Month: July 2019

Warren’s Trade Policy Dresses Up Trumpism with Progressive Rhetoric

If Sen. Elizabeth Warren (D–Mass.) moves into the White House in 2021, she’ll be ready to sign trade deals with other countries—but not many of them.

The Warren campaign’s trade policy plan attempts to draw a distinction between the progressive senator and President Donald Trump, who has spent a good deal of his time in office threatening to terminate existing trade deals without getting very much in return. Warren says her administration “will engage in international trade—but on our terms and only when it benefits American families.”

It’s a classic example of a sentence where nothing that comes before the “but” really matters. Warren’s policy is aiming, essentially, for a more competent version of the protectionism that Trump has brought to the forefront of American politics in the past two years. Warren’s plan calls for “establishing a set of standards countries must meet as a precondition for any trade agreement with America.” Those standards include enforcement of collective bargaining, elimination of domestic fossil fuel subsidies, and a long-term plan to reduce carbon emissions—rules so strict that they effectively disqualify any developing country from reaching a trade deal with the United States.

“Most developing countries would fail to meet those benchmarks,” says Scott Lincicome, a trade attorney and scholar with the libertarian Cato Institute. “It’s easy to say ‘I’m for trade agreements’ when you set the bar so high that no country can qualify for a trade agreement.”

For Warren, it’s not clear whether that’s a feature or a bug. Politically, it seems obvious that she is making a play for the same working-class voters that helped Trump win the White House. In a Medium post detailing the plan, Warren bemoans how “big multinational corporations have bought and lobbied their way into dictating America’s trade policy” by seeking to “pad their profits by shifting American jobs to countries where they can pay workers next to nothing.”

Dressing up Trump’s anti-trade stance with progressive rhetoric makes sense for Warren’s campaign. In addition to creating an opening to compete with Trump for Rust Belt voters, it will give her an opportunity to challenge Democratic frontrunner Joe Biden’s history of support for trade deals such as the North American Free Trade Agreement—a pact viewed contemptuously such 2020 contenders as Trump, Warren, and Sen. Bernie Sanders (I–Vt.). Warren and Biden will not share the stage during this week’s primary debates, but her proposal goes out of the way to stress how it breaks with previous administrations from both parties.

Beyond the political realm, Warren’s trade strategy seems to rely on magical thinking. She writes about using “America’s leverage to boost American workers and raise the standard of living across the globe,” but there’s little reason to believe that making it more difficult to reach trade deals with developing nations would actually help workers in those places.

After all, one of the benefits of signing trade agreements is to improve conditions in developing countries. Investing in underdeveloped countries provides American companies with cheap sources of labor (and American consumers, by extension, with less expensive goods) while allowing unskilled workers to advance from subsistence farming to low-level manufacturing. History has shown repeatedly that labor standards increase as countries get richer—but those incremental changes depend to some degree on foreign investment. Refusing to sign trade deals with developing countries will not cause those places to magically advance. More likely, it will cause them to stagnate.

Warren does, thankfully, dismiss the Trumpian notion that tariffs can be used to force other nations to bend to America’s will—but even on this most obvious point, she prevaricates: “while I think tariffs are an important tool, they are not by themselves a long-term solution to our failed trade agenda and must be part of a broader strategy that this Administration clearly lacks.”

It’s easy to criticize Trump’s foolish use of tariffs, but Warren’s refusal to take tariffs off the table is a good illustration of the struggle that Democrats, generally, are having in confronting Trump’s trade policies. As Axios reported over the weekend, not a single candidate in the Democratic field is currently willing to commit to repealing Trump’s tariffs on Chinese-made goods.

The evidence that Trump’s trade policies are harming the economy continues to grow. Dan Drezner, a professor of international politics at Tufts University, notes that Trump’s tariffs have “unwittingly sanctioned the U.S. economy” by reducing both domestic and foreign investment. Business investment in the second quarter of 2019 fell into the negative numbers, while investment from China has dropped by a whopping 88 percent since 2016, The Wall Street Journal reports.

Democrats should be eager to run against those policies, but instead they seem to be taking a wait-and-see approach. The strategy appears to be based on the hope that Trump’s trade policies will tip the economy into a recession (or into a period of reduced growth) before November 2020—thus allowing Democrats to make the election a referendum on Trump’s handling of the economy while promising they’d do a better job of implementing, essentially, the same trade policies.

In the meantime, Warren’s proposal is a good reminder that Trump’s trade policies aren’t bad merely because they are Trump’s.

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US Treasury Now Expects To Borrow Over $800 Billion In Debt In Two Quarters

One of the reasons why Trump and Congress were so quick to pass a debt ceiling deal last week is that had they failed to do so, with the Treasury’s cash balance sliding precariously lower and expected to hit $0 by early September, there was a non-trivial chance the US could technically default by the time Congress came back from its August vacation.

Of course, that did not happen, a debt ceiling extension deal was reached, and as a result the Treasury is now free to start reloading its cash balance, and it plans on doing just that. On Monday, the Treasury Department announced its latest quarterly estimates of net marketable borrowing needs for the current (July – September 2019) and upcoming (October – December 2019) quarters. What it revealed was the following:

After borrowing just $40 billion in the past, April-June period, which left the Treasury with a quarter end cash balance of $264 billion, in the current quarter, the Treasury now expects Treasury issuance to explode higher, and borrow a whopping $433 billion in net marketable debt, a massive $274 billion higher – or more than doubling – its prior forecast announced in April 2019.

The reason for this debt issuance flurry? To rebuild the cash balance back to a level of $350 billion, which is where the Treasury expects its end-of-September cash balance to be, up from just $85 billion as of the April 29 forecast.

Looking ahead, during the October – December 2019 quarter, the Treasury unveiled for the first time that it expects to borrow $381 billion in new debt, assuming an end-of-December cash balance of $410 billion with $310 billion of the new issuance going to cover financing needs.

As for the past quarter, in April 2019, the Treasury estimated marketable borrowing of $30 billion and assumed an end-of-June cash balance of $270 billion. The change in borrowing resulted from lower net cash flows partially offset by the lower end-of-quarter cash balance due to the Treasury hitting the debt ceiling.  

In other words, the Treasury will sell $814 billion in debt in the current and future quarter… and it will only gets worse from there.

As Bloomberg reports, the Treasury is expected to hold its quarterly note and bond sales at record levels for the third straight time as Washington’s latest budget deal shows that the U.S.’s debt binge will continue. While President Trump once said he would eliminate the national debt, he is now set to approve a budget that will help  usher in trillion-dollar annual deficits. As a result, Bloomberg notes that Wall Street securities firms predict that a boost in Treasury issuance may be coming in a year’s time.

Bond dealers see the status quo prevailing at Wednesday’s quarterly refunding announcement. Forecasts are coalescing around the view that the Treasury will keep auction sizes of 3-, 10- and 30-year debt unchanged at a record total of $84 billion, in sales scheduled from Aug. 6-8. To put it in perspective, the tally was $62 billion at the time of the 2016 U.S. election.

The coupons issuance is expected to raise $296bn in new cash from private investors for the August to October period. This amount, coupled with $194bn in bill issuance, will help fund an estimated $272bn of financing needs plus $200bn of cash balance increase.

Additionally, with a July debt limit suspension, bills are expected to increase by $130bn in August, although as DB notes, the risk is that it could run higher. The Treasury’s decision to gradually rebuild its cash balance will help limit some of the pressure in funding markets. Higher repo rates would make issuance of front-end coupons more expensive. For example, 2yr Treasury-OIS has widened about 8bp in July since investors began expecting the August bill supply would put upward pressure on funding rates. In its refunding statement, the Treasury could signal that it would temporarily run a lower cash balance over the next several weeks, which should help alleviate funding market anxiety, although in light of the Treasury’s forecast that seems somewhat contradictory.  Indeed, with the Treasury’s decision to quickly rebuild its cash balance back to a level it deems more prudent (say $350bn), the increase to bills over the next 4-6 weeks significantly exceeds most Wall Street forecasts.

The bipartisan deal to suspend the debt limit for two years also paves the way for a $324 billion increase in government spending over the period above existing budget caps. That’s emboldening most dealers to pencil in increases in debt sales by fiscal 2021, which starts in October 2020.

The House passed the debt-ceiling expansion and budget bill on July 25 and Senate Majority Leader Mitch McConnell said he expects his chamber to clear it this week for Trump’s signature.

“The deficit is rising and the impetus toward higher spending is very strong,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. “By the second half of next year Treasury will have to raise coupon sizes again.”

This is good news for Washington’s spenders… and a catastrophe for any deficit hawks left. With the president shoving aside past Republican orthodoxy on fiscal restraint and the issue not prominent among Democrats campaigning to take his job, Washington is showing no signs of slowing spending.

Which means that when it comes to fiscal conservatism, Trump is a Republican in name only, as the fiscal shortfall has continued to soar under Trump as tax cuts, bipartisan spending increases and entitlements weigh on the budget outlook. Meanwhile, socialist candidates for the 2020 presidential election are trying to attract voters with proposals that would only increase the gap such as MMT.

Maya MacGuineas, president of the nonpartisan budget watchdog Committee for a Responsible Federal Budget, called the latest budget deal “a total abdication of fiscal responsibility by Congress and the President.”

What’s clear – as Bloomberg concludes  – is the backdrop puts the $15.9 trillion Treasury market on course to balloon in the next couple of years.

“By 2021, Treasury will begin to have a problem, given deficit growth, and need to increase coupon sizes,” said Margaret Kerins, global head of fixed-income strategy at BMO Capital Markets. Then again, if the current administration is still in charge, the world will likely have far more pressing issue than the eventual insolvency of the US to worry about…

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Warren’s Trade Policy Dresses Up Trumpism with Progressive Rhetoric

If Sen. Elizabeth Warren (D–Mass.) moves into the White House in 2021, she’ll be ready to sign trade deals with other countries—but not many of them.

The Warren campaign’s trade policy plan attempts to draw a distinction between the progressive senator and President Donald Trump, who has spent a good deal of his time in office threatening to terminate existing trade deals without getting very much in return. Warren says her administration “will engage in international trade—but on our terms and only when it benefits American families.”

It’s a classic example of a sentence where nothing that comes before the “but” really matters. Warren’s policy is aiming, essentially, for a more competent version of the protectionism that Trump has brought to the forefront of American politics in the past two years. Warren’s plan calls for “establishing a set of standards countries must meet as a precondition for any trade agreement with America.” Those standards include enforcement of collective bargaining, elimination of domestic fossil fuel subsidies, and a long-term plan to reduce carbon emissions—rules so strict that they effectively disqualify any developing country from reaching a trade deal with the United States.

“Most developing countries would fail to meet those benchmarks,” says Scott Lincicome, a trade attorney and scholar with the libertarian Cato Institute. “It’s easy to say ‘I’m for trade agreements’ when you set the bar so high that no country can qualify for a trade agreement.”

For Warren, it’s not clear whether that’s a feature or a bug. Politically, it seems obvious that she is making a play for the same working-class voters that helped Trump win the White House. In a Medium post detailing the plan, Warren bemoans how “big multinational corporations have bought and lobbied their way into dictating America’s trade policy” by seeking to “pad their profits by shifting American jobs to countries where they can pay workers next to nothing.”

Dressing up Trump’s anti-trade stance with progressive rhetoric makes sense for Warren’s campaign. In addition to creating an opening to compete with Trump for Rust Belt voters, it will give her an opportunity to challenge Democratic frontrunner Joe Biden’s history of support for trade deals such as the North American Free Trade Agreement—a pact viewed contemptuously such 2020 contenders as Trump, Warren, and Sen. Bernie Sanders (I–Vt.). Warren and Biden will not share the stage during this week’s primary debates, but her proposal goes out of the way to stress how it breaks with previous administrations from both parties.

Beyond the political realm, Warren’s trade strategy seems to rely on magical thinking. She writes about using “America’s leverage to boost American workers and raise the standard of living across the globe,” but there’s little reason to believe that making it more difficult to reach trade deals with developing nations would actually help workers in those places.

After all, one of the benefits of signing trade agreements is to improve conditions in developing countries. Investing in underdeveloped countries provides American companies with cheap sources of labor (and American consumers, by extension, with less expensive goods) while allowing unskilled workers to advance from subsistence farming to low-level manufacturing. History has shown repeatedly that labor standards increase as countries get richer—but those incremental changes depend to some degree on foreign investment. Refusing to sign trade deals with developing countries will not cause those places to magically advance. More likely, it will cause them to stagnate.

Warren does, thankfully, dismiss the Trumpian notion that tariffs can be used to force other nations to bend to America’s will—but even on this most obvious point, she prevaricates: “while I think tariffs are an important tool, they are not by themselves a long-term solution to our failed trade agenda and must be part of a broader strategy that this Administration clearly lacks.”

It’s easy to criticize Trump’s foolish use of tariffs, but Warren’s refusal to take tariffs off the table is a good illustration of the struggle that Democrats, generally, are having in confronting Trump’s trade policies. As Axios reported over the weekend, not a single candidate in the Democratic field is currently willing to commit to repealing Trump’s tariffs on Chinese-made goods.

The evidence that Trump’s trade policies are harming the economy continues to grow. Dan Drezner, a professor of international politics at Tufts University, notes that Trump’s tariffs have “unwittingly sanctioned the U.S. economy” by reducing both domestic and foreign investment. Business investment in the second quarter of 2019 fell into the negative numbers, while investment from China has dropped by a whopping 88 percent since 2016, The Wall Street Journal reports.

Democrats should be eager to run against those policies, but instead they seem to be taking a wait-and-see approach. The strategy appears to be based on the hope that Trump’s trade policies will tip the economy into a recession (or into a period of reduced growth) before November 2020—thus allowing Democrats to make the election a referendum on Trump’s handling of the economy while promising they’d do a better job of implementing, essentially, the same trade policies.

In the meantime, Warren’s proposal is a good reminder that Trump’s trade policies aren’t bad merely because they are Trump’s.

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Kamala Harris’ New Student Debt Provision Would Help Approximately No One

Over the weekend, Sen. Kamala Harris (D–Calif.) unveiled a plan for “reducing the opportunity gap” between African Americans and the remainder of the country. It included several provisions, but one part in particular drew the most attention: She promised to “establish a student loan debt forgiveness program for Pell grant recipients who start a business that operates for three years in disadvantaged communities.” Beneficiaries could receive up to $20,000 in debt forgiveness and could defer debt without interest during a “business-formation period” of three years or less.

What?

The provision is so ridiculously specific that it’s hard to tell who exactly would benefit from it at all. Students who qualify for Pell grants hail from low-income households: They likely have little capital to begin with, which would certainly impede a successful small business. Harris says she’ll also establish a $12 billion fund to assist minority small business owners, but that $12 billion will likely be for naught—at least when it comes to fulfilling Harris’ requirements for help with student debt. About 80 percent of small businesses fail within the first year and a half, and even fewer make it to Harris’ three-year minimum. And her plan is supposed to be for businesses operating in disadvantaged communities. They face a much tougher entrepreneurial landscape and a subsequent decreased chance of success.

Other elements of Harris’ plan include a $60 billion investment in STEM education at historically black colleges and universities (HBCUs). The proposal in total costs $84.5 billion, with additional capital set aside for a $10 billion investment in the State Small Business Credit Initiative and another $2.5 billion “to support HBCU programs that will generate Black teachers.” How she plans to pay for it is unclear, but an aide has intimated that she will close tax loopholes and raise levies on the wealthy and Wall Street.

Harris’ plan comes amidst a slew of other confusing policy statements. On a number of occasions, the senator has flip-flopped on whether or not she wants to eliminate private health insurance. And during a recent appearance on The View, she initially told the panel that she did not support decriminalizing illegal border crossings—a backtrack from her debate performance—only to immediately reverse course in the same sentence.

“I’m not in favor of decriminalizing or not having consequence for, let me be very clear, we have to have a secure border, but I am in favor of saying that we’re not going to treat people who are undocumented cross the border as criminals, that is correct, that is correct,” Harris said.

In that vein, her opportunity gap proposal is the latest in a string of would-be policies mired in doubt and disarray, perhaps because Harris herself doesn’t quite know yet where she falls. The senator is trying to pull off a high-flying balancing act, one where she tries to appeal to everyone by standing for everything. The end result looks more like standing for nothing.

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Nieves v. Barlett and Allegedly Retaliatory Arrests Based on Speech Alone

From Novak v. City of Parma, decided today by the Sixth Circuit (opinion by Judge Amul Thapar, joined by Judges Gilbert Merritt and Chad Readler):

The Supreme Court held recently in Nieves v. Bartlett that to bring a First Amendment retaliatory arrest claim, a plaintiff must generally show that there was no probable cause for the arrest…. [But] this case may not be subject to the general rule of Nieves because the sole basis for probable cause was speech. Besides posting [a parody of a police department Facebook page] to his Facebook page, Novak committed no other act that could have created probable cause.

In other First Amendment retaliation cases on point, by contrast, the defendant’s conduct was a mix of protected speech and unprotected conduct. That is, the defendants both said something and did something. See, e.g., Nieves v. Bartlett (defendant made remarks to police officers (protected speech) and acted aggressively toward them in an intoxicated state (unprotected conduct)); Reichle v. Howards (2012) (defendant made political remarks (protected speech) and unlawfully touched the Vice President (unprotected conduct)); Swiecicki v. Delgado (6th Cir. 2006), 463 F.3d at 491–92 (defendant made comments to the officer (protected speech) and engaged in disorderly conduct while intoxicated (unprotected conduct)). Here, we have nothing like that. Novak did not create a Facebook page criticizing police and use his computer to hack into police servers to disrupt operations. The sole basis for probable cause to arrest Novak was his speech. And there is good reason to believe that, based on the reasoning underlying the First Amendment retaliation cases, this is an important difference.

This is important because in Nieves and its predecessors, the Court based its reasoning on the thorny causation issue that comes up in cases with both protected speech and unprotected conduct. The idea is that in cases where the plaintiff both did something and said something to get arrested, the factfinder will not be able to disentangle whether the officer arrested him because of what he did or because of what he said. “[R]etaliatory arrest cases … present a tenuous causal connection between the defendant’s alleged animus and the plaintiff’s injury.”  For example, in [an earlier precedent], the Court held there was no retaliation “if the same decision would have been reached absent [plaintiff’s] protected speech.”  Here, that inquiry gets us nowhere because “absent [Novak’s] protected speech,” there would be no basis for probable cause. So, in this case, the causal connection is not so tenuous. And the reason for requiring that plaintiff show an absence of probable cause where probable cause is based only on protected speech is not so clear.

Second, this case strikes at the heart of a problem the Court has recognized in the recent retaliation cases. “[T]here is a risk that some police officers may exploit the arrest power as a means of suppressing speech.”  The Court also recognized this risk in Nieves.… Novak’s case is prime ground for the pretext that the Supreme Court has worried about.

For one, potential probable cause was based on protected speech alone. That is not dispositive because the officers’ consideration of his protected speech may have been “wholly legitimate.” But the fact that the arrest was made based only on protected speech at least raises a concern that probable cause “does little to prove or disprove the causal connection” between Novak’s criticism of the police and his arrest

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Brazilian Prison Riot Leaves 52 Prisoners Dead, 16 Decapitated

Authored by Jack Phillips via The Epoch Times,

At least 16 prisoners were decapitated and dozens more were killed during a prison riot in Brazil.

At least 52 inmates died in the riots that involved criminal gangs in Para, located in the northern part of the country.

Two officers were also taken hostage as the rival gangs clashed, reported the AFP news agency on July 29.

The fight began at the Altamira Regional Recovery Center at around 7 a.m. local time, said a Para state official in the AFP report.

He said that two guards were taken hostage during the clashes before the gangs freed them.

According to BBC, reports in Brazil said that many inmates died of suffocation when the prison was set on fire. A video posted by Brazilian media outlets shows smoke emitting from a prison building, and another showed prisoners on rooftops.

The prison has a capacity for 200 prisoners, but it was occupied by 311 inmates, Sky News reported.

Brazil has a prison population of 704,000, but there is only cell space for about 416,000 around the country, the report noted.

In May of this year, some 55 inmates died at prisons in Amazonas state.

At one prison, 15 prisoners were found dead, with many being stabbed by makeshift knives and strangled, according to the report. Forty prisoners were found dead at another facility, and their reported causes of death were asphyxiation.

Two years before that, about 150 prisoners died during a several-week-long span of violence across several prisons. The violence was blamed by rival gangs.

According to Sky, the riots lasted weeks and was linked to the control of drug-trafficking networks in the area.

In May, Brazil’s justice and public security ministry said it was sending a federal task force to help local officials handle the situation.

“I just spoke with (Justice) Minister Sergio Moro, who is already sending a prison intervention team to the State of Amazonas, so that he can help us in this moment of crisis and a problem that is national: the problem of prisons,” Amazonas state Gov. Wilson Lima said.

Several drug-trafficking and other criminal gangs in Brazil run much of their day-to-day business from prisons, where they often have wide sway. The 2017 slayings were largely gang-related, prompting authorities to increase efforts to separate factions and frequently transfer prisoners.

Authorities have not yet said whether gang wars were behind the latest blood-letting.

Moro had to send a federal task force to help tame violence in Ceara state in January that local officials said was ordered by crime gang leaders angered by plans to impose tighter controls in the state’s prisons.

The Associated Press contributed to this report.

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Beyond Meat Boosts Outlook, After Revenue Grows 287%

The numbers are in.. and they are positive (but it’s all relative).

  • Q2 revenue printed $67.3 million (smashing expectations of $52.7 million) and up 2877% from the previous $17.4 million.

  • Q2 Adjusted EBITDA: $6.9 million, or 10.2% as a percentage of net revenues; up from a loss of $5.6 million in Q2, 2018

$14 Billion market cap Beyond Meat increased its full-year revenue forecast to $240 million (near the highest analyst estimate of $242 million)

The company has a solid cash buffer:

The Company’s cash was $277.0 million as of June 29, 2019 and total outstanding debt was $30.5 million. Net cash used in operating activities was $22.4 million for the six months ended June 29, 2019.

Capital expenditures totaled $7.5 million for the six months ended June 29, 2019 compared to $10.0 million for the prior-year period.

Adjusted EBITDA to be positive compared to prior expectations of break-even Adjusted EBITDA.

“We are very pleased with our second quarter results which reflect continued strength across our business as evidenced by new foodservice partnerships, expanded distribution in domestic retail channels, and accelerating expansion in our international markets. We believe our positive momentum continues to demonstrate mainstream consumers’ growing desire for plant-based meat products both domestically and abroad,” said Ethan Brown, Beyond Meat’s President and Chief Executive Officer.

“Looking ahead, we will continue to prioritize efforts to increase our brand awareness, expand our distribution channels, launch new innovative products, and invest in our infrastructure and internal capabilities in order to deliver against the robust demand we are seeing across our business.”

Beyond Meat closed down 5.4% ahead of earnings, its biggest decline since June 24, and notably – despite the huge beat and upside outlook – traders are not being squeezed to death yet…

What happens next?

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Kamala Harris’ New Student Debt Provision Would Help Approximately No One

Over the weekend, Sen. Kamala Harris (D–Calif.) unveiled a plan for “reducing the opportunity gap” between African Americans and the remainder of the country. It included several provisions, but one part in particular drew the most attention: She promised to “establish a student loan debt forgiveness program for Pell grant recipients who start a business that operates for three years in disadvantaged communities.” Beneficiaries could receive up to $20,000 in debt forgiveness and could defer debt without interest during a “business-formation period” of three years or less.

What?

The provision is so ridiculously specific that it’s hard to tell who exactly would benefit from it at all. Students who qualify for Pell grants hail from low-income households: They likely have little capital to begin with, which would certainly impede a successful small business. Harris says she’ll also establish a $12 billion fund to assist minority small business owners, but that $12 billion will likely be for naught—at least when it comes to fulfilling Harris’ requirements for help with student debt. About 80 percent of small businesses fail within the first year and a half, and even fewer make it to Harris’ three-year minimum. And her plan is supposed to be for businesses operating in disadvantaged communities. They face a much tougher entrepreneurial landscape and a subsequent decreased chance of success.

Other elements of Harris’ plan include a $60 billion investment in STEM education at historically black colleges and universities (HBCUs). The proposal in total costs $84.5 billion, with additional capital set aside for a $10 billion investment in the State Small Business Credit Initiative and another $2.5 billion “to support HBCU programs that will generate Black teachers.” How she plans to pay for it is unclear, but an aide has intimated that she will close tax loopholes and raise levies on the wealthy and Wall Street.

Harris’ plan comes amidst a slew of other confusing policy statements. On a number of occasions, the senator has flip-flopped on whether or not she wants to eliminate private health insurance. And during a recent appearance on The View, she initially told the panel that she did not support decriminalizing illegal border crossings—a backtrack from her debate performance—only to immediately reverse course in the same sentence.

“I’m not in favor of decriminalizing or not having consequence for, let me be very clear, we have to have a secure border, but I am in favor of saying that we’re not going to treat people who are undocumented cross the border as criminals, that is correct, that is correct,” Harris said.

In that vein, her opportunity gap proposal is the latest in a string of would-be policies mired in doubt and disarray, perhaps because Harris herself doesn’t quite know yet where she falls. The senator is trying to pull off a high-flying balancing act, one where she tries to appeal to everyone by standing for everything. The end result looks more like standing for nothing.

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Nieves v. Barlett and Allegedly Retaliatory Arrests Based on Speech Alone

From Novak v. City of Parma, decided today by the Sixth Circuit (opinion by Judge Amul Thapar, joined by Judges Gilbert Merritt and Chad Readler):

The Supreme Court held recently in Nieves v. Bartlett that to bring a First Amendment retaliatory arrest claim, a plaintiff must generally show that there was no probable cause for the arrest…. [But] this case may not be subject to the general rule of Nieves because the sole basis for probable cause was speech. Besides posting [a parody of a police department Facebook page] to his Facebook page, Novak committed no other act that could have created probable cause.

In other First Amendment retaliation cases on point, by contrast, the defendant’s conduct was a mix of protected speech and unprotected conduct. That is, the defendants both said something and did something. See, e.g., Nieves v. Bartlett (defendant made remarks to police officers (protected speech) and acted aggressively toward them in an intoxicated state (unprotected conduct)); Reichle v. Howards (2012) (defendant made political remarks (protected speech) and unlawfully touched the Vice President (unprotected conduct)); Swiecicki v. Delgado (6th Cir. 2006), 463 F.3d at 491–92 (defendant made comments to the officer (protected speech) and engaged in disorderly conduct while intoxicated (unprotected conduct)). Here, we have nothing like that. Novak did not create a Facebook page criticizing police and use his computer to hack into police servers to disrupt operations. The sole basis for probable cause to arrest Novak was his speech. And there is good reason to believe that, based on the reasoning underlying the First Amendment retaliation cases, this is an important difference.

This is important because in Nieves and its predecessors, the Court based its reasoning on the thorny causation issue that comes up in cases with both protected speech and unprotected conduct. The idea is that in cases where the plaintiff both did something and said something to get arrested, the factfinder will not be able to disentangle whether the officer arrested him because of what he did or because of what he said. “[R]etaliatory arrest cases … present a tenuous causal connection between the defendant’s alleged animus and the plaintiff’s injury.”  For example, in [an earlier precedent], the Court held there was no retaliation “if the same decision would have been reached absent [plaintiff’s] protected speech.”  Here, that inquiry gets us nowhere because “absent [Novak’s] protected speech,” there would be no basis for probable cause. So, in this case, the causal connection is not so tenuous. And the reason for requiring that plaintiff show an absence of probable cause where probable cause is based only on protected speech is not so clear.

Second, this case strikes at the heart of a problem the Court has recognized in the recent retaliation cases. “[T]here is a risk that some police officers may exploit the arrest power as a means of suppressing speech.”  The Court also recognized this risk in Nieves.… Novak’s case is prime ground for the pretext that the Supreme Court has worried about.

For one, potential probable cause was based on protected speech alone. That is not dispositive because the officers’ consideration of his protected speech may have been “wholly legitimate.” But the fact that the arrest was made based only on protected speech at least raises a concern that probable cause “does little to prove or disprove the causal connection” between Novak’s criticism of the police and his arrest

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Laws Banning “Impair[ing] the Functions of any Police … Operations”

Novak v. City of Parma, decided today by the Sixth Circuit (opinion by Judge Amul Thapar, joined by Judges Gilbert Merritt and Chad Readler), suggests such statutes may be unconstitutional, when applied to speech that supposedly “impair[s] the functions” of the police by leading people to call the police department:

[An Ohio] statute makes it a crime to “use any computer … or the internet so as to disrupt, interrupt, or impair the functions of any police … operations.” Ohio Rev. Code § 2909.04(B). To see how broad this statute reaches, consider an example. An activist tweets the following message: “The police are violating our rights #TakeAction #MakeYourVoiceHeard.” People in the community see the tweet and begin calling the police department to share their views. A small protest even forms in the town square. Police station employees spend time fielding the calls, and a couple of officers go down to monitor the protest.

Under the plain text of the Ohio statute, have these acts of civic engagement “interrupt[ed]” police operations? Taken at face value, the Ohio law seems to criminalize speech well in the heartland of First Amendment protection. This broad reach gives the police cover to retaliate against all kinds of speech under the banner of probable cause. Critical online comments, mail-in or phone bank campaigns, or even informational websites that incite others to “disrupt” or “interrupt” police operations could violate the law.

Where a statute gives police broad cover to find probable cause on speech alone, probable cause does little to disentangle retaliatory motives from legitimate ones. Thus, this case raises new questions under Nieves v. Bartlett [the recent decision limiting plaintiffs’ ability to sue for retaliatory arrests, when there was probable cause for the arrests -EV]. It may be that, based on the Supreme Court’s reasoning in that case and others, the general rule of requiring plaintiffs to prove the absence of probable cause should not apply here. We need not decide that now.

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