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Schumer: Trump Threatens To Keep Government Closed For “Months Or Years”

Following an 11:30 a.m. meeting in the White House with House Speaker Nancy Pelosi (D-CA), House Majority Whip Steny Hoyer (D-MD) and other congressional leaders, Pelosi and Schumer spoke outside the White House.

Speaking first, Pelosi said that the meeting with President Trump was lengthy and sometimes contentious. Senate Minority Leader Chuck Schumer (D-NY) meanwhile says Trump threatened to keep government closed for months or years.

President Trump is expected to speak next.

Watch (viewers can rewind to desired segment): 

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Strategists See 19% For Stocks In ’19 But Legendary Investor Scoffs “It Will End Badly”

For all the uncertainty over everything from the U.S. economic outlook to trade tensions, and even the reason behind massive swings in stocks, Bloomberg strategist Michael Regan notes that most market participants were certain of one thing as the calendar turned to the new year:

a 2019 rebound in U.S. equities, after their worst year since the global financial crisis.

The consensus is calling for a stronger stock market, with double-digit percentage gains for the S&P 500 in the coming year.

  • The average estimate from a survey of 170 Markets Live readers is for the S&P 500 to close the year at 2,799, implying a 12% gain, which is in the neighborhood of the Markets Live bloggers’ forecast.

  • Wall Street strategists are more bullish, with a mean estimate of 2,975, or a 19% advance

While Regan warns contrarians to beware (saying that this doesn’t look too far-fetched, considering the history of U.S. equities and back-to-back yearly declines in the S&P 500 are rare, and when the market is down for a single year, the following year often produces out-sized returns).

Hell, why not believe the strategists and analysts, they nailed AAPL right?

But, as we noted previously, BofA’s Michael Hartnett has a laconic view on the groupthink that once again appears at the start of the year:

“the horror, the horror” especially since he thinks that there is one key capitulation that has yet to take place: that of the sell-side, as Bloomberg consensus forecasting 10-year Treasury @ 3¼%, S&P500 @ 2975 by end-2019.

And he is not alone, as The New York Times reports  that legendary investor Jim Stack, president of InvestTech Research, believes that the worst isn’t over and that the Dow and S&P 500 will soon be down 20 percent from their peaks, retreating into a bear market. After correctky warning at the start of last year that…

“If there are any certainties, one will be that this party will eventually come to an end…

And when it ends, it will end badly, and with high volatility.”

He is perhaps worth paying attention to again this year as he told NYT that even though valuations have come down and macroeconomic indicators “have remained remarkably strong,” Stack says that he is still defensive and hasn’t changed his bearish allocation, adding that this week’s ISM collapse suggests “serious cracks” are starting to appear in the economy.

And that was before a revenue warning from Apple sent markets into another steep fall on Thursday, only to retrace it all in a epic reversal today as Powell shifted into full PPT mode, proclaiming America’s economic momentum strong…

Which Stack expected;

“I think the Fed will stand down and put future rate increases on hold,” he said, “which could stabilize the market, at least for the time being.”

However, Stack reminds investors of one key lesson.

“A lesson from history is that the market leads the economy by a lot longer than investors realize.”

If the economy is headed toward recession, as the latest stock market declines suggest it may be, “we won’t see the first economic warning signs until the first three to five months” of 2019. Among the leading indicators he’s watching for signs of weakness are consumer confidence, housing starts and unemployment claims.

Of course, the unrelenting cry from the asset-gatherers and commission-takers is how ‘cheap’ the market has become on a forward-P/E basis:

 

Mr. Stack, however, points out correctly that in the event of an economic downturn – or even a significant slowdown – “those projected earnings will go out the window.”

And the legendary investor concluded by pointing out his surprise at the extremes reached in December, without even “a single hard warning sign of recession on the horizon.”

“Can you imagine,” he asked, “how volatile it will be when we do have those warnings?”

Given today’s panic-bid back to Wednesday’s highs…

Nothing would surprise us anymore.

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Bioengineering Photosynthesis Boosts Crop Growth by 40 Percent

HaleyAhlersRIPEProjectIllinoisResearchers at the University of Illinois report in Science that they have engineered crops that are 40 percent more productive than conventional crops.

Green plants containing the protein rubisco use sunlight to convert water and atmospheric carbon dioxide into life-sustaining organic compounds, such as glucose. Photosynthesis is also responsible for almost all of the oxygen in the atmosphere. There is, however, a glitch in the process. About 20 percent of the time, rubisco grabs oxygen molecules instead of carbon dioxide, resulting in the creation of a plant-toxic compound that must be eliminated through the process of photorespiration. Photorespiration uses up resources that could have been devoted to producing more growth and yield.

The Illinois researchers have engineered new detoxifying pathways that save enough resources to boost plant growth by 40 percent. They report that these engineered plants developed faster, grew taller, and produced about 40 percent more biomass, most of which was found in 50-percent-larger stems. Because higher temperatures result in less efficient photosynthesis and greater levels of photorespiration, the researchers believe that this bioengineering feat will help farmers maintain and increase yields in the face of future climate change.

The researchers tested their hypotheses in tobacco, but the team is now seeking to use their techniques to boost the yield of soybean, cowpea, rice, potato, tomato, and eggplant.

Thus do Malthusian predictions of global famines continue to recede. “In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate,” declared the Stanford biologist Paul Ehrlich in his 1968 book The Population Bomb. Needless to say, he was wrong. Thanks to crop breeders like Norman Borlaug, the amount of cereals per capita has increased from about 600 pounds in 1968 to more than 840 pounds now.

A 2017 study calculated that food production will need to increase between 25 to 70 percent to meet global demand in 2050. If the current global rising trend in crop yields is simply maintained at 1.4 percent annually for the next 32 years, that implies a 56 percent increase by 2050. Breakthroughs like this will make achieving that goal even easier, and in the process will enable humanity to spare and restore more land to nature.

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Thanks to Heavy Taxes and Regulations, California’s Legal Cannabis Sales Fell After Recreational Stores Opened

State-licensed sales of recreational marijuana began a year ago in California, and so far things are not turning out quite the way officials expected.

While “state officials estimated there would be as many as 6,000 cannabis shops licensed in the first few years,” the Los Angeles Times reported last week, “the state Bureau of Cannabis Control has issued just 547 temporary and annual licenses to marijuana retail stores and dispensaries.” The New York Times notes that legal cannabis sales totaled $2.5 billion in 2018, which is about $500 million less than in 2017, before the first recreational shops opened. Marijuana tax collections amounted to $234 million at the end of September, which suggests the total for 2018 will be less than half what officials predicted and less than a third of the $1 billion annual haul they were expecting within a few years.

What went wrong? Nothing really surprising. California is regulating and taxing the hell out of cannabis, which makes it hard for legal suppliers to compete with the state’s longstanding, extensive, and highly developed black market.

To begin with, marijuana businesses need local as well as state approval. Retailing is allowed in just 89 of California’s 482 cities and just six of the 88 municipalities in Los Angeles County. State law permits home delivery, which should provide a way around local bans, but the Bureau of Cannabis Control has yet to finalize a proposed rule that says deliveries are allowed in towns where storefronts are prohibited.

Even when there is no local ban, would-be marijuana merchants need permission from the local government as well as the state, a dual licensing system that doubles the regulatory headaches. Licensees are subject to the Medicinal and Adult-Use Cannabis Regulation and Safety Act, the Bureau of Cannabis Control’s regulations, and whatever additional rules the local government imposes.

“The cannabis industry is being choked by California’s penchant for over-regulation,” Dale Gieringer, director of California NORML, told the L.A. Times. “It’s impossible to solve all of the problems without a drastic rewrite of the law, which is not in the cards for the foreseeable future.” Cannabusinesses are also hampered by a shortage of banking services, since financial institutions remain leery of serving customers who deal in products that are banned by federal law.

If they manage to get licensed, comply with all the relevant regulations, and find ways to pay expenses and process sales, marijuana merchants still must contend with black-market competitors who are not subject to those regulations or to state and local taxes, which can add 40 percent or so to the retail price. Among states that have legalized recreational use, California has the second highest taxes, bested only by Washington, where the total rate can be as high as 47 percent. By contrast, Alaska collects $50 per ounce from growers, while Michigan’s legalization initiative calls for a 10 percent retail tax.

“Because we are up against high taxes and the proliferation of illegal shops, it is difficult right now,” the owner of a pot shop in Wilmington told the L.A. Times. “We expected lines out of our doors, but unfortunately the underground market was already conducting commercial cannabis activity and [is] continuing to do so.”

Despite their avowed desire to displace the black market, legislators and regulators acted as if it did not exist. “There’s always been a robust illicit market in California, and it’s still there,” industry analyst Tom Adams told The New York Times. “Regulators ignored that and thought they could go straight into an incredibly strict and high-tax environment.”

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Tijuana: Fed Up & On “On The Brink”

Authored by Sarah Cowgill via Liberty Nation,

The financial burden on the border city is only one cost. Add in crime, illness, and unsanitary conditions…

As thousands of immigrants gather in Tijuana after a months-long march through poverty-stricken countries to reach the Calexico border, it appears the Guatemalan, Salvadoran, and Honduran wannabe refugees are receiving an unhealthy dose of reality.

Their promised America — mostly advertised as a life replete with bountiful resources, including unending welfare, free child care, and high-paying jobs for the uneducated — refuses to process the entire lot.  And as a government scale-back and standoff over border security tediously plods along, legal immigration into the United States is held in perpetual limbo.

What could possibly go wrong?

As Host Cities Go

Tijuana is fed up with playing host-city to some 6,200 migrants bringing illness, creating fear for businesses and residents, and financially burdening the busy border town.  In an interview with Tijuana Mayor Juan Manuel Gastelum, pent-up frustrations were obvious, as he said the caravan is “hitting us hard. It’s costing us 550,000 pesos a day.”  That figure approximates $28,000, but is widely disputed by other officials as nearing an unmanageable $40,000 per day.

Tijuana City Delegate Genaro Lopez Moreno added details about the city’s migrant caravan-induced crisis on Fox News’ program Tucker Carlson Tonight:

“Things got out of hand because they kept growing and growing…

But we’re carrying the financial load of keeping these people with medicine, food, shelter, blankets, and whatever. There’s a lot of trash because the 360 grew to 6,200, and that’s when it got out of hand …

There’s like 1,500 people here, there’s 2,200 people there, and there’s 2,000 people that are not accounted for.”

The situation is overwhelming the town’s mental, physical, and financial resources. And one wonders where the organizers and assistance givers along the route, Pueblo Sin Fronteras, have gone.  If you ask Mayor Gastelum, he is quite clear on the fate of the organizers: “This person who say he’s from Pueblo Sin Fronteras, he say that he’s one of the leaders of the caravan, well, why don’t the federal police say, ‘Hey, hey, come over here.’”  .

The mayor, and most of the migrants, believe Pueblo Sin Fronteras lied about the caravan and how long the asylum process would take. The mayor indicated that representatives of the anti-borders group should be charged with “putting people at risk.”

And then there is the uptick in criminals now living in Tijuana, which accounts for almost 300 arrests for drug possession, intoxication, and breaking and entering.  During the journey, the Department of Homeland Security identified the most pressing concerns for Mexico and the United States:

“…over 270 individuals along the caravan route have criminal histories, including known gang membership. Those include a number of violent criminals – examples include aggravated assault with a deadly weapon, armed robbery, sexual assault on a child, and assault on a female. Mexican officials have also publicly stated that criminal groups have infiltrated the caravan. We also continue to see individuals from over 20 countries in this flow from countries such as Somalia, India, Haiti, Afghanistan, and Bangladesh.”

Liberals can squawk about the bedraggled masses of women and children seeking asylum, but Department of Homeland Security reports warned us that “50 percent are single adults …. Guatemalan Intel Minister said that the caravan is employing tactics to push women and children to the front to act as human shields ….”

Of course, what Americans in their right minds would buy what today’s alt-left Democrats are attempting to sell?

No Mas Caravanas

The people of Tijuana have taken to the streets to rid their city of the unwanted burden of an additional 6,200-plus people roaming around, depleting charity and city resources, with no assistance from the federales in the works.

Carrying handmade signs demanding “no more caravans,” people are speaking to their country and to Americans across the border in solidarity.

Does this sentiment sound familiar? Fidel Ernesto Gonzalez, of Tijuana, demanded the Mexican government secure his country’s southern border with Guatemala, requiring any asylum seeker enter the country legally, with passport and legal paperwork.

“It’s the same thing that Donald Trump is dealing with in the United States. If you want to enter the United States, you can enter, but you have to do so legally.”

Both Mexico and the United States have reached the end of their collective rope on the public relations stunt created and executed by the Democrats. It is obvious they care not for the people involved; they seek only the optics.  But the line between humanity and hysteria, legal and illegal, and the safety and welfare of thousands is beginning to blur.

Build the wall, Mr. Trump, and take no political prisoners in the process.

As Gastelum said, “Tijuana is a city of immigrants, but we don’t want them in this way. It was different with the Haitians; they carried papers, they were in order. It wasn’t a horde, pardon the expression.”

And that is precisely how the majority of Americans feel, Mr. Mayor.

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Why The Real Market Chaos Is Yet To Come: A Surprising Take From Goldman Sachs

If one asks traders what was the common market theme over the past three months, among the various (often angry) answers, one will stand out: general prevailing chaos, manifesting itself in soaring volatility which coupled with record low liquidity and massive trading volumes, resulted in disjointed, erratic price action that crushed all momentum and trend-following strategies (which these days is most of them).

Commenting on this phenomenon, among others, yesterday JPMorgan quant Marko Kolanovic opined, correctly noting that “liquidity has become to a large extent driven by market volatility” reinforcing a negative feedback loop between volatility and liquidity, and as the most recent examples he cited the unprecedented drop in futures market depth or “record low liquidity” we discussed previously (shown in the chart below), the currency flash crash on Jan 2, or the equity market “upside crash” on December 26.

Yet one thing that Kolanovic ignored was the the third aspect of what has recently become the market’s unholy trinity: trading volumes.

Addressing this under-discussed facet of market function, overnight Goldman’s derivatives expert Rocky Fishman pointed out that after nearly a decade of declining market volume, 2018 saw an abrupt reversal in this trend, with high volume growth in SPX E-mini futures (+21%), most S&P 500 ETFs (+40%), and SPX index options (+27%).

On the surface, this appears paradoxical: after all, falling realized liquidity would seem to contradict the observed strong growth in trading volumes of US index products. However, as Goldman points out, when volatility’s impact is considered, delta-one SPX product growth – or volume adjusted for vol impact – was actually low in 2018.

Indeed, when discussing market volumes one must always consider that they tend to be highly correlated with realized volatility, or as Goldman puts it, “there is a high positive correlation between realized volatility and volumes of SPX futures and the three major S&P 500 ETFs (SPY, VOO, IVV).”

The relationship shown in the graph below implies that E-mini SPX futures should trade $200bln notional/day when realized vol is at 10%, and around $260 bln/day when realized vol is at 20%. This relationship is particularly strong for the ETFs (0.88 correlation between monthly unit volume and realized volatility over the past 5 years, vs. 0.80 for E-mini futures).

From this it follows that the spike in volatility in the last quarter of 2018 contributed to high-volume months… however as shown above, delta-one volume was lower than volatility would have indicated. As Fishman notes, the concentration of high-volatility months (five of 2012-8’s ten most volatile months were in 2018) led to a concentration of high-volume months.

However, the last five years’ volume vs. volatility relationship for both futures and ETFs makes 2018’s delta-one volumes appear low for this level of volatility. Furthermore, July and August came with the lowest future and S&P ETF trading volumes in years, even though realized volatility was marginally higher than it was throughout 2017

Another consideration is that the sharp volume gains in 2018 were largely offsetting losses from the record low-volatility observed in 2017. According to Goldman, low volatility in 2017 contributed to reduced future and S&P ETF volumes in 2017, while 2018’s gains largely offset 2017’s losses.

Finally, showing the explicit co-relationships between volume, liquidity and volatility is the following chart which shows that the top-of-book depth, which as we showed previously is record low, tracks the ratio between volume and realized volatility. In other words, “volumes that are low for a given level of volatility may be limited by poor liquidity – or may be leading to poor liquidity” according to Fishman. So whichever way the arrow of causation works (it’s some of each), 2018 came with both poor liquidity metrics and delta-one volume numbers that were lower than would be expected for this level of volatility.

Why is this a concern?

Because in a time when the entire asset class of active investing is increasingly endangered by the encroaching threat of passive investing resulting in prominent hedge funds shuttering left and right and removing marginal market players, and where HFTs are now cannibalizing each other and unable to “provide liquidity”, i.e. offset any sharp jump in trading volume, as a result of unprecedented commoditization of order flow, trading volumes – in both absolute and delta-one terms – will keep declining. This is how Kolanovic explained the recent trends observed in the market:

The depletion of market reversion forces was driven by a decline of value investors (as money moved to passive and systematic strategies), a shift of assets from public to private equity (private equity has a more favorable mark to market treatment, thus creating arbitrage between public and private equity), and a reduction of human risk taking activity after the 2008 crisis (e.g., block traders, prop desks, etc.).

Said otherwise, with volatility expected to keep rising as central bank liquidity withdrawal accelerates in the coming months, something BofA discussed two days ago when it noted that “a flattening in the yield curve over the last three cycles has preceded rising volatility by about three years” and thus “expects a more volatile backdrop for US stocks in the coming years”, going so far as to suggest that volatility will “likely double by 2021″…

… absent an increase in overall market volume, liquidity will collapse to even more unprecedented depths as the volume/volatility ratio hits new all time lows.

Which takes us back to something Kolanovic said yesterday, namely that “Equity markets could benefit from a rethinking of the current state of liquidity provision and of market reversion forces.” In this particular case, the JPM quant is absolutely correct, because if the current trend of rising volatility coupled with declining delta-one volumes continues, the result will be a market in which the top-of-book depth eventually collapses to zero and where even the smallest order has the potential to unleash chaos.

Which is good news for all those day traders who hope that the current illiquid, disjointed market state persists… and bad news for those investors who hope for a reversion to prior trends. Because absent another major central bank intervention that eliminates the endogenously rising market volatility, the real chaos is yet to come.

 

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2019 Could Make Or Break OPEC

Authored by Irina Slav via Oilprice.com,

When OPEC+ agreed to begin cutting crude oil production again in December, hardly anyone in the cartel thought the effect of the news on prices would be as lackluster as it turned out to be. It took some time for the fact to sink in that this time too many traders were worried about the future of oil demand and were reluctant to speculate with oil. Now OPEC is facing another tough year, perhaps even tougher than 2016, and it might just need to reduce production even more to make it work.

“Well, J.P. Morgan said prior to the OPEC meeting early December, that if OPEC didn’t really cut by more than around 1.2 million barrels per day, and they did just for the first half, (not) for the full year, that we could gravitate toward … our low-oil-price scenario, which is $55 Brent for 2019,” the investment bank’s head of oil and gas for the Asia-Pacific told CNBC this week.

“We expect oil markets to remain volatile, in part driven by flexible North American shale production that can ramp up and down quickly in response to changes in investment levels,” ConocoPhillips’ CEO Ryan Lance told Bloomberg, also this week.

North American shale production is, of course, the number-one challenge for OPEC’s plans. Two years ago it was easier: nobody was sure exactly how flexible shale oil production can be so the OPEC cuts worked, helped by a brighter global economic outlook. Now, things are different. Shale production is growing despite the slump in prices and although this may change if prices fall further or stay at current levels for longer, this is far from certain: in the last week of December, after prices have been on the decline for three months, U.S. drillers continued adding rigs.

Yet it wasn’t just U.S. production that rose last year: Russia’s hit a new record in 2018, at 11.16 million bpd, which made it the second-largest producer after the United States. Saudi Arabia also pumped at a record level of over 11 million bpd in the months that followed the June OPEC+ decision to reverse the cuts to rein in prices. This is the context in which OPEC+ agreed the new cuts, which were 600,000 bpd lower than the ones agreed in 2016. No wonder skepticism is rife.

Some analysts believe that once the cuts enter into effect, which they did at the start of the new year, the effect on prices will come to be felt. But JP Morgan’s Scott Darling may just turn out to be right: yesterday, news that Saudi Arabia had reduced its crude oil exports by half a million barrels daily pushed up prices only briefly before both Brent and West Texas Intermediate faltered and slid down again.

While six months may be enough to reduce the combined output of OPEC and its partners by the agreed 1.2 million bpd, if U.S. production continues to grow at the current rate, it would likely offset this cut completely. True, the amount of crude that is added or leaves the global markets is not the only factor that counts: the type of crude is also important, and U.S. oil is overwhelmingly light crude, while there is also global demand for heavier grades that the Middle East and Russia produce. Yet grades are rarely the top concern of traders when they hear words like “oversupply”. Volatility, as Conoco’s Ryan Lance said, is clearly here to stay and will likely intensify in the coming months. OPEC might just be forced to extend the cuts it agreed in December if a positive effect from this agreement fails to materialize soon.

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Leave the Strand Alone! Iconic Bookstore Owner Pleads With NYC: Don’t Landmark My Property—New at Reason

If New York City moves ahead with a proposal to landmark the home of the Strand Book Store, it would be putting a “bureaucratic noose” around the business, says owner Nancy Bass Wyden. “The Strand survived through my dad and grandfather’s very hard work,” Wyden says, and now the city wants to “take a piece of it.”

Opened by her grandfather, Benjamin Bass, in 1927, the Strand is New York City’s last great bookstore—a four-story literary emporium crammed with 18 miles of merchandise stuffed into towering bookcases arranged along narrow passageways. It’s the last survivor of the world-famous Booksellers Row, a commercial district comprised of about 40 secondhand dealers along Fourth Avenue below Union Square.

On December 4, 2018, the New York City Landmarks Preservation Commission held a public hearing on a proposal to designate the building that’s home to the Strand as a historic site. If the structure is landmarked, Wyden would need to get permission from the city before renovating the interior or altering the facade.

“It would be very difficult to be commercially nimble if we’re landmarked,” Wyden tells Reason. “We’d have to get approvals through a whole committee and bureaucracy that do not know how to run a bookstore.”

Wyden’s outrage derives in part from her family’s decades of struggle to keep the business alive.

The Strand survived, she says, because of “my grandfather and my dad’s very hard work and their passion…Both worked most of their lives six days a week” and they “hardly took vacations.”

Why can 11 unelected individuals of the Landmarks Commission curtail Wyden’s property rights? Signed into law in 1965, New York’s Landmarks Act was challenged as unconstitutional 13 years later by the owner of Grand Central Terminal, which sued the city for preventing it from building a skyscraper on top of the train station.

The U.S. Supreme Court upheld the law in a 6–3 decision, setting a precedent that in the dissenting opinion of Justice William Rehnquist undermined constitutional protections. As Rehnquist wrote, the city had “in a literal sense, ‘taken’ substantial property rights” from the company without offering just compensation, as required by the Fifth Amendment.

Since that ruling, the number of landmarked properties in New York has more than doubled to about 36,000, encompassing more than a quarter of all the buildings in Manhattan.

Wyden (who is married to Oregon Sen. Ron Wyden) has a big platform, as the owner of a literary landmark in the media capital of the world; The New York Times, The Guardian, Fortune, and the New York Post have all written about her fight with the Landmarks Commission. “I think that there are other business owners like me that ended up just kind of getting trapped in this situation without much of a voice,” Wyden says.

In her simple message to the city—”leave me alone”—Wyden is unwittingly echoing the line of retired public school librarian Ella Suydam, owner of a Brooklyn farmhouse built by her Dutch ancestor, which the city first tried to landmark in 1980. “Who the hell are you to tell me what I can do with my house,” Suydam told the Commission in 1980, intimidating its members into backing off.

The city waited until 1989, when Suydam was dead, to landmark the house.

Most building owners are less successful in their dealings with the Landmarks Commission. When the city proposed designating Manhattan’s former meatpacking district—a neighborhood comprised of 104 buildings—one property-owning family opposed the plan, testifying at a March 13, 2003, public hearing.

“If the buildings become part of a landmark district, this will essentially eliminate new construction,” said Richard Meilman, whose grandfather, a Russian-born butcher, had purchased multiple properties in the area in the 1940s.

The Landmarks Commission designated the properties later that year.

Wyden is committed to preserving the Strand. “I want to continue the Strand forever,” she says. “That’s my legacy and my goal in life.” She just objects to the loss of control.

“Our family’s been a great steward to the building,” Wyden tells Reason. “Two years ago there was a massive sewer fire. It blew out two stories of our windows and rocked the foundation. We restored the windows to the prior look and we restored the pillars to the way they originally had been even before we bought the building.”

The Landmarks Commission will vote on designating Wyden’s building next month. She’s not optimistic.

“I’ve been told that nobody wins with Landmarks, but I want to fight them because it’s just so wrong, and so unjust, and so unfair, and we can’t let them keep running over everybody in their way.”

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Justin Amash: Say You’re Not ‘OK’ With the Wall

WallIf there is one bright star in the bleak congressional landscape, it is Justin Amash, the Republican congressman from my home state of Michigan, who was just re-elected for his fifth term. At a time when almost every other GOP politico has flipped and flopped on Trump, depending on whether his/her political ambitions are served by cheerleading or resisting him, Amash has been a lonely voice of sweet reason. He has unwaveringly stood up to Trump not to score points or advance his career—or his stock among liberals—but for the sake of a principled libertarianism anchored in limited government, markets, fiscal responsibility, pluralism, tolerance, and a humane and pro-growth immigration policy.

So it is very disappointing that he commented this week to the Ionia Sentinel-Standard that he does not have an “inherent” problem with a border wall to control illegal immigration. This shows just how much Trump’s presidency has moved the Overton Window on immigration in general and the wall in particular.

That Sen. Lindsey Graham (R–S.C.), who called Trump “a race-baiting, xenophobic, religious bigot” who “doesn’t represent my party” after Trump proposed his Muslim ban, should now be four square behind the wall is one thing. Graham pulled a Trump Tower–sized switcheroo last year when his poll numbers in South Carolina tanked and it became clear that his #NeverTrump stance might cost him his re-election bid. At that point, he started shooting little Twitter valentines to Trump declaring that the Donald is “just what America needs” because he “relishes being the Law and Order president and a strong Commander in Chief.”

Mitt Romney, the incoming freshman senator from Utah, has pulled another switcheroo of his own. After accepting Trump’s endorsement twice—once before his failed presidential run and then for his Senate bid in the fall—Romney penned a scathing op-ed this week denouncing Trump as “divisive, racist, sexist, anti-immigrant, dishonest or destructive to democratic institutions.” No doubt, Romney is trying to replace outgoing Sen. Jeff Flake as the Senate GOP’s leading anti-Trumper (which would be a worthy goal, except that Romney is no Flake). He too has said he’d vote for Trump’s wall, a position that represents a small glimmer of consistency in Romney, actually, given that he was way ahead of the curve in staking a harsh restrictionist position: Running for president in 2012, he declared that he wanted to push illegal aliens to “self deport”—a position that Trump at the time called “maniacal” and blamed for Romney’s loss.

In contrast to Graham and Romney’s opportunism, Amash has been a sincere and steadfast voice of opposition, a man who consults not his political interests but his bedrock commitments when he opines on Trump’s policies and antics. He has supported Trump’s criminal justice reforms and the few other good things the president has done. But he has also gone after Trump in no uncertain terms for bad-mouthing minorities and immigrants, for proposing to get rid of birthright citizenship by executive order, and for waxing rhapsodic about his “easy to win” trade wars, and for mocking Rep. Mark Sanford for losing the election.

Amash has also called out other Republicans—including fellow members of the misnamed Freedom Caucus—as they’ve drifted toward Trumpism, trading their commitment to limited government and fiscal responsibility for a protectionist, reactionary nationalism. Amash was the only Republican who opposed the House GOP’s resolution last summer “supporting the officers and personnel” of ICE, a bill whose sole purpose was to embarrass the anti-ICE left. In a tweet, Amash denounced as “dubious” the resolution’s claim that ending ICE would allow gangs to roam free. He asked why his party would “treat a federal agency as though it’s beyond reproach and reform.”

So again, it’s troubling that Amash of all people would now be saying that if the wall is “done thoughtfully,” after taking into “consideration private property at the border and environmental concerns,” he’d be “OK with it.”

Walls are the specialty of Communist regimes that regard the outside world as a threat to their control. A wall with Mexico, a friendly neighbor, would be particularly terrible, because it would cut across an area that has historically been integrated around geographic, economic, cultural, and even ethnic lines. Indeed, the border in towns like Laredo, Texas, literally runs through families, with one half living in America and the other half in Mexico. Even mortal enemies like India and Pakistan have not erected artificial physical barriers between them, holding out hope that one day they will bury the hatchet and be united in trade and friendship.

Setting that aside, there are also many practical reasons why the wall would be “inherently” bad and not “OK.”

For starters, as Nick Gillespie and I (and numerous other Reason writers) have pointed out repeatedly, notwithstanding the hysteria about migrant caravans, border apprehensions are at a historic low; the number of Mexicans entering the country without authorization has plummeted, due to entirely natural causes. And it is unlikely to pick up again, because Mexico, like the rest of the world outside Sub-Saharan Africa, has completed its “demographic transition”—meaning its fertility rate has dropped as more infants survive to adulthood—so it no longer has surplus young men to send our way. Indeed, right now there are more Mexicans leaving America than entering. Even if you see immigration as a battle, building a wall would be fighting the last war.

Furthermore, at least half of the unauthorized population consists not of border jumpers but visa overstays (a non-trivial number of who at any given time are illegal because America’s Kafkaesque immigration bureaucracy failed to renew their visas in a timely fashion). A wall will do nothing about that. And the profits for drug smugglers are too huge to be deterred by a wall, as the Bipartisan Institute’s Theresa Brown has argued. Nor will it thwart motivated terrorists. The best way to enhance border security is not a silly wall; it’s to give those who mean no harm legal avenues, such as guest worker visas, to come to America. This will reduce cross-border illegal flows even more, handing America far more operational control over the border far more cheaply.

There is an argument, as I said last week, for paying Trump some ransom money for his wall in exchange for legalizing DREAMers (those who were brought to the country without authorization as minors) and Temporary Protected Status holders (those trying to escape turmoil or violence in their native countries). This is especially true since he has dropped his asking price considerably since the last shutdown. At that time he was demanding $25 billion and a 40 percent cut in legal immigration. This time, he wants “only” $5 billion.

But just because it is sometimes necessary to pay ransom to avoid a bigger catastrophe doesn’t mean it is “inherently” OK, no matter how small the amount.

That Amash, the man with the strongest moral compass in the GOP, should be signing off on a wall rather than calling for a guest worker program shows just how much the conversation about immigration policy has deteriorated in the GOP, compared to the 1980s when such sentiment was conventional wisdom in the party and the country.

Indeed, watch this 1980 debate between George H.W. Bush and Ronald Reagan and weep.

When asked whether kids of illegal aliens should he allowed a free education in public schools, Bush argues “yes.” It would do no good to anyone to deny them an education, he says. Then he goes on to point out that the only reason that substantial illegal immigration even exists is because America has made certain forms of labor that should be “legal” “illegal,” turning a whole bunch of “honorable, decent, family-loving people” who are “good” and “decent” and “part of my family” into law breakers.

Reagan one-ups Bush and says that “barriers” are not the answer to dealing with all the unemployed youth in Mexico at that time who wanted to come to America to work. “Open the border both ways,” he declares, calling specifically for “work permits” so that Mexicans can “come and go” legally from America. He points out that the fact that Mexicans can come to America to work is a “safety valve” that “prevents the lid from blowing off down there” and calls for working with Mexico in a “mutual recognition” of our common problems. No idiotic demands that Mexico pay for a wall. No denouncing it for sending “rapists” and “criminals” and not its “best people.”

Sad!

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Senate Bill Seeks Aggressive Clamp Down On Chinese Tech Espionage

After top FBI officials testified before the Senate Judiciary Committee last month that Chinese espionage poses the “most severe” threat currently facing American security, and after greater scrutiny of major Chinese telecommunications that had before operated with seeming impunity in the US like Huawei Technologies Co. and ZTE Corp. — especially following the arrest of Huawei’s CFO Meng Wanzhou and others in Canada — senators are now proposing a bill to combat technology threats from China. 

Senators Mark Warner and Marco Rubio during a previous press conference on Russian election meddling. via Getty

Senators Mark Warner and Marco Rubio are co-sponsoring legislation that seeks to counter the risk of state-sponsored technology theft by establishing an “Office of Critical Technologies and Security” overseen by the White House. The bill would add greater teeth and oversight to current Trump administration efforts to quash Chinese attempts at stealing technology secrets from US firms, which often also involves supply chain infiltration at foreign manufacturing sites, following a related bill signed into law last August which attempted to strengthen a panel that reviews foreign-based investments in the US for national security risks, but which was widely viewed as “watered down” when it came to China. 

Mark Warner (D-VA) described, “It is clear that China is determined to use every tool in its arsenal to surpass the United States technologically and dominate us economically.” Continuing his Friday statement, he said, “We need a whole-of-government technology strategy to protect U.S. competitiveness in emerging and dual-use technologies and address the Chinese threat.”

And Rubio (R-FL) specified the China tech theft threat as follows: 

China continues to conduct a coordinated assault on U.S. intellectual property, U.S. businesses, and our government networks and information with the full backing of the Chinese Communist Party. 

Rubio added, “The United States needs a more coordinated approach to directly counter this critical threat and ensure we better protect U.S. technology.”

This follows months of multiple major instances of China caught in brazen acts of theft of American technology and trade secrets, though which only very slowly picked up steam in the mainstream media. 

Trump has consistently blasted China’s “unfair trade practices” which includes stealing US intellectual property as the “cost of doing business” with Beijing. The issue has sent tensions soaring amidst a trade war that’s already disrupted the flow of hundreds of billions of dollars worth of goods, potentially slowing growth. 

Last month Presidents Trump and Xi Jinping called for a truce in their escalating trade war following a sideline meeting at the G20 summit in Buenos Aires, and starting early next week the two sides are set to hold governmental trade talks in Beijing (Jan 7-8).

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