Business
Column: Harris is right about housing assistance and price gouging. Here's what you should know
Up to now, Kamala Harris’ presidential campaign has been careful about rolling out its policy initiatives, and — at least in political terms — for good reason.
Policy details at this stage of a campaign do little but give opponents and pundits grist for nitpicking. Most voters aren’t very interested in the details of what a given legislative venture will look like once it goes through the Capitol Hill meat grinder. Political journalists, for their part, seem to be chiefly interested in teasing out holes in the proposal.
For Harris’ campaign, this looks like a lose-lose proposition. After grousing incessantly that Harris hadn’t offered policy specifics since becoming the evident Democratic nominee on July 21, the press has moved on to questioning her intentions, sometimes by seizing on misrepresentations of her actual proposals.
Vice President Harris will … direct her Administration to crack down on unfair mergers and acquisitions that give big food corporations the power to jack up food and grocery prices.
— Harris campaign
That has been happening since Friday, when Harris issued her first policy “agenda.” This was largely devoted to lowering the cost of housing, food, medical services and child-raising for families, and generated a swell of quibbles in the press and the punditocracy. As it happens, however, Harris is right about the burden of those costs, and right about the best ways to address them.
At this point in an election cycle, presidential campaigns are all about themes and impressions. Harris plainly is setting out a theme of help for an American middle class that has rightly felt neglected by government for decades. Donald Trump’s theme is … what, beyond whining about how he’s treated?
Harris’ professed desire to lower food prices led to a spurt of news articles and columns asserting that she was proposing “price controls.”
It’s hard to know where that idea came from; it peaked even before Harris’ policy brief was issued Friday, when the hand-wringers discovered that she was contemplating nothing of the kind.
Some commentators, abetted by the right-wing peanut gallery, may simply have extrapolated from indications that she was targeting price gouging, but that’s on them, not her. (The Murdoch-owned New York Post strained so hard to tag her policies as “Kamunism” that one almost fears that it gave itself a hernia.)
The Harris campaign in its formal statement proposed “the first-ever federal ban on price gouging on food and groceries.”
Some commentators pointed out that the average net profit margin for supermarkets is about 1%. They argued that this rules out any indication that Americans had been the victim of gouging by retailers.
Is that so?
It’s true that retail grocery profit margins are in the very low single digits. They always have been. But food retailing is a high-volume business, so margins below 2% can translate into annual profits of — to take just two examples — $1.3 billion (at Albertsons) and $2.2 billion (at Kroger).
Food and beverage retailers raised their prices during the pandemic — and have kept them at the higher levels since then.
(Federal Trade Commission)
That doesn’t mean that the grocers can’t gouge shoppers. After all, they did so during the pandemic.
How do we know this? From their own financial disclosures, which show that Albertsons and Kroger jacked up prices well beyond any increases in their costs.
The pretax profit margin at Albertsons rose from 0.96% in 2019 to 1.62% in 2020 and 2.92% in 2021; it fell back to 2.01% in 2023, once the pandemic appeared to move to the rearview mirror. At Kroger, the margin went from 1.62% in 2019 to 2.54% the following year. It dipped to 1.49% in 2021, but rose again to 1.96% in 2022 and 1.89% last year.
Nothing can explain the pandemic-era spike in profits better than these companies raising prices faster than their costs. In other words, gouging.
The Federal Trade Commission said so, without using the term. It found that food and beverage retailer revenues rose to 7% over total costs during the pandemic, well beyond “their recent peak of 5.6 percent in 2015.” That trend, the FTC reported, “casts doubt on assertions that rising prices at the grocery store are simply moving in lockstep with retailers’ own rising costs.”
Even beyond the food sector, as I reported earlier, corporate profiteering was unmistakably a significant contributor to inflation over the last few years. That was the conclusion of a team at the Federal Reserve Bank of Kansas City, who reported that markup growth “could account for more than half of 2021 inflation.” The annualized inflation rate reached 5.8% that year.
Notwithstanding the ginned-up controversy over Harris’ anti-gouging initiatives, it’s proper to note that price gouging and its country cousin, price-fixing, have traditionally been a bipartisan concern.
In 2020, Donald Trump issued an executive order to prevent gouging on health and medical resources, which makes his claim that Harris’ initiatives on prices are tantamount to “communism” seem more than a teensy bit hypocritical.
In the food sector, Republicans and Democrats in Congress last year took aim at price-fixing in the meat packing business. In 2022, StarKist pleaded guilty to price-fixing on tuna and paid a $100-million fine; Bumble Bee had also pleaded guilty and its former chief executive was sentenced to a prison term.
One linchpin of Harris’ attack on food prices is closer scrutiny of consolidation in the food industry. “Vice President Harris will … direct her Administration to crack down on unfair mergers and acquisitions that give big food corporations the power to jack up food and grocery prices,” the campaign stated.
If you’re an executive of Kroger and Albertsons, you can probably figure out that she’s talking about you. Those grocery giants are trying to push through a gargantuan $24.6-billion merger that, like all such mergers, will almost certainly produce higher prices at the checkout conveyor. The Harris campaign telegraphed that she will give the Federal Trade Commission more authority to chase bad actors in the food sector. The FTC already has sued to block the merger, and it’s a fair supposition that under a President Harris the agency won’t be backing off.
On housing, Harris is proposing $25,000 in down-payment assistance for first-time home buyers, with special attention for first-generation buyers. Her campaign didn’t specify how that assistance would be delivered, but did project that more than 4 million first-time buyers would be eligible over four years.
This proposal generated cavils in the chattering classes that it would drive home prices up to absorb the $25,000 grant, putatively keeping homes out of the reach of the beneficiaries.
A couple of points are germane here. One is that government-sponsored down-payment assistance programs are in place in all 50 states and the District of Columbia. The difference in Harris’ proposal is that it would be federalized and somewhat more generous than many state programs.
Pundits who claim that the proposal would drive prices higher must not know much about how the housing market works. First, fewer than one-third of home buyers are first-time buyers.
Sellers who assume that all their bidders are sitting on $25,000 in government cash risk pricing their homes out of a market in which two-thirds are using their own resources.
Budget hawks at the Committee for a Responsible Federal Budget, which was founded with money from a hedge fund billionaire, fretted that the down-payment proposal would raise the federal deficit by $100 billion over 10 years, at least.
To put this in perspective, consider the biggest federal giveaway to homeowners, the mortgage interest deduction from federal income tax.
This deduction costs the Treasury about $30 billion a year; if the increase in the standard deduction enacted in the Republicans’ Tax Cuts and Jobs Act of 2017 expires as scheduled next year, the cost of the mortgage deduction will soar to $84 billion in 2026, according to the congressional Joint Committee on Taxation.
Unlike the down-payment assistance contemplated by Harris, the deduction on home mortgage interest and points is heavily skewed toward the wealthy.
More than 63% of its claimants in tax year 2018, the most recent for which the IRS provides statistics, had incomes higher than $100,000; the $123 billion of deductible interest and points they reported to the IRS was 73% of the total.
More to the point, the mortgage interest deduction is a lousy tool for spurring home ownership, which supposedly is the goal of such tax breaks. That’s because it is “targeted at the wealthy, who are almost always homeowners,” as Harvard economists Edward L. Glaeser and Jesse Shapiro observed in 2003.
For middle- and low-income Americans, on the other hand, the No. 1 obstacle to home ownership is the down payment. Helping those households buy a house is tantamount to the government putting its money where its mouth is.
During an impromptu encounter with the press Sunday, Harris rightly described her initiatives as investments, not spending. Consider her remarks about the child tax credit, on which she proposes to restore to the level of up to $3,600 per child enacted in the Biden administration’s American Rescue Plan, and to raise to $6,000 for the first year of a child’s life.
“The return on investment in terms of what that will do and what it will pay for will be tremendous,” she said.
She’s right: In 2021, when the higher credit was enacted, the credit reduced the child poverty rate by about 30%, keeping as many as 3.7 million children out of poverty by the end of that year. When the enhancements expired in January 2022 and the credit fell to $2,000, the child poverty rate spiked to 17% from 12.1%, plunging those 3.7 million children back under the poverty line.
This is the program that Sen. JD Vance, the GOP candidate for vice president, claims to love. But when a raise in the program came up for a vote in the Senate earlier this month, Vance didn’t even bother to show up to vote.
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Business
Final orange grove in the San Fernando Valley is likely to give way to luxury homes
![Final orange grove in the San Fernando Valley is likely to give way to luxury homes Final orange grove in the San Fernando Valley is likely to give way to luxury homes](https://ca-times.brightspotcdn.com/dims4/default/6441667/2147483647/strip/true/crop/3000x1575+0+244/resize/1200x630!/quality/75/?url=https%3A%2F%2Fcalifornia-times-brightspot.s3.amazonaws.com%2F15%2Fe0%2F743640e84d809c1c16f06a5f106e%2Fsf-980829-orange-grove.jpg)
A century-old orange grove in Tarzana appears to be on its way to becoming the site of luxury homes, a transformation that would mark the end of commercial citrus farming in the San Fernando Valley, where the crop was once a mainstay.
At 14 acres, Bothwell Ranch represents less than one-thousandth of what once was, before the orchards and ranches of the Valley gave way to vast tracts of housing and commercial buildings to serve residents. Citrus production amid the multimillion-dollar homes is far from viable, and the parcel of land is now owned by a developer who intends to fill most of it with houses.
Los Angeles city planning officials held a public hearing Wednesday to collect comments before deciding whether to give the owners the green light to build 21 two-story homes while preserving a third of the site on Oakdale Avenue as a publicly owned orange grove managed by the Mountains Recreation and Conservation Authority for educational purposes.
City officials are still gathering information about the planned development, but Henry Chu, the city zoning administrator for the project, said Wednesday that he is inclined to approve it within a few weeks.
While hard to imagine today, Los Angeles was the top agricultural county in the nation for most of the first half of the 20th century, according to Rachel Surls, co-author of “From Cows to Concrete: The Rise and Fall of Farming in Los Angeles.” Citrus crops were as integral to that success as they were to the branding and selling of Southern California as a bucolic, desirable place to live.
“The Los Angeles Chamber of Commerce, different citrus marketers and organizations such as Sunkist oranges were very much a part of basically making Los Angeles look like this golden, almost tropical, agricultural paradise where people could come and get a whole new start,” Surls explained. “That positioning of Los Angeles as a place where citrus grew was really, really key to the growth of Los Angeles.”
With history in mind, City Councilman Bob Blumenfield announced in 2022 that after years of negotiations a deal had been reached between the site’s new owners, Borstein Enterprises, and the Mountains Recreation and Conservation Authority to preserve a third of it.
“While I wish there was a way to save the entire Bothwell Ranch, with this partnership we can save a large amount of it to be run by one of the best land preservation organizations in the country,” Blumenfield said.
The Bothwell Ranch gets its name from Lindley Bothwell, who purchased the farmland in 1926 after earning a degree in agriculture from Oregon State University, Blumenfield said. At the time, the citrus orchard was about 6 years old and totaled 100 acres. The Bothwell family sold off pieces of the land over the years but maintained a farming operation for decades until Ann Bothwell died in 2016. The ranch survived even as other ranches were driven out by rising land value during the housing boom after World War II.
It is now likely to be replaced by a development called Oakdale Estates. The owners have said they intend for the houses to include environmentally sustainable features such as “cool” roofs that reduce heat reflection into the atmosphere and a new street with a system that captures and filters rainwater before reusing it to irrigate landscaping that will include some citrus trees.
Two rows of citrus trees are expected to line Oakdale Avenue on the west side of the site as a homage to the land’s past, according to plans for the development. Designs for the residences call for modern farmhouses and Spanish architecture, meant to embrace the heritage of the San Fernando Valley.
Abelardo Hernandez, left, and Al Trujillo trim orange trees at Bothwell Ranch in the San Fernando Valley on Aug. 27, 1998.
(Frank Wiese / Los Angeles Times)
A critic of the project, Jeff Bornstein, said at Wednesday’s city meeting that the development should be reduced in scope to preserve more of the orchard.
“We have very little that marks our heritage of the past in the west San Fernando Valley,” he said. “We need to save a lot more of these” trees.
The citrus trees planted in the 1980s are past their prime fruit-bearing years and suffer from the effects of under-watering, a representative for the developer said.
When seen in aerial photographs, the ranch looks like a lush green anachronism — plucked from the agrarian past and neatly but nonsensically deposited into a suburban jewel box of red roofs and turquoise pools and tennis courts.
“We’re overrun,” as the late Bothwell matriarch told a reporter in 1998 with a sigh. “But you can’t stand in the middle of Ventura Boulevard and say, ‘Stop!’”
Times staff writer Julia Wick contributed to this report.
Business
Opinion: Tipping culture is out of control. Trump and Harris would make it worse
If you left the U.S. for a summer vacation, you may have encountered a strange and refreshing custom: not tipping. Or at least not tipping everyone in sight.
Americans have long been among the world’s most profligate tippers. “We tip more occupations than any other country, and we tend to tip larger amounts than other countries,” says Michael Lynn, a professor of consumer behavior at Cornell University’s School of Hotel Administration whose research focuses on tipping. “We’re kind of the tip-happiest country out there.”
Just wait. American tipping culture is poised to get even more intense. In a rare case of bipartisan agreement, presidential candidates Donald Trump and Kamala Harris both advocate exempting tips from federal income taxes. It’s a popular stance with many potential voters, notably in Nevada, a swing state whose many casino, hotel and restaurant workers rely heavily on tips.
The idea would be bad news for customers — and perhaps even for tipped workers themselves.
Consumers are already weary of the way tip expectations have expanded since the pandemic. As people curbed their restaurant dining to avoid COVID-19, they increased the size of the tips they left, whether for dining in, takeout or delivery. Meanwhile businesses gravitated toward machines for cashless, no-contact transactions.
Soon tip jars that once collected loose change at cash registers morphed into touch screens suggesting significantly larger tip amounts, even for small purchases. Restaurants without waiter service — and takeout coffee places — now come with pressure to tip.
A Pew Research Center survey last November found that 72% of U.S. adults believe tipping is expected at more places than five years ago. You have to wonder how often the other 28% get out of the house.
It’s all a bit much. In a February WalletHub survey, three out of four respondents said tipping has gotten out of control. Tipping isn’t just a financial burden. It creates psychological stress. Is a tip optional or expected? How much is enough? Am I a bad person if I say no?
Excluding tips from federal income tax might simplify employer paperwork and erase the difference between easily tracked credit card charges and cash gratuities, which often go unreported. The exemption could also allow employers to pay lower (taxed) wages, because workers would have the hope of keeping more (untaxed) tips.
All of those factors would encourage even more transactions to come with real or virtual tip jars. If your barista, tattoo artist and massage therapist get tips, why not the supermarket cashier, dental hygienist and plumber? Tipping in those situations might seem odd, even unseemly today, but tax-free income is hard to resist.
Vice President Harris has specified that the exemption would apply to “service and hospitality workers,” but they aren’t the only people who currently receive tips. It’s hard to imagine those limits surviving the political pressure to include at least all tipped workers below a given income threshold.
Either way, however, the proposal picks winners. To help all workers in low-paid jobs, presidential candidates might propose increasing the standard deduction or the earned income tax credit. That would be fairer. But the tip loophole isn’t about a general increase in take-home pay; it’s about winning votes in Nevada.
Like the tax credits that oil companies get for blending ethanol with gasoline, thereby subsidizing demand for Iowa corn, making tips tax free offers big benefits to a concentrated group while spreading the costs over the general public. Nobody’s likely to vote against a candidate because they dread proliferating tip jars, but workers who make a lot of tips might vote for them.
If either proposal came to pass, the revenue forgone by the Treasury would have to come from somewhere else. But that would be a “next year” problem, an unpleasant reality not destined to get much attention this fall or sway many votes in November.
That’s why we see two fiercely opposed candidates rushing to agree on this harebrained scheme. We can only hope that they cancel each other out and that whoever is elected drops the idea.
Virginia Postrel is a contributing editor for WorksinProgress.co and writes a newsletter at vpostrel.substack.com. Her most recent book is “The Fabric of Civilization: How Textiles Made the World.”
Business
Near-boiling coffee with a faulty lid left Starbucks customer badly burned, suit says
![Near-boiling coffee with a faulty lid left Starbucks customer badly burned, suit says Near-boiling coffee with a faulty lid left Starbucks customer badly burned, suit says](https://ca-times.brightspotcdn.com/dims4/default/287cb91/2147483647/strip/true/crop/4589x2409+0+325/resize/1200x630!/quality/75/?url=https%3A%2F%2Fcalifornia-times-brightspot.s3.amazonaws.com%2F14%2Fc1%2F130385ce4cae85ac2330387c1f4c%2Fearns-starbucks-92067.jpg)
A South Los Angeles woman is suing Starbucks for negligence, alleging she was scalded at a drive-through window in Lynwood.
Muriel Evans filed a complaint Wednesday with the Los Angeles County Superior Court in Compton. She alleges that a faulty coffee cup lid and the excessive heat from her beverage led to severe burns after a barista spilled coffee into her lap.
Evans is asking for general and special damages, including her medical, hospital and incidental expenses, and punitive damages to “set an example” of Starbucks. She alleges the corporation is indifferent “to the obviously dangerous mixture of excessively hot temperatures combined with defective lids.”
“Starbucks has shown a reckless disregard for the safety of its customers, continuing to serve scalding hot coffee in defective cups despite countless reports and warnings,” Evans’ attorney Nick Rowley said in a statement.
A Starbucks representative responded briefly: “We take pride in ensuring our beverages are crafted with care and delivered to customers safely. We take all claims seriously, but we will not be commenting on pending litigation.”
Evans pulled into the Starbucks drive-through on Aug. 25, 2022, and ordered a coffee, according to the lawsuit.
A Starbucks employee then “mishandled” the coffee and spilled it onto Evans’ lap, with the hot liquid rolling down her left leg, according to the lawsuit.
A South Los Angeles woman says her leg was severely injured after the lid came off a cup of 190-degree Starbucks coffee.
(Courtesy of Trial Lawyers for Justice)
Evans said she suffered severe burns to her body along with nerve damage and disfigurement.
Evans’ legal team believes the coffee’s temperature was 190 degrees, just a little less than boiling.
Previous Starbucks guides have listed most hot beverages at between 150 and 170 degrees.
Water heated to 120 degrees takes five to 10 minutes to cause a third-degree burn; at 131 degrees, it’s 10 to 30 seconds; and at 140 degrees, it’s two to five seconds, according to the National Center for Biotechnology Information.
As for the lids, there have been various media articles and threads and videos complaining about Starbucks’ lids and their ease in falling off, including on Reddit and TikTok.
Starbucks is facing similar lid lawsuits.
A San Fernando Valley teen filed a suit in June against the company, alleging she was burned by hot tea. The teen’s drink was double-cupped, but the lid popped off, the lawsuit alleges.
“Muriel Evans suffered severe burns because Starbucks prioritized cost-cutting over basic customer safety,” Rowley said. “We intend to hold Starbucks fully accountable for their blatant disregard and gross negligence.”
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