It took less than a day for the White House’s carefully crafted step-by-step process for reopening the country to be discarded by…the president himself.
President Donald Trump met with governors to outline those plans on Thursday afternoon. On Thursday evening, he stood at the podium in the White House’s briefing room to explain how states would be able to reopen their economies in the coming weeks and months by following a three-step process, as long as COVID-19 cases decline. Then, on Friday, Trump issued a series of bizarre (even by his own standards) tweets that seemingly called for residents of three states to defy shutdown orders.
That would, on its own, be pretty weird. Has a president of the United States ever used the bully pulpit to call for residents to revolt against state leaders? But in the context of what’s already been a whiplash-inducing week of contradictory messaging from the president, Friday’s “LIBERATE” tweets only add to the confusion. Remember, on Tuesday Trump declared that he had “absolute power” to order states to reopen their economies. By Thursday, he’d apparently realized that wasn’t correct and had conceded to putting governors in charge. Less than a day later, he’s apparently siding with protesters against some of those same governors—governors who were acting in accordance with shutdown guidelines originally pushed by the Trump administration itself.
As is often the case, it’s not exactly clear what Trump is suggesting that Michiganders, Minnesotans, and Virginians should do. But it is pretty obvious that there’s a tension between the plans Trump (and his coronavirus task force) outlined on Thursday night and an all-caps call to “LIBERATE” some states.
It’s also not clear why he picked those three states, although it is worth noting that all three have Democratic governors. While Michigan has already seen some public protests against the overzealous lockdown imposed by Gov. Gretchen Whitmer—her stay-at-home order also forced businesses to stop selling any items deemed nonessential by the state government—the state has also seen a severe coronavirus outbreak in Detroit and its suburbs. The Centers for Disease Control and Prevention (CDC) says Michigan has “widespread” community transmission of the virus and more than 28,000 documented cases. Virginia and Minnesota have lower reported rates of the disease and are under less severe (though still economically ruinous) lockdowns. It’s understandable that Trump shares the frustrations many are feeling about over-broad economic shutdowns, but surely he has a more effective way of conveying those concerns to certain state officials.
Trying to figure out exactly what Trump is up to is probably beside the point. One of his greatest weaknesses is an inability to see beyond the current news cycle, and this isn’t the first time he’s immediately contradicted himself or his staff with an unexpected tweet.
The more important problem is that Friday’s “LIBERATE” tweets continue a pattern of inconsistent coronavirus messaging and policy emanating from the White House.
It’s unreasonable to expect a president or any public official to have all the answers in the middle of an evolving crisis. But the fact that the federal government—and the White House, specifically—have demonstrated an apparent inability to deliver a believable and consistent message for more than a single day is only adding to the sense of confusion and fear felt by many Americans.
As much as Trump might want to believe otherwise, the economy won’t immediately come back to life when he (or various governors) allows businesses to reopen. If Americans are generally fearful of the virus—or, more to the point, if they can’t trust public officials who say it is safe to no longer fear the virus—they will continue to stay home, not spend money, and make the recovery from this massive economic collapse even more difficult than it already will be.
This age of battling narratives tends to conceal the broken consensus behind it. What’s gone is a broad social agreement that there are certain fundamental realities, and then codes of conduct that follow from them.
When anything goes, don’t expect people to do the right thing, or even know what it is.
The Covid-19 debacle presents just such a set of quandaries and puzzles. For many people stewing in quarantine, the virus is a just another evil phantom lurking in the permanent twilight zone of television, and even there, among the familiar jabbering figments, there’s little agreement about it. The statistical projections mutate weekly. It’s no worse than any annual flu… It’s a savage illness that attacks every organ in the body, leaves survivors maimed, and you can even catch it again… The lockdowns are imperative… the lockdowns amount to economic suicide… There’s no sorting it all out, and the uncertainty itself is intolerable.
The only certainty is that most of the people in lockdown are going broke fast. By any ordinary rules, they are wiped out. They can’t even pretend anymore to keep juggling all those monthly payments for rent or mortgages, food, the cars, the medical insurance, the electricity, the cable, and on and on. The $1200 mad money checks promised by Uncle Sam are little consolation for that, and the small business “loans” – if you can even jump through the infuriating hoops to get them – just pile on an additional layer of obligation in a lifetime of debt serfdom. You don’t have to leap too many steps ahead mentally to imagine utter personal ruin on that glide path. And so what if millions of others are feeling squashed by the same phantom forces of disease and finance?
One firm reality is this: the global debt system that supported the turbo-charged global economy, was disintegrating badly in the early fall of 2019, threatening every financial asset and the markets that affected to manage them – and all the operations of modern daily life that they represented. Nowhere on earth was the debt load more out-of-control than in China, where there were no constraints whatsoever on the banks’ accounting fraud, since they answered solely to the ruling party, which had but one overarching policy: to keep ruling.
And the biggest economic fiction of all was that China could maintain its supernatural growth rates in a world that had actually reached the limits of growth. Mr. Trump’s trade wars sent tremors through the system. A whole lot of bad loans were about to be flushed down the drain. Banks everywhere else felt the vibrations, too, you may be sure. The Wuhan virus was, at least, a very convenient distraction from all that. And then, the darn thing got loose on countless airplane flights around the world.
The Covid-19 corona virus didn’t initiate the financial disorders of the moment in the US and Europe, but it ensured that there would not be another appearance of any “recovery” a la the central bank interventions of 2009-19. What it portends is a fast-track journey to a whole new disposition of things: first, for a while, a harsher, hungrier, angrier society of broken promises and dashed expectations; and then adaptation when a consensus emerges that the set of facts at hand amount to a new reality. In the meantime, we’re living in the meantime, which is not a comfortable place.
Money is not an economy. Money is a medium of exchange within an economy where people grow things, make things, move things, and serve each other in countless ways. We’re not going to replace all those growings, makings, movings, and services by just giving people money. Money may produce more money by the magic of compound interest, but money is not necessarily wealth, it just represents our ideas about wealth, and interest stops compounding anyway when the trend is clearly for reduced growings, makings, movings, and servicings. That’s exactly how and why capital vanishes. The hocus-pocus of Modern Monetary Theory can only pretend to work around that reality.
The world never reached such a pitch of activity up to the blow-ups of 2008, and it went through the motions for a decade after that. Now that it’s stopped, all that’s left is the law of gravity, and it doesn’t get more basic. The “wealth” acquired in the decade since by the so-called “one-percent” was loaded onto a defective aircraft, like a Boeing 737-MAX, and an awful lot of it will fall to earth now on broken wings. Their agents and praetorians on Wall Street are working feverishly to stave off that crash-landing, like a band of magicians casting spells on the ground while that big hunk of juddering metal augers earthward.
Wait for it as spring brings new life across the land and things unseen before steal onto the scene.
Navy Reports Alarming ‘Stealth Transmission’ Rate: 60% Of Infected Carrier Crew Symptom-Free
In an extremely worrisome development signaling the coronavirus peak in the United States could last longer than expected, the US Navy has found that most COVID-19 cases aboard the virus-stricken aircraft carrier Theodore Roosevelt are among sailors who are asymptomatic.
“Sweeping testing of the entire crew of the coronavirus-stricken U.S. aircraft carrier Theodore Roosevelt may have revealed a clue about the pandemic: The majority of the positive cases so far are among sailors who are asymptomatic, officials say,” Reuters reports.
This suggests the virus could be spreading more frequently by stealth mode in the broader population, with many more people than is known walking around walking around with the disease unawares.
Nuclear aircraft carrier USS Theodore Roosevelt, via AP/VOA
At least 655 Roosevelt sailors have now tested positive, including one death and multiple hospitalizations, out of a total crew of a about 4,800. It’s startling that the Navy has found that out of over 600 COVID-19 infected sailors, the majority have displayed no symptoms. Testing is about 95% complete on the entire crew since the ship was diverted to Guam last month amid a spiraling crisis on board.
“With regard to COVID-19, we’re learning that stealth in the form of asymptomatic transmission is this adversary’s secret power,” Rear Admiral Bruce Gillingham, surgeon general of the Navy, told reporters.
The Navy specified that 60% of the Roosevelt’s positive cases “so far have not shown symptoms”. Crucially, Reuters points out that the“figure is higher than the 25% to 50% range offered on April 5 by Dr. Anthony Fauci”.
This is likely due the fact that enlisted military ranks tend to be already very healthy individuals in their 20’s and early 30’s. The carrier crew also provides a key active case study given the isolation of nearly 5,000 people apart from broader society, and the young, fit demographic.
Defense Secretary Mark Esper told NBC’s Today on Thursday that the conclusions regarding asymptomatic spread aboard the ship conclusions are “disconcerting”. Esper said, “It has revealed a new dynamic of this virus: that it can be carried by normal, healthy people who have no idea whatsoever that they are carrying it,” Esper said.
While this is not a new revelation, the case of the Roosevelt carrier and its crew provides shocking and clear confirmation that this reality is likely playing out on a much broader scale than previously thought.
“Don’t fight the Fed.” – Every amateur investor who has never seen a bear market.
Over the last decade, investors have been trained to “buy” the markets every time the Federal Reserve was engaging in providing liquidity to the financial markets. As I noted in “Pavlov’s Dogs:”
“Classical conditioning (also known as Pavlovian or respondent conditioning) refers to a learning procedure in which a potent stimulus (e.g. food) is paired with a previously neutral stimulus (e.g. a bell). What Pavlov discovered is that when the neutral stimulus was introduced, the dogs would begin to salivate in anticipation of the potent stimulus, even though it was not currently present. This learning process results from the psychological ‘pairing’ of the stimuli. Importantly, for conditioning to work, the ‘neutral stimulus,’ when introduced, must be followed by the ‘potent stimulus,’ for the ‘pairing’ to be completed.”
For investors, as each round of “Quantitative Easing” was the “neutral stimulus,” which was followed by the “potent stimulus” of higher stock prices, Not surprisingly, after a decade of “ringing the bell,” investors have been conditioned to respond accordingly.
It is worth a trip back through history to evaluate the relationship between the Fed’s monetary interventions, and the impact on asset prices.
2002-2007: Credit spreads and financial conditions had normalized following the “Dot.com” crash. The Fed’s balance sheet was growing in line with the rate of GDP growth, ensuring banks had adequate liquidity to operate (This is the baseline of “normalcy.”)
2008: March – Bear Stearns fails, mortgage defaults start to rise, credit conditions worsen, and yield spreads rise. September – Lehman fails and freezes credit markets. Asset prices decline sharply, triggering margin calls, and the Fed floods the system with liquidity. As discussed last week:
The reality of the economic devastation begins to set in as unemployment skyrockets, consumption and investment contract, and earnings fall nearly 100% from their previous peak, as the market declines 26% into late November. It was then the Federal Reserve launched the first round of Quantitative Easing.
Stocks staged an impressive rally of almost 25% from the lows. Yes, the bull market was back! Except that it wasn’t. Over the next few months, the Fed’s liquidity was absorbed by the “gaping economic wound,” and the market fell another 28.5% to its ultimate low.”
Note: At this juncture, credit conditions were improving, spreads were normalizing, and the bulk of the economic devastation had been seen.
2010: QE1 ends, credit conditions tighten slightly as the new economy recovery showed strains. The Fed quickly acts to inject more liquidity with QE2. Given credit spreads and conditions were close to normal levels, the excess liquidity only had one place to go – the stock market.
2011: QE2 ends as the world is hit with a double-threat. Japan is impacted by a massive tsunami and the U.S. Government is enthralled in the midst of a “debt-ceiling debate.” Again, despite credit spreads and conditions being near normal levels, the Fed jumps in with “Operation Twist.” The economy quickly found its footing in Q3 of 2010, and with no crisis to absorb the liquidity, it flowed into the stock market.
2012: One of the byproducts of the “debt ceiling debate” was a bipartisan commission tasked with finding $1 trillion in spending cuts to reduce the deficit. This was known as the “fiscal cliff.” In late 2012, Ben Bernanke panicked and launched QE3 to preempt a “fiscal cliff” crisis. However, no crisis occurred, leaving the trillion-plus in liquidity with nowhere to go but the stock market.
2016: With the market down 20% from the peak over fears of a disorderly “Brexit,” Janet Yellen calls on the BOE and ECB to launch a Euro-QE program. Once again, the “Brexit” crisis never happened, and the only place for all of the excess liquidity to go was into the equity markets.
2019: In mid-summer, the Fed is faced with an “overnight liquidity shortage” for hedge funds. This was the first sign of trouble, but credit markets were not showing any real signs of strain. With credit markets operating normally, the liquidity flowed into asset prices, pushing markets to all-time highs.
NOTE; With 2008 a distant memory, and a decade of “emergency measures” providing “excess liquidity” to financial institutions for “emergencies” that never occurred, investors were fully trained to “buy the dip.”
2020: COVID-19 Strikes: The shutdown of the economy was unprecedented. Importantly, for the first time in a decade, credit conditions tightened, and yield spreads blew out. Bank’s loan loss reserves are exploding, and the economic data is worse than at any other point in history outside of the “Great Depression.”
While the Federal Reserve is busy providing liquidity to keep the credit markets functioning, investors who have forgotten to study 2008 still assume stocks can only rise. However, this time, for the first time since the “Financial Crisis,” there is “credit event” absorbing the Fed’s liquidity.
Importantly, like 2008, the “economic disruption” is likely to be far worse and more damaging to corporate earnings, than currently estimated as these “bailouts” fail to increase economic prosperity, wages, or savings.
How do we know that?
The chart below is our economic composite indicator. Given the primary indicators of economic strength are wage growth, inflation, the dollar, and interest rates, it is no surprise the indicator has a close correlation to GDP.
Since the financial crisis, there has been very little organic economic growth. Importantly, the rate of growth remained below pre-recessionary highs. The Fed’s zero-interest-rate policies, and expansion of the balance sheet, did little to improve that weakness. In fact, we argue that their incredibly loose monetary policy which fed speculative investments, deterred from economic growth.
In other words, while the Federal Reserve’s policies have been shown to absolutely boost asset prices, and inflate debt levels, they are responsible for detracting from economic growth, and widening the “wealth gap” between economic participants,
No “V-Shaped” Recovery
Consumption, what you and I spend supporting our families, working, and playing, comprises roughly 70% of economic growth. Of that 70%, retail sales make up about 40%. This past week, the first “retail sales” report was released showing the impact of the “economic shutdown” on domestic consumption.
“Pretty Catastrophic’ Month for Retailers, and Now a Race to Survive. March brought a record sales plunge as the coronavirus outbreak closed stores. A long shutdown could leave lasting changes in the shopping landscape.” – NYT
This decline in retail is not the end, but the beginning, as job losses mount. Retail demand is going to continue to suffer long after the “economy” is re-opened.
From this analysis, we can extrapolate the decline in retail sales into expectations for PCE growth. Again, since PCE comprises almost 70% of the economy, this is why expectations are for a drop of 10%, or more, in GDP in the second quarter.
Unfortunately, despite many hopes to the contrary, this is unlikely to be a “V-shaped” recovery for several reasons.
While the Government is talking about re-opening the economy, they are discussing doing so in phases over several months. Essential workers like plumbers, electricians, and other providers will reopen first, and only in areas with low infection rates. Then over time the rest of the economy will be opened as the “risk of spread” diminishes.
The problem is that during that time, the majority of small business owners, which as stated previously, comprise about 70% of employment, and roughly 45% of GDP, will run out of money. To wit:
“Most importantly, as shown below, the majority of businesses will run out of money long before SBA loans, or financial assistance, can be provided. This will lead to higher, and a longer-duration of, unemployment.”
However, the bigger problem was noted on Wednesday by UBS:
“Not every company that qualifies for the Federal Reserve’s loan support will survive the coronavirus-led downturn. Despite the Fed’s rescue efforts, these companies may struggle to remain in business and could be downgraded deeper into junk territory by the raters.
‘For now, we assume direct Fed loan support helps 50% of those eligible; i.e., distressed firms become non-distressed. However, without specific single name analysis, this estimate is effectively the coin toss because the actual figure is below 100% and above 0%. That implies half of eligible issuers avoid distress with Fed loans (9% leveraged loans, 10% middle-market, 19% high-yield).’
In reality, not every company that qualifies on paper will be able to pull this off. Some may suffer from long-term effects of the pandemic such as reduced travel and office-space rentals. Others may require assistance beyond September 30, which is the current termination date of the Fed’s facilities.”
Even if these companies get loans and assistance, they require “revenue” to stay in business.However, the nasty “feedback loop” is that by reducing employment, consumption is also curtailed. As revenue falls at the top line, the propensity to make capital investments into the economy plummets.
“Between the Federal Reserve injecting a massive amount of liquidity into the financial markets, and corporations buying back their own shares, there have been effectively no other real buyers in the market.”
The problem with surging unemployment is what happens to confidence.
Consumption Is Function Of A Paycheck
Without a job, or even the threat of losing one’s job or a pay cut, “confidence” is falling quickly which curtails consumption.
(The chart below shows our composite confidence index, which combines both the University of Michigan and Conference Board measures.) If we overlay that confidence composite with personal consumption expenditures, it is not surprising there is a reasonably high correlation.
Not surprisingly, since retail sales make up 40% of personal consumption expenditures, it also has a high correlation with consumer confidence.
Do you know what else has a high correlation with consumer confidence?
“[Who is a better measure of economic strength?] Is it the consumer cranking out work hours, raising a family, and trying to make ends meet? Or the CEO of a company who is watching sales, prices, managing inventory, dealing with collections, paying bills, and managing changes to the economic landscape on a daily basis? A quick look at history shows this level of disparity (between consumer and CEO confidence) is not unusual. It happens every time prior to the onset of a recession.
“Notice that CEO confidence leads consumer confidence by a wide margin. This lures bullish investors, and the media, into believing that CEO’s really don’t know what they are doing. Unfortunately, consumer confidence tends to crash as it catches up with what CEO’s were already telling them.
What were CEO’s telling consumers that crushed their confidence?
‘I’m sorry, we think you are really great, but I have to let you go.’”
As I concluded in that note last year:
“It is hard for consumers to remain ‘confident,’ and continue spending, when they have lost their source of income. This is why consumer confidence doesn’t ‘go gently into the night,’ but rather ‘screaming into the abyss.’”
While the markets have indeed managed a strong “bear market rally” following the fastest decline in the entirety of financial history, there are reasons to be cautious.
We are just entering into what will likely be a longer, deeper, and more damaging recession than what we saw in 2008. Credit conditions and yields spreads are still a long-way from normalized, and defaults and bankruptcies are likely only in the very early stages. Liquidity from the Fed has suspended bankruptcies for the time being, but the longer this recession/depression drags on, the greater the risk is the Fed only delayed the inevitable.
While the Federal Reserve has certainly moved quickly to assist the credit markets in remaining operational, as discussed here, those “emergency measures” don’t translate into stronger economic prosperity, revenues, or corporate profits.
What this all means is there will be no “V-shaped” recovery.
It also suggests there is a possibility that “buying the dip,” doesn’t work this time.
The COVID-19 pandemic has devastated the hotel industry, and in doing so put the taxpayers who funded generous incentives for these hotels at risk of never being paid back.
This week, The New York Times reportedon publicly funded hotels from around the country that are having to delay openings, or sitting empty thanks to coronavirus-related shutdowns and cancellations.
That includes the Hyatt Regency Hotel in Portland, Oregon, and the Loews Kansas City Hotel, which respectively received $74 million and $166 million in public incentives. The Hyatt opened in December. The Loews, which was already facing cost overruns, was supposed to open in early April, but that has since been delayed.
The Hyatt’s subsidies, like much of the public assistance detailed in the Times article, were funded by the sale of bonds by Portland’s Metro government (a separate entity from the city of Portland), which planned on paying back bondholders from taxes on hotel room stays in the city.
Metro told the Willamette Week that it has enough reserves to keep servicing the bonds on the Hyatt for the foreseeable future. But the longer COVID-19 shutdowns remain in place, the greater the risk that that governments who splurged on pricey hotel projects will have to pay back their creditors from general funds they’d otherwise be spending on public services.
It’s not just hotels either. Cities across the country are scrambling to figure out how to pay for stadiums, convention centers, and other venues that received taxpayer support. These projects were all pitched as economic development tools. With large gatherings banned in most of the country, they’re now a drain on city revenues that are already being squeezed by the current economic slowdown.
Wichita, Kansas, spent $75 million on a new baseball stadium that was opened in March, before being forced to close because of the pandemic. The city was expecting sales taxes from the stadium and surrounding businesses to pay for the costs of the venue. With games canceled for the foreseeable future, that’s looking increasingly unlikely, reports the Wichita Eagle.
Paducah, Kentucky, had just agreed to build a new aquatic center with the hope of attracting more tourism dollars. Now city leaders are scrambling to figure out how they’ll pay back the $20 million they borrowed to build the facility, according to local NBC affiliate WPSD.
Interestingly, Paducah’s aquatic center was already projected to lose money, even without the pandemic.
That’s because targeted subsidies for things like stadiums and hotels don’t make economic sense even in good times, says Michael Farren of George Mason University’sMercatus Center.
“Targeted economic development subsidies don’t work. They don’t actually raise the standard of living in the communities that use them,” he tells Reason.
Farren says these kinds of incentives, at best, spend scarce public dollars on economic activity that would have happened regardless of the subsidies offered. That’s a loss for local businesses and residents who have to pay these taxes but don’t receive any of this largess, he says.
“You’re subsidizing one provider of goods and services at the expense [of] other providers of goods and services. You can certainly see winners and losers,” says Farren.
Often, targeted government subsidies can end up distorting markets by oversupplying a good or service, which then creates more demand for subsidies and incentives in order for said business to stay afloat.
Pointing to the research of University of Texas professor Heywood Sanders, Farren argues that local governments have oversupplied the market for convention space, and have since tried to shore up demand for these venues by building luxury hotels.
Now both types of investment are losing money at the worst possible time. Local governments are under tremendous financial strain as sales taxes they rely on evaporate, and the demands for all forms of public services grow.
This would be the case regardless of whether governments had splurged on dubious economic development projects. It nevertheless means that cities across America are having to divert money from providing essential services to cover the costs of luxury hotels.
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A family in Oxford, Wisconsin, is suing the local sheriff’s department after a patrol sergeant threatened to arrest a teenage girl for disorderly conduct for posting on Instagram about being infected with COVID-19.
Amyiah Cohoon, 16, is a student at Westfield Area High School in Westfield, Wisconsin. According to this lawsuit, she and schoolmates went to Disney World and Universal Studios in Florida for a spring break trip in early March, right as the coronavirus was beginning to spread and businesses began to shut down. She and her classmates canceled the trip early and returned home.
Once home, Cohoon began developing symptoms associated with COVID-19. She sought medical assistance, but at the time they were unable to test her to see if she was infected. She was diagnosed with an upper respiratory infection with “symptoms consistent with COVID-19,” according to the lawsuit.
Cohoon went home and posted on Instagram letting people know that she had COVID-19 and was in self-quarantine. Her condition worsened and she was brought to the hospital for treatment. She posted again about the experience on Instagram. Finally, they were able to test her, but the test came back negative. According to the lawsuit, doctors told her it was likely the missed the window for testing positive, but she probably did have COVID-19, despite the test results. (False negative results have been an ongoing issue in accurately diagnosing infections.)
After she returned home from this visit, she posted again on Instagram and included a picture of herself at the hospital wearing an oxygen mask.
The very next day, Patrol Sergeant Cameron Klump from Marquette County Sheriff’s Department showed up on the family’s doorstep. He was there under orders from Sheriff Joseph Konrath to demand that Amyiah and her father, Richard Cohoon, remove Amyiah’s Instagram posts. If they refused, Klump said the family faced charges for disorderly conduct and Klump told them he would “start taking people to jail,” according to the suit.
Konrath’s justification was that there had been no confirmed cases of COVID-19 in the county. He found out about the Instagram post from Amyiah’s high school. The Cohoon family had contacted the school to let them know about Amyiah’s infection, but nobody ever contacted them back to get more information. It appears that instead the school contacted the police. Under the threat of arrest, Cohoon complied and deleted the allegedly illegal Instagram post.
That evening the family would discover that a school administrator sent out an alert to families accusing Cohoon of making it up and assuring families that any information of infection was just a rumor. “Let me assure you there is NO truth to this,” the message read. “This was a foolish means to get attention and the source of the rumor has been addressed. This rumor had caught the attention of our Public Health Department and she was involved in putting a stop to this nonsense.”
The family then connected with the Wisconsin Institute for Law and Liberty, and the Institute sent a letter to Konrath warning him that he had violated Cohoon’s First Amendment rights and demanded both an apology and the promise that there would be no further threats of criminal charges against the family for Amyiah’s post.
Konrath refused, and now the Wisconsin Institute of Law and Liberty is suing Konrath and Klump in the U.S. District Court for the Eastern District of Wisconsin for violating Cohoon’s First and 14th Amendment rights. Her Instagram posts are protected speech, the Institute argues, and there was nothing about her posts that violated the county’s disorderly conduct law, and even if they did, the Wisconsin Supreme Court has held that disorderly conduct statutes in the state cannot be applied to speech protected by the First Amendment.
The Wisconsin Institute for Law and Liberty is asking the court to rule that Cohoon’s posts were protected speech and order that the sheriff’s department may not threaten or cite Cohoon or her family for these posts, plus paying “nominal damages.”
The sheriff’s department is not backing down or even acknowledging an overreaction. According to the Milwaukee Journal Sentinel, their position remains that the one negative test means that she did not have COVID-19, which simply isn’t how it works. The Sentinelreports:
Sam Hall, an attorney for the sheriff, said the teenager “caused distress and panic” among other parents by claiming she had contracted the coronavirus despite getting a negative test result.
“This case is nothing more than a 2020 version of screaming fire in a crowded theater,” he said, referring to speech that is not protected by the First Amendment.
That the sheriff’s lawyer is misusing the much-maligned “fire in a crowded theater” argument from Schenck v. United States is a huge tell that these guys don’t have a leg to stand on. It’s a bad argument, a bad precedent (it was about censoring anti-war activism), and the Supreme Court has subsequently weakened that decision and broadened our free speech protections.
And even if that ruling remained relevant, Amyiah Cohoon was not engaging in the equivalent of “shouting fire in a crowded theater.” Because of the significant number of false negative test results, it’s appropriate for health staff to treat her as though she likely has COVID-19 based on her symptoms. It’s also appropriate for the Cohoon family to attempt to warn families of the students who went with her to Florida that they might have been exposed, too.
It’s the school officials and the police who behaved irresponsibly, not Amyiah or her family.
MSNBC anchor Stephanie Ruhle suggested earlier this week that former Vice President and likely Democratic nominee in the 2020 race Joe Biden form “a shadow government” to counter President Donald Trump’s daily briefing on the White House’s response to the coronavirus pandemic.
“Do they (the Biden campaign) need to do it in a bigger way? What did you just call it ‘the President’s daily clown show’? That’s his press briefing? Should Joe Biden be counter programming that? Should he be creating his own shadow government, shadow cabinet, shadow SWAT team? And gearing up there at a podium every night saying here’s the crisis we’re in, here’s what we need to do to address this,” Rule said in her interview with former Obama White House Deputy Chief of Staff Jim Messina.
Messina, as Ruhle implied, did earlier in the interview call the President’s daily briefings a ‘clown show’ and suggested that “real upstanding leaders” like former President Barack Obama and Senator Elizabeth Warren endorsing Biden and his message “is a contrast that the Biden campaign is gonna bank on going forward.”
Given President Trump’s push for nationwide testing, DPA-threats on ventilator and PPE manufacture, state-by-state re-opening of the economy, massive money-flow to America, and taxpayer-funding for vaccine/treatments… we wonder just what it is that this new “shadow government” will do to “counter Trump’s response.”
The COVID-19 pandemic has devastated the hotel industry, and in doing so put the taxpayers who funded generous incentives for these hotels at risk of never being paid back.
This week, The New York Times reportedon publicly funded hotels from around the country that are having to delay openings, or sitting empty thanks to coronavirus-related shutdowns and cancellations.
That includes the Hyatt Regency Hotel in Portland, Oregon, and the Loews Kansas City Hotel, which respectively received $74 million and $166 million in public incentives. The Hyatt opened in December. The Loews, which was already facing cost overruns, was supposed to open in early April, but that has since been delayed.
The Hyatt’s subsidies, like much of the public assistance detailed in the Times article, were funded by the sale of bonds by Portland’s Metro government (a separate entity from the city of Portland), which planned on paying back bondholders from taxes on hotel room stays in the city.
Metro told the Willamette Week that it has enough reserves to keep servicing the bonds on the Hyatt for the foreseeable future. But the longer COVID-19 shutdowns remain in place, the greater the risk that that governments who splurged on pricey hotel projects will have to pay back their creditors from general funds they’d otherwise be spending on public services.
It’s not just hotels either. Cities across the country are scrambling to figure out how to pay for stadiums, convention centers, and other venues that received taxpayer support. These projects were all pitched as economic development tools. With large gatherings banned in most of the country, they’re now a drain on city revenues that are already being squeezed by the current economic slowdown.
Wichita, Kansas, spent $75 million on a new baseball stadium that was opened in March, before being forced to close because of the pandemic. The city was expecting sales taxes from the stadium and surrounding businesses to pay for the costs of the venue. With games canceled for the foreseeable future, that’s looking increasingly unlikely, reports the Wichita Eagle.
Paducah, Kentucky, had just agreed to build a new aquatic center with the hope of attracting more tourism dollars. Now city leaders are scrambling to figure out how they’ll pay back the $20 million they borrowed to build the facility, according to local NBC affiliate WPSD.
Interestingly, Paducah’s aquatic center was already projected to lose money, even without the pandemic.
That’s because targeted subsidies for things like stadiums and hotels don’t make economic sense even in good times, says Michael Farren of George Mason University’sMercatus Center.
“Targeted economic development subsidies don’t work. They don’t actually raise the standard of living in the communities that use them,” he tells Reason.
Farren says these kinds of incentives, at best, spend scarce public dollars on economic activity that would have happened regardless of the subsidies offered. That’s a loss for local businesses and residents who have to pay these taxes but don’t receive any of this largess, he says.
“You’re subsidizing one provider of goods and services at the expense [of] other providers of goods and services. You can certainly see winners and losers,” says Farren.
Often, targeted government subsidies can end up distorting markets by oversupplying a good or service, which then creates more demand for subsidies and incentives in order for said business to stay afloat.
Pointing to the research of University of Texas professor Heywood Sanders, Farren argues that local governments have oversupplied the market for convention space, and have since tried to shore up demand for these venues by building luxury hotels.
Now both types of investment are losing money at the worst possible time. Local governments are under tremendous financial strain as sales taxes they rely on evaporate, and the demands for all forms of public services grow.
This would be the case regardless of whether governments had splurged on dubious economic development projects. It nevertheless means that cities across America are having to divert money from providing essential services to cover the costs of luxury hotels.
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A family in Oxford, Wisconsin, is suing the local sheriff’s department after a patrol sergeant threatened to arrest a teenage girl for disorderly conduct for posting on Instagram about being infected with COVID-19.
Amyiah Cohoon, 16, is a student at Westfield Area High School in Westfield, Wisconsin. According to this lawsuit, she and schoolmates went to Disney World and Universal Studios in Florida for a spring break trip in early March, right as the coronavirus was beginning to spread and businesses began to shut down. She and her classmates canceled the trip early and returned home.
Once home, Cohoon began developing symptoms associated with COVID-19. She sought medical assistance, but at the time they were unable to test her to see if she was infected. She was diagnosed with an upper respiratory infection with “symptoms consistent with COVID-19,” according to the lawsuit.
Cohoon went home and posted on Instagram letting people know that she had COVID-19 and was in self-quarantine. Her condition worsened and she was brought to the hospital for treatment. She posted again about the experience on Instagram. Finally, they were able to test her, but the test came back negative. According to the lawsuit, doctors told her it was likely the missed the window for testing positive, but she probably did have COVID-19, despite the test results. (False negative results have been an ongoing issue in accurately diagnosing infections.)
After she returned home from this visit, she posted again on Instagram and included a picture of herself at the hospital wearing an oxygen mask.
The very next day, Patrol Sergeant Cameron Klump from Marquette County Sheriff’s Department showed up on the family’s doorstep. He was there under orders from Sheriff Joseph Konrath to demand that Amyiah and her father, Richard Cohoon, remove Amyiah’s Instagram posts. If they refused, Klump said the family faced charges for disorderly conduct and Klump told them he would “start taking people to jail,” according to the suit.
Konrath’s justification was that there had been no confirmed cases of COVID-19 in the county. He found out about the Instagram post from Amyiah’s high school. The Cohoon family had contacted the school to let them know about Amyiah’s infection, but nobody ever contacted them back to get more information. It appears that instead the school contacted the police. Under the threat of arrest, Cohoon complied and deleted the allegedly illegal Instagram post.
That evening the family would discover that a school administrator sent out an alert to families accusing Cohoon of making it up and assuring families that any information of infection was just a rumor. “Let me assure you there is NO truth to this,” the message read. “This was a foolish means to get attention and the source of the rumor has been addressed. This rumor had caught the attention of our Public Health Department and she was involved in putting a stop to this nonsense.”
The family then connected with the Wisconsin Institute for Law and Liberty, and the Institute sent a letter to Konrath warning him that he had violated Cohoon’s First Amendment rights and demanded both an apology and the promise that there would be no further threats of criminal charges against the family for Amyiah’s post.
Konrath refused, and now the Wisconsin Institute of Law and Liberty is suing Konrath and Klump in the U.S. District Court for the Eastern District of Wisconsin for violating Cohoon’s First and 14th Amendment rights. Her Instagram posts are protected speech, the Institute argues, and there was nothing about her posts that violated the county’s disorderly conduct law, and even if they did, the Wisconsin Supreme Court has held that disorderly conduct statutes in the state cannot be applied to speech protected by the First Amendment.
The Wisconsin Institute for Law and Liberty is asking the court to rule that Cohoon’s posts were protected speech and order that the sheriff’s department may not threaten or cite Cohoon or her family for these posts, plus paying “nominal damages.”
The sheriff’s department is not backing down or even acknowledging an overreaction. According to the Milwaukee Journal Sentinel, their position remains that the one negative test means that she did not have COVID-19, which simply isn’t how it works. The Sentinelreports:
Sam Hall, an attorney for the sheriff, said the teenager “caused distress and panic” among other parents by claiming she had contracted the coronavirus despite getting a negative test result.
“This case is nothing more than a 2020 version of screaming fire in a crowded theater,” he said, referring to speech that is not protected by the First Amendment.
That the sheriff’s lawyer is misusing the much-maligned “fire in a crowded theater” argument from Schenck v. United States is a huge tell that these guys don’t have a leg to stand on. It’s a bad argument, a bad precedent (it was about censoring anti-war activism), and the Supreme Court has subsequently weakened that decision and broadened our free speech protections.
And even if that ruling remained relevant, Amyiah Cohoon was not engaging in the equivalent of “shouting fire in a crowded theater.” Because of the significant number of false negative test results, it’s appropriate for health staff to treat her as though she likely has COVID-19 based on her symptoms. It’s also appropriate for the Cohoon family to attempt to warn families of the students who went with her to Florida that they might have been exposed, too.
It’s the school officials and the police who behaved irresponsibly, not Amyiah or her family.
American government-level responses to the COVID-19 pandemic predictably divide along partisan lines. That’s meant a lot of televised sniping between Republicans and Democrats, as well as competing narcissistic windbaggery from President Donald Trump and New York’s Gov. Andrew Cuomo. It has also meant a revival of the tension between dispersed decision-making and concentrated authority. With Americans pulling away from each other into opposing camps, the time is ripe for breaking centralized control over our lives.
This week, the Democratic governors of Connecticut, Delaware, New Jersey, New York, Pennsylvania, and Rhode Island announced the creation of a “multi-state council” intended “to develop a fully integrated regional framework to gradually lift the states’ stay at home orders while minimizing the risk of increased spread of the virus.”
Simultaneously, the governors of California, Oregon, and Washington – also all Democrats – proclaimed a “Western States Pact” based on “a shared vision for reopening their economies and controlling COVID-19 into the future.”
Both groupings emphasize public health considerations over restarting the lockdown-crippled economy. They object to the president’s push for reopening businesses and getting Americans back to work.
In response, Trump insisted that he has “total authority” over decisions about when life should get back to normal. That’s a patently false claim that he had to walk back. We may be accustomed to the federal government exercising near-absolute power, but the Constitution reserves most tasks for the states, no matter what they’ve willingly surrendered over the years.
The battle we’re watching isn’t a principled dispute over federalism and the Constitution. Nothing converts Democrats into fans of state power like Republican control of the White House, and it’s exactly that control that makes Republicans into cheerleaders for the federal government. Their positions will reverse just as soon as the major parties’ fortunes do. Given the deep partisan polarization in the U.S., which has seen Republicans and Democrats come to not just oppose but actually hate each other, change in control of Congress or the White House is just a recipe for flipping the script. Republicans and Democrats may trade places, but half the country will continue to resist whatever is happening in Washington, D.C.
This also isn’t a contest between heroes and villains.
Likewise, governors justifiably fret over the pandemic’s lethal impact on densely populated urban areas in their states. But Cuomo’s threat to send the National Guard to steal ventilators from upstate hospitals looked very much like an exercise in rewarding the New York City residents who vote for him at the expense of voters elsewhere who don’t. And many of the restrictions imposed by state officials responding to COVID-19 are nothing less than intrusive and bizarre.
Besides, if Trump lacks the authority to open and close the economy at will, it’s not clear that governors possess it, either.
“Americans should know that ample legal precedents suggest that most shelter in place orders are unlawful and unconstitutional,” Robert E. Wright, professor of political economy at Augustana University, wrote for the American Institute for Economic Research. He points to a history of quarantine orders much more limited in scope than what we’ve seen this year.
But if we’re going to have bad policy, better to have it imposed at the state and local level than by the feds. Then, it can be compared to differing approaches elsewhere. It can also be evaded if necessary, the way Pennsylvanians poured across the state line to make purchases in neighboring communities after their government monopoly liquor stores closed as part of the pandemic response.
Truthfully, governors rediscovering the pleasures of state power likely have more on their minds than the “laboratories of democracy” that U.S. Supreme Court Justice Louis Brandeis described in his discussion of federalism and policy experiments. The partisan divide built into the revolt of the coastal states’ alliances against federal power makes their efforts look like yet another salvo in the increasingly nasty political warfare that has engulfed the country in recent years.
Gov. Gavin Newsom, for his part, has the habit of referring to California as a “nation-state.” That raises questions about just how far he plans to take his assertion of independence from federal policy set by Trump and Republicans.
But if Newsom and company have learned to enjoy going their own way, they might want to remember that it doesn’t have to stop at the state level. Protests against strict lockdown rules in Michigan, North Carolina, and Ohio make it clear that shifting power from the federal governments to the states doesn’t eliminate disagreement and resistance. Officials in some places—including county sheriffs in Idaho and Michigan—refuse to enforce at least parts of state stay-at-home orders that they consider unconstitutional and violations of civil liberties.
“In the spirit of liberty and the Constitution, you can request those of us that are sick to stay home, but, at the same time, you must release the rest of us to go on with our normal business,” Sheriff Daryl Wheeler of Idaho’s Bonner County wrote to Idaho Gov. Brad Little.
If states dissent from federal policy and try to pursue a different approach, localities certainly feel justified in doing the same. And if local policies rub individuals the wrong way, you can expect plenty of people to insist on making their own decisions for themselves.
And why not? Decentralized decision-making doesn’t guarantee better results than the centralized kind, but it affects and offends fewer people. It allows greater respect for people’s varying circumstances and their different tolerances for risk.
Of course, the same can be said about all sorts of decisions that are traditionally left to the powers-that-be to impose one-size-fits-all mandates that end up fitting very few. If we can break the habit of deferring to centralized authority, we may find that we like making our own choices.
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