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Three days after the Primary That Shook the Universe, we know what next year’s Congress won’t include: House majority leader Eric Cantor. In his place there will be lots (more) partisan rancor, a decent chance of another debt-ceiling battle, and an economics professor named David Brat. Brat ran at Cantor from the right, and his academic pedigree means that he’s left a long paper trail over the years.
When Brat gave credit to God in his victory speech, it wasn’t just posturing. “In his writings, Brat seems eager to fuse Christianity and the generally secular field of academic economics”, says Kevin Roose. Brat’s work often focuses on what makes countries rich or poor, and he closely links Protestant beliefs with free markets. In a 2004 paper he wrote, “give me a country in 1600 that had a Protestant-led contest for religious and political power and I will show you a country that is rich today”. Protestantism, he says, “provides an efficient set of property rights and encourages a modern set of economic incentives”. That’s not an entirely new idea. “Sociologist Max Weber said essentially the same thing (only much, much better)” back in 1905, saysCandida Moss.
The crisis in Iraq continues to worsen. The militant group Islamic State of Iraq and the Levant (also referred to as the Islamic State of Iraq and Syria) has taken the city of Mosul, in the Sunni-dominated northern area of the country, and are headed south. But the Iraqi Kurds, based in their own semi-autonomous region in the northeast of the country, have taken the oil-rich city of Kirkuk, Reuters reports.
There is increasing fear of civil war in the country as the conflict escalates. Worse, there are fears the conflict could move beyond Iraq’s borders, with the extremist ISIL launching attacks against both Syria and Turkey.
The U.S. economy may have contracted more than originally estimated in the first quarter. New healthcare spending data suggests the economy may have shrunk as much as 2% (the original estimate was just slightly over 1%). However, a lot of that GDP drop was due to low inventory accumulation, says Peter Coy, and that’s actually good news for next quarter, when firms will likely produce more to make up that inventory.
Goldman Sachs’ top economist, Jan Hatzius, thinks that “the US economy is now growing at an above-trend pace”, despite the drop in Q1 GDP. This is partially because Hatzius sees good things going on in the housing market, and sees a growing trend of millennials (finally!) moving out of their parents’ houses and forming households. Joe Weisenthal agrees with Hatzius’s conclusion, mostly, he says, because the credit markets are expanding. David Wessel tweets Macro Advisors’ GDP tracking: -2.1% for the first quarter of 2014, but anticipating 3.7% for the second quarter.
Do you know where the meat in your hamburger came from? It’s sort of trick question, because even if you don’t know, it’s pretty easy to guess. Roberto Ferdman reported yesterday that the top four meat packers in the United States — Tyson Foods, JBS USA, Cargill, and National Beef — control 75% of the nation’s beef supply. Most of that consolidation happened in the 1980s, but the big four have been slowly adding to their market share in the last decade:
Ferdman explains why this matters:
Consumers are becoming increasingly more concerned with how their meat is produced. Part of that is born from a demand for more humane practices—the meat industry’s malpractices are well documented—and part of that stems from a heightened awareness about what people are putting into their bodies—the meat industry has come under fire for both its questionable practices and potential for large-scale contamination. An ever-shrinking pool of options will only make it more difficult for consumers the fair opportunity to appropriately decide whom they do business with.
On Monday, President Obama signed an executive order capping student loan payments at 10 percent of the borrower’s income and allowing debts to be forgiven after 20 years of payments. Income-based repayment — what the administration calls the “Pay-As-You-Earn Program” — is already an option for most borrowers. This order expands it for another 5 million people, mostly those who took out loans before October 2007.
Libby Nelson writes that it’s unclear how much this plan will really help those who need it. “Enrollment rates in income-based repayment plans [that already exist] have increased after an Education Department outreach blitz, but far more people are eligible than are enrolled”. For those who do sign up, borrowers who have the highest overall payments — mostly law and business graduates — will benefit most, says Karen Weise. Kelly Field writes that that means this program isn’t necessarily helping those who need it most: graduates with moderate debt burdens compared to MBAs and lawyers, but much lower incomes.
Another day, another potential Bank of America mortgage settlement. This time it could be up to $17 billion — the largest settlement by any bank. BofA, however, is finally putting its foot down. According to the New York Times, it doesn’t want to pay more than $12 billion.
The bank has paid out much more than any other bank over crisis-era mortgages. Here’s a Reuters chart showing how much it, JPMorgan, and Citi have paid so far:
Fancy taxi app Uber just closed a new round of funding that valued the company at $18.2 billion, less than a year after being valued at $3.5 billion. Despite the company “operating in 128 cities in 37 countries around the world with hundreds of thousands of transportation providers and millions of consumers connecting to our platform,” there are a lot of people who don’t think it’s worth that much.
Dan McCrum does some back-of-the-envelope math and figures out that, using some optimistic assumptions, Uber needs 60 million users to justify an $18 billion valuation. That’s not a lot compared to other major smartphone apps, but it is a huge chunk of the global taxi-taking population. “It’s equivalent to the entire populations of San Francisco, Los Angeles, New York, Chicago, London, Washington DC, Paris, Toronto, Tokyo and Hong Kong combined”, he says.
Consumer debt is back in the US. Matt Phillips at Quartz reports that after a long period of low or negative debt since the crisis, households seem to be breaking out their credit cards again. In April, revolving consumer debt spiked above $5 billion for the first time since 2008:
Phillips explains why that’s a bad thing:
So is an increase consumer credit use good news or bad news? Well, if you’re simply rooting for GDP growth, without regard for how it occurs, you can argue that this is a great sign. Roughly 70% of US economic activity is driven by consumption … But if you care about the long-term sustainability of US economic growth and the financial health of American households, it’s not particularly heartening to see signs of backsliding into a widespread reliance on credit cards.
A computer program named Eugene Goostman made AI history by becoming the first machine to pass the Turing Test, the 65-year-old benchmark for human-level artificial intelligence. At a competition at the Royal Society London, the program successfully convinced a third of the competition’s judges that it was a human — albeit a 13-year-old Ukrainian boy whose first language was not English.
“What Goostman’s victory really reveals, though, is not the advent of SkyNet or cyborg culture but rather the ease with which we can fool others”, says cognitive scientist Gary Marcus. The program doesn’t have actually have human-level intelligence, which is what the Turing Test is really meant to look for, but is simply very good at deflecting questions using human-like speech patterns. As a result, Adam Mann argues Eugene actually got an F on the Turing Test.
The march toward legalizing gay marriage across the country continued last Friday, when a federal judge declared Wisconsin’s ban on it unconstitutional. Clerks in two counties started issuing marriage licenses on Friday, according to Reuters.
However, gay marriage in Wisconsin is still in limbo. Over the weekend there were still some questions related to whether the ruling would take effect immediately. The Wisconsin judge did not include a mandate to begin issuing licenses as judges in other states have done, and the state attorney general filed an emergency motion asking the judge to stay her ruling pending appeal. The stay hasn’t yet been granted — there will be a hearing this afternoon.