6 Takeaways from the CBO’s Latest Budget Report

The Congressional Budget Office
just released
a big new budget report
outlining its most up-to-date
expectations for the economy, the deficit, and Obamacare over the
next decade.

It’s the first major budget document from the office since the
launch of the health law’s exchanges last year, so there are plenty
of interesting new figures and projections. Here are six key
takeaways from the report:

1. Over the next decade, there will be millions fewer
full-time jobs because Obamacare creates disincentives to
work.
In 2024, the labor force will be smaller by about
2.5 million full-time equivalent jobs than it would have been in
the absence of the health law. This represents a significant
upwards revision; CBO had previously estimated that there would be
about 800,000 fewer full-time positions in 2021 because of the law.
As before, the expectation is that this reduction will stem largely
from a reduction in the labor supply; with Obamacare in place, CBO
expects that fewer people will choose to work in order to maintain
their health coverage. The effect is expected to be concentrated in
amongst part-time workers, for whom “the loss of [Obamacare’s
health insurance] subsidies upon returning to a job with health
insurance is an implicit tax on working.”

2. Fewer people are expected to gain insurance through
Obamacare as a result of the botched rollout of the
exchanges.
The CBO expects that 1 million fewer people
will enroll in Medicaid, and 1 million fewer will get coverage
through the exchanges, thanks to the “significant technical
problems that have been encountered in the initial phases of
implementing the ACA.” The CBO’s projections were finished last
year, however, so they don’t incorporate the latest enrollment
data. 

3. CBO estimates that Obamacare’s risk corridors
program—the provision which has been dubbed a bailout of insurance
companies—will result in a net revenue gain for the government
rather than a net payout to insurance companies.
The CBO
projects that the government will make about $8 billion in payments
to insurers under the program and receive about $16 billion in
revenue in return, for a net gain of $8 billion. That estimate,
which was completed in early December, is based on the experience
with insurers participating in Medicare Part D, which also includes
a risk corridor program. This is a hard one to estimate. As CBO’s
report says, “the government has only limited experience with this
type of program, and there are many uncertainties about how the
market for health insurance will function under the ACA and how
various outcomes would affect the government’s costs or savings for
the risk corridor program.” Whether you think this is a likely
estimate, then, depends on whether you think Medicare Part D offers
a useful guide for what to expect from Obamacare. 

4. Taken by themselves, Obamacare’s insurance provisions
will increase the deficit by $1.4 trillion.
The Affordable
Care Act is a sprawling piece of legislation with a variety of
revenue mechanisms built in that are supposed to offset the
significant cost of the law. But CBO broke out the provisions that
are specifically related to the provision of insurance coverage—the
cost of the subsidies, the Medicaid expansion, the penalty payments
made as a result of the mandate, the tax on high-end coverage,
etc.—and found that, over the next 10 years, they will increase the
deficit by $1.48 trillion. (See the CBO’s table below.) This
doesn’t mean that Obamacare, as a legislative whole, is now scored
as a deficit hike. But it does mean that its central component, the
coverage expansion scheme, is. 

5. Under current law, annual budget deficits will remain
roughly equal to their current size for a few years before they
start to rise again.
This year’s deficit is projected to
total $514 billion, a big drop from the $1 trillion annual
shortfalls we were seeing during Obama’s first term. And next
year’s is projected to be slightly smaller—about $478 billion. But
that’s where the reduction stops. After that, CBO projects that
deficits will begin to rise again, both in dollar terms and as a
percentage of the economy.

6. Total federal debt is huge. In part
because the nation has run such large annual deficits over the past
few years, the total amount of federal debt is enormous. By the end
of this year, outstanding national debt will equal about 74 percent
of gross domestic product (GDP), rising to 79 percent over the next
decade. That’s going to create a drag on the economy for a long
time to come. “The amount of debt relative to the size of the
economy is now very high by historical standards,” the CBO’s report
says. “Such large and growing federal debt could have serious
negative consequences, including restraining economic growth in the
long term, giving policymakers less flexibility to respond to
unexpected challenges, and eventually increasing the risk of a
fiscal crisis.”

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Nick Clegg is Right, British Drug Policy Should Change

British Deputy Prime Minister and Leader of
the Liberal Democrats Nick Clegg has
said that British drug policy is not working. According to the BBC,
Clegg said that he does not back legalization and that the Liberal
Democrats will publish a study on an alternate drug policy later in
the year.

Clegg’s recent comments are not the first time that he has
criticized British drug policy. Last October,
Clegg said, “I don’t think we’re winning the drugs war,” and
expressed frustration that the Conservatives, led by Prime Minister
David Cameron, “are not prepared to look more openly” at
alternative drug policies.

Clegg is right. In December 2012, Cameron rejected
a report
on drug policy written by members of the Home Affairs
Committee, who said that the Portuguese model of decriminalization
“is a model that merits significantly closer consideration.” and
that “We were impressed by what we saw of the Portuguese
depenalised system.” The report recommended “the establishment of a
Royal Commission to consider the best ways of reducing the harm
caused by drugs in an increasingly globalised world.”

Responding to the report, Cameron
said
, “I don’t support decriminalisation. We have a policy
which actually is working in Britain.”

In the BBC’s reporting on Clegg’s recent comments it is
mentioned that The Home Office does not think that drug policy in
the U.K. needs to be changed because the use of illegal drugs has
been falling.

According to the British government’s figures on England and
Wales, this is the case. The
graph below
from the British government plots the percentage of
people between the ages of 16 and 59 who used illegal drugs
(excluding mephedrone) in the last year in England and Wales from
1996 to 2013. Class A
drugs are crack cocaine, cocaine, ecstasy, heroin, LSD, magic
mushrooms, methadone, and methamphetamine.

While it might be the case that there has been a decrease in the
number of people who have used illegal drugs in England and Wales,
this does not necessarily mean that British drug policy should not
be changed.

While the U.K.’s war on drugs is nowhere close to the scale of
the American effort to fight the use of illegal drugs, it is still
the case that Britons face time behind bars if caught in possession
of illegal drugs. In fact, some of those who work in British
prisons are not pleased about current drug policy. The president of
the Prison
Governors Association
said last year that “The current war on
drugs is successful in creating further victims of acquisitive
crime, increasing cost to the taxpayer to accommodate a higher
prison population and allowing criminals to control and profit from
the sale and distribution of Class A drugs.” and that “A
fundamental review of the prohibition-based policy is desperately
required.”

Cameron might think that the current British drug policy is
working, but he should be open to changes, especially if they would
reduce the prison population and save taxpayers some money.

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The $3 Trillion Hole – Why EM Matters To European Banks

How many times in the last few days have we been told that Turkey – or Ukraine or Venezuela or Argentina – are too small to matter? How many comparisons of Emerging Market GDP to world GDP to instill confidence that a little crisis there can't possible mean problems here. Putting aside this entirely disingenuous perspective, historical examples such as LTCM, and ignoring the massive leverage in the system, there is a simple reason why Emerging Markets matter. As Reuters reports, European banks have loaned in excess of $3 trillion to emerging markets, more than four times US lenders – especially when average NPLs for historical EM shocks is over 40%.

The risk is most acute for six European banks – BBVA, Erste Bank, HSBC, Santander, Standard Chartered, and UniCredit

 

As Reuters notes,

European banks have loaned in excess of $3 trillion (1.83 trillion pounds) to emerging markets, more than four times U.S. lenders and putting them at greater risk if financial market turmoil in countries such as Turkey, Brazil, India and South Africa intensifies.

 

  

 

But the exposure could be a headache for the industry as a whole, just as it faces a rigorous health-check by the European Central Bank, aiming to expose weak points and restore investor confidence in the wake of the 2008 financial crisis.

 

"We think EM (emerging markets) shocks are a real concern for 2014," said Matt Spick, analyst at Deutsche Bank. "When currency (volatility) combines with revenue slowdowns and rising bad debts, we see compounding threats to the exposed banks."

 

 

An emerging markets crisis could hit banks in a variety of ways – a collapse in local currency can hurt reported earnings or capital held in the country; loan losses can jump as interest rates rise; or income from capital markets activity or private banking can fall.

 

 

The biggest risk is that a jump in interest rates sparks defaults on loans, analysts added. Often a credit shock follows or replaces a currency shock, as happened in Argentina in 1999-2002.

 

 

they still have about 12 percent of their assets in emerging markets, and about a quarter of their earnings come from the region as often the businesses there are "unusually profitable", Deutsche Bank's Spick said.

 

 

emerging market turmoil could also have a broader, indirect impact on revenues in investment banking and wealth management.

 

"A significant increase in volatility in EM bonds and FX may result in volumes drying up and hence a potential for a material slowdown in EM fixed income revenues," said JPMorgan analyst Kian Abouhossein.

 

He estimated the investment banks of HSBC and Standard Chartered each generated $2.1-2.2 billion from emerging markets, while Credit Suisse and Deutsche Bank made about $1.1 billion each.

 

Dismissing the "rotation from EM to DM" meme – we previously noted…

The ironists among market punters will even attempt to construe all this as a reason to buy more developed world stocks on the premise that the money flooding out of such places as Thailand, the Ukraine, Turkey, and Argentina will be parked in the S&P and the DAX (perhaps overlooking the fact that the purchase price of these now-unwanted positions was most likely borrowed, meaning that their liquidation will also extinguish the associated credit, not re-allocate it).

 

The Goldilocks lovers will also tend to assume that any such disruption will serve to delay the onset of genuine tightening and may even induce further ill-advised stimulus measures on the part of the major central banks. Certainly Madame Christine Defarge – that tax-sheltered tricoteuse who knits beside the guillotine set up for the hated bourgeoisie – has already begun to militate for such a response.

 

For their part, the biddable are already trying to drown out the noise of the Cacerolazo by making the fatuous argument that the EMs account for such a piffling portion of world GDP that their fate should be a matter of complete indifference to the rest of us.

 

Needless to say this is a touch disingenuous at best. Their share of end consumption-biased GDP may be lower, but they account for an equivalent fraction, if not a small majority, of global industrial production – and they have been responsible for an even bigger proportion of its growth this past decade. Ditto for trade and ditto for resource use.


    



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Mike Huckabee "Leading" in Early 2014 Early 2016 GOP Polling, Ought to Be Familiar: Everything Old is New Again

who's who?The eruption of Chris Christie’s very Jersey
scandal (traffic, bullying, cronyism) earlier this year as a
national news story may have had more to do with his perceived 2016
aspirations than its wider newsworthiness.
New early 2016 polling
from CNN suggests the scandal’s taken
away the very early “lead” in the Republican presidential
nominating contest even earlier CNN polling found, to the benefit
of Hillary Clinton, the very early Democrat frontrunner, who’s
hoping to leave her national scandals in the past, and who earlier
polling found polling within the margin of error in a hypothetical
matchup with Christie.

The CNN poll found Mike Huckabee (a “new name” it called him)
rising a point above the rest of the GOP field, at 14 percent.
(Rand Paul had 13, followed by Christie and Jeb Bush at 10) The
murmurs about the former Arkansas governor mulling a 2016 run may
be new, but Huckabee, who ran for president in 2008, was considered
by some Republican operatives as a presumptive frontrunner in 2012,
and has hosted an eponymous weekend show on Fox News for more than
five years, is hardly a new name. Less than a year out from the
first GOP primaries, Gallup
started tracking candidates
’ name recognition and “positive
intensity” to get a clearer sense of what it actually meant when
more familiar names appeared at the top of “trial heat”
results.

We’re still twice as far from a 2016 election as Gallup was when
it started doing that, but there is some limited polling from them
on the name recognition of some of the names thrown around as the
primordial 2016 GOP pool. In June of last year, a Gallup poll
(pdf)
found 20 percent of respondents had never heard of Chris Christie,
and 26 percent had never heard of Rand Paul. Mike Huckbaee’s Name
ID, and Jeb Bush’s for that matter, weren’t measured. But consider
that Paul Ryan, who got 9 percent in CNN’s poll, was “never heard
of” by only 19 percent of Gallup responded. Marco Rubio, tied at 9
with Ryan, had 29 percent never hear of him in the Gallup polling.
Presumably, Huckabee, a cable news figure and former Republican
contender, and Jeb Bush, the brother of a former president and the
son of another one, would have far higher name recognition. Without
that information, it’s hard to tell what the number means, except
that Republicans aren’t sure who they want running for president
yet. The more important decision might be in what ideological
direction the party should go, something that’s being litigated in
Congress and on the state level, not just in the 2014 elections,
but in the debates about the party’s agenda that are already
preceding them, as Peter Suderman noted when he declared Obama, not
in this round of polling questions, was over.

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Mike Huckabee “Leading” in Early 2014 Early 2016 GOP Polling, Ought to Be Familiar: Everything Old is New Again

who's who?The eruption of Chris Christie’s very Jersey
scandal (traffic, bullying, cronyism) earlier this year as a
national news story may have had more to do with his perceived 2016
aspirations than its wider newsworthiness.
New early 2016 polling
from CNN suggests the scandal’s taken
away the very early “lead” in the Republican presidential
nominating contest even earlier CNN polling found, to the benefit
of Hillary Clinton, the very early Democrat frontrunner, who’s
hoping to leave her national scandals in the past, and who earlier
polling found polling within the margin of error in a hypothetical
matchup with Christie.

The CNN poll found Mike Huckabee (a “new name” it called him)
rising a point above the rest of the GOP field, at 14 percent.
(Rand Paul had 13, followed by Christie and Jeb Bush at 10) The
murmurs about the former Arkansas governor mulling a 2016 run may
be new, but Huckabee, who ran for president in 2008, was considered
by some Republican operatives as a presumptive frontrunner in 2012,
and has hosted an eponymous weekend show on Fox News for more than
five years, is hardly a new name. Less than a year out from the
first GOP primaries, Gallup
started tracking candidates
’ name recognition and “positive
intensity” to get a clearer sense of what it actually meant when
more familiar names appeared at the top of “trial heat”
results.

We’re still twice as far from a 2016 election as Gallup was when
it started doing that, but there is some limited polling from them
on the name recognition of some of the names thrown around as the
primordial 2016 GOP pool. In June of last year, a Gallup poll
(pdf)
found 20 percent of respondents had never heard of Chris Christie,
and 26 percent had never heard of Rand Paul. Mike Huckbaee’s Name
ID, and Jeb Bush’s for that matter, weren’t measured. But consider
that Paul Ryan, who got 9 percent in CNN’s poll, was “never heard
of” by only 19 percent of Gallup responded. Marco Rubio, tied at 9
with Ryan, had 29 percent never hear of him in the Gallup polling.
Presumably, Huckabee, a cable news figure and former Republican
contender, and Jeb Bush, the brother of a former president and the
son of another one, would have far higher name recognition. Without
that information, it’s hard to tell what the number means, except
that Republicans aren’t sure who they want running for president
yet. The more important decision might be in what ideological
direction the party should go, something that’s being litigated in
Congress and on the state level, not just in the 2014 elections,
but in the debates about the party’s agenda that are already
preceding them, as Peter Suderman noted when he declared Obama, not
in this round of polling questions, was over.

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Meet the U.S. Allies – Saudi Arabia Passes Draconian, Medieval Laws to Crush Dissent

One of the most significant geopolitical events of 2013 was the failed push for war in Syria by the Obama Administration. It didn’t merely fail as a result of a war weary public (although that played a key role), it also failed due to the fact our clownish “leaders” were attempting to offer military support to rebels with a large al-Qaeda element. So the pathetic “sell” by the U.S. establishment was to push the nation into a conflict allied with the very terrorist group against which we are fighting the “war on terror,” and have given up so many of our civil liberties to wage. Ridiculous, yet they tried anyway. That is how stupid they think the public is.

What that failed attempt at war mongering demonstrated to anyone paying attention is that our foreign policy is a complete joke and total sham. We publicly claim to support “democracy” and “freedom” around the world, yet in reality support some of the most oppressive regimes out there.

No relationship highlights this hypocrisy as clearly as our extremely close alliance with the Saudi regime, one of the last “absolute monarchies” on the planet. Not only that, but increasing evidence points to its direct involvement in the 9/11 attacks. But it gets worse. A lot worse. The regime has just passed a series of Medieval laws to crack down on all dissent. In a nutshell: Dissent = Terrorism.

From the New York Times:

DUBAI, United Arab Emirates — Saudi Arabia put into effect a sweeping new counterterrorism law Sunday that human rights activists say allows the kingdom to prosecute as a terrorist anyone who demands reform, exposes corruption or otherwise engages in dissent.

The law states that any act that “undermines” the state or society, including calls for regime change in Saudi Arabia, can be tried as an act of terrorism. It also grants security services broad powers to raid homes and track phone calls and Internet activity.

Saudi Arabia is one of the world’s last absolute monarchies. All decisions are centered in the hands of 89-year-old King Abdullah. There is no parliament. There is little written law, and judges — implementing the country’s strict Wahhabi interpretation of Islam — have broad leeway to impose verdicts and sentences.

continue reading

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The Two Biggest Fears

Submitted by Peter Tchir of TF Market Advisors,

I have two major concerns right not that I think everyone should be nervous about.  Actually I have lots of concerns, but most aren’t about the markets, and discussing them in this forum isn’t appropriate, so I will stick to my market related fears.

These are two risks that I see taking this sell-off further and faster than anyone else expects.

The Death of the Normal Curve

I think algo’s in general have had changes the distribution of returns.  That seems particularly true around the big Moving Averages.  Maybe it is just me, but I see so many conversations about the 50 DMA and 100 DMA these days that it seems that everyone is looking at them.  It might just be my streams, or it might just be that everyone really is that bored, or is looking for an excuse not to sell.

In any case, I think there are many more “entities” trading the moving averages (and other technical levels).  I think that has shifted the return distribution over time.

Let’s say in the good old days, there was a “normal” return distribution around the 100 DMA.  Since I am graphically challenged I will work with a very simple binomial distribution that illustrates the point.

Say there was a 75% chance of a bounce with a 0.5% profit, then there should have been a 25% chance with a 1.5% loss.  That would have created an expected value of 0.

People still trade it because they felt they had some other “advantage” that let them pick the bounces with a higher success rate.  Or pick those bounces that would generate higher returns.

Over time as more and more algos try to trade the same phenomena the success rate actually increases.

It becomes to some degree, a self-fulfilling prophecy.  If I am buying at the 100 DMA because it bounces and you are buying at the same price (for the same reason) then it is likely to bounce.  So what happens over time is the “win rate” increases.

Now let’s say you win 90% of the time, and the average profit is still 0.5% then that loss, which only occurs 10% of the time, should be 4.5%.  Yikes.

You can see how it would happen.  The 100 DMA at one time represented the entire market which was not overly biased towards technicians.  Shorts maybe covered at those levels because it seemed appropriate.  Longs doubled down because they had liked it there once before, so why not now.  All these charts are just a graphical representation of human behavior.

But now that has changed.  A lot of the people sitting on long positions bought for no other reason than it should go higher.  It wasn’t a long only manager adding to a position at levels they had once liked.  It was a twitchy algo buying because it has to go up.  One feature all those algo’s have is relatively tight stop losses.  They may all need to exit at the same time.  That might push us further than anyone expected.

While real money might add at the 100 DMA, maybe once they break through it and have all their gains from the past few months wiped out, they don’t add, or even sell.  Maybe the algo’s that sniff out weakness short.  Maybe that is why we don’t get a small gap down, but instead hit an air pocket.

So I am nervous that the support we think we have has been eroded by the types of trading that goes on, and that what should be a small sell-off based on the data, becomes a larger sell-off base on the positioning and types of trading we see in the market.

Treasury Weakness

In case you missed it this morning, we recommended covering the long bond long position (I do love saying that).

Before getting into why we are nervous, I have to admit I still think TBT might be the most insane “investment” out there.  2 times the daily move in any treasury seems silly.  These leveraged ETF’s have serious path dependency problems as it stands.  The “churn” of daily bounces hurts their returns.  That is common enough in treasuries.  Then it is based on some index (Barclay’s 20+ year treasuries) that is completely affected by the Fed’s positions.  The Fed owns significant portions of a lot of the bonds that are in that index, making pricing less transparent.  But that is solved by being short through bilateral swaps.  Okay, I use the term “solved” very loosely.  So you have path dependent leveraged risk to an index that isn’t fungible through bilateral swaps.  Shoot me.  Please just shoot me.

But shares outstanding for TBT continue to grow.  If ever any investment should be destroyed on principle alone, this is it.  It makes me want to go long the long bond, again.

But I can’t.  Not every “consensus” trade loses every day and I am very nervous that “something” is going on in the treasury complex.

Here are our concerns:

We have hit some target levels 2.60% on the 10 year and 3.55% on the long bond (or close enough)

 

We aren’t rallying as much as we “should” be.  Completely subjective, but this morning when futures were down 4 (how quaint that seems) treasuries were also lower.  It feels like there is real resistance here, and I’m not sure how things like TBT aren’t causing a massive short squeeze, but it appears that they aren’t.  So cautious here.

 

The prices paid on ISM was very high today.  The CRB index is getting higher by the day.  The dollar is weak.  So there are signs of commodity inflation, if nothing else, but that should help put a floor on how low treasury yields go.

 

Finally, and possibly most important, is that we are annoying most of the rest of the world.  Bernanke often said that trade barriers established during the great depression made the problem worse.  He urged government not to repeat that act, and they haven’t.  But his policies are starting to have that same impact.  Countries blame QE for their mess.  Countries are starting to question the sense of having a single reserve currency.

So I don’t like what is going on here.

What is worse, is that I do believe that if treasuries crack at all, then retail will exit high yield and investment grade bonds and with spreads already leaking there will be no hedge fund demand.  In fact, hedge funds will become forced sellers.  Then the real final bid, the pension funds and insurance companies, who are already fairly long risk, will hold off using their capital until the pain grows.

It will be the drop in corporate bond prices that cause the real problem, but it will be precipitated by a treasury sell-off.  One that we haven’t seen yet.  Hopefully we won’t see.   Hopefully some perception of “safety” and concerns about how weak growth will be will hold down treasury yields, but I am extremely nervous.

Positioning/Model Portfolio

We are selling the remaining 5% of SPY March 180 puts.  We want to sell them before they become completely intrinsic value.

We should probably sell XOVER protection, but will hold on to it for now (in no small part because it is now after noon and London has shut).

We might take some IG off later today (we added a tiny bit more on Friday around lunchtime).

I am very close to going short treasuries.  Not the long bond.  Maybe the 10 year.  Maybe the 5 year.  Maybe we do via interest rate swaps.  I am looking to see what expresses my concern the most with the least amount of damage if I am wrong.  This is difficult to pull the trigger on since you know my feeling on TBT and since I am bearish enough stocks that it is hard to get too jazzed up about a treasury sell-off.


    



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Matthew Feeney Discusses Heroin on HuffPost Live at 1:30pm ET

At 1:30pm ET I will be on
HuffPost Live discussing heroin with Maia Szalavitz of
Time, who has written an article titled
“Philip Seymour Hoffman Didn’t Have to Die,”
and Jeff Deeney,
who
supports
injections sites for heroin users.

Watch live
here
.

Reason senior editor Jacob Sullum has recently written
on whether heroin use is “soaring”
and on how prohibition makes heroin
more dangerous

For more from Reason.com on heroin click here.

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Gene Healy Says We Need Political Labels

Major partiesLaunched in 2010 to “move
America from the old politics of point-scoring toward a new
politics of problem-solving,” No Labels is back, with a “three-year
campaign to create a national strategic agenda” and a new book,
No Labels: A Shared Vision for a Stronger America. “The
grownups show up,” gushes one Amazon reviewer. But if these are the
“grownups,” why do they come wearing happy-face buttons and
spouting get-along bromides that might have been drawn from a
middle-school “No Putdowns” campaign? Does Congress really need its
own anti-bullying movement? It’s easy to make fun of No Labels,
writes Gene Healy, but it’s also important, because their empty
pieties offer no real alternative to business as usual.

View this article.

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Will Russian Police Attempt to Arrest a Rainbow, Should One Appear at the Sochi Games?

The Winter Olympics kick off at the end of the week in Sochi,
and it’s still not entirely clear how Russian authorities are going
to respond to any objections to the country’s increasingly vicious
targeting of its non-heterosexual citizenry.

Human Rights Watch has released a “worst of” video highlighting
some of the anti-gay violence happening in Russia. Watch below:

Left out of the New York Times
report
is that one of the main alleged perpetrators of ant-gay
violence, Maksim “Machete” Martsinkevich, has been
charged
with “extremism” for his videos, fled to Cuba, and was
extradited back to Moscow to face a trial. So apparently there’s
some sort of a limit to the amount of thuggery the state will turn
its back on, though it’s not quite clear what the lines are (going
viral, maybe?).

Actually, nothing about Russia’s anti-gay anti-“propaganda” law
is particularly clear. ESPN points to the confusion about how the
law might affect foreign visitors to the
Olympics
:

Sen. Chris Murphy, D-Conn., the chairman of the European
(including Russia) Affairs Subcommittee of the Senate Foreign
Relations Committee, has studied the situation and told ESPN.com,
“The Russians have said they will not use these laws to crack down
during the Olympics, but I would not counsel my gay and lesbian
friends to go to the Olympics. We don’t know what the Russians will
do.”

Murphy also notes that Putin and the Russians have “blurred the
lines that define what behavior will be viewed as criminal. We
cannot determine with any certainty what conduct they will deem
criminal.”

The Russian anti-LGBT culture is particularly alarming to
athletes and activists because Russia’s laws and policies equate
homosexuality with pedophilia, a position that comes as a complete
surprise to Americans and others whose cultures and laws have moved
toward increasing acceptance of gays and lesbians, their lifestyles
and their rights to marriage and other benefits.

For Murphy and the DRL, it is the Russians’ claim of a
connection between homosexuality and pedophilia that is both wrong
and potentially dangerous.

“Putin is being totally and completely irresponsible when he
connects homosexuality and pedophilia. He shows this when he tells
gay people to stay away from children,” Murphy said.

A Russian journalist has been accused violating the law by
creating a social media group called “Children-404” to help LGBT
teens share their stories and find support. From
RIA Novosti
:

The case against Lena Klimova was opened at the request of
Vitaly Milonov, an ultraconservative regional lawmaker who has
spearheaded anti-gay legislation in Russia.

Milonov confirmed to RIA Novosti that he requested a check into
the Children-404 pro-LGBT group on the Russian social networking
site Vkontakte.

The group publishes personal statements by Russian gay teens on
their struggle for acceptance and against homophobia in the
country’s conservative provinces.

The group, created by Klimova, inveigles teens into questioning
their sexuality, Milonov said.

“Without such groups, no kids like that would exist,” said
Milonov, who has also campaigned against MTV, modern opera,
abortion and the teaching of evolution in schools.

In the meantime, GLBT supporters have
targeted
Coca-Cola and McDonald’s for protests due to their
financial support of the Olympics via sponsorships.

Whether the Olympics is going to be a big gay disaster for the
Russians is up in the air at the moment. Though it’s possible the
Olympics could be a
disaster
even without the gay issues.

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