Atlas Shrugged: The Mocking

Monday, October 24, 2011

Subsidy Is The Best Policy

Megan McArdle was forced to switch from a debit to a credit card when new regulations led to the elimination of her frequent flyer perks. Some commenters, both predisposed and well-trained by the little missy to exhibit public demonstrations of callousness towards others, excoriate her for expecting them to subsidize her airline upgrades. Other commenters do a thorough job of dismantling McArdle's extended whine and marvel at the hypocrisy of her expectations. A good time is had by all but McArdle, so let's pull up a chair and watch the show. Sometimes the best thing to do is just get out of the way and let the funny speak for itself.

Gepap 2 days ago
What a whinner you are McArdle. Durban turned a hidden fee into a transparent fee at worse, and you complain? Jesus.

McMegan 15 hours ago in reply to Gepap
No, that's not right. He slapped a price control on interchange fees, with the result that the fee was charged somewhere else.

Price controls are not "more transparent"; they shift the fee into some other form. Price controls on bread are not "more transparent" because we now really notice that we have to spend seven hours waiting in line for a loaf, whereas before the "excess" cost was "hidden" in the price of the goods we bought.

gyshrestha 10 hours ago in reply to McMegan
So why do you think retailers should subsidize your airline perks, seriously

McMegan 10 hours ago in reply to gyshrestha
Why do you think people with low-balance bank accounts should pay higher fees so that Wal-Mart doesn't have to? Seriously.

gyshrestha 10 hours ago in reply to McMegan
because, it is not your inalienable right to have a debit card. Use cash if you don't want to pay for debit card service.


gyshrestha 10 hours ago in reply to McMegan
basically, you want a subsidized debit card service on retailers money

McMegan 10 hours ago in reply to gyshrestha
Or, alternatively, they want a subsidized payment system on my money. It costs them money to handle cash and checks.

gyshrestha 10 hours ago in reply to McMegan
well, now do not beat around the bush, miss. If it costs retailers money to handle cash, so be it. it still costs them money to process charges. you are implying that retailers are getting the payment system for free, no they pay for it. only that it was more predatory before. now if the banks want to pass the costs to customers they should be able to, you are using the service, if you don't want to use it, do not, use cash like old days, why should retailers subsidize the populace

gyshrestha 10 hours ago in reply to gyshrestha
doesn't that make sense in your black and white world

gyshrestha 10 hours ago in reply to gyshrestha
i will give you a good analogy, imagine you lived back in 1800's, you, Megan is a hardworking entrepreneur, you own a salon in Still Water, OK. The payment mode of the day is, say its Lima. Now, everything is well and good. the world is flat and bankers are rich and making money, then all of a sudden Master Cardos open a bank in your town, then he introduces his own currency, lets say, Nola. Then, he sends a messenger to every residents in the town and inform them, if they bring their Lima and use Nola in the town, he will give all of them cash back of 2%. Now, all the residents would obviously do as Master Cardos want because we are all self interested individuals, but Master Cardos charge all the merchants in the town 3 % to convert the Nola into Lima, the same Lima which they have to use to buy brewski from next town or pay their employees who live in the next town where they do not use Nola. Now, merchants in the town was not happy with change at first but they took the idea anyways, slowly the rates started creeping up and closed around five percent. then, it came to be known that another town in the south has same system but the rate over there is less than one percent, there are no significant cost differences, so the merchants rebelled against the banker, Master Cardos and called a senator and have him revised the rate to 2.5 percent, this is what happened, crazy

gyshrestha 10 hours ago in reply to McMegan
because, it is not your inalienable right to own a debit card, use cash, you freeloader

Remember that McArdle said she was using the Doug Ramsey system, in which one uses cash for daily expenses, not debit cards. No doubt she figures she is saving money by using the card to subsidize her airline upgrades.

gyshrestha 10 hours ago in reply to McMegan
It is not similar to price control at all, you have two big entities colluding and you worry about price control, it is not like setting price for a gallon of milk or a loaf of bread in traditional sense, do not set everything in black and white term, it's like putting checks and balances to predatory pricing by firms who control majority of the market and the product they sell is indispensable to modern form of commerce

McMegan 10 hours ago in reply to gyshrestha
It is not only similar to a price control, it is in fact, a price control. They have capped the fee at a set price, which is the definition of a price control. Are you unfamiliar with the legislation, or with the concept of price controls?

gyshrestha 9 hours ago in reply to McMegan
i know about the legislation because i am a small retailer myself, now, it is a price control, i do not deny it, but all price controls are not created equal, you are just crying wolf because the government took an action and it irked your libertarian skin, and you set it in black and white terms, if you were to be truthful, you will also inform your readers about who controls the market, how they set the price, and who pays for the service.

gyshrestha 8 hours ago in reply to McMegan
you compared soviet price control on bread to government fixing predatory pricing in highly unregulated service category where there is no competition at all, Genius!



Wilson263 2 days ago
But even less do I like cramming my extra long legs and my back problems into cattle class for long-haul flights, a problem I currently solve by using my accumulated miles to upgrade to first class.

Surely this is a problem that can be solved by accepting more Koch money!?!?!?!

vkg123 2 days ago in reply to Wilson263
her elitism is really beginning to show. Too lazy to even look for a "maybe lost" card even. DC must be bad for her.

Alsadius 2 days ago in reply to vkg123
Didn't look or didn't find? Or should I say, didn't read or didn't think?

realcynic 2 days ago in reply to Alsadius
Well, gee, if her card was cancelled by the issuer and no replacement was offered, what does it matter whether she has the card in her possession or not?

AAdvantage decides to shaft her by taking away all the miles from her debit card, refusing to transfer it to her new AAdvantage credit card - but it is Dick Durbin's fault?

How does that make sense even in McMeganWorld?

McMegan 15 hours ago in reply to realcynic
Who said my miles didn't transfer? They're in my frequent flyer account; they transferred just fine. I'm just annoyed about having to use a credit card, when I was perfectly satisfied with my debit product.

TimSims 11 hours ago in reply to McMegan
Will your viewpoint change if, in the fullness of time, the cost of using debit of cash for most transactions is lower than the cost of using credit, as the case used to be back in the 80s, before CC companies started strong arming merchants?

Might you be able to save enough money flying coach on short flights to simply afford the upgrade to first class out of your own pocket? Or is this an issue where your employer was reimbursing you for your tickets, but letting you keep the miles? If so, it sounds like you were siphoning corporate funds (legally) and now you're just upset that you need to go to an extra bit of trouble to do so.

If I'm mis representing your viewpoint, please let me know.

McMegan 11 hours ago in reply to TimSims
It has long been perfectly legal for merchants to offer a cash discount. In fact, some gas stations do. You might ask why most merchants don't, and whether this tells us something about the likelihood that they will rebate more of their interchange fees gains to us than our banks did.

TimSims 11 hours ago in reply to McMegan
Actually a lot of retail CC agreements expressly forbid offering cash discount, just as many forbid retailers from refusing a CC even for trivial purchases of a dollar or less. These types of clauses are now forbidden, which gives retailers a lot more leeway to offer discounts (as well as refuse to let you use your CC to buy a pack of gum).

I haven't seen a gas station in Illinois offer a cash discount since the 80s, even though at one time, they ALL had a separate price for cash. I don't think I've seen any retailer offer a cash discount for anything in the past 20 years.

McMegan 11 hours ago in reply to TimSims
Those clauses are not legal, and haven't been for a long time: http://www.fdic.gov/regulation...

gyshrestha 8 hours ago in reply to McMegan
here is a link for you Megan,the statue only cover credit cards, not the debit cards, http://usa.visa.com/personal/u...

There is a lot more; more ignorance, more snark, and more information on debit and credit cards--from commenters, of course. Who could have known that complaints about not getting free upgrades to first class would have irritated so many people during these hard times?

31 comments:

fish said...

I can't stand the insufferable bragging over there about how people so expertly manage their money so that they know to the penny what their bank balance is. It is like they all read a Christmas Carol and decided it was a tragic tale of descent into madness.

keatssycamore said...

Hey, Susan, I think you mean "Dave" Ramsey. He's the self-help guru McMegan turned to when her financial life became unmanageable. You have "Doug" above. Sorry for picking that nit.

OTOH, glad you pointed out that Ramsey says, "use cash" and McMegan hears, "cattle class". Though I find it completely unsurprising that she practices his program her way. Typical McMegan.

ifthethunderdontgetya™³²®© said...

fish is just jealous. He can't remember where he put his nest eggs!
~

KWillow said...

I use a United Airlines VISA, so we can use the "miles" to upgrade to Business Class on long trips.

But I try hard not to think of Coach passengers as being "cattle".

Despite her claims of bad-back etc, it seems ArgleBargle is just too too classy to sit next to one of the 'cattle'.

Ufotofu9 said...

I love this blog, but something I have realized after over a decade on the internet is: you can't win when it comes the debating in the comments sections. You lose by getting involved in the debate in the first place.

blivet said...

"A couple of weeks ago, I lost my debit card. Well, 'lost' is a strong word. I'm sure it's somewhere in my house..." Personally I think Jane needs to lay off the sauce, but one way or another her life sounds like a shambles, by her own description.

hylen said...

This guy gyshrestha has a future as a blog commenter!

Lurking Canadian said...

Can't we focus on the real tragedy, which is that her commenters don't understand that it's All About Her?

KWillow said...

Well, I read ArgleBargle's post. She assumes her AAdvantage card was cancelled because of the new credit card laws, but shows absolutely no evidence to support this claim. Maybe they cancelled her ATM card because she keeps loosing it.

Myles said...

To be fair, the whole Durbin amendment was essentially a straight transfer from consumers to retailers (e.g. Wal-Mart, Target, etc., for the most part). As a consumers, I really don't see why I should be further subsidizing greedy, sharp-elbowed businessmen. I really don't see the moral problem with one group of greedy businessmen (credit card companies) making another group of greedy businessmen (retailers) pay for benefits enjoyed by consumers.

Anatole David said...

@Susan

Today McMegan doubled down on her war against "price fixing" in defense of banking oligopolies, through debit cards, fixing exorbitant fees sans transparency.

Melodrama ensued--wrestling columns, etc

cynic said...

Myles: To be fair, the whole Durbin amendment was essentially a straight transfer from consumers to retailers

No. It was a transfer from Banks to retailers. Consumers, if affected at all, are affected only at the margin because they can switch to other banks that don't charge the 'make up' fee.

Anonymous said...

No. It was a transfer from Banks to retailers. Consumers, if affected at all, are affected only at the margin because they can switch to other banks that don't charge the 'make up' fee.

Empirically disproven by the experience in Australia. Consumers ended up paying higher fees and getting fewer rewards, because the demand for debit card services is pretty inelastic and banks will have to pass on the costs anyhow. Again, I have no sympathy for retailers screaming for political ex-post rule-changing to get more money from banks. Both are greedy, sharp-elbowed businessmen. If you don't like the fees, don't take the cards and the increased customer traffic enabled by cards.

Myles

Anonymous said...

Actually, let's try this argument another way: if retailers didn't have to eat the debit card charges, they wouldn't spend millions lobbying to change the existing rules by legislative action, would they? That they bothered at all is ipso facto evidence that they had to eat the charges. And the charges they eat generally go at least 60% toward consumer rewards. So every additional dollar that is going toward retailers as a result of the Durbin amendment, at least 60 cents are coming straight out of the consumers' pockets. It's rent-seeking, pure and simple.

Myles

cynic said...

Myles: Consumers ended up paying higher fees and getting fewer rewards, because the demand for debit card services is pretty inelastic and banks will have to pass on the costs anyhow.

Same false argument that Mcmegan makes: some consumers getting fewer rewards means a subsidy has been removed. Removal of subsidy to *some* is NOT a 'cost' passed to *all*. Banks can try to pass on the cost and may even succeed, but it is by no means automatic.

And the charges they eat generally go at least 60% toward consumer rewards. So every additional dollar that is going toward retailers as a result of the Durbin amendment, at least 60 cents are coming straight out of the consumers' pockets.

That is false as well. Mcmegan did not lose any of her 'rewards'. In any event, removal of a reward for 'some' is not the same as 'coming out of pockets' of others.

Myles said...

Removal of subsidy to *some* is NOT a 'cost' passed to *all*.

Removal of subsidy for some, is, in fact, a cost that is passed to the aggregated. If you have 100 people who each have 100 pencils and you take 60 pencils each from 40 of these people, you have in fact decreased the aggregate number of pencils, or benefit to the consumer, from 10,000 to 7,600.

I really don't know why you are engaging in Jesuitical bullshit about something as obvious as this.

In any event, removal of a reward for 'some' is not the same as 'coming out of pockets' of others.

Given fungibility of money, a dollar of reward earned is in fact directly proportional to a dollar of money saved. The reduction in rewards does in fact come straight out of the consumer's pocket.

Downpuppy said...

Fungible means I can haz your money?

Kewl!

Dragon-King Wangchuck said...

Myles and other ME-gan defenders,

Shut up about Australia, you have no idea what you are talking about. The interchange fee cap price control is on credit cards. Teh debit card system in Australia is EFTPOS and I have yet to find any evidence that these fees have ever been cut.

Also too, capping credit card interchange fees raised prices? [citation needed]. Perhaps you are referring to page 49 of this GAO report:
By capping interchange fees, RBA estimates that fees to merchants were lower by about 1.1 billion Australian dollars for the period of March 2007 through February 2008, but officials acknowledged that it would be very difficult to provide conclusive evidence of the extent to which these savings have resulted in lower retail prices because so many factors affect such prices at any one time.
Yeah - empirically proven all right.

cynic said...

More Myles bullshit:
a dollar of reward earned is in fact directly proportional to a dollar of money saved
Except that a) we are talking about Debit cards here and b) Debit cards do not give a cash back (dollar for dollar) reward. What they give is bullshit rewards like miles to those who rarely fly and some random 'points' that can be used to offset the insanely high prices at the AAdvantage 'store' and still buy it for higher price than you can find it at Amazon.

The only reason why McMegan makes such a big deal of this is that she (and apparently you) think that these rewards are worth so much that everybody should pay higher interchange fees to banks.

Dragon-King Wangchuck said...

ME-gan's "keep digging" post is astonishing. She's so innumerate she can even misquote her own numbers. Her point #1:
"We're talking about a transfer of, at most, tens of dollars a year."

That "ten dollars a year" bit hyperlinks to another one of her brilliant articles showing teh average transfer paid by the lowest income group was $23 (which is at most ten bucks). Even worse, she isn't even talking about teh regressivity at this point - but teh degree of "hurts". In that case, the actual amount is quoted in teh linked BM Matt piece:
"On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year."

IOW, her "at most ten bucks" is a transfer of an average of $151 from groups that tend toward teh lower end of teh income spectrum for a subsidy of $1,482 to teh folks at teh higher end.

Pete said...

D-KW, that's no fair, you having empirical facts and all. Why'dya bring a gun to a lil' ol' knife fight?

Downpuppy said...

So Megan wades into the Oakland police riot without bothering to even read the story..

(Yeah. I'm shocked too)

and some new character almost spoils the game:

JeffJeffJeffJeffJeff 50 minutes ago
Megan, sincerely, why are you offering advice if you have no understanding of what happened and no intention of finding out?
You don't even have an accurate understanding of the predicates for violence, timeline, etc. You're facilitating misinformation and setting up a discussion based on nonsense.

KWillow said...

"Its an easy, cushy job, but someone's gotta do it!"

atat said...

That Oakland article reads like a Megan parody. She's just an arrogant, and ignorant, concern troll. Miss Two-by-Four playing the scold. Jeezus. She admits she knows next to nothing about the events, and yet she still thinks it's a good idea to play referee. What goes through her mind? I can't imagine the thought process at work here.

Dillon said...

Megan, sincerely, why are you offering advice if you have no understanding of what happened and no intention of finding out?

Why? It's her oeuvre.

(or, as Megan might say, her 'outre').

Downpuppy said...

Megan coming down neutral on the police defense of her most cherished bankers is a pretty solid sign that the militarized violent assault of the police was way over the line. (Just in case you couldn't tell that from the videos)

Susan of Texas said...

The last thing McArdle wants is Occupy Eckington. But it's interesting to see her point of view develop.

1. Dirty, silly protesters.
2. They'll trivialize themselves into disbanning.
3. For the love of God, don't get violent. Violence never got anyone anything.

Susan of Texas said...

Also--I apologize for the lack of posting, I'm working on two posts and it's a busy time.

Also, too.

atat said...

The "criticism" section there needs some serious filling out.

Anonymous said...

http://www.theatlantic.com/business/archive/2011/10/can-you-be-guilty-of-insider-trading-without-personal-gain/247489/

Anonymous said...

ok, now she's just baiting.
I bet her blog hits had been doing down.

-ecl