Category Economic Policy

Good for Balthazar for Getting Rid of its Bathroom Attendants

Danny Vinik Leave a comment

Henry Blodget caused a bit of a stir last week when he penned a diatribe against the bathroom attendants at the New York restaurant, Balthazar. Here’s a sample of it:

I always forget that Balthazar makes a guy stand in the tiny bathroom all day, so whenever I open the Balthazar bathroom door after breakfast, I am hit by the same series of unpleasant emotions: Annoyance, guilt, pity, uncomfortable invasion of personal space, and then… extortion.

…

I go through this internal dialogue and series of emotions every time I enter the Balthazar bathroom. And it makes me hate Balthazar and never want to come back. And then, over time, I forget the Balthazar bathroom experience, and remember only the dining room and meal. And then, eventually, I go back.

But this is a terrible practice — this “bathroom attendant” thing.

It is never helpful.

It is never anything other than uncomfortable and degrading.

It is never a “service” that I look forward to or enjoy.

So I am hereby appealing not just to the bosses at Balthazar, but to restaurateurs and hoteliers all over the world, to eliminate it.

Lo and behold, Balthazar took his advice. Owner Keith McNally announced today that he will be relieving the bathroom attendants of their duties over the next few weeks. In the end, he said, he agreed with Blodget so the bathroom attendants will be no more.

In finding this out, Blodget reacted on Twitter with remorse and wished that McNally had hired them as waiters instead. But this doesn’t make any sense. If McNally agrees with Blodget and does not see a purpose for the attendants, then he should get rid of them. If he has an opening on his wait staff, then he should fill it. But hiring extra waiters for the sake of hiring isn’t a good business strategy.

It’s certainly sad that those workers have lost their jobs, but our economy works best when companies take advice from their customers and make changes to their businesses accordingly. Capitalism dictates that companies have the ability to fire workers it deems expendable and workers can leave jobs for better ones. McNally made that decision. He should not feel compelled to continue employing them just because he eliminated their positions.

There is a larger point here as well. We’re into President Obama’s second term and the economy is still barely recovering. These firings wouldn’t be as painful if the workers knew they had a high chance of finding a new job in the near future. Unfortunately, our government (read: Republicans) has done everything in its power to lower those odds. Sequestration is a moronic policy that is significantly reducing growth. The government shutdown harmed the economy and fiscal brinksmanship does so well. Bipartisan agreement to let the payroll tax cut expire is holding back the economy too. These are just the ways Congress is actively harming the economy. It should be actively helping it by passing infrastructure bills and immigration reform. The Balthazar bathroom attendants would have a much greater chance of finding a new job if Congress wasn’t actively trying to stop them from doing so.

It’s a sad state of affairs that eliminating pointless jobs will cause such an uproar. These positions simply unnerved customers and guilt-tripped them into tipping. They should be eliminated, but the workers should also be able to find new employment in positions that use their skills better (anyone can turn on a faucet and hand out paper towels) and provide a greater benefit to society. The abomination here isn’t McNally eliminating those jobs or Blodget’s post that led him to do so. It’s the government’s inability to help Americans get back on their feet and recover from the Great Recession. Direct your anger there.

FOMC Expectations Show The Non-Taper Worked

Danny Vinik Leave a comment

The FOMC will release its October statement at 2PM today and the widely held expectation is that the Fed will stand pat and continue its $85 billion in bond purchases. Despite the overwhelming belief that the Fed would taper in its September meeting (it didn’t), the exact opposite belief is now conventional wisdom this time around. Why did everyone’s expectations about Fed policy take such a dramatic turn?

Not because the economy suddenly crashed. Equities are still rising and interest rates have fallen in the past month as the market has pushed back the timeline for the taper. The jobs report was underwhelming, but not catastrophic. Consumer confidence fell, though this wasn’t surprising. The government shutdown hurt the economy, but much of it will be made back in the upcoming quarters and we also avoided a default. The shutdown has also delayed the release of some economic data.

All in all, it has been a mediocre, slightly below average last month of economic news. But based on market expectations last time, slightly below average data would still lead the market to expect the Fed to taper. Since that’s not the case, then it’s not the data alone that has caused Fed watchers to adamantly believe that the Fed won’t taper this time. It’s because the Fed regained its credibility and realigned the market’s expectations with future Fed policy.

The Fed cannot commit to any action it will take in the future since it does not know the future state of the economy. But it can give the market a baseline of how it will react if certain economic conditions come to pass. That’s what Bernanke set out to do in June when he said that the Fed would begin tapering in the fall if the market continued to improve at a moderate pace. Over the summer, that improvement slowed, but the market didn’t adjust its expectations to take into account this slowdown. It assumed that the baseline that Bernanke laid out was a set path of action, despite his repeated admonitions not to take it that way.

In fact, this blind belief that the Fed would taper caused interest rates to rise which weakened the economy and gave further incentives to the committee to continue its bond buying. By pricing in the taper, the market helped create the economic conditions for the Fed to do just the opposite.

Through all of that, the FOMC sent a message in September: Don’t assume that the Fed won’t adjust its policy based on the underlying economic data. Finally, Fed watchers and the market are catching on. The 180-degree turn in expectations is a direct result of the Fed convincing the market that it’s data-dependent and for them to use the Fed’s forward guidance as just that, a guide not a set path. The unanimous belief that the Fed will not taper today is evidence of that policy’s success.

Dumb Arguments Against Changing The Height Act

Danny Vinik 2 Comments

The D.C. Office of Planning recently sent a proposal to Rep. Darrell Issa (R-Calif.) to update the 1910 Height Act. The proposal called for a modification of the formula used to calculate maximum height restrictions in the L’Enfant area and also to release the city of all federal height restrictions in the rest of the District. The city would set its own limits based on its zoning process.

Iss has taken a keen stance on D.C. issues and asked for the proposal, along with one from the National Capital Planning Commission (NCPC), which presented a much more timid recommendation. While the fate of the 103-year-old law rests with Congress, D.C. residents have not been quiet about voicing their displeasure at the proposal. But the arguments against modifying the Height Act always seem to come up short.

The arguments in favor are pretty straightforward. The current housing restrictions severely limits the supply of residential and commercial space. That means higher rents for both residents and businesses, which are passed down to consumers through higher prices of goods. With more housing, rents would fall, prices would fall and more people would move into the city. This would not just provide a much larger customer base, but also a much larger tax base, giving the city more resources to spend on infrastructure and other programs. The arbitrary restrictions on the housing supply severely restrict economic growth. D.C.’s plan would start to change that.

Not everyone seems to get this though.

For instance, the President of the Capitol Hill Restoration Society, Janet Quigley, recently published a piece that argued it “could raise housing costs.” This is entirely wrong. Here’s a simple, Econ 101 demonstration of what happens when you increase the availability of housing:

supply shifts out

 

Notice how price falls? In the case of housing, that’s rents. The amount of housing demanded increases as well, but this is a shift along the demand curve. It’s a result of the lower housing costs as the market reaches a new equilibrium. In and of itself, relaxing housing restrictions will lead to lower, not higher, housing costs.

But the most ludicrous argument I’ve seen against modifying the Height Act comes from Chris Otten, the director of the District Dynamos, when he questioned whether the population growth forecasts laid out by Planning Director Harriet Tregoning were accurate. Much of the impetus for changing the law comes from the fact that D.C. estimates that its current housing stock cannot keep pace with the city’s expected population growth. Otten thinks he’s found a hole in that argument. Here’s Aaron Wiener at City Paper:

Chris Otten, director of the Ralph Nader-backed District Dynamos, questioned Tregoning’s population growth forecasts, saying they do not account for increased cancer rates from disasters like the Fukushima nuclear meltdown.

Wait. What?! Otten’s reason for doubting the growth forecasts is that more people may die of cancer thanks to potential nuclear meltdowns in the future. Of course, Otten could have come up with a hundred other potential future disasters that will restrict population growth. Why not the risk of a meteor shower? Or an alien attack? This line of argument is so absurd it goes to show how far opponents of changing the Height Act will go to stand in its way. Let’s hope Issa & Co. don’t give them a second thought.