California’s Newsom grants exception to state law so restaurants can cope with other state law

By Sean Higgins.

"California Governor Gavin Newsom signed legislation over the weekend that exempted restaurants in the Golden State from an anti-false advertising law that Newsom had signed last year. The exemption was, in reality, a fix-it bill needed because the state’s restaurants had adopted special workarounds to comply with the state’s other various other regulations. Chief among those was the state’s second-highest-in-the-nation minimum wage law; legislation that Newsom had also championed.

The legislation signed Saturday allowed restaurants to include service fees in the customers’ tabs, provided that the restaurants are upfront about them on the menu. The state’s anti-false advertising law would have otherwise prohibited such added-on fees. 

Newsom’s administration has defended the anti-false advertising legislation by saying it would enhance price transparency for consumers. It hasn’t issued a statement on why it granted restaurants the exception. 

The restaurants have included the service fees on customers’ tabs as a workaround to the state’s high minimum wage law. The wage floor is currently $16 an hour for all workers and rises to $20 if the restaurant falls under the arbitrary criteria of being a fast-food establishment.  

This endless micromanagement has not increased employment for California workers, but it has increased menu prices paid by customers. Restaurant owners meanwhile claim the state’s ever-growing regulatory structure has given them new and more powerful headaches. 

This mandate became a problem due to a separate long-standing issue restaurant managers face: some of their employees (servers and bartenders) receive customer tips, while others (cooks, dishwashers, etc.) don’t. Restauranteurs have long said that this difference makes it hard for them to hire people as cooks and dishwashers because most workers, unsurprisingly, want jobs where their wages will be supplemented by tips.  

In decades past, restaurants often simply paid the servers and bartenders less, knowing that the tips would make up the difference. What did it matter if the money came from the employer or directly from the customer so long as it went into the pocket of the worker? The federal government even has a special lower minimum wage for tipped employees. 

The California minimum wage laws, however, require the same wage be paid to workers whether they receive customer tips or not. This coincided with the nation’s steady transition towards a cashless society. The credit card machines now include sections to add tips, which made giving gratuities an even more widespread practice. Due to these changes, restaurant owners faced an even harder time hiring people for the jobs that don’t get tips. 

Employers are, however, allowed under state and federal law to create “mandatory tip pools” that collect the gratuities made to servers and bartenders and instead give all workers a cut. Restaurateurs also often add special surcharges to bills to further balance out this process. The California anti-false advertising law prohibited such “hidden fees.” 

Golden State restaurants are obligated to engage in these increasingly complicated workarounds to comply with regulations so they can remain open and profitable. Newsom and politicians like him support this ever-expanding regulatory state so they can claim that they’re fighting for working folks. But as Saturday shows, they’ll quietly pass exceptions to the messes they created when they become problematic.  

They could have saved everyone a lot of time and energy by just leaving well enough alone."

$1.2 Trillion Bipartisan Infrastructure Bill Off to a Very Slow Start

By Marc Joffe of Cato.

"Enacting legislation and realizing its purported benefits are two very different things: a lesson now being learned by supporters of the 2021 Infrastructure Investment and Jobs Act (IIJA), known colloquially as the bipartisan infrastructure bill. The law, which dedicated $1.2 trillion to a variety of infrastructure initiatives, has yet to yield many of its expected deliverables.

Recent headlines have exposed two glaring implementation shortfalls. Although the IIJA included $42.5 billion for rural broadband, these funds have yet to add any high‐​speed internet service to the nation’s countryside. And $7.5 billion allocated to electrical vehicle charging infrastructure has produced only eight federally funded charging stations to date.

Among the reasons given for the slow progress on these initiatives include complex requirements for grantees, Buy America requirements, and preferences for unionized employees and those who have been involved with the justice system.

These factors, along with general inflation, are also impacting transit and rail projects championed by IIJA supporters. Some of these projects may never materialize, while others will take a decade or more to complete while serving only a limited number of passengers.

Amidst escalating costs, Houston Metro decided to pause construction of a 25‐​mile bus rapid transit line that would have received $939 million of IIJA funds. Metro staff estimated that the University Corridor BRT’s construction cost would have been $2.28 billion versus a previous estimate of $1.57 billion, and that annual operating and state of good repair costs for the line would have totaled $323 million. This is a lot of money to transport an estimated 19,400 daily passengers.

Another IIJA‐​funded transit project facing cancellation is New York’s Second Avenue Subway extension. After Governor Kathy Hochul pulled the plug on the Manhattan congestion pricing initiative, the Metropolitan Transportation Authority no longer has enough money to cover its $4.3 billion local share of the project, which would have attracted $3.4 billion in federal funds. It remains to be seen whether Hochul will reverse course on congestion pricing after the November election.

If she does not, the Federal Transit Administration will have to allocate IIJA funds to even less worthy projects. And, California, home of the never‐​ending $128‐​billion high‐​speed rail boondoggle, has several to offer.

For example, the FTA is considering a 1.3‑mile rail extension in San Francisco that has a total cost of $8.25 billion. The new segment will extend the lightly patronized Caltrain system further into San Francisco’s empty downtown. Next up would be a second rail tunnel under the San Francisco Bay even though utilization of the current tunnel is well below its 2015 peak. That project alone is likely to cost more than $45 billion and could single‐​handedly absorb all remaining IIJA transit capital funds.

With respect to intercity rail, the largest share of IIJA funds are being devoted to Amtrak’s Northeast Corridor, which is a reasonable choice given the preponderance of passengers located between Boston and Washington. But the high cost of executing projects on this corridor limits the opportunities for service improvements. Instead, Amtrak will be largely treading water.

The biggest IIJA‐​funded Amtrak project involves replacing infrastructure connecting New York and northern New Jersey, including a tunnel under the Hudson River and a bridge over the Hackensack River, which both date from 1910. A second project will replace a Civil War era tunnel west of the Baltimore station.

These two projects will last well into the 2030s (if not longer) and will cost $23 billion (before overruns). Once done, they will provide important reliability benefits but only minimal travel time improvements for those using Acela to get from New York to Washington.

And while passengers wait for the new projects, Amtrak service may well deteriorate. In June 2024, New York area passengers got a taste of what may be ahead as Amtrak service was repeatedly disrupted due to power issues.

So despite Congress appropriating tens of billions of dollars, the nation’s rail and bus passengers are likely to see little in the way of new travel options or speed improvements, especially over the next five years. Once all the money has been spent (by around 2040), it is safe to predict that only a small number of new passengers will be lured away from cars and planes."

Not a single home or business has been connected to new broadband networks nearly three years after President Biden signed the funding into law

See Why We Can’t Have Nice Things, Part XXIV by Alex Tabarrok.

"WashingtonTimes: Residents in rural America are eager to access high-speed internet under a $42.5 billion federal modernization program, but not a single home or business has been connected to new broadband networks nearly three years after President Biden signed the funding into law, and no project will break ground until sometime next year.

A big part of the problem is the piling on to any government program a host of progressive wish-list items including:

• Preference for hiring union workers, who are scarce in some rural areas.

• Requiring providers to prioritize “certain segments of the workforce, such as individuals with past criminal records,” when building broadband networks.

• Requiring eligible entities to “account not only for current [climate-related] risks but also for how the frequency, severity, and nature of these extreme events may plausibly evolve as our climate continues to change over the coming decades.”

If this sounds familiar, recall my post on Building Back Key Bridge Better (note the date).

By the way, the FCC estimates that 7.2 million locations, i.e. houses and businesses, don’t have broadband access. $42.5 billion is enough to give all 7.2 million locations a 4-year subscription to Starlink (7.2 million locations * $120 per month * 48 months=$42.7 billion), and I am sure Elon would give us a discount so I didn’t include set up costs. Of course, the FCC decided that Starlink was not eligible for the program citing “SpaceX’s failure to successfully launch its Starship rocket.” Note that the FCC made their decision in 2022, years before the program was to rollout."

Why is the Biden Administration Against Fee Transparency in Education?

By Alex Tabarrok.

"President Biden has made a big deal of simplifying fees:

The FTC is proposing a rule that…would ban businesses from charging hidden and misleading fees and require them to show the full price up front. The rule would also require companies disclose up front whether fees are refundable. This would mean no more surprise resort fees at check out or unexpected service fees to buy a live event ticket.

Like everyone, I dislike these kinds of fees, although I don’t think they are a good subject for legislation. But I would certainly not prevent firms from offering a simple, up-front fee. And yet that is exactly what the Biden administration is doing in higher education.

So called Inclusive Access programs let colleges package textbooks with tuition and other fees. Students get one bill and access to textbooks on the first day of college. It’s convenient, no more hunting for textbooks or sticker shock. In addition, inclusive access programs give colleges bargaining power when negotiating prices.

Strangely, the Biden administration’s Department of Education wants to ban colleges from offering inclusive access programs. Thus, the Dept. of Education is arguing that simplified pricing is bad for consumers at the same time as the FTC is arguing that simplified pricing is good for consumers. What makes this contradiction even more baffling is that Inclusive Access was a program promoted in 2015 by the Obama-Biden Administration!

Proponents of the ban argue that letting students negotiate their own purchases lets them better tailor the outcome. Maybe, but that’s the same argument for letting airlines unbundle seat choice and baggage allowances. Hard to have it both ways. Pricing is complex.

Tyler and I are textbook authors so you might wonder where our interests lie. I actually have no idea. It’s complicated. I suspect inclusive access leads to a more winner-take-all market on textbooks. Modern Principles is a winner, thus on those grounds I would favor. More generally, however, I would get the FTC and the Dept. of Education out of pricing decisions and let colleges and firms negotiate. Pricing decisions are more complicated and contextual than simplified bans or regulations."