Exposing The Core – Peeling Back The American Political Onion

Authored by Dr.D via Raul Ilargi Meijer’s Automatic Earth blog,

Dr. D. peels the American political onion to get down to what it’s all about. I’m impressed. He explains America better than just about anyone. Turns out, there ain’t much left. So yeah, what happened?

*  *  *

Dr. D: The news cycle runs so frenetically it’s easy to lose track of the bigger tide. Let’s go back a week and look at something the Automatic Earth has been talking about since the beginning.

This weekend at a speech in Mumbai, Hillary Clinton said:

“If you look at the map of the United States, there’s all that red in the middle where Trump won. …I win the coast…

I won the places that represent two-thirds of America’s gross domestic product. So I won the places that are optimistic, diverse, dynamic, moving forward. And his whole campaign, ‘Make America Great Again,’ was looking backwards.”

There are many ways to look at this: for one thing, by number, over 90% of the counties are Red. Yet over 50% of the population is concentrated in the cities and Blue counties. Clinton officially won the popular vote. Yet the United States has always had a geographical Electoral College system. A compromise of representation between small, weak states and strong, large states, and the rules of the 2016 campaign were no mystery or surprise. Yet that’s only the middle-sized picture.

The Big Picture is Mrs. Clinton saying she’s representing the important people, the right people – even the working people – and that 2/3rds of those people live exclusively in Blue districts on both coasts. While this is arguably true, it wasn’t always true. NYC or San Francisco have always been important, but from their founding until now, places like Dayton, St. Paul, Pittsburgh, or New Orleans were considered vital, important places, places where their own specialty happened: tires or flour, steel or shipping, lumber or mining.

What Happened? In a way the election was a referendum on “What Happened?” What happened to my community, my country, my area, and all the vital work those long-abandoned areas used to do, what happened to the massive GDP those areas used to contribute, and the answer is simple:

An organism contracts from the periphery to the core.

There’s a lot in that statement. As it took decades, even a century to happen, you can see which peripheries were sacrificed first and next, who had power, who didn’t, and how long they could maintain it; and that’s interesting, because it was not East or West, white or black, rural or urban as they might have you believe. There are as many hopeless, abandoned people in Baltimore as there are in Billings, Montana, possibly more, and possibly started far sooner. But if it’s not ethnic or geographical, then what is it?

An organism contracting from the periphery to the core is a consequence of centralization.

The Automatic Earth began with discussing the shrinking of the country, of industrialization, in terms of who would receive the ever-dwindling supplies oil and energy, the infrastructure and attention, but that is not necessarily a function of practicality. It is more often a function of political power, and we largely have a political problem and not a practical one.

The Core has been using their power to attract and concentrate more wealth and more power to themselves and their areas until most of the nation’s wealth and power are concentrated in Clinton’s 2/3rds of GDP, the sub-10% of the counties. All top 10 richest zip codes are now in one region: the Washington D.C. area.

Economic wealth and power is used to expand political power, further extracting the wealth of the Periphery to maintain the lifestyle of the Core. While this may seem a practical strategy, it isn’t. At one time the Periphery was creating maybe 2/3rds of the wealth of the nation, costing nothing, and that was with no more infrastructure than remains today.

So when those places are idled, 2/3rds of the nation’s GDP also vanishes, and while the Core can maintain their lifestyle by cannibalizing the remaining energy and attention, the entire nation they are part of only becomes far poorer. So far from the concentration of power making them stronger , it’s making them weaker , as they have a fraction of the former wealth and ability, cohesion and cooperation, men and materials to draw on.

This leads to the problem she highlights, which is social and political fracturing. With a majority of the wealth pulled to the Core, the Periphery withdraws its economic and social consent in a sense of unfairness that is only validated by further extractions, concentrations, and non-cooperations.

This can make it more difficult to run even the Core economy as disagreements develop between Core vs Periphery or entitled vs disenfranchised peoples even within the Core itself, leading to a difficulty maintaining compliance, resource supplies, disagreements on how to allocate wealth, support infrastructure, and so on.

This may seem an engineering issue, but this is also Tainter’s “Collapse of Complex Societies”, where cultures weather many storms, many expansions and contractions, but what causes “Collapse” is the attempt to maintain expensive infrastructure built up during the good times, at the expense of one portion of society. If compromise can be reached, Society survives.

If a compromise cannot be reached and the Core attempts to force its will via social and military force, the price of compliance becomes too high and fails, and with it, the cooperation, the social contract that makes a people or a nation one unit. It fractures, and when it does, those pieces break up and become, as he says, simpler, Less Complex societies. Less specialized, less concentrated, and less centralized, or by our modern pejorative view, “Primitive.”

As our American society has measurably less energy since 1974, we have seen the re-allocation and distribution of that energy ring-fenced into an ever-dwindling core of fewer counties, and fewer participants in those counties, and like other complex societies, we have been socially fracturing since that time as well, as fewer and fewer within the system benefit from it.

There’s much more to unpack in this, but let’s just ask some questions:

• What makes a “Core”? What constitutes the “Periphery”?

• Since the Periphery has and could contribute a majority of overall GDP, what inspires the Core to sacrifice it rather than expand their wealth through it?

• As a metaphor for a bodily process, a biological “contraction” occurs during emergencies such as starvation, freezing, or flight. But would the body really survive if it crippled the legs, lost its fingers, or its hearing to save itself? Contrarily, would the body survive and function if the brain, liver, or heart swelled to 3 times their original size?

• What is the resource load of a brain or stomach that is 3x larger than necessary?

• Since from an engineering perspective all parts of a machine must be in working order for it to work at all, what impractical, non-engineering priorities must be established to cause the core and periphery to become so mismatched?

• How are those impracticalities decided? How are they maintained?

• Is the deciding and maintaining of inequity and non-function a benefit to the Core? To the Periphery? Both? Neither?

• Once the Periphery has been sacrificed to the Core, what must happen for them to be re-joined and freely cooperate again?

• Can this be done? What would have to be sacrificed that wasn’t sacrificed before? By which side? One? Both?

Mrs. Clinton’s idle quote has meaning. If her places are “optimistic, diverse, dynamic, moving forward” then logically the other , the 90% of Red America is “pessimistic, oppressive, racist, dull, lazy, and backwards.” “Deplorable,” if you will. Aside from how this doesn’t seem to be a good pitch to win votes among 90% of voting counties, you have to ask, “How did they get this way?” and “What is your plan to gather your countrymen and make them optimistic, productive, and to work again, and thus help all?” Yet oddly, that was her opponent’s slogan.

If she’s not asking the question of how to include and elevate everyone, isn’t she really saying “I’m in favor of further enriching my Core at your expense”? And while historically that is indeed a common response to dwindling energy, Tainter warns it may also be one that can collapse both the economy and the society.

Since large, concentrated societies contract to the Core to protect themselves and their critical assets, those in the core historically won’t offer time or resources to help anyone but themselves: the army, the police, the roads, the tax officials.

When that is true, you may want to localize, decentralize and maintain your own Core, with your own people, at home. This re-localizing will re-establish the balance of power in the Periphery where most people live.

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Where Volkswagen Cars Go To Die

An aging football stadium in Michigan. A decrepit paper mill in Minnesota. A sun-bleached patch of desert in California.


These are the lots where Volkswagen is storing the hundreds of thousands of diesel vehicles that included software to help them cheat US emissions testing as the company races to buyback a huge chunk of its inventory ahead of a deadline agreed to as part of its settlement with the US government, per Reuters.


Under the terms of its landmark settlement with the US government, if 85% of the 500,000 cars VW promised to repurchase haven’t been bought back or fixed by then, the company will face higher punitive payments.

Luckily for VW, the company says it has already repurchased 83% of these vehicles. Back in 2015, the company admitted to one of the biggest corporate scandals of the millennium: Installing software in its diesel cars to cheat US emissions test.


The company later pleaded guilty to several felonies, agreed to three years probation, an paid more than $4 billion in fines.

Meanwhile, it was also required to buy back any car that had been affected by its strategy.


According to a court filing, as of Dec. 31, Volkswagen had repurchased 335,000 diesel vehicles, resold 13,000 and destroyed about 28,000 vehicles.

As of the end of last year, VW was storing 294,000 vehicles around the country. The company has sent more than 400,000 letters offering buybacks and reimbursements.

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Peak Fragility: Why The Middle East Is Doomed

Authored by “Ehsani” – a Middle East expert, Syrian-American banker and financial analyst who visits the region frequently and writes for the influential geopolitical analysis blog, Syria Comment

* * *

The Mideast is doomed. Egypt alone needs to create 700,000 jobs every single year to absorb the new job seekers out its 98 million population. A third of this population already live below the poverty line (482 Egyptian Pounds a month, which is less than $1 a day). The seeds of the vicious circle that the Mideast region finds itself in today were planted at least 5 decades ago. Excessive public spending without matching revenues were the catalyst to a faulty and dangerous incentive system that helped to balloon populations beyond control. A governance system that was ostensibly put in place to help the poor ended up being a built-in factory for poverty generation. Excessive subsidies helped misallocate resources and mask the true cost of living for households. Correlation between family size and income was lost.

Successive Mideast leaders are often referred to as evil dictators. I see them more as lousy economists and poor users of simple arithmetic and excel spreadsheets that can help demonstrate the simple, yet devastating power of compounding. Unless you are a Gulf-based monarchy enjoying the revenue stream from oil and gas that can postpone your day of reckoning, the numbers in nearly every single Arab country don’t add up.

Image source: Middle East Eye via AFP, Egypt.


It is important to note that excessive population growth is not fundamental the issue here. Japan and many parts of Europe are suffering from too little population growth. The problem in Arab societies is lack of productivity stemming from weak private sector and overburdened bankrupt public sector. As students of Economics know, “Potential” Economic Growth of a country is derived by adding the growth rate of its labor force to the growth rate of the economy’s productivity. High labor force growth therefore ought to be a plus for the “Potential Growth”.

The Arab World’s problem is that it suffers from shockingly low levels of “productivity”. This may seem like a fancy word but the concept encapsulates everything that Arab economies and societies suffer from. Why does the Arab world have such low productivity? The answer lies in everything from excessive size of public sector, subsidies and overbearing regulatory system leading to corruption. As public sector liabilities grow, education, healthcare & infrastructure funding suffers.

Why is the size of the public sector coupled with excessive subsidies the problem? Because what starts as the noble cause of helping the poor ends up masking the true costs of raising family size. Governments soon go broke. Services suffer. Anger rises. We know the drill now.

* * *

The average cost of raising a child until age 18 for a middle-income family in the U.S. is approximately $245,340 (or $304,480, adjusted for projected inflation). That is about $15,000 per child per year for a two-parent family with median annual income (college costs excluded).

Growing up in Syria, I can still recall the “Family Booklet”. The more dependents you had on that booklet, the more was your allocation of subsidized rice, sugar, tea, edible oil, etc. Your home electricity was also subsidized. So was your diesel. Schooling? Free all the way. Not only almost all your food staples and energy use was subsidized, the Syrian State used to give a prize (Nishan) to women who gave birth to 12 children or more. Syria at that time had about 6 million people (and produced 300,000 barrels of oil a day and had plenty of water).

Without having to pay full price for bread, sugar, electricity, tea, fuel or education (all the way to college) and with the State becoming by far the largest employer (job guaranteed), the Syrian population doubled every 22 years. Imagine the pressures on the State coffers.

There’s no need for much imagination about how Syrian State fared as its population doubled every 22 years while its oil reserves and production dropped by 50%. It was still expected to offer all those freebies to a populace that never once asked how the State was to pay for all this. Not only Syrians never asked how their state could meet those obligations while they doubled every 22 years but the State itself never explained. It is debatable that the State was even aware of the power of compounding and what that does in the outer years (50 years ahead).

As State finances (revenue minus expenses with little to no borrowing program) suffered, so did the services. Schools, hospitals, municipal services became insufficiently funded. They were examples of Paul who had to be robbed to pay Peter (subsidies & losing public sector). As the state could not increase salaries with inflation, real wages and standards of living suffered. Even Mother Teresa would have had to accept a bribe if she had 5 kids and a salary of $150 a month.

Corruption is an inevitable by-product of a broken system. When the State can’t meet its built-in obligations, services suffer, corruption is rampant. The public’s anger grows and fingers start to point at anyone and everyone that is getting a bigger slice of the cake that is not growing anywhere near number of mouths it needs to feed. In the end, governments that start off by offering more than they can sustainably afford in the long run, end up being criticized and even toppled for seemingly not providing enough to a population that grew beyond that capacity of the system to handle.

When Governments spend, they can fund their expenditures in three ways: 1) Collect taxes 2) Borrow (assuming Lenders are available) or 3) Print money (assuming the central bank is not totally independent of the govt). Without sustainable tax base, it’s unlikely lenders will be willing to fund governments unless the latter are asked to pay unsustainably high interest rates. Similarly, printing money will soon lead to debasing the currency and rampant inflation.

* * *

What about Collecting taxes? Inscribed over the front door of the US tax office, (IRS) are the words “Taxes are what we pay for a civilized society.” As one once also said: “Countries that don’t have a properly observed tax regime usually fall into chaos and corruption.”

Growing up in Syria, avoiding taxes was akin to breathing. It had to be done. Often times, tax rates were impossibly high (top marginal rate was once over 70%). Not paying taxes is not just the fault of citizens but also the government’s which needs to accurately calibrate those rates. Regardless of underlying factors behind poor tax collection, the fact is that the Syrian government was expected to provide services, run losing businesses (public sector) & offer generous subsidies without matching tax collection or borrowing. Something had to give – quality of services.

As spending increased with rise of the population, the government investment in schools, hospitals, roads, municipal services, civil servant salaries and human capital suffered and even froze. The public had the right to complain but the public didn’t want to know how the government was funding itself. “When the children come, God will hand their fortunes along with them” – this is what we grew up hearing from families whose income did not seem to support the number of children they had. People would laugh it off as a joke. Sadly, this was Syria’s ticking time bomb.

On my trip to Syria few months ago, a young gentleman at my hotel explained to me how he was finding it hard to resist the pressure from his extended family and friends to stop at 5 kids. His father had 11. His brothers had 8-9. Having only 5 himself was insulting to his manhood. Like most Arab countries, Syria’s peak fertility (Avg number of children per woman) was between 1975-1980. The world’s highest then was Yemen at 8.7. Syria was 9th in the world at 7.47. It was in the company of Senegal, Malawi, Niger, Kenya, Rwanda, Afghanistan & Gaza.

Even by 2005-2010, Syria’s population growth rate was still in the top 10 in the world at 3.26%. It also had one of the world’s youngest populations with a median age of only 15.4 years (only 4.8% was over the age of 60; these statistics are from UN’S World Population tables).

* * *

Egypt did embark on strong population control strategy. Over two decades and by early 2000, its population growth rate dropped from 3.5% to 1.7%. Large billboards were used in rural areas. An expanded use of contraception program was also effective. Sadly, success didn’t last, and by 2007, complacency set in. Mubarak also started pushing back against international NGO’s administrating the programs. Once he was overthrown & Morsi came in, all contraceptions were banned. Before long, growth rate was back up to 2.55% taking country’s population near 100 million.

While Egypt tried its hand with family planning, Syria never did. But this thread is not about merits or problems of population growth – it’s about fiscal pressures and what this dynamic inflicts on state budgets in a world of high subsidies, excessive public spending and limited resources.

The Syrian government was either not fully aware of the unfolding dynamic or that it was aware but it found it politically difficult to embark on a serious family planning program. Was the religious minority status of the leadership a factor and how would the religious establishment react? Whatever the motivations or the excuses were, the fact remains that no steps were taken to match the baked-in future population numbers with revenues or resources. The only way was to make cuts in government investment, freeze public salaries and watch the quality of the services decline.

Many have blamed current Syrian Leadership for a long list of governance shortfalls. No one (included Assad himself) can claim otherwise. What this long explanation has to highlight is that at least empirically speaking, Bashar Assad inherited a near impossible situation.

* * *

Ironically, when Hafez Assad took over, he wrestled the Ba’ath party to the right as he fought off the more leftist wing that took power with him first. He immediately embarked on his “corrective movement”. I recall American cars being allowed as imports (yellow dodge taxis).

Older members of my family still refer to the period between 1970 and 1976 as Syria’s golden period. Merchants saw their businesses boom as foreign trade was relaxed and the corrective movement quickly became seen as a tilt to the right from an earlier ultra leftist leaning. Regardless of your politics, Hafez Assad was a larger than life figure in modern Syrian politics. Soon after taking over, he powered forward building a top down centralized State (Syria was part of Soviet camp during Cold War) that would come to dominate Syria’s future.

Merely 6 years after taking over, sporadic assassinations became widespread. Syrians would later find out their Govt was at war with the Muslim Brotherhood culminating in Hama in 1982. This 6-year battle between Islamists & Damascus left its mark in Syria’s DNA ever since.

Having been near a death situation, Syrian Leadership abruptly reversed the trends from 1970-1976 when it opened the economy and relaxed international trade and moved almost the exact opposite direction. The old Eco corrective movement was frozen. Security reined supreme now.

Between 1982 and the year 2000 when Bashar took over, Syrian Leadership spent most of its energies making sure the Islamist and Ikhwan (Muslim Brotherhood) would never see the day of light again.Being charged with belonging to Muslim Brotherhood received the death sentence by law. Add in the collapse of the Soviet union (Syria was a big victim of this huge event), falling reserves and oil production, currency devaluation, restrictions on foreign exchange transfers using draconian laws, Syria’s economy took a beating just when its fertility was in the top 10 globally.

* * *

Fast forward to 2000 when current President Assad takes over. Yes, expectations and hopes were high both domestically and internationally. A very young population now has one of theirs. He studied abroad. He was surely going to reverse direction both politically & economically. From the start, Bashar’s main challenge was always going to be how to meet those high expectations. Political activists and thinkers quickly set up Damascus salons to carve a new political platform where they can start to participate in political life.

Economically speaking, there was now talk about allowing foreign banks and even starting a stock market. Economic reforms of this type were always going to produce winners & losers. Those w capital made it big. They now owned banks, insurance companies and hotels. And the losers? Losers were all those one of 7.4 kids born around 1980 to mothers with high fertility rates and fathers who did not have the income to support them. Those in rural areas fared worse. They were ill prepared or educated. The state was increasingly unable to support them.

The state never implemented family planning campaign (how would Islamists have reacted to Alawi President trying to reduce the numbers of the majority?). The state also never communicated to the public that course country was on was arithmetically untenable. The clock kept ticking. This is not to say State didn’t make mistakes. Old agrarian policies were by now resulting in over-exploitation of groundwater resources (again this was an inherited legacy). What was new was 2007-2009 drought that was one of worst in recent memory.

* * *

What about corruption? Corruption thrives in heavily bureaucratic centralized systems where civil servants suffer from frozen salaries and inflation rates that eats away at their real purchasing power. Without supplemental income, employees at all levels of the state apparatus will hardly survive As the State can’t afford to raise salaries with inflation, employees at all levels are left to fend off for themselves to make ends meet. The state knows it, the public knows it & what you end up with is institutionalized corruption as inevitable consequence of broken system.

For corruption at this level to be addressed, the level of public spending and liabilities have to fall dramatically. The size of government has to be smaller. The public sector has to slim down. Those left can now receive proper wages. Taxes must all get collected as the state gets a handle on finances,

What about corruption at highest levels? What about Rami Makhlouf? As we found out recently in Saudi, this problem is not restricted to Syria. This is not to say that Rami and leadership made a mistake in occupying such visible position in Syria’s economy. Rami Makhlouf seems to have turned into the lightening rod for every Syrian whose purchasing power or standard of living fell behind. While its impossible not to appreciate the reasons behind this widespread public sentiment at the time, a little bit of math helps here.

Many cite the “billions that Rami stole”. Suppose that all this is true and that Rami siphoned off $1 billion every single year. Had this money gone to the public, each of 23 million Syrian would have had their income rise $43 a year ($3.65 per month). Hardly solves the issue. No one ought to dismiss the negative effects of high level corruption at the high end. Appearance and optics matter tremendously and Rami’s case is a perfect microcosm of that. But, had Rami not been around, it would make very little difference to the broader issue at hand.

* * *

What about Western political meddling? The state department had run a democracy promotion program since September 11 (2001) and many activists were supplied with media training & equipment to help them capitalize on the moment when it presented itself. March 2011 was that moment.

What about political reforms that were expected after Assad’s arrival in 2000? This was classic case of high expectations clashing with reality on the ground and the system as a whole. What was seen as needed “reforms” to some was viewed as dangerous slippery slope by others. What was described above was the nasty cocktail mix that was waiting in the wings as events unfolded in March 2011. Those who wanted more political participation included the poor, those from the rural areas, the Islamists and the regional/western adversaries of the Syrian leadership.

Assad may not have anticipated the Tsunami early but by the summer & end of 2011, he made up his mind. This was going to be a fight till the end where losing was not an option. There would be no panic but he would stop at nothing till he ensures victory.

* * *

In conclusion, Assad was dealt a tough hand. He inherited a legacy that was born out of years of governance challenges. How would one maintain a largely socialist structure while the population doubled every 22 years and revenues from the country’s natural resources were falling by nearly 50%?

When and if Syria’s war is over, a new chapter and contract must start. The private sector must become the engine of growth. Regulations must be streamlined. Taxes must be cut to level low enough to ensure respectable collection rate. And one final idea, or a wish list of sorts: Rather than financial handouts, Syria must ask for 20 year grace period that would allow it to get to export to the rest of the world free of duties.

Sanctions ought to also be lifted. Investments in labor intensive industries must be encouraged to help employment. If and when the economy finds its footing, it’s critical that women’s labor participation rises from the abysmal rates in the region. Studies conclusively show that increased women participation in the labor force is the single biggest factor behind population growth control.

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How the Free-Range Kids Movement Is Helping Parents Embrace Their Libertarian Side

freeIn signing the Free-Range Kids Bill, Utah just became the first state to explicitly recognize the right of parents to raise their kids without the threat of government intervention. Imagine that: it will no longer be considered negligent to let your kid walk to school, play outside, come home with a latchkey, or even, under certain conditions, wait briefly in the car.

The bill, which was named for the movement I started, has has been getting tremendously positive press. The New York Times, The Washington Post, The Wall Street Journal (that one’s by me), Good Morning America, USA Today, The Hill, and Kennedy of Fox Business all covered it favorably. And the vast majority of commenters have said something along the lines of finally and it’s awful we even need a law like this.

Here, for instance, is The Washignton Post story. It begins:

It all started when Lenore Skenazy let her 9-year-old ride the subway home alone. She gave him a map, a MetroCard, a $20 bill and — just in case — some quarters for a pay phone call. Then she left him in the handbag section in New York’s original Bloomingdale’s. It was all his idea. He had begged Skenazy to just leave him somewhere and let him find his way back all by himself, until finally, on a spring day in 2008, she let him do it.

“I trusted him to figure out that he should take the Lexington Avenue subway down, and the 34th Street crosstown bus home,” she wrote in her 2008 column for the New York Sun, the one that ended up starting a movement. “If he couldn’t do that, I trusted him to ask a stranger. And then I even trusted that stranger not to think, ‘Gee, I was about to catch my train home, but now I think I’ll abduct this adorable child instead.’

“Long story short: My son got home, ecstatic with independence.”

Within days, Skenazy’s story went viral, as parents across the country wondered whether she was “America’s Worst Mom” or just one who valued her kid’s independence. Within a year, she wrote a book. She coined a new term. She called her parenting style “free-range,” allowing her son to do various activities without stifling supervision.

And now it’s the basis of a new law in Utah.

And here is a typical comment:

The people of Utah feel they should be allowed to parent and make choices without the threat of losing their kids. Utah is simply trying to stop the encroachment of government into every part of their lives.

Here’s a comment from The New York Times piece:

Finally, a sensible law.

And from Yahoo News, where the piece garnered 6,791 comments:

So basically it’s now legal to go outside and play like when I was a kid.

This push for freedom isn’t over—the Times reports that other states are considering similar laws. And media interest continues. I was on CBS This Morning on Saturday, and on Monday I’ll be on C-Span at 8:30 a.m. After that I’m on NPR’s “On Point” from 11:00 p.m. until noon.

Free-range parenting has captured America’s imagination because America has captured its kids. We have been locking them up at home, transporting them to supervised classes, and tracking them by text and GPS, all in the name of safety. We do this, even though the crime rate today is back to what it was when gas was 29 cents per gallon.

Now that I am president of the new non-profit Let Grow—Free-Range Kids with a board and a budget—my goal is to make it easy and normal to give kids back their freedom, so they grow up ready to think and fend for themselves.

I have to thank Reason for giving me a platform for all these years, and publishing that “Fragile Generation” cover story. I would also like to give a special shout out to the Reason Foundation’s Adrian Moore for helping me write what became the first draft of the Free-Range Kids law. Onward.

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Why WSJ Insists Trump’s Crackdown Against Amazon Would Be “A Long Shot”

President Donald Trump’s decision to launch a PR war against Amazon this past week helped drive the Nasdaq to its worst monthly performance since January 2016 (of course, Trump’s involvement was precipitated by an Axios report claiming the president is “obsessed” with finding ways to punish the e-commerce company). But in the interest of stopping the bleeding (as tech shares, and chiefly the FANG stocks grouping of which Amazon is a member, led the market lower in arch), the Wall Street Journal published a story on Saturday  – following another round of attacks by Trump – claiming that an anti-trust action against Amazon of the type that Trump has intimated just isn’t feasible, based on a cursory reading of US anti-trust law.

As WSJ reporter Laura Stevens explains, trying to spit up Amazon on anticompetition grounds “would be difficult, requiring an overturn of the principles that have guided US antitrust enforcement for decades..”


The problem, Stevens explains, is that Amazon doesn’t have enough of a monopoly in any one of its business lines (even its core e-commerce business) to run afoul of US anti-trust laws – which were written and passed during the first half of the twentieth century.

Amazon’s rapid growth over more than two decades from an online bookseller to a $178 billion retailer that also has a cloud-computing business, a Hollywood studio, a device business and a grocery store chain has prompted Mr. Trump and some policy experts to question how big is too big.

Current regulations typically only kick into effect when a company is dominant in one market or is hurting consumers—neither of which experts think currently apply to Amazon. While Amazon has about 43% of the U.S. e-commerce market, it is still less than 4% of total U.S. retail, according to eMarketer.

Some people in the business community, including those who know Mr. Trump well, have said that antitrust law has failed its historical purpose when it comes to Amazon, focusing too much on pricing and not enough on concerns that integrated businesses can be anticompetitive, people familiar with the matter have said.

As support for her argument, Stevens cites an article in the Yale Law Review published in January 2017 entitled “Amazon’s Antitrust Paradox”. The article was written by Lina M. Khan, and it outlines how to restructure antitrust enforcement in the US. The premise is that recent case law surrounding anti-trust activities in the US focuses too much on whether the company is harming the consumer, rather than zeroing in on anti-competitive practices.

Her basic argument is that antitrust framework has moved from looking at market structure to consumer welfare, something that has led Amazon to escape scrutiny so far. She lays out an argument that if Amazon is practicing predatory pricing in various markets, that can squeeze competition even if it is good for consumers. She argues that restoring an approach that examines Amazon’s power across markets, rather than its impact on consumers, would more adequately address the tech giant’s power.

Ms. Khan and other researchers have recently triggered some debate about antitrust regulation in the policy and academic community, says A. Douglas Melamed, a law professor at Stanford University and previous acting assistant attorney general in charge of the antitrust division at the U.S. Justice Department during the Clinton administration. But many of the theories are too general and operate on potentially problematic and unproven premises.

Because of this, if Trump did want to pass new anti-trust legislation, he would need to push it through a Republican-controlled Congress inclined to peel back stifling regulation – not add more of it. As of now, the Department of Justice has no open anti-trust investigations against Amazon, and the White House communications office has said the administration isn’t planning anything. And in response to Trump’s claims about Amazon not paying enough in taxes, the company has said it collects sales taxes on its own inventory in all 45 states that have such a tax and has voluntarily started collecting taxes in some municipalities (of course, this glosses over the fact that much of the merchandise sold on Amazon is technically sold by third-party sellers).

The thing is, as Bill Simons, former CEO of Walmart US, pointed out during an appearance on CNBC last week, Amazon is engaged in business activities that are clearly anti-competitive. Amazon operates its e-commerce business at a loss, undercutting its rivals and fulfilling its strategy to win by gobbling market share, and relies on more profitable businesses like Amazon Web Services to make up for it. Brick-and-mortar retailers, and other e-commerce companies, literally can’t compete with its prices.

As Simons said, “they’re not making money in retail, they’re just putting retailers out of business.”

The real problem isn’t that an anti-trust case can’t be made – it can. The problem is making bringing Amazon to heel politically palatable.

Given Trump’s penchant for touting stock-market performance as the primary barometer for the effectiveness of his administration, even the president might not want to risk tanking one of the market’s most vital workhorses.

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Erdogan Accuses Israel Of State Terrorism, “Inhumane Attack” In Gaza

In response to the killing of 16 Palestinians by the Israeli army following clashes during a demonstration on March 30 on the Gaza-Israeli border, Turkey’s president Recep Tayyip Erdoğan accused Israel of being a “terrorist state and occupier,” and its army of “inhuman cruelty” in its crackdown on Palestinian protesters.

“Oppressor Israel and its army are only courageous against the oppressed in Gaza, Jerusalem, they are cowards when it comes to facing others,” Erdogan said at a ruling Justice and Development Party (AKP) congress in the southern province of Adana on April 1, addressing Israeli Prime Minister Benjamin Netanyahu according to Turkey’s Hurriyet.

“He says our soldiers are oppressing people in Afrin. Netanyahu, you are very weak, very poor. We [Turkey] are dealing with terrorists. But you are not concerned about terrorists because you are a terror state,” Erdoğan said. Calling the Israeli leader “an occupier” in Palestine, Erdogan said Netanyahu has no right to criticize Turkey.

“You are not popular. The step you took regarding Jerusalem at the United Nations is out in the open. The answer you received is out in the open. Stop bragging about owning nuclear weapons. The time may come when those weapons don’t work,” Erdoğan added.

“You are also a terrorist. History is recording what you have done to all those oppressed Palestinians,” Erdoğan said, adding that he believes Israelis too are disturbed by Netanyahu’s misdeeds.

Erdogan’s harsh language came after tens of thousands of Palestinians marched to Gaza’s border with Israel on March 30; at least 16 were killed and hundreds injured when Israeli forces opened fire on protesters marking “Land Day.” Land Day is an annual Palestinian commemoration of the deaths of six Arab citizens of Israel killed by Israeli forces in 1976 during demonstrations over government land confiscations in northern Israel.

March 30’s rallies were the start of a six-week protest that culminates on May 15, the day the Palestinians call “Nakba,” or “the Catastrophe,” when Israel was founded.

“Israel will get trapped under the oppression it inflicts in Palestine. We will continue to support our Palestinian sisters and brothers in their rightful cause until the very end,” Erdogan wrote earlier Saturday on social media.

To be sure, Israel responded: Prime Minister Benjamin Netanyahu raised his voice and hit back at Erdoğan shortly after the sharp criticism of Israel.

The most moral army in the world will not be lectured to on morality from someone who for years has been bombing civilians indiscriminately,” Netanyahu wrote on Twitter.

Erdoğan said a total of 3,844 terrorists have been “neutralized” since the start of “Operation Olive Branch” in Syria’s Afrin region. “We will not stop until the last terrorist is wiped out from our region” he added. Turkey launched the sarcastically named “Operation Olive Branch” on Jan. 20 to clear Syrian Kurdish People’s Protection Units (YPG) militants from Afrin near Turkey’s border with Syria. As we reported recently, two weeks ago Turkey-backed Free Syrian Army and Turkish troops entered the town center of Afrin, which had been controlled by the YPG since 2012.

* * *

Meanwhile, Reuters reported that on Sunday, Israel’s defense minister rejected calls for an inquiry into the killing of the 15 Palestinians by the IDF.

Hamas, the dominant Palestinian group in Gaza, said five of the dead were members of its armed wing. Israel said eight of the 15 belonged to Hamas, designated a terrorist group by Israel and the West, and two others came from other militant factions.

A tense calm descended on Sunday on the border area, where hundreds of Palestinians, a fraction of the tens of thousands who initially turned out, remained in tent encampments along the fenced 65-km (40-mile) border.

Avigdor Lieberman, the Israeli defense minister, rejected criticism of Israel’s actions, saying soldiers along the Gaza frontier “deserve a medal” and did what was necessary to protect the border. “As for a commission of inquiry – there won’t be one,” he told Israeli Army Radio.

* * *

The good news, so to speak, as the generational animosity between Turkey and Israel shows no signs of abating, is that absolutely nothing has changed in the middle east, where relationships between the various states are shown in their simplified form on the following diagram.

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Rep. Joe Kennedy III Is Sad that Pot Legalization Will Restrict Cops and Prosecutors

Dan Savage of The Stranger has flagged this awful interview of Rep. Joe Kennedy III (D-Mass.), one of those Kennedys and widely believed to be a big, big star for the Democrats in the years and decades to come. Suffice it to say that rarely has a congressman, even one blessed to belong to the most famous family in U.S. politics, been more tone-deaf and out of touch when it comes to drug policy.

In response to a question about legalizing marijuana from Vox‘s Ezra Klein, former prosecutor Kennedy responds:

So this one, um, this one’s a tough one for me. My views are not do not exactly line up with my own state and it’s something I’m struggling with…. [We] decriminalized it when I was in the court system, when I was trying cases, or shortly thereafter, if I remember the years right, in Massachusetts. When we decriminalized it it actually had a pretty big consequence for the way that Massachusetts prosecutors went about trying cases in terms of—because an odor of marijuana was, at last initially, because marijuana was an illegal substance, if you smelled it in a car, you could search a car. When it became decriminalized you couldn’t do that. So that was the way that we hadn’t—the base case that prosecutors used to search cars for under cover contraband, guns, knives, a whole bunch of other stuff, all of that got thrown out the window. That’s not to say that’s right or wrong, but that is to say that when that went through a public referendum, which is how that law was passed, I don’t think anybody had [given] much though[t] to, you’re actually gonna change one of the foundational principles for law enforcement that we use in our court system. [emphasis added by Savage]

Given his age (late 30s), past job, and status as the son of a former congressman and descendant of presidents and senators, Kennedy can’t claim he hasn’t thought about the issue. If your response at this late stage in the ongoing legalization movement is to start talking about how decriminalization made it harder for cops and prosecutors to search and convict people on non-pot-related charges, you’ve really got a screw loose. And as much as I’d like to, let’s not get ahead of ourselves when it comes to declaring victory in the War on Pot. As Cato’s Clark Neily tweeted in an unrelated conversation just yesterday, “There were more arrests for marijuana-related offenses in 2016 than for all violent crimes combined. Low-hanging, irrelevant fruit, and no cost-benefit analysis whatsoever.”

Savage riffs:

Joe Kennedy III sounds like he’s channeling Jefferson Beauregard Sessions III here.

What Kennedy is pining for here amounts to a stop-and-frisk program for people in cars—or a stop-and-harass-racial-minorities-in-cars program. Stop-and-frisk on sidewalks was ruled unconstitutional by the courts and has been shown to be ineffective by social scientists. And if it’s not okay and not helpful to randomly stop people on the street and search their persons for no reason whatsoever, how can it be okay or helpful to randomly stop people in vehicles and search their cars for a subjective, bullshit, easily abused reason like, “Something smells funny!”?

Kennedy’s stock has been rising over the past few months for at least two reasons. First, he delivered the Democratic response to Donald Trump’s 2018 State of the Union address (to mixed reviews, at least in part stemming from his “drool mouth” problem that became a Twitter trend for a few days). Second, Democrats are waking up to the fact that the average age of their leading candidates for the 2020 presidential race (Joe Biden, Elizabeth Warren, Hillary Clinton, Bernie Sanders) is well north of 70.

If his answer to the question of pot legalization is any indication, Kennedy is not only out of touch with the 60 percent (and growing) of Americans who want the stuff treated basically like alcohol, he’s against it for all the wrong reasons. In Colorado, which legalized recreational pot five years ago and has the most-developed tourism market, past-month use by teens is down; the rates for homicides, burglary, and robbery have declined; and homelessness in the state’s biggest city is down. At the very least, we can all agree that “Marijuana Doomsday Didn’t Come.” Younger voters are both more likely to be in favor of legalization and skeptical of law enforcement, so Kennedy is wrong on two counts with the cohort that owns the future.

Of course, it’s not as if any other Democrats, much less Republicans, are rushing toward electoral victory by openly advocating for legalization, either. The first national major-party candidate that does so will get an incredible first-to-market advantage when it comes to running for president in 2020. Yes, they will take many arrows, but those will bounce off easily enough, especially as the country continues to get more OK with legal weed. If it’s a mug’s game appealing the better angels of politicians’ nature, then maybe we should just start appealing to their will to power.

Related: In 2015, Reason looked at how legalization was working out in Colorado. Take a look.

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‘Wounded Warrior’ Responds To David Hogg: “It’s Not A Gun Problem, It’s A Culture Thing”

Authored by Scott Morefield via The Daily Caller,

Wounded warrior Derek Weida, who lost a leg while deployed in Iraq, posted a poignant rebuttal to Parkland survivor David Hogg’s gun control campaign on Friday.

As of Sunday afternoon, Weida’s Facebook post  had over 41,000 reactions and over 18,000 shares.

The post was written from the perspective of Weida “listening to David Hogg speak,” and it began with a direct piece of advice for Hogg: “Watch what you say.”

“I got shot on a house raid in Iraq. My getting shot didn’t make me a professional on war, international relations, house raids (obviously!), or guns,” wrote Weida, adding that despite the “horrible thing” that happened to him – and the feelings he had against the war in Iraq — he “didn’t come home and protest the war.”

Acknowledging that he “signed up to be shot at” as opposed to Parkland students, Weida had a few words to say about gun control.

“It’s not a gun problem, not a people problem, it’s a culture thing,” wrote Waida. “America loves guns. Accept that just like I had to accept that America loves God. Don’t ever be so quick to tell a whoooole lot of people how to live.”

Weida stated that while nobody “wants shootings of any kind,” in a way he’s “with” the anti-gun students. But he added,

“It’s not even about the gun. It’s about the freedom and the right… And you can’t win an argument against that, nor should you (In most cases).”

“Yes, let’s find ways to deter those .001% of people as best we can but they’re gonna accomplish their task regardless… Most likely. “

“I guess I just want to say don’t be so quick to talk. Don’t be so quick to think YOU are somehow the ONE person who has things figured out. You want to make a change? Cool!! But… Try to be less of a cunt about it.”

In 2015, Weida was featured in Stars & Stripes for how physical fitness helped pull him out of depression after losing his leg to an insurgent’s bullet in 2007 while deployed to Iraq.

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Cryptogeddon – Bitcoin Breaks Below $7,000; Ether Down 75% From Highs

As if the last few weeks were not bad enough, cryptocurrencies are re-tumbling since Friday’s close.

Once again there is no clear catalyst but headlines from crypto world include South Korean and Thai regulators preparing to unveil their crypto-tax proposals (and notably the maze of details surrounding US tax requirements for cryptos may also be forcing some unwinds to cover unforeseen ‘costs’).

The Kazakh National Bank has banned crypto-mining and The FBI has issued a warning regarding fraud and cryptos.

Bitcoin is now below $7,000 – a level it first hit in October 2017 – down 67% from its record high in December.

Ethereum is worse – down 75% from its highs and back below $400, this is the lowest level for the second largest crypto by market cap since November 2017.


While this collapse is very reminiscent of the dotcom debacle, CoinTelegraph’s Nikolai Kuznetsov  sees innovation and sustainability.

While it is only prudent and smart for anyone entering the crypto space to proceed with caution especially when it comes to trading and investing in crypto assets, it would be unfair to be totally dismissive of what the Blockchain technology has brought about. The parallels with the dotcom bubble should serve as lessons to stakeholders.

One must remember that the aftermath of the dotcom bubble also affirmed that truly innovative organizations and technologies could weather the storm. Companies such as Amazon and eBay proved that pairing novel ideas with good business acumen can lead to success. Surely, the situation today with crypto and the environment of dotcoms from nearly twenty years ago would have their differences. Ventures must be able to navigate these nuances in order to make the best possible decisions moving forward.

Whether or not crypto ventures will share a similar fate to dotcoms remains to be seen. At least for now, crypto stakeholders have a chance to write a different story.

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Michigan Activates Emergency Ops Ahead Of Chinese Space Station Crash

With China’s Tiangong-1 space station (translated as “Heavenly Palace”) full of highly toxic chemicals such as hydrazine, set to crash into the earth at a still unknown location some time today, Michigan isn’t taking any chances.

As a reminder, several weeks ago Aerospace.org predicted that while the list of possible crash sites includes locations in Northern China, South America, Southern Africa, Northern Spain and the United States, lower Michigan in particular is among the regions with the highest probability of a direct hit.

Fast forward to today when in advance of Tiangong’s atmospheric reentry, sometime between now and April 2, Michigan Gov. Rick Snyder has activated the state’s Emergency Operations Center today to monitor its travels.

According to the Detroit Free Press, and as noted previously, pieces of the 8.5 ton space station have the potential to land in the southern Lower Peninsula of Michigan, according to the Aerospace Corporation. Still , while the possibility that space debris could land in Michigan looms, the odds of it actually happening are miniscule.

“When considering the worst-case location … the probability that a specific person (i.e., you) will be struck by Tiangong-1 debris is about 1 million times smaller than the odds of winning the Powerball jackpot,” according to Aerospace, a government contractor that provides research, development, and advisory services to national-security space programs.

In any event, Michigan’s Emergency Operations Center urges anyone who suspects they have encountered debris from the space station to call 911 and stay at least 150 feet away from it.

In a follow up article we will present readers with several options on how to track the space station’s trajectory in real time.

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