CEO since 2008. The current CEO, named Javier Romero, seems unreachable, listed at an address in Belize that may not exist, according to the WSJ. Sanchez sold 210 million shares in the company, now worth nearly $3 billion, to this lucky new CEO back in February, according to the WSJ.

And now, inevitably, this may be happening:

The stock ended its busy trading day Thursday down 5.5 percent at $13.90 -- leaving it with a market value of $4 billion.

Update 2: Sure enough, the SEC halted trading in Cynk stock on Friday morning, Business Insider reported. The SEC cited "concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK's common stock."

So if you've dumped your life savings into Cynk, this might be a good time to reconsider your life choices.

Mark Gongloff   |   June 25, 2014   10:04 AM ET

Obamacare is going to have to return its hero's cape, and we're all going to have to learn to think twice before we over-react to shaky economic data.

Two months ago, President Barack Obama's signature health-care reform law was widely credited with saving the U.S. economy from shrinking in the first quarter by giving a huge jolt to health-care spending. On Wednesday, we found out that had all been a mirage.

Using more-solid data than it had two months ago, the U.S. Bureau of Economic Analysis found that health spending actually shrank in the first quarter, weakening overall consumer spending and contributing to a terrible quarter for the broader economy. Gross domestic product shrank at a 2.9 percent annualized rate in the quarter, the worst since the depths of the Great Recession, with health spending alone shaving 0.16 percentage points from growth.

What a difference from two months ago, when the BEA first guesstimated that health spending soared at a 9.9 percent rate in the quarter, helping to keep the economy out of the dumpster. Many news outlets, including yours truly, ran headlines like this:


Other outlets, with differing ideologies, zeroed in on the alleged spending surge as a bad thing, pointing out that one of the goals of Obamacare was to reduce such spending.

We were all wrong. It turns out that health-care spending actually fell, as apparently millions of new Obamacare and Medicaid enrollees boosted their total health-care spending much, much less than the BEA had guessed they would.

We should have listened to our own health-care reporter Jeffrey Young, who wrote when the first data came out:

Because everything with the words "health care" in it have been intensely politicized since 2009 when Congress started writing what eventually became the Affordable Care Act, every number that comes out has a tendency to be overanalyzed, and people on the left and the right have a tendency to draw grand conclusions from what can be pretty meager, preliminary information.

Young also pointed out that the long-term trajectory of health-care spending should be higher, anyway, given an improving economy, an aging population and other factors. On Wednesday, the White House suggested that health spending should pick up, but health prices should stay low, both of which the White House naturally attributed to Obamacare.

And we might not really have seen the full impact of Obamacare sign-ups on the economy yet, particularly as large numbers of them happened at the tail end of the first quarter, for insurance that actually couldn't be used until April -- the second quarter -- at the earliest.

Anyway, this episode highlights the risk we run every month of giving too much weight to any one economic number -- especially big, politically charged numbers like the unemployment rate and health-care spending. These numbers are often just best guesses that are revised completely beyond recognition in short order, and yet they can cause wild mood swings in consumers, politicians and financial markets. Better to be patient and stay focused on the big picture.

Mark Gongloff   |   June 24, 2014    3:25 PM ET

Accused of paying its workers too little, Walmart has responded in the most 2014 way possible: by being snarky on the Internet with a "fact check." Unfortunately, it is longer on snark than on facts.

Walmart rep David Tovar recently took a digital red pen and marked up a New York Times opinion column by Timothy Egan that suggested Walmart could help fix America's income inequality problem simply by raising wages for its low-paid workers. It was a fun idea with a lot of viral potential, and way cheaper than actually paying a living wage.

thanks for sharing

So. Hilarious. At least to right-wingers: The Wall Street Journal's in-house rape apologist James Taranto called it "devastating." NewsBusters called it not just "devastating" but also "spirited." Tucker Carlson's Daily Caller called it "EPIC."

In the face of such success, it seems almost unsporting to fact-check Walmart's fact-check -- almost, but not quite. (Tovar's full fact-check can be seen at the end of this story.)

can we see your math

Egan accused Walmart of draining U.S. tax coffers because its workers make so little that they have to go on food stamps and other public assistance to make ends meet. "We are the largest tax payer in America," Tovar countered. "Can we see your math?"

Actually, we would like to see Walmart's math, because Exxon Mobil, Chevron, Apple and Wells Fargo paid more in taxes than Walmart, according to a January study by 24/7 Wall Street. That study used 2012 data in some cases, but fresher numbers haven't changed the picture much, according to HuffPost's review of company financial reports. It could be that Tovar meant that Walmart has the biggest U.S. tax bill, but that would also not be correct -- Apple paid more in U.S. taxes than Walmart in the latest fiscal year. Wells Fargo, too, if you count deferred taxes, as the bank does, taking a hit to earnings.

Walmart spokesman Kory Lundberg said in a phone interview that the company was looking into the discrepancy.

Walmart does pay a lot in taxes, for sure -- more than $6 billion in U.S. federal taxes alone in its latest fiscal year. But by not paying its workers a living wage, which does force some unknown number of them onto public assistance, its policies also arguably eat into a lot of tax revenue. A recent study by Americans For Tax Fairness estimated that Walmart workers cost the U.S. government $6.2 billion a year. The group also estimated that Walmart and its founding Walton family cost the government another $1.6 billion in tax revenue through various tax loopholes.

we see more associates

Walmart has repeatedly disputed the ATF's $6.2 billion number, and Tovar did so again in his fact-check. Trouble is, Walmart never offers any numbers of its own. Tovar claimed, "We see more associates move off of public assistance as a result of their job at Walmart." But that is not a particularly informative statement. "More" than what? Do more associates move off of public assistance than move on to it? How many move in each direction annually? Tovar's link takes you to one person's story in a YouTube video -- which, thanks, but without hard numbers, this is not so much a fact-check as it is an unsubstantiated assertion.

Walmart's Lundberg said the company has studied the number of its workers who are on public assistance, but declined to share its data.

"There are people that come to Walmart on public assistance, and through their job at Walmart, we see that most are able to move off of it within a couple of years," he said.


Regarding a 2013 study by House Democrats that estimated that one store in Wisconsin costs taxpayers nearly $1 million per year in assistance, Tovar claimed the fact-checking website Politifact has declared it "mostly false." But Tovar's claim is mostly misleading -- Politifact was addressing an Ed Schultz segment on MSNBC that cited the study, not the study itself.

Tovar also claimed that the company pays hourly employees $12.91 an hour, and that this figure does not include the pay of any store managers. But Walmart's pay figure has not changed much from what it was in previous years, when it did include some store managers who are paid hourly.

In a phone interview, spokesman Lundberg conceded that the latest figure does include some department managers who are paid hourly. Tovar's fact-check is not factual.

gandel furman

Egan's column cited a November 2013 story by Fortune reporter Stephen Gandel, which argued that Walmart could "give workers a 50 percent raise without hurting shareholder value." In his "fact check," Tovar questioned the credibility of Gandel, an established journalist, without offering any reason to do so. He suggested that we should instead listen to Jason Furman, chairman of President Barack Obama's Council Of Economic Advisors, as if Furman had recently written something that countered Gandel's argument.

Tovar did offer a link to an unrelated piece by Furman from 2006 about how Walmart helps the poor by letting them buy cheap stuff. Furman's piece was flawed -- Walmart could probably also help the poor by giving them better wages -- but, more importantly, it has no relation to Gandel's argument.

In the past, Walmart has also pointed to a 2005 paper by Furman that calls Walmart a "progressive success story." But in that paper, Furman also wrote that Walmart "does not pay enough for a family to live the dignified life Americans have come to expect and demand" and that the company had tried to shred the social safety net on which many of its low-paid workers rely.

Tovar did not dispute a recent Lake Research Partners survey that found Walmart has a 28 percent disapproval rating among Americans. Instead, he used math to point out that this result means that Walmart has a 72-percent approval rating. He did not mention that rivals Target, Costco and Amazon have far, far higher approval ratings than Walmart.


Tovar also rather desperately tried to co-opt some of the corporate goodwill that has been accumulated by Starbucks over the years, by marking up an Egan sentence about Starbucks' OK pay and benefits to make it look as if Walmart offers OK pay and benefits, too.

Tovar wrapped up his rebuttal by suggesting that Egan write a different story. This story would be one about how Walmart is helping bring back the American Dream by buying more U.S.-made goods -- which is pretty ballsy, after Walmart has spent decades helping to wreck America's manufacturing base by selling us cheaply made foreign goods. This alternative story would also explain how Walmart is "expanding training, education and workforce development programs," all stuff that Walmart says is more important than just paying a boring old living wage.

This is the standard corporate objection to raising wages: We're not going to pay people more now, we're going to train them so they can earn more in the distant future. But you can't eat education, or pay your mortgage with a workforce development program. Why can't low-wage workers have some of both?

I'm going to have to declare Walmart's fact check "Mostly Bullshit."

Here's Tovar's response in its entirety:

walmart fact check

Mark Gongloff   |   June 23, 2014   11:23 AM ET

Sting may not plan on leaving very much of his wealth to his offspring, but don't mistake him for some kind of equalizing role model out of Thomas Piketty's dreams.

Gordon Sumner, a/k/a Sting, the 62-year-old former frontman for The Police and alleged marathon sex-haver (not really), told the UK's Daily Mail that his children are not going to see very much of his fortune, which amounts to a little more than $300 million.

"I certainly don’t want to leave them trust funds that are albatrosses round their necks," he reportedly said of his six kids, all of whom are now adults. "They have to work. All my kids know that and they rarely ask me for anything, which I really respect and appreciate."

This is an admirable position for jillionaire rock royalty to take. If all millionaires and billionaires were more like Sting, then maybe we wouldn't have to worry about the dystopian hellscape of yawning inequality foretold by French economist Piketty in his book Capital In The Twenty-First Century. In Piketty's telling, wealth inequality will widen forever because the rich always get richer at a faster rate than the economy grows, and then they keep leaving their ever-expanding wealth to their ne'er-do-well young.

But Sting's screw-em approach to estate planning is not quite the noble child sacrifice it might seem.

For one thing, Sting's children are forever going to have the very substantial benefit of being Sting's children. They have been raised by millionaires in nurturing environments and attended the very best, most expensive schools. And the connections they have are priceless. For the rest of their lives, if they ever get into trouble, Sting's kids can just ring up, say, Paul McCartney or some other jillionaire rock royalty, or maybe just plain old royalty, and say, "Hi, Sting's kid here. Can you spare a few pounds and/or a job?"

And Sting has not promised to give all of this money to charity, as billionaires Warren Buffett and Bill Gates have done. Instead, Sting claims that he just plans to spend most of his loot. (Though he does do a lot of charity work.)

Which is fine, it's Sting's money, he can do what he wants with it. And this is certainly wealth redistribution of a different sort. Because boy, can Sting spend the hell out of some money. For example, he apparently has "more than 100 people on his payroll," according to the Daily Mail.

‘I keep a community of people going," he reportedly said. "My crew, my band, my staff... it’s a corporation!’"

I guess the rich really are job creators, just like they're always telling us. Still, this 100-person payroll raises nearly 100 questions:

What is Sting doing that requires the assistance of 100 people? Are they helping him sign autographs? Curate his Twitter feed? Do these 100 people do search-engine optimization for Do they make the olive oil, wine and honey for his Palagio brand of foodstuffs? Are they running the Tuscan estate where said foodstuffs are made? Is that Tuscan estate hiring? Would the ability to type left-wing diatribes at 100 words per minute be suitable experience? Do they act out songs from the Broadway musical he wrote? Does Sting sign the paychecks? Are those checks worth more than their face value because they have been signed by Sting? What are the benefits? What music plays in the break room? Good Police stuff or Sting's sketchier solo work?

Anyway, good on Sting for hiring all of these people and making his kids get jobs, but I'm not sure having everybody emulate Sting would be the best fix for wealth inequality.