Starbucks’ Straw Ban Will See the Company Use More Plastic, Not Less

2018 will forever be remembered as the year that hating plastic straws went mainstream. Once the lonely cause of environmental cranks, now everyone wants to eliminate these suckers from daily life.

In July, Seattle imposed America’s first ban on plastic straws. Vancouver, British Columbia, passed a similar ban a few months earlier. There are active attempts to prohibit straws in New York City, Washington, D.C., Portland, Oregon, and San Francisco. A-list celebrities from Calvin Harris to Tom Brady have lectured us on giving up straws. Both National Geographic and The Atlantic have run long profiles on the history and environmental effects of the straw. Vice is now treating their consumption as a dirty, hedonistic excess.

Not to be outdone by busybody legislators, Starbucks, the nation’s largest food and drink retailer, announced on Monday that it would be going strawless.

“This is a significant milestone to achieve our global aspiration of sustainable coffee, served to our customers in more sustainable ways,” said Starbucks Kevin Johnson CEO in a press release announcing the move.

The coffee giant says that by 2020 it hopes to have eliminated all single-use plastic straws at its 28,000 stores worldwide. It will now top all its cold drinks with fancy new strawless lids that the company currently serves with its cold brew nitro coffees. (Frappuccinos will still be served with a compostable or paper straw.)

As is to be expected, Starbucks’ decision was greeted with universal adulation.

The World Wildlife Fund and Ocean Conservancy both provided ebullient quotes for Starbucks’ press releases. Liberal magazine The New Republic praised the move as an “environmental milestone.” Slate hailed the Starbucks straw ban as evidence of as a victory for a bona fide anti-straw movement, one that would hopefully lead to bans of more things plastic in years to come.

Yet missing from this fanfare was the inconvenient fact that by ditching plastic straws, Starbucks’ will actually be increasing its plastic use. As it turns out, the new nitro lids that Starbucks is leaning on to replace straws are made up of more plastic than the company’s current lid/straw combination.

Right now, Starbucks patrons are topping most of their cold drinks with either 3.23 grams or 3.55 grams of plastic product, depending on whether they pair their lid with a small or large straw. The new nitro lids meanwhile weigh either 3.55 or 4.11 grams, depending again on lid size.

(I got these results by measuring Starbucks’ plastic straws and lids on two seperate scales, both of which gave me the same results.)

This means customers are at best breaking even under Starbucks’ strawless scheme, or they are adding between .32 and .88 grams to their plastic consumption per drink. Given that customers are going to use a mix of the larger and smaller nitro lids, Starbucks’ plastic consumption is bound to increase, although it’s anybody’s guess as to how much.

In response to questions about whether their strawless move will increase the company’s plastic consumption, a Starbucks spokesperson told Reason “the introduction of our strawless lid as the standard for non-blended beverages by 2020 allows us to significantly reduce the number of straws and non-recyclable plastic” as the new lids are recyclable, while the plastic straws the company currently uses are not.

This is cold comfort given the fact that even most of the stuff that is put in recycling bins still winds up at the dump. The company did not address, nor did it dispute, that its transition to strawless lids would increase its overall plastic consumption.

The weight of plastic—not the raw number of plastic objects used, or whether those objects are recyclable or not—is what should really concern environmentalists.

Pictures of turtles with straws up their noses are certainly jarring. However most plastic, whatever form it enters the ocean as, will eventually be broken up into much smaller pieces known as micro-plastics. It is these micro-plastics that form those giant ocean garbage patches, pile up on the ocean floor, and leech into the stomachs and flesh of sea creatures.

Reducing the amount of micro-plastics in the ocean thus requires cutting down on the aggregate weight of plastics entering the ocean each year. It cannot be stressed enough that straws, by weight, are a tiny portion of this plastic.

At most, straws account for about 2,000 tons of the 9 million tons of plastic that are estimated to enter the ocean each year, according to the Associated Press; or, .02 percent of all plastic waste. The pollution problem posed by straws looks even smaller when considering that the United States is responsible for about one percent of plastic waste entering the oceans, with straws being a smaller percentage still.

As countless experts have stressed, truly addressing the problem of marine plastic pollution will require going after the source this pollution; namely all uncollected litter from poorer, coastal countries that lack developed waste management systems.

Straw banners have proven stubbornly resistant to this logic. Instead, they have chosen to rely on either debunked statistics (such as the claim that Americans use 500 million straws a day, which was the product of a 9-year-old’s research) or totally unproven notions (like the theory that straws are a “gateway plastic”) in order to justify petty prohibitions on innocuous straws. And they have been helped along by an uncritical media. Coverage of Starbucks’ strawless move saw The New York Times, Wall Street Journal, and National Geographic all cite the 500-million-straws-a-day figure.

By adopting a myopic focus on banning straws, environmentalists, city councils, and conscious capitalists are, at best, having no significant impact on the overall problem of marine plastic waste. At worst, they are pushing expensive prohibitions on consumer choice that are counter-productive—at least in the case of Starbucks’ ban—and come with all sorts of unintended consequences.

For instance, straw bans will likely hurt disabled people who lack the motor skills necessary to pull off a flawless cup-to-lip motion. While reusable straws exist, they are hard to clean and not always handy when one needs them. “What if you decide on the spur of the moment to go have a drink with friends after work but forgot your reusable straw that day? [That] doesn’t leave a lot of room for spontaneity—something nondisabled folks get to largely take for granted,” Lawrence Carter-Long of the national Disability Rights Education & Defense Fund told NPR. Senior citizens and parents with young children will likely be affected for the same reasons.

Why not use more eco-friendly disposable straws? Because they are terrible. Paper straws are known to collapse halfway through a drink. Compostable straws cost six to seven times more than their plastic alternatives, don’t keep for long, and fall apart when exposed to high heat.

Straws, although not essential for most people most of the time, are still a wonderful convenience that help people enjoy a drink on the go, preserve their carefully-applied lipstick, or save their teeth from the corrosive effects of some beverage. Just yesterday, we as a nation celebrated 7-Eleven’s ‘Free Slurpie Day’, a holiday that can’t hope to survive in a strawless world.

Giving up on free slurpies and dignity for disabled people in the pursuit of totally illusionary environmental benefits seems like a poor trade-off, yet that is the trade-off straw prohibitionists are forcing the rest of us to accept.

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CFTC Approves Record $30 Million Award For JP Morgan Whistle-Blower

The CFTC has finally approved what is expected to be the largest award in the history of its whistle-blower-awards program: According to Bloomberg, the commission has authorized a $30 million award for information about JP Morgan neglecting to inform its wealthy asset-management clients about conflicts of interest involving the bank’s investment recommendations.

JPM

The award represents 30% of the $100 million in penalties and surrendered profits that the CFTC received in a December 2015 settlement with the bank. 

The CFTC made the award public on Thursday without naming individuals or the bank. According to the attorney, Edward Siedle, it was the culmination of a December 2015 settlement in which JPMorgan agreed to pay regulators a total of $367 million for failing to disclose that it was steering asset-management clients into investments that would be especially profitable to the bank.

That included $100 million that went to the CFTC — $40 million in penalties and $60 million in disgorgement. The bank agreed to pay an additional $267 million at the time to the Securities and Exchange Commission, where a pair of preliminary whistle-blower awards totaling $61 million were authorized a year ago but still await final approval.

It’s also the fifth award in the history of the CFTC program, which was created along with a separate whistle-blower program at the SEC as part of the Dodd-Frank act. As the claimant’s attorney, Edward Siedle, said, many bank whistle-blowers aren’t aware that there’s “a commodities element” to many cases of investment fraud, which opens the door to the CFTC’s involvement, and the possibility of more settlement money.

“We hope that an award of this magnitude will incentivize whistle-blowers to come forward with valuable information and provide notice to market participants that individuals are reporting quality information about violations” of commodities-trading law, said CFTC Chairman J. Christopher Giancarlo.

Siedle acknowledged earlier Thursday that an unnamed client of his acted as a whistle-blower in obtaining the CFTC award. Siedle said he had also obtained a preliminary award from the SEC on behalf of the same client.

“Most would-be whistle-blowers overlook the fact that there’s a commodities element in most investment fraud,” Siedle said. “This award demonstrates that the CFTC is willing to act quickly on those complaints if contacted.”

In a separate award granted last year, the Securities and Exchange Commission handed two whistle-blowers a combined $61 million bounty, equivalent to roughly 23% of its $267 million settlement with JPM.

Under Dodd-Frank, the SEC and CFTC run two separate whistle -blower award programs. Each allows whistle-blowers to receive between 10% and 30% of total recoveries, depending on the value of the information they provide. Those settlements are often worth tens – if not hundreds – of millions of dollars.

So far, no comments from fortress-balance-sheet CEO Jamie Dimon on the award or the underlying fraud as he likely sees this a just another ‘storm in a teacup’… although he knows a fraud when he sees one.

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A Florida Man Arrested for Pot Is in Jail Until He Lets Deputies Search His Phones

MarijuanaA Tampa, Florida, man is in jail for contempt of court because he couldn’t (or wouldn’t) unlock a pair of cell phones to comply with a search warrant.

The case of William Montanez, first arrested on June 21, got some attention last week when Tampa’s Fox affiliate reported that a judge tossed him in jail for contempt because he couldn’t remember the passcodes on two phones deputies wanted access to.

Beyond the issue of whether courts can force a person to provide the passcode to their phone, there’s another issue here of why, exactly, the Hillsborough County Sheriff’s Department is demanding access in the first place.

Montanez’s attorney, Patrick Leduc, spoke to Reason Wednesday and provided copies of all the police reports and warrants in the case. Montanez was initially pulled over by a deputy who was monitoring his car on outdoor surveillance footage and saw him leave a gas station and drive onto the street without coming to a full stop first. This is a traffic violation in Florida.

The report doesn’t indicate why the deputy was monitoring Montanez in the first place, but the deputy used the traffic violation to pull Montanez over. Then things get a little sketchy. According to the deputy’s report, he requested a drug-sniffing dog to come to the scene before even approaching Montanez’s vehicle.

Montanez’s own behavior was a little sketchy as well. He did not have his driver’s license, registration, or proof of insurance in the vehicle. The deputy also reported smelling a “strong odor of a freshly sprayed masking cologne.” The drug-sniffing K9 was brought in to check the car, and the dog indicated the presence of drugs.

This led to a search where deputies found some marijuana in a plastic baggie in a hidden compartment in the car and some burnt roaches. Montanez acknowledged that the marijuana was his and for his own use. The amount of marijuana found constituted merely a misdemeanor under Florida law. The deputy also found two bottles of oil, which when field-tested, came back positive for THC. Possession of any amount of cannabis concentrate in Florida is a felony. They also found a gun the glove compartment of the car, which even if the gun is legally owned and licensed, counts as a charge of possessing a gun firearm during the commission of a felony because of those two bottles of THC oil. And they also found $1,203 in cash on Montanez. Possessing cash is not a crime, and Montanez has not been charged with any crimes in relation to having all that cash on hand.

None of this explains why police wanted to access Montanez’s phones. According to the police reports, the deputy was attempting to power down Montanez’s phones. While doing so, a text message popped up that said “OMG, did they find it?” The report states that the text message arrived after the traffic stop, leading the officer to believe that there was evidence on the phone. So the deputy seized the phones. He asked Montanez for the passcodes and Montanez declined. They submitted a search warrant to compel Montanez to supply the passcode and allow them to access all the content on both the phones.

But, the question remains, why? The warrant application explains the contents of the phone could provide evidentiary information related to the four charges filed against Montanez. But they already have the literal physical evidence for the charges they’ve filed. They’ve got the drugs and the gun. Montanez is not charged with anything connected to drug trafficking.

Leduc sees a deeper motive in trying to get access to Montanez’s phones.

“It’s basically a fishing expedition,” Leduc says. “This is an intel operation. They’re seeking to get into his cellphone to see what data-mining they can do.”

Leduc notes that the deputy who pulled Montanez over isn’t some general patrol officer. The deputy himself notes on the warrant request that he’s part of a street crimes team that investigates drug and narcotics cases. In short, it’s unlikely that the stop leading to the discovery of drugs was any sort of coincidence. And the desire to search Montanez’s phone may be for something bigger than securing a conviction for the charges Montanez is facing.

Regardless of whether Montanez has a deeper connection to drug trafficking—he has previous arrests for marijuana possession but no felonies—Leduc doesn’t believe an arrest for drug possession should logically lead to the police being permitted to search all your technology.

“There’s no limiting principle here,” Leduc says. “If the state’s theory is correct, if you’re a dude on a street corner, smoking a joint, they can demand your phone. If I enter a home, if I see marijuana, should I be able to search their laptops?”

Unfortunately for Montanez, the judge who handles first court appearances lacks the jurisdiction to quash a warrant even if he or she were inclined to and could only consider whether to hold Montanez in contempt for not complying. Judge Gregory Holder ordered Montanez to unlock the phones. Montanez said he could not remember the passcodes and was unable to do so. So Holder found Montanez to be in contempt and detained him.

Leduc has submitted an emergency petition for a hearing in order to fight the contempt order. Montanez could be held for up to six months unless he unlocks the phone or unless the court frees him. Leduc’s petition challenges whether deputies established probable cause to search the phone and asks the court to declare that Montanez does not have to give up his passcodes.

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Rickards: First, Currency War; Now, Trade War; Is Shooting War Next?

Authored by James Rickards via The Daily Reckoning,

My thesis is that currency wars are followed by trade wars and then finally shooting wars among major powers.

This happened in the 1930s and it seems to be happening again.

Currency wars begin in a condition of too much debt and not enough growth. Countries steal growth from their trading partners by cheapening their currencies to promote exports and import inflation.

The present currency war started in January 2010. The problem with currency wars is that all advantage is temporary and is quickly erased by retaliation. Trading partners retaliate with their own devaluations. Currency cross-rates end up back where they started, with costs imposed due to the uncertainties.

Not only is the world not better off but it is worse off because of the costs and uncertainty resulting from the currency manipulations.

Eventually, the world wakes up to this reality and moves to the trade war stage. Once countries realize that currency wars don’t work, they turn quickly to trade wars through tariffs and other trade barriers.

The problem is that trade wars don’t work either, for the same reason currency wars don’t work — retaliation or tit-for-tat tariffs soon puts everyone back where they started.

The new trade war started in January 2018 with the announcement of tariffs, and those tariffs actually began to take effect last week. Just because trade wars have started does not mean the currency wars are over. Not at all. The currency wars and trade wars continue side by side. In fact, they are related.

If the U.S. puts tariffs on China, which we have, then China can fight back two ways.

The first is to impose their own tariffs on U.S. exports, which they have.

The second is to cheapen their currency to offset the impact of the tariffs. If the U.S. imposes a 25% tariff on China but China cheapens its currency by 25%, then everyone is back where they started in terms of the costs of Chinese goods to U.S. consumers.

This would be a potentially devastating development for markets.

A shock yuan maxi-devaluation will be the shot heard round the world as it was in August and December 2015 (both times, U.S. stocks fell over 10% in a matter of weeks).

There are individual winners and losers from the currency and trade wars, but the global economy as a whole is definitely a loser. This new trade war will get ugly fast and the world economy will be collateral damage. I believe it will get much worse before it is resolved.

We should look for slower growth and possibly a recession as the trade and currency wars play out. Let’s hope that history does not repeat and that we don’t end up in a Third World War, as the currency/trade wars of the 1930s helped lead to WWII.

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US “Asleep At The Wheel” – As Nuclear Industry Faces Collapse

A new, shocking report by researchers at Carnegie Mellon University’s Department of Engineering and Public Policy (EPP), Harvard University, and the University of California San Diego School of Global Policy and Strategy discovered that the US nuclear power industry could be on the verge of a collapse — a reality that many have yet to realize.

Published in Proceedings of the National Academy of Science (PNAS), “US nuclear power: The vanishing low-carbon wedge” examined 99 nuclear power reactors in 30 states, operated by 30 different power companies. As of 2017, there are two new reactors under construction, but 34 reactors have been permanently shut down as many plants reach the end of their lifespan.

We’re asleep at the wheel on a very dangerous highway,” said Ahmed Abdulla, co-author and fellow at the School of Global Policy and Strategy at UC San Diego. “We really need to open our eyes and study the situation.”

For more than three decades, approximately 20 percent of U.S. power generation has come from light water nuclear reactors (LWRs). These plants are now aging, and the cost to service or upgrade them along with fierce competition from Trump’s economic order to prop up failing coal and heavily indebted shale oil/gas companies make nuclear power less competitive in today’s power markets.

In return, the American shale boom could trigger a significant number of US nuclear power plant closures in the years ahead, the researchers warned. The country is now at a critical crossroad that it must abandon nuclear power altogether or embrace the next generation of miniature, more cost-effective reactors.

The researchers noted that small modular reactors might play a significant role in US energy markets in the next few decades. This new design would effectively swap out the current aging, LWRs that the Atomic Energy Commission allowed to rapidly expand across the country in the 1960s and after. The researchers described several scenarios where new nuclear power plants could be used to back up wind and solar, produce heat for industrial processes, or serve military bases.

Given the current market structure and policy dynamics, the researchers were not convinced that nuclear power would be competitive in the future power market.

While efforts continue to advance batteries for storing electricity from solar and wind, utilities have made an impressive push into natural gas. As of 2018, fossil fuel now produces nearly 32 percent of US power.

Given the impending collapse of the nuclear industry, the researchers questioned whether renewable energy would be enough to offset losses from retiring nuclear power plants.

“The reality is you cannot actually replace 20 percent of the need with wind and solar, unless you want to wallpaper every square inch of many states,” said Christian Back, vice-president of nuclear technologies and materials at General Atomics. “It’s not efficient enough.”

Back said with the right political support, nuclear reactors operating today could be retrofitted to increase safety and lifespan, while smaller, more cost-effective ones could be strategically placed on the grid.

“This is a situation like Nasa when you’re putting someone on the moon where the government needs to recognize the long-term benefit and investment that’s required and help support that,” Back added. “This is where political will matters.”

Researchers also suggested that many civilians overlook nuclear energy and do not realize the urgency of the situation.

In the article’s conclusion, the researchers warn, “It should be a source of profound concern for all who care about climate change that, for entirely predictable and resolvable reasons, the United States appears set to virtually lose nuclear power, and thus a wedge of reliable and low-carbon energy, over the next few decades.”

Is the Era of Nuclear Power Coming to an End? 

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Explaining The ‘Bullish Case For US Stocks’ During Trade Wars

Authored by Nicholas Colas via DataTrekResearch.com,

Last week’s rally in US stocks may just be the effect of a light volume/holiday week melt up, but the numbers were impressive and set the posts for last week’s action:

  • S&P 500 +1.52% last 5 days
  • Tech sector in S&P: +2.29%
  • Russell 2000: +3.10%
  • S&P Small Cap: +3.31%
  • All of which roundly beat “Rest of world” equities, up only 0.70% (MSCI All Country Ex-US)

Although Friday’s Goldilocks-style Jobs Report played a role, this strong performance stands in notable contradiction to market concerns over global trade disputes. Given these have been brewing for months, they should now be bitter enough to make for a less appetizing US stock market. The tape respectfully disagrees.

All of which got us to thinking: what is the bear case for US stocks missing with respect to trade wars? A few thoughts:

#1. Investor uncertainty is keeping a lid on long-term Treasury rates. This helps support US equity valuations and also buffers stock prices from any incremental uncertainty over corporate earnings. Yes, trade wars should be inflationary as the price of imported goods rises. But as with equity price action, the market disagrees with this concern. A few numbers:

  • Current 10-year Treasury Yield: 2.82%. The last time it was over 3% was May 17th. In fact, the benchmark Treasury has only closed +3% 10 days in 2018.
  • 10-Year Treasury breakevens (a measure of expected long run inflation) have been stable at 2.0-2.1% since the start of the year.

#2. Global interest rates are playing a supporting role here. While not enough to help overseas equity markets (All World Ex-US down 4.74% YTD), low yields elsewhere do seem to be putting a cap on US rates. For example:

  • Japanese 10-Year yields at 0.029% are closer to their 2018 lows (0.010%) than their highs (0.092%).
  • German 10-Years yield 0.294%. This is very close to the 2018 lows of 0.278% while the high water mark was 0.764%.
  • UK 10-Years hold to the same pattern. Current yields are 1.268%. The 2018 low close was 1.190%, and the high was 1.645%.

#3. Worries over the economic spillover of trade disputes give investors some hope that the Federal Reserve will slow the pace of rate increases in the back half of 2018. Data from the Fed Funds Futures market December 2018 contracts:

  • While the odds of 2 more increases this year crept up last week, they remain just below 50% (49.3%)
  • The odds of just one more bump in 2018 are still relatively high at 40.4%.

#4. So goes Tech, so goes US large caps, and these companies have less exposure to US trade policy than most sectors. Facebook and Google are banned in China, and Amazon/Netflix have minimal presences. In Europe, the first two do face regulatory threats, but these predate trade war chatter. And Apple, the biggest Tech company of them all, seems naturally hedged by being a large employer in China and a systematically important part of the US equity market.

Bottom line: if Industrials (-4.6% YTD) were the largest weighting in the S&P 500, US market performance would look a lot more like the rest of the world. But Tech holds that spot, and its 26% weighting is enough to support the S&P 500.

Summing up: we aren’t trying to whistle past the graveyard on the tariff topic, but rather frame the discussion in a way that respects market action.There are two sides to every coin. You likely have read enough “Tails, you lose” about the effects of trade wars on equity prices. But so far US stocks are coming up “Heads”, and there are some logical reasons for that.

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Report: Air Force One Isn’t American or Comfy Enough for Trump

President Donald Trump reportedly isn’t happy with some aspects of the planes that carry him around the globe. But his issues with Air Force One have nothing to do with things like safety or performance. Rather, he wants a “more American” paint job and a bigger and better presidential bed, according to Axios.

Trump met earlier this year with executives from Boeing, including CEO Dennis Muilenburg, and the two parties agreed Boeing will develop two new Air Force One planes at a cost of roughly $3.9 billion. Trump also detailed his curious specifications for the planes. According to Axios:

We’re told that Trump wants a color scheme that “looks more American” and isn’t a “Jackie Kennedy color.” He doesn’t think the current blue (technically “luminous ultramarine”) represents the USA.

Some Air Force officials disagree, arguing that the current color scheme is “known around the world,” Axios reports. Doesn’t matter. Trump wants his planes to be red, white, and blue. He also wants Air Force One’s presidential bed “to be larger and more comfortable,” like the bed on his personal plane.

Ironically, Trump might not be able to experience the changes in person. The new planes aren’t going to be ready until 2021 at the earliest, so he would have to win reelection if he wants to enjoy them. And it could take an additional three years for the Air Force to test the planes, CNN reported in February, meaning they might not be good to go until 2024. But Trump is reportedly keen on the process being completed before he leaves office, with a source telling CNN that the president “wants to fly on that new plane.”

At the end of the day, paint jobs and presidential beds likely won’t increase the final cost of the new planes very much. But if the current Air Force One fleet isn’t broken, why is Trump ordering new ones ahead of schedule?

This order seems like the latest sign of a troubling trend where politicians not only treat the government like a piggybank, but do so without the slightest hint of shame. In February, The New York Times revealed that Secretary of Housing and Urban Development Ben Carson ordered a brand new, taxpayer-funded $31,000 dining room set for his office. Scott Pruitt’s tenure as administrator of the Environmental Protection Agency, which ended last week, was plagued by similar financial scandals, from installing an expensive soundproofed telephone booth in his office, to regularly traveling first class on airlines and taking a security detail on personal trips.

Politicians and policymakers have always played fast and loose with other people’s money. It’s what they do. But doing it so boldly and publicly normalizes some gross behavior.

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President ‘Rock’? Dwayne Johnson Says “Absolutely” Considering A Political Run

Authored by Mike Brest via The Daily Caller,

Wrestler turned actor Dwayne “The Rock” Johnson said he is considering a run for political office on The Late Show with Stephen Colbert Wednesday night.

WATCH:

“I know you’re not particularly a political person, but people have talked to you about whether you would run for political office yourself,” Colbert said. “Do you actually take that possibility seriously?”

“I absolutely do, yes,” Johnson responded.

Johnson then explained that a Washington Post article suggested that if he ran, he would have a shot at winning, and that’s where the hype began.

“So when that started picking up — of course when I’m asked — yes, I have incredible respect for our American people and our country, so I said, ‘Yes, I would consider it,’” Johnson added.

“But at the same time, Stephen — I mean, look, I’m not delusional at all. Like I feel like I … you know what it is? I need that thing … oh, experience.”

Johnson is one of many celebrities that have suggested or been rumored to consider a political run now that the president has blazed the trial. Other celebrities that have been rumored include Mark Cuban, Howard Shultz and Kanye West.

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Citing ‘Public Safety,’ University of Kansas Removes Flag Artwork That Made Republicans Upset

KUAdministrators at the University of Kansas took down a controversial work of art—an American flag covered in black ink—after the state’s Republican governor and secretary of state demanded action.

“The disrespectful display of a desecrated American flag on the KU campus is absolutely unacceptable,” said Gov. Jeff Colyer in a statement. “Men and women have fought and died for that flag and to use it in this manner is beyond disrespectful. I spoke to leadership to demand that it be taken down immediately.”

The flag is meant to symbolize “a deeply polarized country,” according to the artist, Josephine Meckseper. Now it represents the speed with which craven university administrations bow to the easily offended. In a statement, KU Chancellor David Girod said:

There has been much discussion today about a public art exhibit on our campus featuring an artist’s depiction of an American flag. Our Spencer Museum, along with other institutions nationally, have participated in this year-long series of exhibits intended to foster difficult conversations.

Over the course of the day, the conversation around this display has generated public safety concerns for our campus community. While we want to foster difficult dialogue, we cannot allow that dialogue to put our people or property in harm’s way.

We have begun the process of relocating the exhibit to the Spencer Museum of Art, where we can continue the important conversation it has generated.

That’s right: the university invoked public safety as an excuse to remove a work of art that offended conservatives.

The Foundation for Individual Rights in Education has called on KU to reverse course. KU “should take a strong stand for the First Amendment,” FIRE’s Peter Bonilla said. “By doing so, KU would stand apart from the numerous institutions that have censored artistic expression—a troubling trend documented in our just-released report, ‘One Man’s Vulgarity,’ drawn from FIRE’s many years fighting against art censorship on campus.”

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Opioid Addicts And Convicts: Goldman Unveils The Scourge Of America’s Labor Force

While the June employment report had its pros (payrolls) and cons (wages), one number attracted attention: the increase in the labor force participation rate, which rose from 62.7 to 62.9, as more people returned to the labor force, in the process sending the number of unemployed workers higher by half a million.

That said, the move was modest, and as Goldman writes in a Q&A note looking at the participation rate, month-to-month changes in the participation rate are quite noisy, with the standard deviation at 0.14pp over the last 10 years.

the participation rate simply moved up in June near the top end of the 62.3%-63.0% range that has prevailed since early 2014. Over this period, the cyclical participation tailwinds have offset the impact of the structural headwinds, of which a ¼pp trend decline due to aging is the most important contributor.

Whatever the reason behind the monthly increase, a more troubling trend is the ongoing secular decline in the participation rate, especially in the context of other developed economies, where despite economic difficulties, the number of people who end up in the labor force has been rising, a stark contrast with the US. Here is GOldman’s view on what is going on here:

Q: The prime-age participation rate is still well below pre-crisis levels. How unusual is the US performance over the last decade from an international perspective?

A: Pretty unusual, especially for prime-age women. The female prime-age participation is still 0.4pp below the 2007Q1 level in the US while it has actually risen in all the other large advanced economies in our sample and by 4.3pp on average (Exhibit 2, left panel).[1] It appears that the social trend of rising female participation in the US came to an end in the 1990s but is probably still ongoing elsewhere (see here for an analysis of the rise in German female participation). As a result, the US female prime-age participation rate is now 4.5pp below the weighted ex-US average and only trailed by Italy’s. Our forecast incorporates a continued moderate cyclical increase in female prime-age participation in 2018H2 and 2019.

Despite a recent pick-up, the male prime-age participation rate has fallen 2.2pp since 2007Q1 in the US vs. only 1.0pp on average in the other DMs (Exhibit 2, right panel). The US male prime-age participation rate is now more than 3pp below the weighted average and nearly 7pp below the Japanese rate.

Of course, regular readers are familiar with this phenomenon which we have covered for the better part of the past decade. But what remains elusive is the answer to the question why is this taking place?

According to Goldman the answer is two-fold: junkies and prisoners, or as Goldman puts it, “the US opioid and incarceration issues … each explain roughly one-sixth of the US prime-age male participation underperformance, or one-third combined”, or in other words, a third of the US participation problem is the result of increasingly more males becoming opioid addicts and ending up in prison as a result, or independently.

Here is Goldman’s full discussion on this troubling issue, which as much as the FBI would like, can not be blamed on Putin or Russia.

Q: What drives the long-run decline in US prime-age participation?

A: Both global as well as US-specific demand and supply factors. Global demand-based factors, especially the impact of technology and trade on less-educated workers, have arguably played an important role. Global supply factors, including increases in family income (from work or transfers), have likely also lowered labor supply across many DMs.

But the US stands out along three other supply dimensions. First, higher rates of painkiller use, including opioids, and middle-age mortality suggest that more severe health and drug-related problems have contributed to lower US participation (Exhibit 3, left panel). Second, the US incarcerates a much larger share of its population, and people with criminal records face severe challenges in re-entering the workforce (Exhibit 3, right panel). Third, while exposure to trade and technology was likely similar to other developed economies, a weaker US policy response—namely, less supportive retraining and job-search assistance—might have made the impact on participation more costly.

Q: The US prime-age male participation rate is now more than 3pp below the average in other DMs. How important are the US opioid and incarceration issues quantitatively in explaining the US gap?

A: Quite important, but not sufficient on their own. Our literature review implies that the two issues each explain roughly one-sixth of the US prime-age male participation underperformance, or one-third combined.

Using estimates of the causal impact of incarceration on employment from Mueller-Smith, we estimate that around 0.5pp of the 3pp US prime-age male gap results from the relatively high share of the population with a felony record.

Using the estimated cross-county relationship between opioid prescription rates and prime age participation rates from Krueger and the assumption that two-thirds of the regional variation in prescription rates reflects local medical supply factors rather than labor market conditions, we estimate that the relatively high US opioid use rate also drives roughly 0.5pp of the 3pp US male prime-age gap.

Q: The incarceration and prescription opioid rates have declined modestly in recent years. Does this imply that the drag from these issues on labor force participation has peaked?

Probably not, because the labor market effects likely operate with important lags. While the incarceration rate peaked 10 years ago, it will likely take many years before we see a corresponding decrease in the number of former prisoners, mostly because prisoners tend to be young, with a median age in the mid-30s.

Prescription opioid rates have also declined modestly since 2012 according to CDC data. However, CDC data also show a shift to heroin and other illegal opioids and a continued rise in the number of drug-related deaths (Exhibit 4, right panel).

While a discussion of whether the phenomenon of the depressed participation rate due to a voluntary exit from the labor force, whether through incarceration or developing an addiction is far beyond the scope of this article, it brings up an ominous point: all those mostly young workers who exit the labor force and become institutionalized wards of the state in some capacity, effectively relinquish any hope for a viable, lucrative and satisfying career. This is also perhaps the primary reason behind the chronic US productivity problem, which has prevented the US economy from growing at capacity, and resulted in stagnant wages for the past decade.

Which reminds us of another perversion of the welfare state where an incentive quirk pushes more people to end up in a lower income – and productivity – bracket instead of motivating them to strive for proper middle class status: recall that as we described in “When Work Is Punished: The Tragedy Of America’s Welfare State“, the net take home between wages and welfare for most minimum wage Americans is as high as that of an ordinary household making $69,000.

This means, that once many Americans fall into the comfortable “welfare trap” that encourages lower wages, it holds back many otherwise ambitious workers from pursuing more productive work that results in higher wages. A similar trap is sprung on those Americans who, for one reason or another, end up in jail or as drug addicts, in both cases preventing them from returning as productive members of society.

Unfortunately, until there is an honest discussion about either the perverse motivations of the US welfare state, or what it is that forces so many Americans to resort to behavior that lands them in prison, or become addicted – and by an honest discussion we do not mean blaming Putin – the US participation problem will only get worse.

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