Millions of Americans are working in the gig-economy could soon discover their side hustle jobs, such as being an Uber driver, Amazon delivery driver, and or completing odd tasks for Handyman, could come to a halt (temporarily) as the Covid-19 outbreak disrupts local economies across the country.
We’ve noted in the past, more than 50 million Americans, or about 44% of all US workers, aged 18-64, are considered low-wage and low-skilled, have insurmountable debts (with limited savings), including auto, student, and credit card debts, are working in the gig-economy via side hustles and are most vulnerable to job losses. Many of these folks are also employed in the services sector, another corner of the job market that is high-risk of job loss if the virus outbreak starts forcing consumers to pull back on discretionary spending.
The dark side of the gig economy could soon be realized as virus impacts are starting to mount, especially in West Coast cities. Millions of gig economy workers are low paid and lack proper health insurance. Some of these folks have barebone policies that require them to pay the first few thousand dollars of medical bills.
The obvious risk to the gig economy so far is cities shutting down that forces a decline in the need for certain services, many of these folks don’t have a financial safety net nor health care for if they contract the virus. It’s simple: American workers aren’t prepared for a pandemic.
“Tales of sky-high bills are buzzing in the media. A Miami man says he received a $3,270 bill for a voluntary coronavirus test; an American evacuated from the outbreak’s epicentre in Wuhan China received a $3,918 bill for mandatory quarantine in San Diego,” said the Financial Times.
As cases and deaths soar in Seattle this week, the first views of the gig economy and services sector grinding to a halt is in downtown Seattle. The area has transformed into a ghost town, as the lack of tourists and people quarantined at home has created a demand shock for the local economy.
Seattle is rapidly approaching post apocalyptic ghost town levels. Pike Place and Westlake are the emptiest I’ve ever seen pic.twitter.com/XRPCTL5t3F
— Kate: my steam buns bring Lu Bu to the yard (@ArmyOfMeat) March 3, 2020
Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, told CBS This Morning that further virus impacts on American cities could put a squeeze on household budgets and lead to a decline in discretionary spending.
ECRI comments on CBS: If there are mass school closings many household budgets will feel a squeeze, hurting discretionary spending. https://t.co/VIscAiZW0Z
CNBC explains that gig economy workers aren’t just some of the most exposed people to contract the virus, they also have no safety net as regular jobs do, such as sick days, health care, and covered expenses. CNBC’s Deirdre Bosa said some gig economy workers have already seen their business halved in the last several weeks due to virus fears.
Putting this all together, as cases and deaths soar in cities across the country, local economies could grind to a halt, and this could crash the gig economy and every millennial in it, who, frankly, many of which aren’t prepared for financial Armageddon unless they read ZeroHedge.
We’ve had a couple of people take issue with us regarding the case fatality rate (CFR) of the 1918 Spanish Flu. Citing Wikipedia and the CDC we gave that rate as being between 10-20%. A couple of commenters, however, insisted the actual CFR was 2-3%, and this led us to look further.
The global mortality rate from the 1918–1919 pandemic is not known, but an estimated 10% to 20% of those who were infected died (case-fatality ratio). About a third of the world population was infected, and 3% to 6% of the entire global population of over 1800 million[51] died.[2]
It is estimated that one third of the global population was infected,[2] and the World Health Organization estimates that 2–3% of those who were infected died (case-fatality ratio).
That’s quite a big change in a pretty short time.
What’s going on? Why is the CFR suddenly being downgraded so dramatically?
The WHO report they use as a source is not about the Spanish Flu, but simply mentions it in passing. It does indeed say 2-3% of those infected died, but gives no source for this, and also claims this represents 20-50 million people.
The trouble with that is the higher range of this estimate (50 million as 2% of total cases) gives a figure of 2.5 billion total cases. Which is higher than the entire population of the world at the time!(1.8 billion).
So something is clearly amiss.
Worse still, the WHO is the only source we have found so far that claims a death toll of 20 million. Most sources, such as the CDC (and see here), broadly agree that between 50 million and 100 million people died of the Spanish Flu (although one recent study wildly differs, see below). In order for 50-100 million deaths to be 2-3% of total cases there would have had to be 2.5 billion – 5 billion cases.
Obviously totally impossible.
Clearly there is something wrong with that newly revised figure of 2-3%. The only way to make it work is to also dramatically revise downward the number of deaths. And indeed there’s evidence of editors trying to do that on Wiki with someone citing a December 2018 study which used a controversial “new methodology” to establish a mortality figure of just 17 million. Given that this number has previously been estimated for India alone, this is remarkable revisionism.
Now, of course, there are debates about numbers of infections versus fatalities in every case study in epidemiology. It’s not an exact science. It’s fluid. Of course, estimates will vary and errors will be made and corrected. There’s more to be said about the inherent uncertainties in these cases, and we are currently talking to a respected virologist with the intention of covering the question further in future. Maybe the previous estimates of infection and fatality were too high. Maybe there is a rational case to be made for lowering them.
But is that what we are seeing on Wiki?
We all know Wikipedia is a micro-managed propaganda organ, so the fact its page on the Spanish Flu began a huge uptick of edits in December 2019, rising steadily until February 2020, and that the bulk of these edits seem concerned with – subtly and overtly – downgrading the severity of the 1918 pandemic has to be of interest.
Why the sudden decision to vastly downgrade the estimated CFR for the 1918 pandemic and source to a rather obscure WHO article that doesn’t even focus on that issue? And, more importantly, why does this extreme downgrade still exist on the page even when editors are pointing out the impossibility of the figures?
At least this new editorial policy by Wiki is well-timed for those looking to stoke fear, and unfortunate for those trying to bring reason to bear. It allows the media and others to cite the newly downgraded 2-3% CFR as evidence that COVID19 is as dangerous as, or more dangerous than, the Spanish Flu and will end up killing millions. That’s some nice clickbait right there.
Is it just human confusion? Maybe.
There is a report by a virologist, and cited by the CDC, that confirms the heretofore commonly accepted 500 million cases and 50-100 million deaths and adds this is a CFR of ‘over2.5%’. Which of course it is. It’s a CFR of 10-20%, as he would be the first to recognise. And 10-20% is over 2.5%.
Maybe his slightly ambiguous wording has led people astray? Maybe people consulting his work, as many do, including the Wiki editors, have taken ‘over 2.5%’ to mean just over, or even to mean exactly2.5%? Maybe that’s all this is.
Maybe.
But at any rate, the error, whatever it is, wherever it came from, isn’t ours. We didn’t make up the 10-20% CFR of Spanish Flu. It was the standard assessment until very, very recently. It still exists, though somewhat hidden now by ambiguous wording and confusion.
“That Would Stink!” – IOC, Japan Face Billions In Losses As Olympic Cancellation Concerns Go Global
Several weeks after Japan started canceling sport and cultural events amid the broadening of the Covid-19 outbreak, Japanese Olympic organizers discussed on Tuesday the possibility the Games could be postponed.
Haruyuki Takahashi, one of the Tokyo 2020 organizing committee’s executive board members, said the Games could be delayed for one or two years. Takahashi said canceling the Games would have significant financial ramifications.
“I don’t think the Games could be canceled. It’d be a delay,” Takahashi told The Wall Street Journal. “The International Olympic Committee (IOC) would be in trouble if there’s a cancellation. American TV rights alone provide them with a huge amount.”
Kazuhiro Tateda, an infectious disease expert of the Japanese government, said the fast-spreading virus could be sticking around a lot longer than many have anticipated, despite the upcoming warmer season.
“Unlike the flu that disappears with warmer weather, the response to the new coronavirus, I think, will have to continue for half a year or a year,” Tateda told NHK on Tuesday.
For their part, the International Olympic Committee and local organizers say the games are on, but the clock is ticking…
“From what we know from numerous other mass-gathering events including sporting events, it is very easy to spread diseases worldwide from such events – from meningitis to Zika,” Dr. Ali Khan. an epidemiologist and dean of the College of Public Health at the University of Nebraska, told the AP.
“Besides welcoming athletes and spectators with their tiny microbes, there is and may be ongoing disease in Japan.”
To safeguard against any unexpected events, such as a continuation of the virus crisis that could extend into the July period when the Games start, the IOC can postpone the two-week event and float expenses through 2022. The IOC has, in the past, bought an insurance policy on the Games that will help cover financial losses associated with a delay or cancellation.
The IOC’s annual reports show it paid almost $14.4 million in an insurance premium to protect against canceling the 2016 Rio Olympics and $12.8 million for a policy to cover the 2018 Winter Olympics in Pyeongchang, South Korea.
But, it is unclear if such a policy is in place for Tokyo as when IOC President Thomas Bach was asked last week after an executive board meeting if the insurance premium has risen to as much as $20 million for a Tokyo policy, he replied: “I don’t know, it wasn’t discussed at this EB.”
Although it would be shocking if they had not.
Not only would a cancellation of the Games would cause major disruptions to the international sporting calendar, it would have severe financial implications not just for the IOC, but for Japan and the world.
As AP reports, Tokyo is officially spending $12.6 billion to organize the Olympics, although a national government audit office says it’s at least twice that much. Andrew Zimbalist, a professor of economics at Smith College in Massachusetts, said construction cost for one venue in Japan was $1.43 billion. The local organizing committee budget of $5.6 billion is private money, with the rest coming from Japanese taxpayers. About $1 billion in the local operating budget is to come from ticket sales, which would be lost if the games go ahead without fans in empty stadiums.
“Some combination of the IOC, the broadcasters, and the insurers will lose big,” Victor Matheson, a sports economist at the College of the Holy Cross in Worcester, Massachusetts, said.
“That loss is coming out of someone’s pocket depending on how all of the contracts are written.”
Matheson adds that athletes are the most vulnerable from the financial shock:
“For athletes, their career length isn’t long and in many sports success in the Olympics is your one shot at a financial return.”
Aside from government officials coffers, athletes, coaches and sports officials, local organizers, and fans will be gutted too…
“I’ve heard things about possibly the Olympics being canceled, and I think that would stink,” J’den Cox, a two-time world champion wrestler and an Olympic bronze medalist, told AP News.
“It would probably break everybody’s heart if that were to happen.”
The AP notes that 73% of IOC’s income is derived from selling broadcast rights. NBC made up at least half of those broadcast payments in the last Olympic cycle. Another 18% of the IOC income is from selling sponsorships. NBC parent company Comcast said its contract with the IOC and insurance would allow it to escape losses if cancelation was seen. However, NBC would lose hundreds of million dollars in ad money.
While there’s billions of dollars on the line, if it is with the IOC, Japan, broadcasters, sponsors, etc., there’s a strong possibility that at this point in time, if the virus continues to spread across the world, the Games would likely be delayed.
For now, an Irish bookmaker is showing odds leaning slightly toward the Olympics not going forward. Odds are 4-6 it will not open on July 24 in Tokyo, and even that it will.
This is the upside of hyper-litigiousness: prevention is prioritized as the most effective means of limiting future liability.
Never mind prevention or vaccines; the big question is “who can we sue after this blows over to rake in millions of dollars?” Yes, this is pathetic, tragic, perverse and evil, but that’s reality in a hyper-litigious society like the U.S.
Many people are struck by the apparent over-reaction of Corporate America to the Covid-19 threat, but this is the only rational response in a hyper-litigious society:the number one priority in a hyper-litigious society is to limit liability. Everything–and yes, we mean everything–flows from this obsessive concern with limiting future liability.
Imagine the lawsuit brought by an employee of Corporate America who could have worked from home but was ordered by her employer to come to the workplace, and who was subsequently infected by the virus.
The corporation’s defense team would naturally claim there was no evidence the employee caught the virus at work, but alas, one employee in the building was confirmed as a carrier of Covid-19, so that defense won’t work: the employee could have been infected by this other employee in the workplace, and lacking any solid evidence to the contrary, it’s clear the company failed to protect its employees from exposure to the virus by forcing employees to work in a virus-infected work place when they could have worked from home.
By forcing an employee who could have worked from home to come to the office, the company is liable for damages. Multiply this case by thousands, and it’s easy to see why Corporate America has proactively moved so aggressively to a “work at home” policy and why corporate legal, HR and risk management teams are quickly issuing press releases and internal memos stressing all the measures the company is taking to lower the risks for employees and customers.
Future court cases will likely come down to basic tests, such as: did the corporation act promptly, prudently and in good faith? Did it pursue its preventative policies rigorously, or in a piecemeal, slapdash manner? Did the management quickly correct flawed execution, or did management fail to provide the necessary oversight, accountability and problem-solving to address the flawed execution of preventative measures? Did the company follow accepted industry protocols and standards? Did it make every available practical effort to reduce the risks to employees and customers?
If the measures are practical, coherent and applied consistently, this is a good thing. In prevention against a highly contagious virus, half-measures and window-dressing will not be effective: the execution of preventative measures must be 100%.
Thus it would be prudent to instruct all employees to wear masks, wash their hands often, conduct digital-online meetings, limit company gatherings, hire crews to regularly disinfect company facilities, etc. Companies that fail to impose and promote preventative policies and execute preventative measures uniformly will be opening Pandora’s Door to lawsuits that could stretch on for years.
This is the upside of hyper-litigiousness: prevention is prioritized as the most effective means of limiting future liability. The downside–extortionist lawsuits seeking quick out-of-court settlements as the cheaper way out of costly litigation–is an ugly reality of conducting commerce in America. But the upside–practical preventative policies that impose “social distancing” and high standards of personal hygiene and the regular disinfecting of common areas–could have a profound impact in lowering the spread of the virus.
Cheap Flights Bonanza & Near Empty Airlines – Chicago To San Francisco: $137
Amid the broader travel, hotel, aviation, tourism and cruise line carnage, airlines are canceling domestic flights left and right while waiving cancellation fees.
And as expected, ticket prices are plummeting given that as the International Air Transport Association has predicted demand for global air travel looks to decline in a first since 2009 over coronavirus fears, resulting in a potential loss of up to $113 billion in 2020 in revenue for the industry. Covid-19 is slashing airfares worldwide, as this brief list of examples suggests, culled from around the web:
New York to Miami: $51
Chicago to San Francisco: $137
New York to London: under $500
New York-Paris Return: $285
In China: Shanghai to Chongqing for merely 29 yuan, or $4.10
Nearly empty British Airways fligtht from London to Milan, via ABC News.
Flyers have over the past week posted images of cabins nearly completely devoid of passengers.
The International Air Transport Association (IATA) predicts a devastating year for the industry:
IATA now sees 2020 global revenue losses for the passenger business of between $63 billion (in a scenario where COVID-19 is contained in current markets with over 100 cases as of 2 March) and $113 billion (in a scenario with a broader spreading of COVID-19).
This after airline share prices have already fallen nearly 25% since the start of the outbreak.
The coronavirus is slashing airfares worldwide. Currently there are some great deals to be had for flying between the U.S and Europe. Tap in New York Paris return for example on Google Flights and it turns up startlingly low prices with leading airlines, American, United, Delta and Air France, for as low as $284 round trip, flying on April 5 to April 15. Go direct to Delta’s website and the picture is the same, with the lowest return fare for the same dates of $285.
Currently the deals site Airfarewatchdog.com reveals price drops of $26-$49 for a number of popular US city to city trips.
Most shale oil wells drilled in the United States are unprofitable at current oil prices, Rystad Energy has warned. The Norwegian consultancy said, as quoted by Bloomberg, that drilling new wells would be loss-making for more than 100 companies.
Just four shale drillers – Exxon, Chevron, Occidental, and Crownquest – can drill new wells at a profit at $31 per barrel of West Texas Intermediate.
The problem is the nature of shale oil wells: while quick to start production and expand it, they are also quick to run out of oil, so drillers need to keep drilling new ones to maintain production, which is what U.S. shale patch players have been doing for years.
However, this has affected investor returns, Bloomberg notes, and now it is affecting spending plans.
“Companies should not be burning capital to be keeping the production base at an unsustainable level,” Tom Loughrey from shale oil data company Friezo Loughrey Oil Well Partners LLC told Bloomberg.
“This is swing production — and that means you’re going to have to swing down.”
The situation is more positive for drilled but uncompleted wells,according to Rystad. The consultancy said yesterday that as much as 80 percent of DUCs in the U.S. shale patch have a breakeven price of less than $25 per barrel of WTI. Yet this is dangerously close to current prices.
“If nobody blinks in this supply war, prices may have to go this low in order to properly reduce production and get supply-demand back in balance,” Rystad’s head of shale research, Artem Abramov, said in the news release.
“This could turn out to be one of the greatest shocks ever faced by the oil industry, as coronavirus containment measures will add to the headache of producers fighting for market share. And OPEC has clearly stated that it won’t be coming to the rescue in the second quarter of 2020,” he also said.
“Even the best operators will have to reduce activity, it’s almost impossible to be fully cash flow neutral this year with this price decline” he concluded.
Even before this, America’s shale producers already had a profitability problem. It just got a lot worse.
Coachella Postponed Due To Coronavirus, Organizers Offer Refunds
The Coachella Valley Music and Arts Festival in Indio, California was postponed on Tuesday afternoon as global cases of COVID-19 top 118,000. Organizers moved the April 10-12 and April 17-19 dates to October 9-11 and 16-18 on the hopes that the coronavirus scourge will be behind us by then.
“At the direction of the County of Riverside and local health authorities, we must sadly confirm the rescheduling of Coachella and Stagecoach due to COVID-19 concerns,” the organizers said in a statement. “All purchases for the April dates will be honored for the rescheduled October dates. Purchasers will be notified by Friday, March 13 on how to obtain a refund if they are unable to attend.”
The cancellation comes after over 18,000 people signed a Change.org petition calling for the event’s cancellation in order to “protect ourselves and California residents by do the right thing before it’s too late.”
Headliners include Rage Against The Machine, Frank Ocean and Travis Scott, who are reportedly all on board for the new date, according to TMZ.
Bank Of Japan Buys Record Amount Of ETFs, Admits ‘Paper Losses’, Plans Program Expansion
Having blown over two trillion yen since October in purchasing stocks (ETFs) in the open market to “support Japan’s economy,” markets are rife with speculation the Band of Japan (BoJ) could pledge next week to buy ETFs at a faster pace than the current commitment to do so by roughly 6 trillion yen ($58.12 billion) per year.
Following pressure from Japanese Prime Minister Shinzo Abe,
“Markets are making nervous movements amid uncertainty over the global economic outlook. Based on agreements made among G7 and G20 nations, the government will work closely with the BOJ and authorities of other countries to respond appropriately,” Abe said in a meeting with ruling party executives on Tuesday.
Reuters reports that such a step is among options the central bank may consider if it approaches the ceiling as a result of aggressive purchases, according to sources familiar with the BOJ’s thinking.
In a somewhat surprising moment of transparency for the Japanese central bank, BOJ Governor Haruhiko Kuroda told parliament the BoJ had bought a cumulative 2.04 trillion yen worth of ETFs since October last year.
Kuroda also revealed the BoJ’s own estimate showed its holdings of ETFs may incur paper losses once Tokyo’s Nikkei stock average falls below 19,000 – 19,500. The Nikkei stood around 19,665 on Tuesday after briefly slipping below 19,000 in morning trade.
In accordance with Abe’s wishes, since BoJ issued an emergency statement on March 2 pledging to offer ample liquidity via market operations and asset buying, Kuroda has been accelerating the pace of ETF buying.
The BoJ bought 100.2 billion yen ($979 million) on Monday, matching a record pace of purchases made twice last week.
Eiji Maeda, the BOJ’s executive director, said the central bank was scrutinising daily price moves and taking appropriate action to stabilise markets.
“We of course won’t hesitate to take additional measures if needed, depending on future market developments,” he said.
So this clearly failed plan – of buying stocks directly in the market – has done nothing for the economy or the people’s wealth and is now actually destroying central bank capital…
But they believe they should just do more of it… and this is the same shit that is now being casually discussed in US banking circles.
In 1991, Maui police officers showed up at the home of Frances and Joseph Lopes.
One officer showed his badge and said, “Let’s go into the house, and we will explain things to you.”
Once he was inside, the explanation was simple: “We’re taking the house.”
The Lopses were far from wealthy. They worked on a sugar plantation for nearly fifty years, living in camp housing, to save up enough money to buy a modest, middle-class home. But in 1987, their son Thomas was caught with marijuana. He was twenty-eight, and he suffered from mental health issues. He grew the marijuana in the backyard of his parents’ home, but every time they tried to cut it down, Thomas threatened suicide. When he was arrested, he pled guilty, was given probation since it was his first offense, and he was ordered to see a psychologist once a week. Frances and Joseph were elated. Their son got better, he stopped smoking marijuana, and the episode was behind them.
But when the police showed up and told them that their house was being seized, they learned that the episode was not behind them. That statute of limitations for civil asset forfeiture was five years. It had only been four. Legally, the police could seize any property connected to the marijuana plant from 1987. They had resurrected the Lopes case during a department-wide search through old cases looking for property they could legally confiscate.
Asset forfeiture laws once applied only to goods that could be considered a danger to society – illegal alcohol, weapons, etc. But with the birth of the modern war on drugs, lawmakers pushed for something with more teeth, which they achieved with the 1970 passage of the Racketeering Influence and Corrupt Organizations (RICO) Act. Although many are familiar with the story of the steady expansion of civil asset forfeiture laws, many overlook the fact that presidential candidate Joe Biden helped put these laws on previously apathetic law enforcement agents’ radar and, worse, played a significant role in broadening their application. Biden has effectively aided and abetted the police state’s sustained assault on American subjects’ property rights.
Expanding Asset Forfeiture, Phase I: The RICO Act of 1970
In 1970, the targets of asset forfeiture were wealthy crime bosses. It was prosecutor G. Robert Blakey, who had worked under Attorney General Robert Kennedy and various congressmen, who set about broadening its scope. He helped draft a bill for a new legal concept, “criminal forfeiture,” which would allow police to seize the illegally acquired profits of a convicted criminal.
The assets that could be seized would now consist of anything that was funded with money connected to criminal activity. To appease those who were worried about abuses of power, Blakey assured them that prosecutors would have to prove beyond a reasonable doubt that the criminal was guilty of a crime before the assets could be seized. There was nothing to worry about; only legitimate bad guys would suffer.
The new policy was passed as part of the Racketeering Influence and Corrupt Organizations (RICO) Act in 1970. Blakey was a fan of the 1931 movie Little Caesar, and the acronym was crafted to honor Blakey’s favorite character from the movie, the gangster Rico Bandello.
The RICO Act wasn’t designed to be part of the war on drugs; it was just meant to target criminals. But when Richard Nixon took office, the RICO Act was one of a number of new tools that the members of his newly created Bureau of Narcotics and Dangerous Drugs (precursor to the Drug Enforcement Administration (DEA)) could use to fight his drug war. Combined with other legal innovations, such as no-knock raids and mandatory minimum sentences, Nixon and his administration would cure America of the drug menace.
Still, the pesky “conviction” requirement stood in the way of law enforcement’s ability to seize criminal assets. In 1978, Jimmy Carter’s director of the Office of Drug Abuse (the title “drug czar” is often retroactively applied), Peter Bourne, decided that the law needed to be changed. Bourne learned of an incident at the Miami International Airport in which a suitcase had been left on the baggage carousel for three hours before police picked it up and found $3 million inside. If drug kingpins could afford to abandon so much money, they must be flush with enough cash to hardly worry about criminal forfeiture laws.
So, at Bourne’s urging, Congress modified the RICO Act to allow the DEA to confiscate assets without a conviction. The burden of proof wasn’t entirely gone (yet), but the government only needed an indictment, rather than a full conviction, to justify asset seizure. After all, the government knew who a lot of these kingpins were, but the criminals continued to get rich while the DEA struggled to build cases against them.
Even then, though, real estate was off limits. Asset forfeiture had evolved from the seizure of dangerous items into criminal profit following a conviction, and now into criminal profit (and its “derivative proceeds”) without the conviction requirement. But real estate—such as the Lopes house—still couldn’t be touched.
But through the 1970s, the RICO Act was still largely ignored by prosecutors. Blakey was holding seminars out of Cornell University, which were attended by federal law enforcement agents and prosecutors, urging them to take advantage of the RICO Act in the war on drugs. He made few inroads. The law was unwieldy, and prosecutors were overworked. More often than not, it wasn’t worth their time. While Blakey was proselytizing the virtues of his law to little effect, he was unwittingly gaining an ally in Congress: Senator Joe Biden.
Expanding Asset Seizure, Phase 2: Biden and the Comprehensive Crime Control Act of 1984
Biden, a young Senator from Delaware, had to do something to show that despite his “liberal” reputation, he could be just as tough on crime as his Republican colleagues. He took notice of the RICO Act, and he realized that law enforcement agencies were not taking advantage of it, particularly in waging the drug war. He turned to the General Accounting Office and asked them to produce a study on the potential uses of RICO for drug enforcement.
The report showed that the RICO Act granted enormous powers to police to confiscate drug-related assets but that these powers were not being taken advantage of: “The government has simply not exercised the kind of leadership and management necessary to make asset forfeiture a widely used law enforcement technique,” the report stated. By the time the report came in, Ronald Reagan was settling into office and getting ready to renew the war on drugs.
Reagan brought the FBI into the drug war, and he gave the director, William Webster, a mission. His agents would use the powers of the RICO Act to find drug rings and take away their assets. Drug cartels must be rendered unprofitable. As the 1980s progressed, the war on drugs would be the country’s biggest political issue. Politicians from both parties would work to show that they could out–drug warrior their opponents. One Democratic representative from Florida, Earl Hutto, said, “In the war on narcotics, we have met the enemy, and he is the U.S. Code.”
Biden brought the RICO law to the attention of the federal government, Reagan enlisted the FBI to use it against drug traffickers, and both parties would now work to dismantle any limitations that the law might still impose.
The drug war became a contest of political one-upmanship. Reagan’s Justice Department fought for all kinds of new powers. Attorney General Edwin Meese and Assistant Attorney General William Weld (yes, that Bill Weld) railed against the limitations on their legal prerogative. Weld went so far as to argue in favor of the legality of using the Air Force to shoot suspected drug-smuggling planes out of the sky, a policy that even his boss was unwilling to endorse.
But Meese, Weld, and everyone else seemed to agree that forfeiture laws didn’t go nearly far enough. By requiring an indictment, the government still had to meet some standard of reasonable guilt before seizing property, which allowed far too many criminals that law enforcement knew to be guilty (but couldn’t build a case against) to keep their ill-gotten gains. To take things further, the Justice Department argued that law enforcement should be allowed to take “substitute” property: they knew that they wouldn’t be able to take everything that had been paid for with drug money, so it stood to reason that they should be able to take legally acquired assets of equal value (however that might be determined). And finally, with real estate off limits, the government was unable to seize marijuana farms, drug warehouses, and criminal homes.
The Comprehensive Forfeiture Act fixed all of these problems. Biden introduced the new bill in 1983, and its provisions became law the next year. Under this law federal agents had nearly unlimited powers to seize assets from private citizens. Now the government only needed to find a way to let local and state police join the party.
Biden’s bill was passed as part of the 1984 Comprehensive Crime Control Act . In addition to a slew of new powers for prosecutors, the burden of proof for asset seizure was lowered once again (agents had to onlybelievethat what they were seizing was equal in value to money believed to have been purchased from drug sales). More significantly, the bill started the “equitable sharing” program that allowed local and state law enforcement to retain up to 80 percent of the spoils.
The law took effect in 1986, the year before Thomas Lopes pled guilty to charges of growing a marijuana plant in his parents’ backyard. In 1987, when Thomas faced the judge, the government had just made it so that his local police had an enormous incentive and unchecked authority to seize property from private citizens, so long as they could show any flimsy connection to drugs. By 1991, the Maui police were running out of easily seized property, so they started combing through case files within the five-year limit to find new sources of enrichment for their precinct using the expanded RICO powers. One such file brought the Lopes home to their attention.
But the Lopeses are only one example out of millions. In the year their home was confiscated by police for a minor, four-year-old drug charge, $644 million in assets were seized. In 2018 alone, the Treasury Department’s Forfeiture Fund saw nearly $1.4 billion in deposits . The Lopes story merely illustrates that criminals (regardless of how one might feel about drug laws) are hardly the only people falling victim to this policy.
The decades-long abuse of this policy has reached such extreme proportions that people on all sides of the political aisle have been turning against it. At this writing (February 20, 2019 for the original version of this article), the Supreme Court has unanimously voted in favor of Tyson Timbs , whose $42,000 Land Rover was seized in 2015 following a conviction for selling $400 in heroin. The court is asserting that asset forfeiture constitutes a fine and that the Eighth Amendment—which protects citizens from excessive fines—applies to both state and local governments. The consequences of the ruling remain to be seen, but it seems nearly certain that the unanimous decision was motivated by the increasing outrage against the civil asset forfeiture policies.
In the fight against the egregious violation of property rights that is asset forfeiture, Americans must not forget who those who promulgated these laws and birthed a new paradigm of government aggression against private persons that is proving difficult to overturn.
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