With president bone spurs asleep at the switch or playing golf, all kinds of nutty provisions got snuck into the bill.
With the president asleep at the switch, all kinds of nutty provisions got snuck into the bill.
Incentivizing SNAP Fraud
As the Prospect has reported, one of the ways Republicans cut the Supplemental Nutrition Assistance Program (SNAP) is by forcing states, which have a vastly smaller capacity to tax and borrow, to shoulder more of the program’s cost. But in the Senate, Lisa Murkowski got a two-year exemption from cost-sharing for states with an erroneous payment rate of above 13.3 percent. That includes her home state of Alaska, which has the highest payment error rate in the nation. It was a giveaway for Murkowski in particular. But to comply with budget reconciliation rules, this exemption extends to the states with the ten highest error rates. This is literally incentivizing states to increase waste and fraud in the program. Indeed, in all seriousness, liberal states would be wise to make their SNAP program as sloppy as possible right now.
The Mass Shooter Subsidy
One of the vanishingly few American gun regulations that still exists is a tax on silencers, which has existed for almost 100 years, and sits at $200—or did until now. Republicans wouldn’t stand for this intolerable burden on America’s large population of hardworking mass shooters, and so they repealed it. They also wanted to remove a requirement that silencers be registered, but that was ruled out of order by the Senate parliamentarian. Still, killing the silencer tax is egregious. Anyone on their way to a workplace or schoolyard to do their part to maintain America’s number one record of gun massacres could already get a fully automatic “bump fire” rifle (thanks to the Supreme Court), but now you won’t even hear them coming.
The Spaceport Sweetener
For some reason, Section 70309 of Trump’s bill would allow municipalities to issue tax-exempt bonds to build spaceports, as is currently the case for airports. Digging around, we couldn’t see any explanation of why this was included except that a company called Space Florida wants it. Perhaps Martians contacted RFK Jr. and told him they need a place to disembark.
No Tax on Oil Drillers
If you listen to Donald Trump’s speeches (good luck to you), you hear a lot about certain modest elements of this bill: no tax on tips, no tax on overtime, no tax on Social Security. That last one is not in the bill at all—there’s a temporary increase in the standard deduction for people over the age of 65 that is not tied to Social Security at all—but Trump always leaves one of these “no tax” items out: the provision for no tax on oil drillers. As the Prospect has reported, the bill includes an exemption for domestic oil and gas companies from the corporate alternative minimum tax, as long as they have “intangible drilling and development costs.” This is something oil companies lobbied insistently for, and it was inserted by Republican Sen. James Lankford (R-OK); most of the firms that will benefit represent his home state of Oklahoma.
Handouts for Chinese Steel Companies
As we have previously detailed, Trump’s bill not only gets rid of almost all of President Biden’s climate program, it also provides vast subsidies to coal producers. At least four million acres of federal land will be opened up to coal leasing, and the royalty rate will be cut from 12.5 percent to 8 percent. Incentivizing coal—the worst fossil fuel for the climate and also particulate pollution—in any way is bad, but Republicans are also literally subsidizing foreign steel companies in places like China, India, and Brazil, by making metallurgical coal eligible for “critical mineral” subsidies through 2030. This coal, which is used in blast furnaces to create steel, is mostly exported to poorer countries with fewer air pollution regulations. Sure enough, the coal doesn’t even have to be used domestically to get the subsidy.
The Garden of Heroes
Republicans constantly go on about how the country is broke and we cannot possibly afford to provide people with basic health care or food assistance. Yet in the same bill that includes the largest cuts to Medicaid and SNAP in American history, there is a $40 million appropriation to the National Endowment for the Humanities to requisition statues for a “Garden of Heroes” in Washington, D.C., something that Kim Jong Un would even be embarrassed to unveil.
A Tax on Gambling Winnings
Republicans changed the tax rules around gambling to limit the amount of losses that could be deducted to just 90 percent. So if you go to Vegas and win $10,000 one day, then lose $10,000 the next, you are still on the hook for $1,000 in winnings. You could end up owing tax even if you lost money.
Now, in our view there is entirely too much gambling in American society, particularly sports. (Thanks once more to the Supreme Court!) But this is a nonsensical way to go about stopping problem gambling. What is needed above all is to get gambling out of smartphones. Companies like DraftKings are manufacturing gambling addicts at an industrial scale with a constant drip of notifications carefully tuned to get you to bet and keep betting as much as possible (ideally, until you run through your entire life savings).
This law wouldn’t do anything about that problem, while seriously punishing the tiny minority of pro gamblers who actually make money playing in poker tournaments and such.
Unlimited SALT
A major point of contention in the legislation was the state and local tax (SALT) deduction. Some Republicans wanted to increase a cap placed on how much state and local taxes people could write off on their federal returns. In the end, that cap was raised from $10,000 to $40,000 for the next five years. However, Republicans vowed they would limit the ability for people with pass-through income, like law partners or hedge fund managers, to take unlimited SALT deductions. The House and Senate wrote new rules to close this loophole. And then, at the last minute, they dropped them. So now rich people have yet another legal tax avoidance scheme, worth between $35 and $40 billion over the next decade. At least somebody gets a break in this legislation.
Tax Breaks for Puerto Rican Rum
One of the more ridiculous traditions in Congress in the recent past was continuing to advance temporary tax cuts in an annual “tax extender” package that had all kinds of pork in it: tax breaks for thoroughbred racehorses, NASCAR racetracks, and Puerto Rican rum shipments. When Congress made some of the anchors of these tax extenders, namely the tax incentive for research and development, permanent, the idea of these other tax extenders carrying along lost its luster, and many were dropped. Lobbyists still have to get paid, however, and liquor distributors in territories like Puerto Rico and the U.S. Virgin Islands managed to secure their tax rebate, which will cost about $2 billion.
More Chipmaker Subsidies?
During his State of the Union address this year, Trump said that he wants to get rid of the CHIPS Act—which subsidizes domestic semiconductor manufacturers—adding, “Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars. It doesn’t mean anything.” But this bill actually increases CHIPS subsidies by about 40 percent. What?
This might possibly end up being a net benefit, insofar as it doesn’t strangle the infant American chipmaking industry in the crib. We’re just baffled that it’s in there. As we’ll see, Trump probably doesn’t even know about it.
How an obscure advisory board lets utilities steal $50b/year from ratepayers
I'm on a 20+ city book tour for my new novel PICKS AND SHOVELS. Catch me in NYC on WEDNESDAY (26 Feb) with JOHN HODGMAN and at PENN STATE on THURSDAY (Feb 27). More tour dates here. Mail-order signed copies from LA's Diesel Books.
Two figures to ponder.
First: if your local power company is privately owned, you've seen energy rate hikes at 49% above inflation over the last three years.
Second: if your local power company is publicly owned, you've seen energy rates go up at 44% below inflation over the same period.
Power is that much-theorized economic marvel: a "natural monopoly." Once someone has gone to the trouble of bringing a power wire to your house, it's almost impossible to convince anyone else to invest in bringing a competing wire to your electrical service mast. For this reason, most people in the world get their energy from a publicly owned utility, and the rates reflect social priorities as well as cost-recovery. For example, basic power to run lights and a refrigerator might be steeply discounted, while energy-gobbling McMansions pay a substantial premium for the extra power to heat and cool their ostentatious lawyer-foyers and "great rooms."
But in America, we believe in the miracle of the market, even where no market could possibly exist because of natural monopolies. That's why about 70% of Americans get their power from shareholder-owned companies, whose managers' prime directive is extracting profit, not serving their communities. To check this impulse, these private utilities are overseen by various flavors of public bodies, usually called Public Utility Commissions (PUCs).
For 40 years, PUCs have limited private utilities to a "rate of return" based on a "just and reasonable profit." They always gamed this to make it higher than was fair, but in recent years, the "experts" who advise PUCs on rate-setting have been boiled down to a tiny number of economists, who have discovered that the true "just and reasonable profit" is much higher than it's ever been considered.
Mark Ellis worked for one of those profit-hiking "experts," but he's turned whistleblower. On paper, Ellis looks like the enemy: former chief economist at Sempra Energy, an ex-Exxonmobile analyst, a retired McKinsey Consultant, and a Socal Edison engineer. But Ellis couldn't stomach the corruption, and he went public, publishing a report for the American Economic Liberties Project called "Rate of Return Equals Cost of Capital" that lays out the con in stark detail:
I first encountered Ellis last week when he was interviewed on Matt Stoller and David Dayen's excellent Organized Money podcast, where he memorably referred to these utilities as "pocket-picking machines":
At the center of the scam is a professional association called the Society of Utility and Regulatory Financial Analysts (SURFA). The experts in SURFA are dominated by just four consulting companies, who provide 90% of the testimony for rate-setting exercises. Just two people account for half of that input.
In order to calculate the "just and reasonable profit," these experts make use of economic models. Even in normal economics, these models are the source of infinite mischief and suffering, built on assumptions that legitimize the most abusive conduct:
But even by the low standards of normal economic models, the utility models are really bad. They rely on unique "risk premium" and "expected earnings" calculations that no one else in finance will touch. As Dayen explains, these models are "perfectly circular."
This might be a bit confusing, but only because it's one of those scams that you assume you must have misunderstood because it's so, well, scammy. In the "expected earnings" analysis, the "just and reasonable profit" a utility is allowed to build into its rates is defined as "the amount of money it would like to make." In other words, if a utility projects future revenues of $10 billion over the next ten years, that is its "expected earnings." "Expected earnings" are treated as equivalent to "just and reasonable profits." So under this model, whatever number the utility puts in its financial projections is the number that it's allowed to take out of the pockets of ratepayers.
This is just as bad as it sounds. In 2022, the Federal Energy Regulatory Commission said that it "defied financial logic." No duh – even SURFA's own training manual says it "does not square well with economic theory."
In the world of regulated utilities, this kind of mathing isn't supposed to be possible. The PUC and its "consumer advocates" are supposed to listen to these outlandish tales and laugh the utility out of the room.
But it's SURFA that trains the consumer advocates who work for the PUCs, the large energy customers, and community groups. These people – who are supposed to act as the adversaries of the companies that pay SURFA members to justify rate-hikes – are indoctrinated by SURFA to treat its absurd models as accepted economic gospel. SURFA has co-opted its opposition, transformed it into a botnet that parrots its own talking-points.
Because of this, the private power companies that serve 70% of US households made an extra $50b last year, about $300 per household. What's more, because the excess profits available to companies that simply bamboozle their regulators are so massive, they swamp all the other tools regulators use to attempt to improve the energy system. No incentive offered for conservation or efficiency can touch the gigantic sums energy companies can make by ripping off ratepayers, so nearly all the incentive programs approved by PUCs have been dead on arrival.
What's more, utilities are allowed to fold the cost of hiring the experts who get them rate hikes onto the ratepayers. In other words, if a utility hires a $10,000,000 expert who successfully argues for a $1,000,000,000 rate-increase, they get to recoup the ten mil they spent securing the right to rip you off for a billion dollars on top of that cool bill.
We often talk about regulatory capture in the abstract, but this is as concrete as it can be. Ellis's report makes a raft of highly specific, technical regulatory changes that states or cities could impose on their PUCs. These are shovel-ready ideas: if you find yourself contemplating a sky-high power bill, maybe you could call your state rep and read them aloud.
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
What’s more frightening at the moment is what will be done accidentally. One misstep with code could blow up the ordinary, smooth functioning of four million payments a day, with dire consequences almost across the board.
This testimony in a federal lawsuit gives you some sense of the stakes.
A nonprofit in West Virginia with five employees, which does nothing but serve individuals in the community with disabilities—getting them to health treatments or the grocery store, building ramps in their homes so they can get around, helping them live on their own—gets 70 percent of its budget through the Administration for Community Living at the Department of Health and Human Services. They have no cushion or advance payout from the government; they can only draw down to pay immediate bills, a total hand-to-mouth operation. When the Office of Management and Budget memo froze all grants, including their funds, within two days they had to lay off three of their five staffers, or 60 percent of payroll. State grants allowed them to rehire two of the staffers, but without the federal funds they are weeks away from collapse.
Multiply this by, I don’t know, hundreds of thousands, or tens of millions if you’re talking about benefit payments for things like Social Security. That’s what we’re talking about.
But it’s important to note that the previous example is from an organization that still lacks access to a federal grant, even though OMB rescinded the memo that started the broad pause on such grants, and even though there are now two temporary restraining orders on that conduct. Just yesterday, D.C. District Court Judge Loren AliKhan issued the second order, days after she issued an administrative stay in the case. In that order, AliKhan cites White House Press Secretary Karoline Leavitt’s comment that the funding freeze was not rescinded along with the memo, and highlights numerous entities that still cannot get funding that was clearly appropriated by Congress and approved by the particular agency. “The funding pause remains in effect—at least for some recipients—despite OMB’s rescission of [the memo],” AliKhan writes. “Destroying the paper trail of allegedly illegal activity means nothing if the activity persists.”
With the rightful concern about collapsing the U.S. payment system, we’ve lost sight of the illegality happening in real time: presidential
Where are the people who fly pro-police flags? They're going to cut funding for police?
Who are the people who like firefighters? They're going to cut that?
Who are the people who like kids getting an education? Do you not realize they're going to put teachers out of work?
Veterans can say goodbye to VA healthcare! The CULT of Elon & the GOP do not care about you!
We can draw two conclusions from this. One, when you set something in motion in the federal government, it’s nearly impossible to roll it back quickly. And we know from this testimony that even a short-term hiccup in funding has real consequences: People will lose their jobs, and services will not be delivered, mostly to the poorest and most vulnerable members of society.
The second, inescapable conclusion is that an active impoundment of federal spending is happening, across several nodes of the government. In many cases, agencies are deriving separate authority than the OMB memo, from executive orders for example. This is no less unconstitutional: You can’t just stop payments approved by Congress because the president doesn’t like the recipient.
Somehow the Republicans who "love" their country so much aren't lifting a finger to protect it or the Constitution.
Did everyone notice the second bullet point above?
They're going to go after VETERANS.
Why?
Because the federal employee workforce is approximately 30% veterans, and they do not care about the service of the people who SERVED the US people whether it's in the US government or the US military.
This is what the people who voted for Trump wanted.
More plane crashes. No food safety. No environmental protections. No veterans' benefits or healthcare.
And the list goes on and on.
Everyone is going to be paying more for everything because Trump wants to put tariffs on EVERYTHING!
Oh, and invading Panama & MEXICO (!!!) is on the list and probably Greenland after that.
Today on TAP: My adopted city is in flames, and we’re collectively to blame.
The Conflagration in L.A.
Today on TAP: My adopted city is in flames, and we’re collectively to blame.
by David Dayen
January 8, 2025
Normally, I would be writing this from the Westside of Los Angeles, where I live most of the year. I happen to be about two hours east right now, away from what has engulfed the region. But I have friends who have been forced to evacuate. The fish restaurant on the Pacific Coast Highway where I brought my then-girlfriend (now wife) to meet my parents has been destroyed. I’m texting friends and family and hearing updates on a running basis. I’m hearing about people I know evacuating from the site of one fire, only to reach a destination that happens to be the site of a different fire. I feel like I’m there without being there.
The biggest problems, aside from the thousand-plus structures already burned and an expected shift in the winds that will bring toxic smoke to much more inhabited areas of the L.A. Basin, seem to be infrastructural. There isn’t enough water to deal with the blazes in Pacific Palisades, Altadena, and Sylmar. Hydrants are dry, and other water resources are being conserved. Power is now out to 400,000 people in the region, some intentionally to remove the threat of sparks and more fires. If the smoke conditions worsen, the health system could come under some strain, as people with respiratory illnesses seek relief.
The heavy winds are starting to soften, but they’re still powerful enough to cancel and delay flights, and disrupt firefighting efforts. Even hours away in Palm Springs, the wind was whipping last night. I’ve heard about numerous semitrucks capsizing on the freeways between the Inland Empire and Los Angeles. That won’t completely cut off the city from a major source of supplies (warehouses dot the landscape in the outlying areas of San Bernardino and Riverside Counties), but it will make things more difficult.
We’re supposed to hold off talk of anything that even smells political in these moments, and focus on the devastation and rescue efforts. But the bottom line is that we have created a ticking bomb in the atmosphere. It has not rained in Los Angeles for close to 300 days, a stat that astonished me when I heard it—and I live here. Wildfires in our current environment in California spread more quickly and haphazardly, and while they may start in uninhabited forests, they can hit heavily populated areas pretty quickly. So far, the evacuation warnings have stalled out at Montana Avenue in Santa Monica, but that’s dangerously close to some very populated areas; my house is about five miles south. That’s never a calculation you want to make.
The idea that you can bolster your infrastructure to handle unpredictable, out-of-control wildfires is very wishful thinking. The L.A. County Fire Department has admitted they were “not prepared for this type of widespread disaster,” and how could they be? We simply don’t have the infrastructure in place to deal with living in places that climate and drought and extreme weather have rendered unlivable, at least in part.
This is the ongoing culmination of a decades-long project of simply ignoring reality. Just in my 20 years of living in L.A., the changes in the climate are noticeable and stark. It’s a different place, and humans molded it that way. We have a ton of hard choices to make and a political and social culture that refrains from making them. It’s difficult not to feel something like despair at all of this. I’m a rational person who likes solutions, but what do you do when the solutions are unequipped for the flames?
Whether due to constitutional gridlock or the paucity of ambition in our politics, voters are in a state of perpetual anger, ready to throw the bums out, throw out the bums who replaced those bums, and eject those new bums, too.
THIS WEEKEND (June 7–9), I'm in AMHERST, NEW YORK to keynote the 25th Annual Media Ecology Association Convention and accept the Neil Postman Award for Career Achievement in Public Intellectual Activity.
Correction, 7 June 2024: The initial version of this article erroneously described Jeffrey Roper as the founder of ATPCO. He benefited from ATPCO, but did not co-found it. The initial version of this article called ATPCO "an illegal airline price-fixing service"; while ATPCO provides information that the airlines use to set prices, it does not set prices itself, and while the DOJ investigated the company, they did not pursue a judgment declaring the service to be illegal. I regret the error.
Noted anti-capitalist agitator Adam Smith had it right: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
Despite being a raving commie loon, Smith's observation was so undeniably true that regulators, policymakers, and economists couldn't help but acknowledge that it was true. The trustbusting era was defined by this idea: if we let the number of companies in a sector get too small, or if we let one or a few companies get too big, they'll eventually start to rig prices.
What's more, once an industry contracts corporate gigantism, it will become too big to jail, able to outspend and overpower the regulators charged with reining in its cheating. Anyone who believes Smith's self-evident maxim had to accept its conclusion: that companies had to be kept smaller than the state that regulated them. This wasn't about "punishing bigness" – it was the necessary precondition for a functioning market economy.
We kept companies small for the same reason that we limited the height of skyscrapers: not because we opposed height, or failed to appreciate the value of a really good penthouse view – rather, to keep the building from falling over and wrecking all the adjacent buildings and the lives of the people inside them.
Starting in the neoliberal era – Carter, then Reagan – we changed our tune. We liked big business. A business that got big was doing something right. It was perverse to shut down our best companies. Instead, we'd simply ban big companies from rigging prices. This was called the "consumer welfare" theory of antitrust. It was a total failure.
40 years later, nearly every industry is dominated by a handful of companies, and these companies price-gouge us with abandon. Worse, they use their gigantic ripoff winnings to fill war-chests that fund the corruption of democracy, capturing regulators so that they can rip us off even more, while ignoring labor, privacy and environmental law and ducking taxes.
It turns out that keeping gigantic, opaque, complex corporations honest is really hard. They have so many ways to shuffle money around that it's nearly impossible to figure out what they're doing. Digitalization makes things a million times worse, because computers allow businesses to alter their processes so they operate differently for every customer, and even for every interaction.
This is Dieselgate times a billion: VW rigged its cars to detect when they were undergoing emissions testing and switch to a less polluting, more compliant mode. But when they were on the open road, they spewed lethal quantities of toxic gas, killing people by the thousands. Computers don't make corporate leaders more evil, but they let evil corporate leaders execute far more complex and nefarious plans. Digitalization is a corporate moral hazard, making it just too easy and tempting to rig the game.
That's why Toyota, the largest car-maker in the world, just did Dieselgate again, more than a decade later. Digitalization is a temptation no giant company can resist:
https://www.bbc.com/news/articles/c1wwj1p2wdyo
For forty years, pro-monopoly cheerleaders insisted that we could allow companies to grow to unimaginable scale and still prevent cheating. They passed rules banning companies from explicitly forming agreements to rig prices. About ten seconds later, new middlemen popped up offering "information brokerages" that helped companies rig prices without talking to one another.
Take Agri Stats: the country's hyperconcentrated meatpacking industry pays Agri Stats to "consult on prices." They provide Agri Stats with a list of their prices, and then Agri Stats suggests changes based on its analysis. What does that analysis consist of? Comparing the company's prices to its competitors, who are also Agri Stats customers:
In other words, Agri Stats finds the highest price for each product in the sector, then "advises" all the companies with lower prices to raise their prices to the "competitive" level, creating a one-way ratchet that sends the price of food higher and higher.
More and more sectors have an Agri Stats, and digitalization has made this price-gouging system faster, more efficient, and accessible to sectors with less concentration. Landlords, for example, have tapped into Realpage, a "data broker" that the same thing to your rent that Agri Stats does to meat prices. Realpage requires the landlords who sign up for its service to accept its "recommendations" on minimum rents, ensuring that prices only go up:
Writing for The American Prospect, Luke Goldstein lays out the many ways in which these digital intermediaries have supercharged the business of price-rigging:
Goldstein identifies a kind of patient zero for this ripoff epidemic: Jeffrey Roper, a former Alaska Air exec who benefited from a service that helps airlines set prices. ATPCO was investigated by the DOJ in the 1990s, but the enforcers lost their nerve and settled with the company, which agreed to apply some ornamental fig-leafs to its collusion-machine. Even those cosmetic changes were seemingly a bridge too far Roper, who left the US.
But he came back to serve as Realpage's "principal scientist" – the architect of a nationwide scheme to make rental housing vastly more expensive. For Roper, the barrier to low rents was empathy: landlords felt stirrings of shame when they made shelter unaffordable to working people. Roper called these people "idiots" who sentimentality "costs the whole system."
Sticking a rent-gouging computer between landlords and the people whose lives they ruin is a classic "accountability sink," as described in Dan Davies' new book "The Unaccountability Machine: Why Big Systems Make Terrible Decisions – and How The World Lost its Mind":
It's a form of "empiricism washing": if computers are working in the abstract realm of pure numbers, they're just moving the objective facts of the quantitative realm into the squishy, imperfect qualitative world. Davies' interview on Trashfuture is excellent:
To rig prices, an industry has to solve three problems: the problem of coming to an agreement to fix prices (economists call this "the collective action problem"); the problem of coming up with a price; and the problem of actually changing prices from moment to moment. This is the ripoff triangle, and like a triangle, it has many stable configurations.
The more concentrated an industry is, the easier it is to decide to rig prices. But if the industry has the benefit of digitalization, it can swap the flexibility and speed of computers for the low collective action costs from concentration. For example, grocers that switch to e-ink shelf tags can make instantaneous price-changes, meaning that every price change is less consequential – if sales fall off after a price-hike, the company can lower them again at the press of a button. That means they can collude less explicitly but still raise prices:
My name for this digital flexibility is "twiddling." Businesses with digital back-ends can alter their "business logic" from second to second, and present different prices, payouts, rankings and other key parts of the deal to every supplier or customer they interact with:
https://pluralistic.net/2023/02/19/twiddler/
Not only does twiddling make it easier to rip off suppliers, workers and customers, it also makes these crimes harder to detect. Twiddling made Dieselgate possible, and it also underpinned "Greyball," Uber's secret strategy of refusing to send cars to pick up transportation regulators who would then be able to see firsthand how many laws the company was violating:
Twiddling is so easy that it has brought price-fixing to smaller companies and less concentrated sectors, though the biggest companies still commit crimes on a scale that put these bit-players to shame. In The Prospect, David Dayen investigates the "personalized pricing" ripoff that has turned every transaction into a potential crime-scene:
"Personalized pricing" is the idea that everything you buy should be priced based on analysis of commercial surveillance data that predicts the maximum amount you are willing to pay.
Proponents of this idea – like Harvard's Pricing Lab with its "Billion Prices Project" – insist that this isn't a way to rip you off. Instead, it lets companies lower prices for people who have less ability to pay:
https://thebillionpricesproject.com/
This kind of weaponized credulity is totally on-brand for the pro-monopoly revolution. It's the same wishful thinking that led regulators to encourage monopolies while insisting that it would be possible to prevent "bad" monopolies from raising prices. And, as with monopolies, "personalized pricing" leads to an overall increase in prices. In econspeak, it is a "transfer of wealth from consumer to the seller."
"Personalized pricing" is one of those cuddly euphemisms that should make the hair on the back of your neck stand up. A more apt name for this practice is surveillance pricing, because the "personalization" depends on the vast underground empire of nonconsensual data-harvesting, a gnarly hairball of ad-tech companies, data-brokers, and digital devices with built-in surveillance, from smart speakers to cars:
Much of this surveillance would be impractical, because no one wants their car, printer, speaker, watch, phone, or insulin-pump to spy on them. The flexibility of digital computers means that users always have the technical ability to change how these gadgets work, so they no longer spy on their users. But an explosion of IP law has made this kind of modification illegal:
https://locusmag.com/2020/09/cory-doctorow-ip/
This is why apps are ground zero for surveillance pricing. The web is an open platform, and web-browsers are legal to modify. The majority of web users have installed ad-blockers that interfere with the surveillance that makes surveillance pricing possible:
But apps are a closed platform, and reverse-engineering and modifying an app is a literal felony – several felonies, in fact. An app is just a web-page skinned with enough IP to make it a felony to modify it to protect your consumer, privacy or labor rights:
(Google is leading a charge to turn the web into the kind of enshittifier's paradise that apps represent, blocking the use of privacy plugins and proposing changes to browser architecture that would allow them to felonize modifying a browser without permission:)
Apps are a twiddler's playground. Not only can they "customize" every interaction you have with them, but they can block you (or researchers seeking to help you) from recording and analyzing the app's activities. Worse: digital transactions are intimate, contained to the palm of your hand. The grocer whose e-ink shelf-tags flicker and reprice their offerings every few seconds can be collectively observed by people who are in the same place and can start a conversation about, say, whether to come back that night a throw a brick through the store's window to express their displeasure. A digital transaction is a lonely thing, atomized and intrinsically shielded from a public response.
That shielding is hugely important. The public hates surveillance pricing. Time and again, through all of American history, there have been massive and consequential revolts against the idea that every price should be different for every buyer. The Interstate Commerce Commission was founded after Grangers rose up against the rail companies' use of "personalized pricing" to gouge farmers.
Companies know this, which is why surveillance pricing happens in secret. Over and over, every day, you are being gouged through surveillance pricing. The sellers you interact with won't tell you about it, so to root out this practice, we have to look at the B2B sales-pitches from the companies that sell twiddling tools.
One of these companies is Plexure, partly owned by McDonald's, which provides the surveillance-pricing back-ends for McD's, Ikea, 7-Eleven, White Castle and others – basically, any time a company gives you a hard-sell to order via its apps rather than its storefronts or its website, you should assume you're getting twiddled, hard.
These companies use the enshittification playbook to trap you into using their apps. First, they offer discounts to customers who order through their apps – then, once the customers are fully committed to shopping via app, they introduce surveillance pricing and start to jack up the prices.
For example, Plexure boasts that it can predict what day a given customer is getting paid on and use that information to raise prices on all the goods the customer shops for on that day, on the assumption that you're willing to pay more when you've got a healthy bank balance.
The surveillance pricing industry represents another reason for everything you use to spy on you – any data your "smart" TV or Nest thermostat or Ring doorbell can steal from you can be readily monetized – just sell it to a surveillance pricing company, which will use it to figure out how to charge you more for everything you buy, from rent to Happy Meals.
But the vast market for surveillance data is also a potential weakness for the industry. Put frankly: the commercial surveillance industry has a lot of enemies. The only thing it has going for it is that so many of these enemies don't know that what's they're really upset about is surveillance.
Some people are upset because they think Facebook made Grampy into a Qanon. Others, because they think Insta gave their kid anorexia. Some think Tiktok is brainwashing millennials into quoting Osama bin Laden. Some are upset because the cops use Google location data to round up Black Lives Matter protesters, or Jan 6 insurrectionists. Some are angry about deepfake porn. Some are angry because Black people are targeted with ads for overpriced loans or colleges:
And some people are angry because surveillance feeds surveillance pricing. The thing is, whatever else all these people are angry about, they're all angry about surveillance. Are you angry that ad-tech is stealing a 51% share of news revenue? You're actually angry about surveillance. Are you angry that "AI" is being used to automatically reject resumes on racial, age or gender grounds? You're actually angry about surveillance.
There's a very useful analogy here to the history of the ecology movement. As James Boyle has long said, before the term "ecology" came along, there were people who cared about a lot of issues that seemed unconnected. You care about owls, I care about the ozone layer. What's the connection between charismatic nocturnal avians and the gaseous composition of the upper atmosphere? The term ecology took a thousand issues and welded them together into one movement.
That's what's on the horizon for privacy. The US hasn't had a new federal consumer privacy law since 1988, when Congress acted to ban video-store clerks from telling the newspapers what VHS cassettes you were renting:
We are desperately overdue for a new consumer privacy law, but every time this comes up, the pro-surveillance coalition defeats the effort. but as people who care about conspiratorialism, kids' mental health, spying by foreign adversaries, phishing and fraud, and surveillance pricing all come together, they will be an unbeatable coalition:
Not every federal agency has gotten the message, though. Trump's Fed Chairman, Jerome Powell – whom Biden kept on the job – has been hiking interest rates in a bid to reduce our purchasing power by making millions of Americans poorer and/or unemployed. He's doing this to fight inflation, on the theory that inflation is being cause by us being too well-off, and therefore trying to buy more goods than are for sale.
But of course, interest rates are inflationary: when interest rates go up, it gets more expensive to pay your credit card bills, lease your car, and pay a mortgage. And where we see the price of goods shooting up, there's abundant evidence that this is the result of greedflation – companies jacking up their prices and blaming inflation. Interest rate hawks say that greedflation is impossible: if one company raises its prices, its competitors will swoop in and steal their customers with lower prices.
Maybe they would do that – if they didn't have a toolbox full of algorithmic twiddling options and a deep trove of surveillance data that let them all raise prices together:
Someone needs to read some Adam Smith to Chairman Powell: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
