Equinomics, bag fees, and leftover campaign dollars

0:01Sierra Juarez:NPR.

0:12Sierra Juarez:This is The Indicator for Planet Money. I'm Adrian Ma. I'm Waylon Wong. And I'm Darian Woods. Uh, help? What? What'd you say, Adrian? Do you need assistance? I said, uh, help. What do you think, Waylon? Shall we help Adrian out? This feels like the start of a kids' show where the episode's mission is about to become clear. Yeah, I just, I don't know. I have all these dang listener questions and I need help answering them. Adrian, this is something we can do. Coming up, why baggage fees cost what they do. Why people aren't breeding horses as much. And what happens to campaign spending. Giddy up!

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1:34Hosting a cookout? Look for sales on chicken drumsticks, thighs, and legs. All no antibiotics ever. Save on halibut fillets, a firm fish that holds up great on the grill. Stay cool and save on cut watermelon and organic strawberries for fruit salads. Plus explore savings on snacks from Annie's and more. Save on summer flavors at Whole Foods Market.

1:54Sierra Juarez:This message comes from Dell Technologies. Interruptions happen at work. But with the Dell Pro laptop powered by Intel Core Ultra with vPro, built with optimized battery and built-in intelligence, your tech won't slow you down. Dell.com slash Dell-Pro. Built for you. All right, it is listener questions. First up, we have Adrian Ma. That's right, my listener question comes from Danny Pena. I'm currently at the airport waiting to catch my flight back home to Portland, and they're calling for volunteers to check their carry-on luggage for free. Why don't the airlines lower the baggage fees to entice more customers to check their luggage?

2:35Sierra Juarez:This is a very good question because, I mean, lots of people, when they go to the airport, are making a decision of whether or not it's worth to shell out 50 bucks to not have to deal with their bag. I always think just carry-on, only. It's easier. I'm also carry-on only, but if I'm by myself, I like to see if I can check my bag for free at the gate because I can't get into the overhead compartment without help, and I hate asking for help. Fair enough. See, this is the consumer side of the equation. On the business side, there's really this balancing act of how much to charge for checking a bag.

3:13Sierra Juarez:Because, Danny, our listener, is right. Right. You could just hold on to your luggage through the whole airport and check it in for free at the gate. Right. So airlines have to find that sweet spot that makes the extra convenience of dropping it off worth your while. And it turns out a lot of people are willing to pay more and more for that convenience. Pretty much every major airline in the U.S. has upped its baggage fees recently. Nicholas Rupp is an economics professor at East Carolina University. Airlines have lots of data. If consumers respond surprising to them, they can always go back and lower the fee.

3:48Sierra Juarez:But to my knowledge, they've not reduced bag fees. The other side of this is that baggage fees are particularly lucrative for airlines. They're not taxed as much as tickets. So Nick says baggage fee money is straight up more valuable to the airlines than ticket money. And people don't tend to base their flight choice off of baggage fees anyway. They're mostly looking at the ticket price. It looks appealing to the consumer who just, at the time of ticket purchase, isn't factoring in that bag fee cost. And don't forget, you could always just hold on to your luggage like Waylon does until you get to the gate and just let fate do the rest.

4:27Sierra Juarez:Thanks, Dani, for the question. Next up, Waylon. All right. My question is coming from John Nagel. He asks, I believe I've stumbled upon a weird indicator that I want to share with you all. My wife is an equine veterinarian, and she said that horse breeding is shockingly low right now. She's never seen so few people breeding horses. As a fan of your show, thank you, this really piqued my interest as a potential recession indicator that people are cautiously breeding horses because they suspect a recession is coming in the near future. This is a very well-timed question for Kentucky Derby season.

5:05Sierra Juarez:I guess it's already over. How many mint juleps did you drink? I guess we'll never know. And you know what? This question was kind of tricky, too. So we reached out to Jill Stowe. She's a professor of agricultural economics at the University of Kentucky, and she studies equine markets. So Jill says, first of all, there has been a decline in horse breeding for a while now. For example, in the thoroughbred industry, the number of foals peaked in 1986. and has been on a decline ever since. That was made worse in 2008 during the Great Recession, and then more recently again with COVID and the past few years of inflation.

5:46Cost of everything has been increasing, including the cost of keeping horses. And, you know, horses are typically seen as luxury goods or not necessities. And so luxury goods require disposable income to enjoy. And when disposable income shrinks due to other factors, There are less funds for pursuing those activities. Jill says luxury is a bit of a loaded term. Those of us who are involved in the horse industry, we think they're necessities. But, you know, looking at the big picture, they tend to be luxury goods. Either way, demand is down. When people aren't buying, breeders and farm owners need to be honest about whether it's worth it to breed more foals.

6:30It is really difficult for a breeder to recoup the funds that they've spent in selling their young stock. So to get back to the original question here, is this a recession indicator? What do you guys think?

6:45Sierra Juarez:I mean, it does bring into the question, what is a recession indicator? Like, will it predict the future? I don't know if those really exist, to be honest, at least as a reliable sign of imminent recession. Yeah, I feel like there's a lot of personal recession indicators out there. You can see in your own circles how people might be feeling, economic pain in different ways. But then whether something niche like horse breeding can reliably tell us whether the broader economy is headed into a downturn may be a harder connection to make. Thank you, Waylon. And to round things out, Darian Woods, what's your question?

7:24Sierra Juarez:Our question comes from Brian Cipola. With elections wrapping up, I have a question about campaign spending. Where does all the money actually go and who really benefits? Millions are poured into these races, mostly for our ads, I assume. But does any of that cash actually make a positive impact in the local community? So, Brian, you asked first, where does the money actually go? I feel like a lot of it does go to advertising, like Brian says. And then you would also just have kind of mundane expenses like staff and overhead, like travel and I don't know, all that texting that I get. You are right.

8:03Sierra Juarez:Paul Ryan of New York City's campaign finance board says advertising is often the largest expense, but there is plenty more. Door knocking, phone calls, get out the vote work, staging rallies, fundraising. It takes money to raise money and campaigns these days raise a lot of money. So the cost of fundraising itself is a significant expenditure. And the last one I would say is research. And to Brian's next question, who benefits from election spending? So media companies certainly benefit from all that advertising demand. Paul says the professional class behind the election industry is also a winner.

8:40Sierra Juarez:Ad makers and political consultants and pollsters, data firms, they make some good money in this work. Paul says local communities are definitely an economic winner too. Campaigns are hiring local staff, organizers and buying ad space from local media to reach everyone. It can be significant money flowing through a local economy. Of course, local economies could have benefited in other ways if people hadn't donated to a political campaign and instead, I don't know, bought a matcha latte or potted plants. The donations just really shifted around who benefited. Darian Woods, thank you very much.

9:14Sierra Juarez:And thank you, Brian, for that question. This has been another Listener Questions in the Bag. We love getting your questions. And in fact, we need more. The Indicator now has a weekly newsletter where we feature listener questions. And you can email us with whatever you're curious about at indicator at npr.org. You can also sign up for said newsletter by checking the show notes in your app. This episode was produced by Cooper Cats McKim and engineered by Sina Lafredo. It's fact-checked by Sierra Juarez. Kate Kincannon is our editor, and The Indicator is a production of NPR.

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