The Recession

Springsteen Clashes with Obama Advisor Jason Furman Over Wal-Mart

| by CEI
From OpenMarket.org | The Competitive
Enterprise Institute Blog
|
By John
Berlau

In between playing at the Lincoln Memorial for Barack Obama’s inaugural
concert and performing the half-time show last night at the Super Bowl, Bruce
Springsteen got caught in a policy controversy over a promotional deal he made.
Springsteen had inked an agreement for Wal-Mart to exclusively sell and promote
his new album, “Working on a Dream.” This made good business sense, given that a
similiar arrangement last year with Wal-Mart and hard rock bank AC/DC led to a
surprise chart-topping album.

But the very mention of the name of Wal-Mart still raises the hackles of some
activists, particularly those affiliated with Big Labor. They called on
Springsteen to renounce the deal, and he caved, telling the New York Times, “we dropped the
ball.” Springsteen said that “given its labor history, it was something that if
we’d thought about it a little longer, we’d have done something different.”

But a major player on the economic team of Obama, for whom Springsteen
campaigned so strongly on behalf of, disagrees stronrgly with Springsteen and
the activists on Wal-Mart’s “labor history.” Jason Furman was a top economist on
the Obama campaign, and President Obama recently named him deputy director of
the National Economic Council at the White House. He is pushing strongly for the
stimulus bill and other liberal fiscal priorities of the administration.

Yet when it comes to Wal-Mart, Furman doesn’t view it to be the threat to
workers that many other liberals do. In fact, he has found it to have greatly
improved the lives of the poor and working class Americans. In a 2005 paper
entitled “Wal-Mart: A Progressive Success Story,” which he
wrote as a visiting scholar at New York University’s Wagner Graduate School of
Public Service, Furman concludes, “By acting in the interests of its
shareholders, Wal-Mart has innovated and expanded competition, resulting in huge
benefits for the American middle class and even proportionately larger benefits
for moderate-income Americans.”

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Furman finds that even if Wal-Mart’s had lowered wages for the retail sector
— “and the evidence for this is far from clear,” he notes — “the magnitude of
any potential harm is small in comparison” to the savings gain to workers as
consumers from Wal-Mart lowering of prices of products. “Plausible estimates of
the magnitude of the savings from Wal-Mart are enormous — a total of $263
billion in 2004, or $2,329 per household.”

Furman further dispells myths about Wal-Mart on wages, benefits, and health
care. “Wal-Mart workers, like other workers in the retail sector, are paid less
than the economywide average wage,” he writes, and its “health benefits are
similar to or better than benefits at comparable employers.”

He also invalidates comparisons to higher-end warehouse clubs like Costco,
noting that “as a result of higher margin goods and larger volumes, sales per
employee are considerably larger at Costco. … Telling Wal-Mart to ape Costco’s
wages is like telling Best Buy to pay its employees as much as the high-end
boutique plasma television dealer across the street.” Similar points about
Wal-Mart’s wages and benefits were made in a Competitive Enterprise Institute study by our adjunct scholar Zachary Courser.

But lest anyone accuse Furman of taking the libertarian line in his paper, he
also fills the study with liberal policy ideas that he argues will improve the
lives of Wal-Mart employees and other workers. These include expanison of the
Earned Income Tax Credit and Medicaid, things that the Obama administration and
congressional Democrats are fighting for in the stimulus. He even calls for
Wal-Mart to join in the fight to “push to expand these public programs.”

Whatever the merits of these “progressive” ideas (and you can find plenty on
them, as well as alternative free-market health care
solutions
, in other entries at Open Market), Furman is right to call for
systemic public policy changes to improve workers lives rather than destructive
attempts to force an individual business to change it wage structure.

One beneficial public policy change Furman could push for in the Obama
administration is reversal of the Bush’s administration’s deeply flawed
moratorium on retailers like Wal-Mart starting their own limited
banking operations.
If the government can promote a General Motors
subsidiary to a bank holding company by virtues of its failure, then businesses
like Wal-Mart not applying for bailouts should not be held back because of their
success. Letting Wal-Mart and other firms expand into banking could expand the
supply of credit and lead to reduced costs and more benefits for consumers on
their savings and checking accounts.

As Americans are tightening their belts and looking for bargains, more are
finding attractive the discounts at Wal-Mart and other “big box” stores. Bruce
Springsteen sings about the working class, but it’s been a long time since he’s
been one of them. He may want to get back to his roots by visting a Wal-Mart, or
at least taking these words from Furman’s study to heart: “To the degree the
anti-Wal-Mart campaign slows or halts the spread of Wal-Mart to new areas, it
will lead to higher prices that disproportionately harm lower-income
families.”

While President Obama can respect Springsteen as a fine musician, as many
other Americans do, he should recognize that when it comes to public policy
relating to Wal-Mart and workers, Jason Furman is the true “Boss.”

(Full disclosure: Like millions of other Americans, I shop at Wal-Mart, and I
also own shares of stock in the company. I have never hesitated, however, to
criticize Wal-Mart when I thought the company was in error, such as on its
misguided “green” initiatives.)