2:00PM Water Cooler 8/30/2017

By Lambert Strether of Corrente


“Why Trump’s threat to withdraw from NAFTA is an empty one” [Los Angeles Times]. “Much of the agreement — including key chapters on North American content requirements, access to government procurement, on investment and services trade — would not be invalidated merely by Trump’s action, according to legal scholars. ‘It leaves you in an odd situation in which a lot of the rest of the rules remain in effect,’ said Jennifer Hillman, a Georgetown University law professor who specializes in international trade. Despite Trump’s repeated warnings recently about exiting the pact, the other two nations appear to understand these limitations. ‘I’m not sure the Canadians or Mexicans actually believe it,’ Hillman said.”



“[Clinton’s] already leaking excerpts and has scheduled September stops in Wisconsin and Michigan, two blue states that Trump flipped last year, quelling any doubt that she is still in campaign mode. She’ll repeat her claims that she would be president except for various miscreants, ranging from Trump to the Russians to former FBI chief James Comey to misogynists and deplorables everywhere” [New York Post (TF)]. “It’s clear to me that Clinton is keeping her options open to run again in 2020. When I mentioned this recently to a group of New York Democrats, all of whom voted for her and one of whom was a substantial Clinton donor for many years, they were unanimous in hoping I was wrong, that she would retire and let the party get on with finding new leaders.” The Donor Party eats its own…

Health Care


I will be interested to see who the co-sponsors are — looking at you, Elizabeth Warren — and the relationship to HR676.

“What Rep. John Conyers’s sweeping single-payer health care bill would actually do” [Vox]. “117 House Democrats have signed on to a bill that would virtually nationalize health insurance.” Quelle horreur!

Our Famously Free Press

“Claude Taylor and Louise Mensch as Cautionary Tales: Stop Believing Twitter’s “Citizen Journalists” [Paste]. (Follow-up on this Guardian story yesterday). Hilarious details on how Taylor and Mensch got p0wned by a hoaxer. The conclusion:

One of the favorite liberal narratives in the aftermath of the Trump election is that Trump voters are somehow more “stupid” than those on the left—that they would believe anything their candidate told them. (This despite the fact that the stupid people won.) Watching people like Taylor and Mensch amass such large followings among the self-styled liberal #resistance community is proof that they are wrong—liberals are equally prone to being seduced by outlandish fantasies, as long as it matches their belief systems. Under the proper circumstances, their credulity is just as embarrassing as anything you’d find on the right, and they’re equally susceptible to believing, and even seeking out, false information that suits their worldview. The only real difference is that there’s more empathy and less cruelty among liberals—marginally.

In short, the fervent desire of #resistance liberals—who tend to fall along moderate, centrist lines—for an easy, policy-free solution to the Trump nightmare has created fertile ground in which hucksters like Taylor and Mensch may flourish.

Remember when the New York Times gave Mensch an Op-Ed? And Larry Tribe tweeted that she was “incomparable” (How true.) Good times…

Realignment and Legitimacy

Trumpism and American Democracy: History, Comparison, and the Predicament of Liberal Democracy in the United States” (PDF) [Robert C. Lieberman, Suzanne Mettler, Thomas B. Pepinsky, Kenneth M. Roberts, and Richard Valelly]. “A careful look at 2016 suggests that in terms of voter behavior it was quite an ordinary election, in which an extraordinarily unusual candidate capitalized on a singular confluence of historical circumstances to capture the presidency.”

Lambert here: This is an enormous political science-y article, worth a read (and worth noting that “political scientists’ forecasting models — based on a set of ‘fundamental’ electoral factors, including economic performance, the incumbent party’s current longevity in the presidency, the incumbent president’s approval rating, and various general measures of public opinion — actually performed very well in forecasting the national popular vote” (and Allan Lichtman made the right call using these techniques.)) From the conclusion (which also gives you an idea of the length and the tone):

Nonetheless, we can conclude with three observations about the contemporary moment in American politics. First, is American democracy under threat? Our answer is yes: comparative experience suggests that these are not propitious conditions for democratic durability, and certainly not for effective government performance. How serious is the threat? It is hard to argue that contemporary American democracy faces a more acute threat than it did during the Civil War. But once-unthinkable scenarios now seem plausible: an unconstitutional third term in office, for example, or emergency government in the wake of a terrorist attack. Or we may see truly systematic disenfranchisement of American voters. It is the multifaceted nature of our moment that is so distinctive and worrisome.

Second, our framework considers institutions, the boundaries of civic membership and status, and norms as bearing an interactive relationship to one another. The sorting of parties in a racialized polity has enabled a certain type of exclusionary candidacy in a far more presidential regime. This kind of interactive complexity raises the stakes for democratic stability, for it enables the corrosion of norms of executive restraint, with possibly broader repercussions for campaign strategy and voter mobilization around exclusionary white nationalist motifs.

Finally, politics will matter, spanning all three of our dimensions, in ways that are hard to predict. The defense of norms and institutions of inclusive citizenship will be exceptionally important as we go forward, for example, as will debates about how to address the corrosive effects of rising inequality. Indeed, all of the norms and institutions that we discussed will require defense and renewal. The very scope of the challenge underscores the gravity of the current moment — and the need to be open to lessons from other national and political histories that once seemed of little relevance to the American experience.

No hits on “Deaton” of Case-Deaton. So despite the gesture toward “the corrosive effects of rising inequality,” the study seems a little blinkered.

UPDATE “Televangelist Jim Bakker: Christians will start a civil war if Trump is impeached” [The Hill]. Grifters gotta grift. But that was true in 1860, too.

“Do the New Democratic Centrists Come in Peace?” [New York Magazine]. Lol, Betteridge’s Law.

“The U.S. Supreme Court is asking attorneys for Mississippi’s governor to file arguments defending the Confederate battle emblem on the state flag” [AP]. Interesting, though this does not mean the Court will take the case.

“On Berkeley” [Medium]. A trip report.

“Berkeley Mayor Calls for Antifa to be Classified as Crime Gang After Clashes at Weekend Protest” [Newsweek]. Not including the embedded agent provocateurs, I assume.

“Should We Be Punching Nazis?” [Talking Points Memo]. “Philosophies that seek to destroy democracy and the rule of law don’t merit equal validation by a democracy.” For example, Jim Crow. And how much of our law today is today’s Jim Crow? A question…

UPDATE “The Antifa Protests Are Helping Donald Trump” [Jelani Cobb, The New Yorker]. “The Antifa demonstrators, unlike the white-supremacist factions that gathered in Virginia, do not represent a tradition of murderous violence in this country; they are not heirs to the most embittered segments of the wrong side of a conflict that ripped the country at its seams during the Civil War, or to groups that orchestrated the lynching of four thousand black people in the decades after that side’s defeat. Nevertheless, there is no escaping the fact that the elements that lashed out in Berkeley were both morally wrong and politically vacuous.”

“The Alt-Right Is Not Who You Think They Are” [The American Conservative]. “Despite some growth over the last few years, the alt-right itself remains a small, mostly anonymous, and marginal movement…. In my experience with the alt-right, I encountered a surprisingly common narrative: Alt-right supporters did not, for the most part, come from overtly racist families. Alt-right media platforms have actually been pushing this meme aggressively in recent months. Far from defending the ideas and institutions they inherited, the alt-right—which is overwhelmingly a movement of white millennials—forcefully condemns their parents’ generation. They do so because they do not believe their parents are racist enough….”

Stats Watch

ADP Employment Report, August 2017: “ADP is calling for a 237,000 rise in August private payrolls for Friday’s employment report where Econoday’s consensus is 179,000. ADP’s predictive accuracy has been on-and-off this year with their call for July, at an initial 178,000 which is now revised to 201,000, well below the actual 205,000” [Econoday]. And: Above consensus [Calculated Risk]. And but: “Correlations between the ADP data and BLS labour-market data have been limited over the past few months, lessening any potential shift in expectations surrounding Friday’s official data, and there may have been a seasonal impact on the data” [Economic Calendar]. “Nevertheless, two consecutive releases above 200,000 for the ADP data will continue to underpin confidence in the labour market and wider economy.” And but: “This month the rate of ADPs private employment year-over-year growth remained in the tight range seen over the last year” [Econintersect]. “ADP employment has not been a good predictor of BLS non-farm private job growth.”

GDP, Q2 2017 (Preliminary): “The second-quarter proved to be very solid, revised 4 tenths higher in the second estimate to a 3.0 percent annualized rate. And strength is centered where it must be as consumer spending is now at a 3.3 percent rate for a 5 tenths upward revision” [Econoday]. “Non-residential investment was also a positive, at a 6.9 percent rate following the prior quarter’s 7.2 percent showing. Residential investment, however, was a drag on the second quarter, at a negative 6.5 percent rate that followed a positive 11.1 percent rate in the first quarter. Government purchases were negative for a second straight quarter, at minus 0.3 percent following a minus 0.6 percent first-quarter showing. Both second-quarter net exports and inventories were slightly positive.” And: Above consensus [Calculated Risk]. And: “The data will maintain confidence in the outlook” [Economic Calendar]. And but: “[C]onsumer spending improved, but the real improvement came from using a lower inflation deflator. I am not a fan of quarter-over-quarter exaggerated method of measuring GDP – but my year-over-year preferred method showed moderate acceleration from last quarter” [Econintersect].

MBA Mortgage Applications, week of August 25, 2017: “Low mortgage rates are failing to entice home buyers, whose activity declined for the third straight week” [Econoday].

Corporate Profits, Q2 2017 (Preliminary): “Corporate profits rose 8.1 percent year-on-year” [Econoday].

Commodities: “Hedge funds built long positions– bets on higher prices in future – in copper futures and options to a new record high last week according to the CFTC’s weekly Commitment of Traders data” [Mining.com].

Retail: “Amazon.com Inc., far from dominating the retail sector, is actually the weakest of the big U.S. players based on operating results, Moody’s Investors Service said Wednesday” [MarketWatch]. “Amazon’s stock has outperformed rivals, but it’s mostly based on the company’s growth story, and particularly the success of its cloud business, Amazon Web Services, [Charlie O’Shea, Moody’s vice president and lead retail analyst] wrote in a new report. ‘That potential is overshadowing the superior real-time operating performance of Amazon’s key retail competitors,” O’Shea wrote. “The emphasis on stock performance is, in our view, forcing brick-and-mortar competitors toward managing more irrationally for short-term performance just when they’re confronting secular change.'”

Retail: “Best Buy Co. is using its improving sales and revenue position to get logistics in place for a changing retail market. The electronics retailer showed sharply higher sales on its most recent quarter… , but the most important growth may be the $700 million Best Buy will spend this year to upgrade its e-commerce operations, supply chain and shipping” [Wall Street Journal]. “The company argues that web sales and foot traffic can work together, and is tying the two tracks together in its distribution, saying 50% of its online purchases are either picked up or shipped from stores. That suggests much of the new investment may go toward getting its sites to do more double duty as storefronts and distribution centers.”

Supply Chain: “It may be last, but it’s not really a mile at all … yet” [DC Velocity]. “Consider the currently-in-vogue term ‘the last mile.’ It refers, of course, to the final leg of a product’s journey through the supply chain—meaning delivery to the customer—rather than a literal distance. As for why it’s getting so much attention, it’s all about the need for speed in the new world of order fulfillment. Suppliers’ ability to meet customer demands for rapid delivery of orders is highly dependent on that last mile of the supply chain. Nowadays, it’s not too much to say that the last mile is where sales are lost or won…. While this is true in many industry verticals, nowhere is the pressure more acute than in retail—and e-commerce, in particular…. That’s where so-called ‘last-mile distribution centers’ come in…. CBRE’s analysis [report here] of the locations of newer last-mile distribution facilities (those opened within the past two years) in the 15 largest U.S. population centers showed that they are positioned, on average, between six and nine miles from the center of the population areas they serve…. Among other findings, CBRE’s study revealed a correlation between population concentration and the length of the ‘last mile.’ ‘Denser cities tend to have shorter average distances, such as the six-mile average in San Francisco and the 6.3-mile average in Philadelphia,’ the researchers wrote in their report. ‘Meanwhile, cities that are more spread out have longer averages, such as 7.5 miles in Houston, 8.5 miles in Phoenix, and nine miles in Southern California’s Inland Empire.'”

Supply Chain: “Best Hikes IPO Valuation to Unicorn Status” [247 Wall Street]. “[Best] is a leading and fastest-growing smart supply chain service provider in China.”

Concentration: “Basically every problem in the US economy is because companies have too much power, new research argues” [Quartz].

But what happens if, for whatever reason, competition in an economy dwindles, and companies are able to ratchet up prices much higher than what it costs to produce them? It would have disastrous effects. Workers’ wages and employment rates would decline. People would switch jobs less often. Economic growth would slow.

According to economists Jan De Loecker of Princteon University and Jan Eeckhout of the University College London, this basically describes the US economy since 1980. In a recently released paper, De Loecker and Eeckhout analyzed the balance sheets of listed companies from 1950 to 2014. (In 2014, these firms accounted for around 40% of all sales.) They found that average markups, defined as the amount above cost at which a product is sold, have shot up since 1980. The average markup was 18% in 1980, but by 2014 it was nearly 70%.

We’ve linked to this paper before, but Quartz gives a good summary.

Concentration: “We need to nationalise Google, Facebook and Amazon. Here’s why” [Guardian]. “Network effects generate momentum that not only helps these platforms survive controversy, but makes it incredibly difficult for insurgents to replace them. As a result, we have witnessed the rise of increasingly formidable platform monopolies. Google, Facebook and Amazon are the most important in the west. (China has its own tech ecosystem.) Google controls search, Facebook rules social media, and Amazon leads in e-commerce. And they are now exerting their power over non-platform companies – a tension likely to be exacerbated in the coming decades.”

Concentration: “Google Critic Ousted From Think Tank Funded by the Tech Giant” [New York Times]. “[N]ot long after one of New America [Foundation]’s scholars posted a statement [from NAF employee Barry Lynn] on the think tank’s website praising the European Union’s penalty against Google [a $21 million donor to NAF], [Google Chair Eric] Schmidt, who had chaired New America until 2016, communicated his displeasure with the statement to the group’s president, Anne-Marie Slaughter, according to the scholar… Ms. Slaughter told Mr. Lynn that ‘the time has come for Open Markets and New America to part ways,’ according to an email from Ms. Slaughter to Mr. Lynn. The email suggested that the entire Open Markets team — nearly 10 full-time employees and unpaid fellows — would be exiled from New America.” Could they have imagined Google was funding them to think, and do policy, rather than emit propaganda for Silicon Valley crooks and monopolists? If they did, (big-time Clinton tech dude) Eric Schmidt yanked (Clinton supporter) Anne-Marie Slaughter’s choke chain, and set them straight! (I love the detail about the “sleek Washington offices where the main conference room is called the ‘Eric Schmidt Ideas Lab.'” Sounds like by “lab,” Google meant a Labrador retriever. Here! Fetch!) Oh, and good for Lynn! More–

Good for them!

Concentration: “Think-Tank Group Axed after Criticizing Google” [National Review], “Google is coming after critics in academia and journalism. It’s time to stop them.” [WaPo], “Google-funded New America Foundation cuts Google critic” [The Week], “Man Criticizes Google, ‘Progressive’ Think Tank Funded by Google Fires Him” [Paste]. Same story across the political spectrum. Looks like Schmidt either ignored his PR team, or didn’t consult them. Oopsie.

The Bezzle: “An FDA First: Cyber Recall for Implantable Device” [Health Care Info Security]. “The agency is instructing patients with certain implantable cardiac pacemakers from St. Jude Medical – now owned by Abbott Laboratories – to visit their physicians for firmware updates to address cyber vulnerabilities that can potentially be remotely exploited by hackers and that pose safety concerns. Approximately 465,000 such devices are in use in the U.S.” Holy moley.

UPDATE The Bezzle: “Maybe unicorns weren’t made to endure in this world after all” [Pando]. “If history doesn’t repeat, it rhymes. Only in the case of the unicorns, the rhymes are being written by a bad poet. The unicorns of yore — and by yore I mean two years ago — aren’t flaming out like the Webvans of the dot-com bust. There are no hard lessons being inscribed inside the mythology of failed startups. No, there is just the sad, slow deflation of a blow-up swimming pool that some kid punctured when he played too hard.”

The Bezzle: “[Michael] Jordan is the best, but not the first hoops guy to trade in the sneakers for the, uh, sneakers, and become a Silicon Valley dealmaker. Last week’s Businessweek cover featured Golden State Warriors Steph Curry and Andre Iguodala wearing the kind of tie-less sports coats and brooding expressions that are mandatory on Sand Hill Road, where they and their teammates are becoming a fixture. Unsurprisingly, the team that VC built is becoming a team of VCs” [Bloomberg].

The Bezzle: “This Dude In Florida Is Raising $100 Million Just To Short The VIX, What’s Your Story?” [DealBreaker]. “In five years, per NYT, Golden has grown his personal riches from around $500,000 to $12 million, mostly by habitually shorting volatility… This is as perfect a Markets In The Year 2017 story as we’re likely to get.”

The Bezzle: “Why Are Coding Bootcamps Going Out of Business?” [Hack Education]. “It appears that there are simply more coding bootcamps – almost 100 across the US and Canada – than there are students looking to learn to code. (That is to say, there are more coding bootcamps than there are people looking to pay, on average, $11,000 for 12 weeks of intensive training in a programming language or framework). All this runs counter, of course, to the pervasive belief in a ‘skills gap.’….” One more thing to thank mainstream economists for! TressieMc: “Boot camps are a tax paid by winners of social inequality for marginally better odds in hyperlocal short term occupational bubbles.”

Political Risk: “Today is your last chance to comment on the proposal to kill net neutrality” [TechCrunch]. (Here is the “How To.”) “As many (including I) have argued over the past months, the FCC’s proposal is wrong in principle, wrong in implementation, and otherwise just plain wrong. While there is plenty of room for debate on how net neutrality should be carried out and the FCC’s role in it, “Restoring Internet Freedom” is a politically motivated, industry-underwritten, and poorly argued rush job that fails to consider numerous factors in the complex industry and culture it attempts to deregulate.”

Today’s Fear & Greed Index: 35 Fear (previous close: 29, Fear) [CNN]. One week ago: 19 (Extreme Fear). (0 is Extreme Fear; 100 is Extreme Greed). Last updated Aug 30 at 11:47am. Another big swing back to Fear.


“[I]n today’s economy, a lot of value can easily be destroyed very quickly. With only a small portion of the housing stock carrying flood insurance, billions of dollars in property will simply be destroyed and not immediately replaced. People who get paid by the hour, or who work for themselves, won’t be able to make up for the income they’re losing a few weeks from now. Hotel rooms and airplane seats are perishable goods—once canceled, they can’t simply be rescheduled. Refineries won’t be able to make up all the time offline—they can’t run more than 24 hours per day. And given that supply chains rely on a huge number of shipments making their connections with precision, the disruption to the region’s shipping, trucking, and rail infrastructure will have far-reaching effects” [Slate]. Nice shout-out…

“Hurricane Harvey’s winds and floodwaters have created emergencies at chemical facilities across the Houston area, from an Exxon Mobil roof collapse at its massive Baytown complex to the risk of an explosion at a chemical plant northeast of Houston” [Governing]. “The incidents, which also included a shelter-in-place Monday evening in La Porte from a pipeline leak, reveal how dangerous it can be when a storm of Harvey’s magnitude collides with the nation’s petrochemical capital. Even the controlled, Harvey-related shutdowns of refineries and plants are resulting in the release of millions of pounds of carbon monoxide and other chemicals into the region’s atmosphere — primarily through a process called flaring.”

Speaking of flaring:

“The water flooding Texas right now is probably filled with infectious bacteria” [Quartz]. Indeed. Floodwater is nasty

“These journalists forecasted catastrophe in Houston. Now, they’re reporting on its aftermath” [Poynter Institute]. Nobody could have predicted…

We’re not the only ones:

“On a sparsely populated island off the coast of the northwestern United States, more than a hundred environmental activists gathered last weekend to practice seaborne drills to disrupt construction on Kinder Morgan Canada Ltd’s (KML.TO) Westridge crude oil terminal” [Mining.com]. “The three-day camp on Lopez Island in Washington state’s San Juan archipelago marks the opening of a new front in the campaign to stop Kinder Morgan’s Trans Mountain pipeline expansion, a $7.4 billion project through British Columbia that gained Canadian government approval last year.”

Class Warfare

“Are you in pain? It could be caused by money problems” [MarketWatch]. “When reviewing data on 33,000 people, they learned that households in which both adults were unemployed spent 20% more on over-the-counter painkillers in 2008 than households where at least one adult was working. Also, their online study of 187 participants indicated that unemployment and financial insecurity were correlated with reports of pain.” Warfare always affects the body. Ergo, class warfare affects the body. Yet another confirmation of Case-Deaton.

News of the Wired

The greatness that is Twitter:

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Readers, feel free to contact me at lambert [UNDERSCORE] strether [DOT] corrente [AT] yahoo [DOT] com, with (a) links, and even better (b) sources I should curate regularly, (c) how to send me a check if you are allergic to PayPal, and (d) to find out how to send me images of plants. Vegetables are fine! Fungi are deemed to be honorary plants! If you want your handle to appear as a credit, please put it in the subject line. Otherwise, I will anonymize by using your initials. See the previous Water Cooler (with plant) here. Today’s plant (KH):

KH writes: “Here’s one of our century plants about to bloom. Behind her beneath the clouds is the backside of Maui. We’ve had a big storm through and there’s even snow on Mauna Kea. Aloha!”

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Readers: Do feel free to use the dropdown and click the hat to make a contribution today or any day. Here is why: Regular positive feedback both makes me feel good and lets me know I’m on the right track with coverage. When I get no donations for five or ten days I get worried. More tangibly, a constant trickle of small donations helps me with expenses, and I factor that trickle in when setting fundraising goals. So if you see something you especially appreciate, do feel free to click the hat!

Query: I got a note from reader J in Massachusetts to which I responded, but AOL bounced it. Can reader J contact me with an address that won’t do that? Thank you!


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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.