Rabobank: In Epic Flop-Flop The WHO No Longer Supports Lockdowns “Because They Make Poor People Poorer”

Rabobank: In Epic Flop-Flop The WHO No Longer Supports Lockdowns “Because They Make Poor People Poorer”

Tyler Durden

Mon, 10/12/2020 – 09:55

By Michael Every of Rabobank

Forget that it’s mid-October, or pretend you are in Sydney or Asia or the Med or the equivalent. Flip flops are so hot right now.

First into them, the PBOC. They had been happy to sit back and watch CNY power ahead vs. USD (and even vs. the CFETS currency basket it is actually pegged to). Partly that was just a weaker USD vs. major crosses and China wanting to show it was one too and not an EM. Partly it was the undeniable lack of tourist capital flight (I mean spending), a surge in Chinese exports of laptops and PPE, and a surge of capital inflows from a Wall Street incapable of reading the newspaper. Anyway, CNY had been gaining in a big way, including a 1.6% move on Friday as it resumed trading after a holiday.

Then over weekend, as is its wont, the PBOC removed a two-year old rule designed to prop CNY up, removing the 20% deposit required on FX forward trades. This makes it cheaper and easier to bet against CNY. That and a message from on high that the PBOC doesn’t want to see rapid appreciation, or one way bets, has seen CNY dip, helping USD vs. most other related crosses. It also underlines the message for the umpteenth time that this is not a free market: how many of the FX analysts saying CNY would keep moving towards 6.50 short term were unable to remember that key fact? Stability, stability, stability is always en vogue. The problem, like En Vogue, is that ‘You’re never gonna get it’.

As long argued here, the only way to impose an artificial stability on a currency with an economy so large is for everyone else globally to just accept the ‘externalities‘ – in this case the massive export surpluses China is once again running. Perhaps if CNY kept going to 6 or 5, these would resolve themselves (triggering other forms of instability in China, and hence undesirable). But with no sign of that happening, others are moving politically – and so are supply chains. We just don’t see it right not because of the Covid-19. Despite the ‘never gonna get them’ of prominent Pollyanna-lysts, supply chains are moving out of China: we are just in a holding phase ahead of the US election before the process either continues or accelerates rapidly, depending on the outcome. That’s a strategic flip-flop that will reshape the world as it happens.

Perhaps faster than one thinks too. As we flagged last week, today is the 90-day deadline from the passage of the US’ Hong Kong Autonomy Act to name all individuals responsible, in US eyes, for actions detrimental to that eponymous cause: which then starts a count-down of 30 days minimum to 60 days maximum, after which the financial institutions that have significant dealings with said individuals are named; and then sanctions can then be imposed on those banks; 12 months from 30-60 days from now, five of ten sanctions on those banks are obligatory; after 24 months, all ten, including loss of access to USD, are obligatory. Unless the US, which just cracked down hard with new Iranian sanctions, and where President Trump is talking about China “paying a huge price”, are about to flip flop and let that first legally-imposed deadline slip. One can see the argument for CNY slipping more, in other words, and again dragging other FX with it.

That’s also the case given that across the world, we see more signs of governments doing other flip flops and going back to what are in effect lockdowns. The UK is about to close more pubs, which is seen as a betrayal of Boris’s new Red Wall voters: who apparently all live and work in pubs(?) China has also seen a new outbreak in Qingdao, showing the virus just keeps popping back up again.

We also have news that it can last for weeks on some surfaces, such as bank notes, especially in cooler temperatures. So a wipe down might be in order too. At least our central banks will now have another excuse to dive headlong into the Brave New World of digital currencies. Don’t worry: this won’t be about replacing cash, or economic micro-management, or Orwellian control, or setting rates well below zero to force spending, or even imposing a balkanised global clearing system as in the 1930s. It will be to save us from Covid-19! Is there anything central banks can’t save us from? (Apart from a lack of inflation.)

Except, ironically, that the WHO has just flip-flopped too and now no longer supports lockdowns ‘because they only make poor people poorer’. This is the same WHO which refused to call Covid-19 a global pandemic for weeks in the crucial early stages, and openly encouraged local and global travel, as it is doing again now. The same WHO which told us masks were not any use in the crucial early stages. The same WHO which supported lockdowns. Now it offers up the solution of generic platitudes: “Develop better systems…Work together and learn from each other.” This is not to advocate for or against lockdowns, but demanding a ‘better system’ is pretty loosey goosey from the body we are all supposed to be listening to. Yet one presumes some politicians will now opt to ‘follow the science’, which seems to be the political equivalent of an FX forecast that just chases spot, with all the inherent swings and roundabouts (and losses).

CDC Wheel of Bullshit (source)

On which segue, this week has another deadline of course: Thursday is the date that the UK and the EU must agree the terms of departure or face the risk of a year-end Hard Brexit. It is unclear if or how BoJo will be able to agree to mutually acceptable terms on fish and on state aid, with France’s Macron apparently very insistent that the ‘level playing field’ argument is applied to the UK, broadly meaning that no industrial policy/levelling up can then be used. The eurosceptic Telegraph reports today that EU countries are apparently war-gaming scenarios for just that No Deal outcome,…which allegedly includes continuing to negotiate after the deadline has passed, rather taking some of the sting out of things if so. Except that the thinking seems to be that a period of “complete chaos” would then focus minds on what is the most logical thing to do next to resolve the problem properly.

Yet haven’t we seen from Covid-19 that this is not how politicians –or scientists– react in the face of or in advance of such chaos?

via ZeroHedge News https://ift.tt/3lPZHq3 Tyler Durden

Class 8 Truck Orders Soar, Up 145% Year Over Year

Class 8 Truck Orders Soar, Up 145% Year Over Year

Tyler Durden

Mon, 10/12/2020 – 09:40

Orders for heavy duty Class 8 trucks soared again in September, according to preliminary data released by ACT Research. Orders totaled 31,100 units, up 60% sequentially and up 145% from a year prior. Finalized data will be released during the middle of October.

It is the order book’s highest level since late 2018, according to TT News. It’s also a positive looking trend that continues to make the case for a V-shaped economic recovery. Class 8 orders had seen significant pressure in the beginning of 2020 due to the coronavirus pandemic. 

Kenny Vieth, president and senior analyst for ACT Research, commented: “Preliminary data show that September orders for medium- and heavy-duty vehicles posted positive readings for a fourth consecutive month, after 19 consecutive months of negative year-over-year comparisons. In aggregate, Classes 5-8 orders rose 49% from August and improved 88% compared to year-ago September.”

He continued: “As orders rebounded to relatively healthy levels early in Q3, most of those orders were targeted at filling open 2020 build slots. With most of that work done by the end of August, we suspect the lion’s share of September’s orders were booked into 2021.”

YOY order growth has been accelerating since April

The medium duty market has also seen a ‘rising tide’ as a result, Vieth said:  “There is a symbiotic relationship between heavy-duty freight rates and medium-duty demand, and clearly, the shift in consumer spending from experiences [services] to goods has been good for the providers of local trucking services.”

“My hunch is this is probably the large national guys coming in and doing their annual deal,” said ACT Research Vice President Steve Tam.

The 2020 recovery from coronavirus-induced lows near April

“I think there is a bit more risk of that happening this time, happening more quickly. The reason is the whole labor dynamic. Their trucks are still out there [parked]. So we don’t need to add as many trucks as it might appear we are going to,” Tam noted said.

Tam concluded that the outlook remained strong: “If our freight forecast is correct, they are going to experience some very solid levels of profitability for the remainder of this year and for next year as well.”

via ZeroHedge News https://ift.tt/34N8HoR Tyler Durden

Coronavirus in Congress Won’t Stop Barrett Confirmation Hearings, Which Start Today

upiphotostwo765861

Partisan anger, mudslinging, and shenanigans to spike this week. The U.S. Senate Judiciary Committee is about to start confirmation hearings for Amy Coney Barrett, President Donald Trump’s new nominee for the Supreme Court. The timing of the hearings—which begin today and are scheduled through Thursday—couldn’t be more absurd, as Americans are already voting in an election just weeks away, questions remain about the completeness of Barrett’s paperwork, and two members of the judiciary committee recently came down with COVID-19. Meanwhile, senior Republicans on the confirmation committee are refusing to take coronavirus tests before everyone meets.

In the rush to confirm before the November election, it looks like Senate Majority Leader Mitch McConnell is willing to put the health of his colleagues and others at risk. The two committee members who tested positive for COVID-19 recently—Utah Republican Mike Lee and North Carolina Republican Thom Tillis—will attend the confirmation hearings via video…mostly. But voting must take place in person.

There are 22 senators on the judiciary committee, each of whom is given 10 minutes Monday for an opening statement. After that, Barrett will give her opening statement.

Tuesday and Wednesday will feature questions from senators, with Thursday reserved for questions and testimony from non-Senate folks.

Judiciary Chair Lindsey Graham can call for a committee vote after that, though Democrats can (and almost certainly will) call for this to be postponed a week. Even with some stalling from Democrats, however, the full Senate will likely vote on Barrett’s nomination by October 29.

As election-time strategy goes, this could be risky for Republicans, since some conservatives may feel compelled to vote for Trump only if a Supreme Court seat is at stake. “Her confirmation can and probably will be done before Election Day, at which point Trump’s SCOTUS voters can—and, on this very basis, should—dump him as swiftly and mercilessly as he’d dump them were they no longer politically useful,” writes Bonnie Kristian at The Week.

Then again, it’s unclear whether “Trump’s SCOTUS voters”—people who would vote for him only on the basis of getting another conservative on the Court—actually exist, at least in any significant numbers.

In any event, Barrett’s fate is no longer really in question—as long as enough senators stay healthy enough to vote, anyway.

“The Republicans would need several senators to defect and there’s no sign of that at this point,” explains Supreme Court analyst and blogger Amy Howe in an interview with PBS. “There are two senators, Senator Lisa Murkowski of Alaska and Senator Susan Collins of Maine, who had said that they wanted Republicans to wait and not vote on a nominee before the election. But I don’t think that either one of them has committed to not voting for Judge Barrett.”

When Barrett makes it to SCOTUS, she’ll face cases on some major issues. More from Howe:

The day after Election Day, the Supreme Court will hear oral arguments in a case called Fulton versus City of Philadelphia. And this is a case about the balance between religious beliefs on the one hand, and anti-discrimination laws, particularly anti-discrimination laws against LGBTQ people, on the other hand. And it’s sort of a second round of cases.

Many of your viewers may remember from a couple of years ago a case involving a Colorado baker who refused to make cakes for a same sex wedding. The Supreme Court in that case ruled for the baker but in a very narrow way, that didn’t resolve the broader question of how do you balance someone’s religious beliefs against anti-discrimination laws? And so the question is back in a case brought by Catholic Social Services in Philadelphia against the City of Philadelphia, which won’t now give contracts to Catholic Social Services because Catholic Social Services won’t work with foster care parents who are same-sex couples.

And the second one is a week after Election Day and that is the challenge to the individual mandate of the Affordable Care Act. And that is a case that back in 2012, again, many of your viewers may remember, the Chief Justice John Roberts joined the court’s then four more liberal justices in upholding the individual mandate. A couple of years later, the Congress changed the mandate, they reduced the penalty for not getting health insurance to zero. And so Texas and some other so-called red states went to court, said, well, if there’s no longer a penalty for not getting health insurance, it can’t be a tax. And they said if the mandate’s not constitutional, the whole Affordable Care Act has to go with it. And so that is obviously a very consequential case that is going to be argued on November 10 in the Supreme Court.


QUICK HITS

• Something strange is going on with California ballot boxes.

• Coronavirus case counts continue to hit record highs in more than a dozen states.

• “Biden is strongly considering former Deputy Attorney General Sally Yates for attorney general,” reports Tana Geneva for Reason. It’s not a good sign for criminal justice reform.

• Michigan takes a small step forward for criminal justice reform.

• Here’s how the first weekend of reinstated shutdown and social-distancing orders in New York City is going:

The New York City fines “went to to people, businesses and houses of worship,” including “a restaurant and at least five houses of worship,” reports The New York Times.

from Latest – Reason.com https://ift.tt/3dl3aJX
via IFTTT

Coronavirus in Congress Won’t Stop Barrett Confirmation Hearings, Which Start Today

upiphotostwo765861

Partisan anger, mudslinging, and shenanigans to spike this week. The U.S. Senate Judiciary Committee is about to start confirmation hearings for Amy Coney Barrett, President Donald Trump’s new nominee for the Supreme Court. The timing of the hearings—which begin today and are scheduled through Thursday—couldn’t be more absurd, as Americans are already voting in an election just weeks away, questions remain about the completeness of Barrett’s paperwork, and two members of the judiciary committee recently came down with COVID-19. Meanwhile, senior Republicans on the confirmation committee are refusing to take coronavirus tests before everyone meets.

In the rush to confirm before the November election, it looks like Senate Majority Leader Mitch McConnell is willing to put the health of his colleagues and others at risk. The two committee members who tested positive for COVID-19 recently—Utah Republican Mike Lee and North Carolina Republican Thom Tillis—will attend the confirmation hearings via video…mostly. But voting must take place in person.

There are 22 senators on the judiciary committee, each of whom is given 10 minutes Monday for an opening statement. After that, Barrett will give her opening statement.

Tuesday and Wednesday will feature questions from senators, with Thursday reserved for questions and testimony from non-Senate folks.

Judiciary Chair Lindsey Graham can call for a committee vote after that, though Democrats can (and almost certainly will) call for this to be postponed a week. Even with some stalling from Democrats, however, the full Senate will likely vote on Barrett’s nomination by October 29.

As election-time strategy goes, this could be risky for Republicans, since some conservatives may feel compelled to vote for Trump only if a Supreme Court seat is at stake. “Her confirmation can and probably will be done before Election Day, at which point Trump’s SCOTUS voters can—and, on this very basis, should—dump him as swiftly and mercilessly as he’d dump them were they no longer politically useful,” writes Bonnie Kristian at The Week.

Then again, it’s unclear whether “Trump’s SCOTUS voters”—people who would vote for him only on the basis of getting another conservative on the Court—actually exist, at least in any significant numbers.

In any event, Barrett’s fate is no longer really in question—as long as enough senators stay healthy enough to vote, anyway.

“The Republicans would need several senators to defect and there’s no sign of that at this point,” explains Supreme Court analyst and blogger Amy Howe in an interview with PBS. “There are two senators, Senator Lisa Murkowski of Alaska and Senator Susan Collins of Maine, who had said that they wanted Republicans to wait and not vote on a nominee before the election. But I don’t think that either one of them has committed to not voting for Judge Barrett.”

When Barrett makes it to SCOTUS, she’ll face cases on some major issues. More from Howe:

The day after Election Day, the Supreme Court will hear oral arguments in a case called Fulton versus City of Philadelphia. And this is a case about the balance between religious beliefs on the one hand, and anti-discrimination laws, particularly anti-discrimination laws against LGBTQ people, on the other hand. And it’s sort of a second round of cases.

Many of your viewers may remember from a couple of years ago a case involving a Colorado baker who refused to make cakes for a same sex wedding. The Supreme Court in that case ruled for the baker but in a very narrow way, that didn’t resolve the broader question of how do you balance someone’s religious beliefs against anti-discrimination laws? And so the question is back in a case brought by Catholic Social Services in Philadelphia against the City of Philadelphia, which won’t now give contracts to Catholic Social Services because Catholic Social Services won’t work with foster care parents who are same-sex couples.

And the second one is a week after Election Day and that is the challenge to the individual mandate of the Affordable Care Act. And that is a case that back in 2012, again, many of your viewers may remember, the Chief Justice John Roberts joined the court’s then four more liberal justices in upholding the individual mandate. A couple of years later, the Congress changed the mandate, they reduced the penalty for not getting health insurance to zero. And so Texas and some other so-called red states went to court, said, well, if there’s no longer a penalty for not getting health insurance, it can’t be a tax. And they said if the mandate’s not constitutional, the whole Affordable Care Act has to go with it. And so that is obviously a very consequential case that is going to be argued on November 10 in the Supreme Court.


QUICK HITS

• Something strange is going on with California ballot boxes.

• Coronavirus case counts continue to hit record highs in more than a dozen states.

• “Biden is strongly considering former Deputy Attorney General Sally Yates for attorney general,” reports Tana Geneva for Reason. It’s not a good sign for criminal justice reform.

• Michigan takes a small step forward for criminal justice reform.

• Here’s how the first weekend of reinstated shutdown and social-distancing orders in New York City is going:

The New York City fines “went to to people, businesses and houses of worship,” including “a restaurant and at least five houses of worship,” reports The New York Times.

from Latest – Reason.com https://ift.tt/3dl3aJX
via IFTTT

Colleges ‘Cancel’ Columbus Day, Instead Host Events For Indigenous Peoples Day

Colleges ‘Cancel’ Columbus Day, Instead Host Events For Indigenous Peoples Day

Tyler Durden

Mon, 10/12/2020 – 09:25

Authored by John Hanson via Campus Reform,

Monday, Oct. 12 marks Columbus Day, which many colleges and universities have begun to call Indigenous Peoples Day, hosting events to celebrate the Native Americans, as well as things like “queer journeys” and “police violence.”

Efforts to abolish or rename Columbus Day are nothing new, but colleges and universities have begun to make the change, with many calling the holiday “Indigenous Peoples Day.”

Campus Reform took a look at how school’s are celebrating Indigenous Peoples’ Day on their campus:

1.  Humboldt State University 

Since 1992, HSU students have protested against Columbus Day; this year, they continue in that tradition. While they have several events, from the “White Supremacist Roots of American Environmentalism” to sewing circles, the week-long event seeks to ensure there is something for everyone.
One event is titled “Decolonizing Public History,” which will be hosted on Facebook live and proudly portrays a statue of Christopher Columbus covered in fake blood with a sign saying, “Stop Celebrating Genocide.”

2.  Idaho State University

Not content with one day, ISU will “host a week of virtual events from Oct. 12 to 15, including talks, workshops, film screenings, and Q&As.” This 4-day event by the university will host sessions such as “Reservation History and the City of Pocatello” by Yvette Tuell,” a showing of the film, “Navajo Math Circles,” and a “Shoshone-Bannock Tribal Museum Tour — Language and Cultural Preservation.”

3.  Merrimack College

Merrimack College, however, is hosting events that are unrelated to Native Americans and instead is hosting events based on diversity and inclusion, according to The Beacon. They will instead host discussions on “race, gender and sexual orientation and how they impact our lives,” “Understanding and preventing police violence,” and “Queer Journeys and Coming Out Stories.” In its two days, the school has one event directly related to Native Americans, “Transnational Indigenous Women’s Activism.”

4.  Massachusetts Institute of Technology (MIT) 

MIT student organizations have planned “a FULL day of awesome events!!” These events start with a 7:00 am Sunrise Ceremony, continue through two musical performances, talks about Native American struggles. They also include “Healing Trauma Through Traditional Foods,” before ending with a talking circle from “8:00 pm–Whenever!”

5.  University of North Dakota

The Native American Law Students Association at the University of North Dakota will celebrate the holiday during a 40-minute session, from “12:10 pm to 12:50 pm.” This event will cover two topics, traditional culture and then efforts to have “Two-Spirited Rights recognized.”

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Key Events This Week: Earnings Season Begins, CPI And Retail Sales

Key Events This Week: Earnings Season Begins, CPI And Retail Sales

Tyler Durden

Mon, 10/12/2020 – 09:17

The biggest highlight this week will be the kickoff of US earnings season with a number of financials reporting earnings this week. As DB’s Jim Reid adds, there will also be some attention on the European Council summit on Thursday and Friday at an important point in the UK-EU negotiations. This meeting has previously been Prime Minister Johnson’s self-imposed deadline to reach agreement on a trade deal. It seems progress has been made and if this continues talks will likely continue beyond that self imposed UK deadline. Mr Johnson held weekend talks with Macron and Merkel so the right people are talking. Bloomberg is reporting that the French are digging in their heels over fishing rights and this is now the main issue.

Elsewhere, in terms of the regular data and central bank calendar, this week is a fairly quiet one. On the data side, we’ll start to see some hard data from the US for September, with the release of the CPI (Tuesday), retail sales and industrial production figures (both Friday). China will also be releasing their trade balance for September (Tuesday), and we’ll also get the Euro Area’s industrial production for August (Wednesday).

On the central bank side, the two G20 decisions expected next week will come from Bank Indonesia on Tuesday and the Bank of Korea on Wednesday, with the consensus expecting rates to stay on hold in both cases. Otherwise there’ll be a number of speakers, including Fed Vice Chairs Clarida and Quarles, and Bank of England Governor Bailey. We will also see the IMF/World Bank annual meetings taking place as well with the latest forecasts out tomorrow.

Going back to the main event – this week’s start of earnings season, a number of financials will lead the way. We’ll hear tomorrow from Johnson & Johnson, JPMorgan Chase, Citigroup and BlackRock. Then on Wednesday, we have UnitedHealth Group, Bank of America, ASML, Wells Fargo, Goldman Sachs and United Airlines. Thursday sees releases from Morgan Stanley and Walgreens Boots Alliance. And on Friday we’ll get earnings from Honeywell International and BNY Mellon. A summary of this week’s reporters is below courtesy of Earnings Whispers:

Source

As Goldman’s David Kostin writes, the consequences of the semi-frozen economy on an uneven road to recovery will be visible in 3Q results: consensus expects 3Q S&P 500 EPS will decline by 21% on a year/year basis, following a 32% drop in 2Q and a 15% fall in 1Q. Including the anticipated 14% fall in 4Q, our full-year 2020 EPS estimate of $130 reflects a 21% year/year decline from the 2019 level. Looking forward, Goldman projects 30% earnings rebound to its baseline 2021 EPS forecast of $170, followed by 11% growth to $188 in 2022. Good luck with that.

Below is a day-by-day calendar of key events courtesy of Deutsche Bank:

Monday October 12

  • Data: Japan September PPI, August core machine orders
  • Central Banks: BoE’s Bailey and Haskel speak
  • Other: IMF/World Bank Annual meetings begin, bond market holiday in the US and Canada

Tuesday October 13

  • Data: China September trade balance, UK August employment, Germany final September CPI, October ZEW survey, US September CPI, NFIB small business optimism index
  • Central Banks: Bank Indonesia monetary policy decision
  • Earnings: Johnson & Johnson, JPMorgan Chase, Citigroup, BlackRock
  • Other: IMF release latest World Economic Outlook

Wednesday October 14

  • Data: Japan final August industrial production, Euro Area August industrial production, US weekly MBA mortgage applications, September PPI
  • Central Banks: Bank of Korea monetary policy decision, Fed’s Clarida, Quarles, Kaplan, ECB’s Lane, Villeroy and BoE’s Haldane speak
  • Earnings: UnitedHealth Group, Bank of America, ASML, Wells Fargo, Goldman Sachs, United Airlines

Thursday October 15

  • Data: China September CPI, PPI, Japan August Tertiary Industry Index, France final September CPI, US weekly initial jobless claims, October Empire State manufacturing survey, Philadelphia Fed business outlook, September import price index
  • Central Banks: Fed’s Quarles, Bostic, Kashkari, BoE’s Cunliffe speak
  • Earnings: Morgan Stanley, Walgreen Boots Alliance
  • Politics: European Council meeting begins

Friday October 16

  • Data: EU27 September new car registrations, Italy final September CPI, Euro Area final September CPI, August trade balance, Canada August manufacturing sales, US September retail sales, industrial production, capacity utilisation, August business inventories, foreign net transactions, preliminary October University of Michigan sentiment
  • Earnings: Honeywell International, BNY Mellon
  • Politics: European Council concludes

* * *

Focusing on just the US, the key economic data releases this week are the CPI report on Tuesday, jobless claims on Thursday, and retail sales on Friday. There are several speaking engagements from Fed officials this week. Below is Goldman’s US week ahead preview:

Monday, October 12

  • There are no major economic data releases scheduled.

 Tuesday, October 13

  • 06:00 AM NFIB small business optimism, September (consensus 100.9, last 100.2)
  • 08:30 AM CPI (mom), September (GS +0.27%, consensus +0.2%, last +0.4%); Core CPI (mom), September (GS +0.22%, consensus +0.2%, last +0.4%); CPI (yoy), September (GS +1.46%, consensus +1.4%, last +1.3%); Core CPI (yoy), September (GS +1.77%, consensus +1.8%, last +1.7%): We estimate a 0.22% increase in September core CPI (mom sa), which would boost the year-on-year rate by a tenth to +1.8% on a rounded basis. Our monthly core inflation forecast reflects further price increases in new and used cars, apparel, hotel lodging, and airfares. While we believe the trend in healthcare inflation is starting to slow, we expect inflation to rebound in the health insurance subcomponent. On the negative side, we estimate another decline in education prices reflecting tuition cuts at some universities. We also forecast lackluster shelter inflation (+0.10% mom sa for both rent and OER) reflecting continued rent freezes and a drag from rent forgiveness in some areas. We estimate a 0.27% increase in headline CPI (mom sa), due to higher food and energy prices.
  • 12:25 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will participate in an online event hosted by the Virginia Chamber of Commerce and the Virginia Early Childhood Foundation.

Wednesday, October 14

  • 08:30 AM PPI final demand, September (GS +0.2%, consensus +0.2%, last +0.3%); PPI ex-food and energy, September (GS +0.2%, consensus +0.2%, last +0.4%); PPI ex-food, energy, and trade, September (GS +0.2%, consensus +0.2%, last +0.3%): We estimate that headline PPI increased 0.2% in September, reflecting weaker energy prices but stronger food prices. We expect a 0.2% increase in the core measure excluding food and energy, and also a 0.2% increase in the core measure excluding food, energy, and trade.
  • 08:35 AM Richmond Fed President Barkin (FOMC non-voter) speaks; Richmond Fed President Thomas Barkin will speak at an online event hosted by West Virginia University.
  • 09:00 AM Fed Vice Chair Clarida (FOMC voter) speaks; Federal Reserve Board Vice Chair Richard Clarida will speak on the economic outlook and monetary policy at an event hosted by the Institute of International Finance.
  • 10:30 AM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Federal Reserve Board Vice Chair for Supervision Randal Quarles will participate in a moderated discussion on levered markets and shadow banking at an online event hosted by the CFA Institute.
  • 02:00 PM Richmond Fed President Barkin (FOMC non-voter) speaks: Richmond Fed President Thomas Barkin will participate in an online discussion at the Economic Club of New York.
  • 03:00 PM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Federal Reserve Board Vice Chair for Supervision Randal Quarles will speak on financial stability at a virtual event hosted by the Hoover Institution.
  • 03:00 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will discuss the outlook for central banks at a virtual event hosted by the Hoover Institution.
  • 06:00 PM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will participate in a virtual town hall on the economy and monetary policy moderated by the Texas Tribune.

Thursday, October 15

  • 08:30 AM Initial jobless claims, week ended October 10 (GS 830k, consensus 820k, last 840k); Continuing jobless claims, week ended October 3 (consensus 10,400k, last 10,976k): We see two-sided risks around this week’s initial claims forecast as California starts to accept new online applications after a two-week pause and revises estimates of initial claims processed during this period. We estimate initial jobless claim decreased to 830k in the week ended October 10.
  • 08:30 AM Philadelphia Fed manufacturing index, October (GS 12.0, consensus 14.5, last 15.0): We estimate that the Philadelphia Fed manufacturing index declined by 3pt to 12.0 in September, reflecting a pause in the exports recovery and a pullback in the ISM measure in September.
  • 08:30 AM Empire manufacturing index, October (consensus +14.0, last +17.0)
  • 09:00 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will speak at a virtual conference hosted by the Atlanta Fed.
  • 11:00 AM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Federal Reserve Board Vice Chair for Supervision Randal Quarles will speak on the pandemic response at an event hosted by the Institute of International Finance.
  • 11:00 AM Dallas Fed President Kaplan (FOMC voter) speaks: Dallas Fed President Robert Kaplan will speak at a virtual event hosted by the US India Chamber of Commerce, a Dallas-based nonprofit focused on bilateral trade with India.
  • 05:00 PM Minneapolis Fed President Kashkari (FOMC voter) speaks: Minneapolis Fed President Neel Kashkari will speak on the economy at an event hosted by New York University.

Friday, October 16

  • 08:30 AM Retail sales, September (GS +1.5%, consensus +1.0%, last +1.2%); Retail sales ex-auto, September (GS +1.2%, consensus +0.9%, last +1.9%); Retail sales ex-auto & gas, September (GS +1.2%, consensus +0.9%, last +1.5%); Core retail sales, September (GS +1.0%, consensus +0.3%, last +1.4%): We estimate that core retail sales (ex-autos, gasoline, and building materials) increased by 1.0% in September (mom sa). Credit card and other high-frequency data indicate that consumer spending picked up following the disbursement of the $300 supplemental unemployment benefit provided by executive order. We also expect another gain in restaurant spending and auto sales, and we estimate a +1.5% increase in the headline and a +1.2% increase in the ex-auto measure.
  • 09:15 AM Industrial production, September (GS +0.3%, consensus +0.6%, last +0.4%); Manufacturing production, September (GS +0.6%, consensus +0.8%, last +1.0%); Capacity utilization, September (GS 71.6%, consensus 71.9%, last 71.4%): We estimate industrial production rose by 0.3% in September, reflecting weaker auto manufacturing and utilities production. We estimate capacity utilization rose by 0.2pp to 71.6%.
  • 09:45 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will participate in a moderated event on culture and community at the New York Fed.
  • 10:00 AM University of Michigan consumer sentiment, October preliminary (GS 80.0, consensus 80.5, last 80.4): We expect the University of Michigan consumer sentiment index declined by 0.4pt to 80.0 in the preliminary October reading. Our Twitter Economic Sentiment index retrenched moderately over the last two weeks.

Source: DB, BofA, Goldman

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Why Amy Coney Barrett is Unlikely to Have Any Meaningful Effect on the Future of the ACA

Obamacare

A central element of Democrats’ strategy in Amy Coney Barrett’s confirmation hearings for the Supreme Court, which begin today, is to argue that her confirmation threatens the future of the Affordable Care Act. On November 10, the Supreme Court will hear oral arguments in Texas v. California, a challenge to the ACA brought by a coalition of GOP-controlled states, and other plaintiffs. Democrats fear that Barrett would cast a decisive vote to strike the law down.

In numerous media interviews I have done about the nomination since it was announced, the ACA issue has come up more often than any other. The focus on it is unfortunate, because Barrett is in fact unlikely to have much effect on ACA. There are lots of legitimate reasons to object to this nomination on both substantive and procedural grounds. But the Obamacare issue is unlikely to be one of them.

I summarized the convoluted history of the case here:

[T]he case arose because, in December 2017, the then-GOP-controlled Congress passed a tax reform law that zeroed out the monetary penalty attached to the Obamacare health insurance mandate, but left the mandate itself on the books. The ACA still officially has a provision requiring most Americans to purchase government-approved health insurance. But violators suffer no penalty if they choose not to follow this requirement.

In  its controversial 2012 ruling in NFIB v. Sebelius, the Court narrowly rejected a previous challenge to the constitutionality of the mandate. But Chief Justice John Roberts’ controlling opinion for the Court only reached this conclusion by reinterpreting the mandate as a tax, thereby saving it from being declared unconstitutional.

After the 2017 tax reform bill eliminated the monetary penalty attached to the mandate, twenty red states filed a lawsuit arguing that what’s left of the mandate was no longer constitutional, because it could not be a tax, if it doesn’t raise any revenue. Much more controversially, they also contended that the rest of Obamacare must fall with the mandate, because the latter is such an important part of the statute that it cannot be “severed” from it.

In 2018, federal district Judge Reed O’Connor issued a highly dubious ruling embracing the plaintiffs’ arguments on both points. In December 2019, a 2-1 decision by the US Court of Appeals for the Fifth Circuit upheld O’Connor’s decision on the unconstitutionality of the mandate, but vacated and remanded his ruling on the severability issue, in effect requiring him to redo that analysis almost from scratch.

The Supreme Court’s decision to hear the case [issued in March] cuts short what might have been prolonged further litigation in the lower courts.

The Trump administration has largely endorsed the plaintiff states’ position in this case. Thus, the defense of the ACA has fallen to a coalition of liberal states who have chosen to intervene in the litigation, led by California.

There is a small kernel of truth to the Democrats’ fears about Barrett, in so far as it is indeed likely that she would vote to overturn what’s left of the individual mandate. We know that because, in a 2017 law journal review essay, she criticized Chief Justice Roberts’ NFIB ruling upholding the individual mandate by construing it as a tax. Interestingly, the essay in question was a quite critical review of co-blogger Randy Barnett’s book Our Republican Constitution, which I myself reviewed (more favorably) here.

Then-Professor Barrett wrote that “Chief Justice Roberts pushed the Affordable Care Act beyond its plausible meaning to save the statute. He construed the penalty imposed on those without health insurance as a tax, which permitted him to sustain the statute as a valid exercise of the taxing power…. Had he treated the payment as the statute did—as a penalty—he would have had to invalidate the statute as lying beyond Congress’s commerce power.”

If Barrett didn’t think the original version mandate could plausibly be considered a tax back when it had a monetary penalty attached to it and could potentially raise some revenue, it’s highly unlikely she believes the the post-2017 version qualifies as a tax, now that it cannot raise any revenue at all. That reasoning strikes me as sound. For reasons I described here, a Supreme Court decision invalidating the residual mandate would set a valuable precedent for the enforcement of constitutional limits on federal power.

But, with the exception of myself and a few other legal scholars, hardly anyone cares about the future of the residual mandate. Since Congress zeroed out the penalty in 2017, that provision no longer plays any meaningful role in the ACA. For everyone else, what matters is the severability issue, which will determine the future of the rest of Obamacare.

And on that point, the one indication of Barrett’s views that we have is her vote—in a moot court—against the plaintiffs’ position (though it is possible she based it on procedural considerations rather than substantive ones). A moot court vote is far from a definitive guide to her views on the subject. But it is at least suggestive.

Perhaps more importantly, the argument that the residual mandate is inseverable from the rest of the ACA is at odds with both the Court’s current severability jurisprudence (which the Court recently reaffirmed in the robocall case), and alternative approaches recently put forward by conservative justices Neil Gorsuch and Clarence Thomas. The reasons why are explained more fully in an amicus brief I joined in the case, along with co-blogger Jonathan Adler and several other legal scholars.

It’s unlikely that Barrett has a novel view of severability so restrictive that it would require collapsing the rest of the ACA in this case. Earlier challenges to the ACA split legal experts along conventional ideological lines. With few exceptions, conservative and libertarian judges and legal scholars (myself included) argued that the individual mandate was unconstitutional, while liberal ones took the opposite view. It’s unsurprising that Barrett, too, had the same view of it as most other conservative academics.

By contrast, most conservative and libertarian experts take a dim view of the severability argument in the present case. The fact that Adler and I joined an amicus brief against it is just one example of the trend, since both of us were heavily involved in previous legal challenges to the individual mandate. Thus, there is no reason to presume that Barrett’s political views or judicial philosophy would predispose her to support the plaintiffs’ position on severability.

For all these reasons, it seems unlikely that Barrett has such a restrictive approach to severability that she would vote to rule the mandate inseverable from the rest of the ACA. To the extent you believe cynical political calculations might influence her decision, it’s worth noting that she likely realizes that voting against the Trump administration position in this case would be an easy way to prove her independence and improve her image in the media and in elite legal circles.

But let’s say that Barrett nonetheless chooses to endorse the plaintiffs’ argument. Even in that scenario, it’s unlikely to lead to the demise of the ACA. That’s because the plaintiffs are still highly unlikely to get the necessary five votes for their position.

In  Barr v. American Association of Political Consultants, decided this past June, seven Supreme Court justices reaffirmed the Supreme Court’s traditional approach to severability, which is highly unfavorable to the plaintiffs’ position in the ACA case. The death of Justice Ruth Bader Ginsburg reduces that number to six. But six is more than enough for a majority.

Moreover, an opinion written by Justice Brett Kavanaugh and joined by Samuel Alito and Chief Justice Roberts emphasizes the following:

The Court presumes that an unconstitutional provision in a law is severable from the remainder of the law or statute. For example, in Free Enterprise Fund v. Public Company Accounting Oversight Bd., the Court set forth the “normal rule”: “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact.” 561 U. S. 477, 508 (2010)…

Applying the presumption, the Court invalidates and severs unconstitutional provisions from the remainder of the law rather than razing whole statutes or Acts of Congress. Put in common parlance, the tail (one unconstitutional provision) does not wag the dog (the rest of the codified statute or the Act as passed by Congress). Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.

In Kavanaugh’s terms, the residual mandate is a textbook example of a “tail” that cannot be allowed to “wag the dog” of the rest of the ACA. Indeed, it’s a much smaller and less important tail than the one the Court ruled was severable in the robocall case. Kavanaugh and the others knew the ACA case would soon be coming to the Court when they wrote and endorsed these words. It’s unlikely they would have joined such an opinion if they were interested in using the residual mandate as a lever to strike down the whole ACA.

As Jonathan Adler  explains, the plaintiffs’ position also doesn’t square well with the revisionist challenge to traditional severability doctrine put forward by Gorsuch and Thomas in the robocall case. But even if he has the Gorsuch-Thomas approach wrong, the six current justices who endorsed the traditional strong “presumption” against severability are more than enough to sustain the ACA.

As I have noted before, the history of Obamacare litigation is filled with many failed expert predictions, including some of my own. Thus, some humility is appropriate. Nonetheless, after the robocall case, I would be extremely surprised if there were more than two or three votes (including Barrett) on the Supreme Court for the plaintiffs’ position on severability in Texas v. California.

To avoid misunderstanding, I should emphasize that none of this necessarily proves that Barrett deserves to be confirmed, or that the GOP is justified in ramming through her nomination before the election. For reasons I have explained here, I think a rushed confirmation process is a bad idea, and that the nomination should be held until after the winner of the election takes office.

I have also long argued that it is perfectly legitimate to oppose a judicial nominee based on  ideology and judicial philosophy, even if her qualifications are otherwise impeccable, and even if her views are in “the mainstream” of current legal thought. People who object to Barrett’s views therefore have entirely legitimate reasons to oppose her, even aside from procedural complaints about the process. But it would be better if the debate over those views focused on the many legal issues where she has actually taken a clear position, and those positions are actually likely to make a difference. The ACA case doesn’t qualify on either count.

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Circuit Court Nominations and Senate Obstruction

It is rapidly becoming a talking point among some activists on the left that Mitch McConnell busted all norms in obstructing Barack Obama’s circuit court nominees, and thus it is only fair that the Democrat pack the Court at the earliest opportunity. (Let us save for another day the other trending claim, fed by Joe Biden himself, that filling ordinary judicial vacancies is itself a form of court “packing” indistinguishable from expanding the size of the Court.)

President Donald Trump has not helped matters by repeatedly bragging that Obama left “a big, beautiful present” of judicial vacancies. Critics of Trump’s judicial appointees have been quick to answer that the only reason those vacancies exist is because of Senate Majority leader Mitch McConnell’s unprecedented obstruction of Obama’s nominees.

In truth, Trump inherited a number of vacant circuit-court seats that was only slightly larger than what Obama inherited (Trump did inherit significantly more district court vacancies). If Obama left him a “big, beautiful present,” Bush left the same present for Obama. Bill Clinton inherited a comparable number of vacancies when he was first inaugurated, though George W. Bush was somewhat more fortunate. Trump inherited far more open seats than did Ronald Reagan, but otherwise he found himself in much the same position as recent presidents. Neither Trump nor Obama were unique. They were reflective of what judicial appointment politics have looked like for the last three decades.

There is endless finger pointing in the war over judicial appointments that gets in the way of any effort at potentially deescalating what is a very unhealthy situation. There is plenty of bad blood and hurt feelings on both sides, and there is little to be gained by trying to determine who hurt whom first.

But we should at least be clear that Obama was not uniquely mistreated in regard to his circuit court appointments (the question of Merrick Garland is a separate issue, but Garland seems to be becoming a mere symbol of general obstruction of judicial nominees). The problem of Senate obstructionism was not a two-year anomaly in 2014-2016 (though those two years were an extreme version). It has been far more deep rooted and persistent than that.

There is no question that Donald Trump has benefited from the combination of a relatively large number of open seats in the lower courts, procedural reforms that made it possible for the Senate to confirm judges on a simple majority basis (starting when Democratic leader Harry Reid nuked the filibuster in 2013), and same-party control of the Senate (the Democrats promptly lost control of the Senate in 2014 and so had little opportunity to take advantage of the new rules). As a result, Trump has been able to appoint a relatively large number of circuit court judges in a single term. He would not have been able to do so had not all three things been true.

Details on circuit court nominations and confirmations over the past forty years below.

As I have detailed in a paper that can be found here, the obstruction that Obama encountered for his lower court nominations had become par for the course over several presidencies of both political parties. Trump found a lot of vacancies on the circuit courts because the Senate had not allowed presidents to fill available seats—and they had done so not merely in the last two years of Obama’s presidency under a GOP Senate. The Senate had done so for nearly a quarter of a century. 

 

As the above figure shows, there has been a fair amount of variation in the percentage of circuit court nominations that result in a confirmation since the beginning of the Reagan administration in 1981. Presidents predictably have more trouble getting their nominees confirmed when the other party controls the Senate and they particularly tend to struggle when a presidential election looms. (Notably, circuit court nominations are hardly ever defeated in a floor vote; unsuccessful nominations are either returned or withdrawn.)

But things have been different since the Clinton era. Presidents of both parties have found their nominations stymied by senators of the other party. It has taken much longer to get a nominee confirmed. More nominees fail to ever reach the bench. Presidential behavior matters as well as Senate behavior. Some presidents flood the Senate with nominees, and others do not (Obama had few successful appointments in his last years in office but he also made very few nominations. Even when Obama enjoyed a Democratic-controlled Senate, he advanced relatively few nominees. Despite having a Democratic Senate, Obama began his second term of office with as many judicial vacancies as when he first arrived in the White House.). Some presidents return nominees to the Senate over and over again, and others pull the plug when nominees get bogged down.

We get a somewhat different picture of recent developments if we focus not on individual nominations but on individual nominees. Unsuccessful nominees to the circuit courts do not get a floor vote; they are just left dangling in the wind. Given the delay in confirming, some nominees who are eventually successful go through several nominations. If we track the fate of particular individuals to their final fate, we see an increasing obstruction by the Senate that peaked in the George W. Bush administration. Over a third of the individuals put forward for a circuit seat by Bush were not confirmed by the end of his presidency. No other president has had such a dismal record. Obama’s overall record was good by comparison.

When we focus on individual nominees (rather than nominations, as I did in the paper here), divided government appears to be a significant culprit. George W. Bush had extraordinary struggles putting nominees on the bench even with a Republican majority in the Senate as minority obstruction peaked. He did even worse with a Democratic-controlled Senate, which was even less willing to confirm his nominees that the Republican-controlled Senate had been with Bill Clinton. Obama enjoyed a Democratic Senate for most of his presidency, and his success rate was quite high (though not quite at historical expectations). When Obama lost the Senate in the last two years of his presidency, however, his success in seating circuit court nominees ground to a halt. Opposition Senates were likewise hard to please at the end of the Clinton and Bush presidencies, but Obama’s success rate was low even by those standards.

At the end of the day, recent presidents have been able to seat a sizable number of circuit court judges. Donald Trump likes to brag that he has seated an unprecedented number of federal judges, and he has done quite well for a single presidential term. But he has seated fewer circuit-court judges who in turn make up a smaller percentage of the federal bench than did the one-term president Jimmy Carter, who benefited from not only an accommodating Senate but also an expanded judiciary. If he is defeated in November, he will have left a mark on the circuit courts that is comparable to what Obama left, and only slightly less than what Clinton and Bush left.

Senate obstructionism has been a pervasive problem for decades. The Senate reached new lows of obstruction over the last two years of the Obama presidency, but it was the continuation of a trend not a sudden departure. If the Senate Republicans had been willing and able to do the same thing earlier in the Obama presidency or at the start of a Hillary Clinton presidency, then it truly would have been an extraordinary sea change in interbranch relations (even by modern standards), but those circumstances never arose. What seems apparent is that Trump has enjoyed the same kind of confirmation success that most presidents enjoy with same-party Senates. Unfortunately, there is little reason to think the recent trends would have reversed themselves had he faced an opposition Senate.

We might have solved the confirmation dysfunction for unified government, but the dysfunction that has recently prevailed during divided government seems likely to still be with us.

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Why Amy Coney Barrett is Unlikely to Have Any Meaningful Effect on the Future of the ACA

Obamacare

A central element of Democrats’ strategy in Amy Coney Barrett’s confirmation hearings for the Supreme Court, which begin today, is to argue that her confirmation threatens the future of the Affordable Care Act. On November 10, the Supreme Court will hear oral arguments in Texas v. California, a challenge to the ACA brought by a coalition of GOP-controlled states, and other plaintiffs. Democrats fear that Barrett would cast a decisive vote to strike the law down.

In numerous media interviews I have done about the nomination since it was announced, the ACA issue has come up more often than any other. The focus on it is unfortunate, because Barrett is in fact unlikely to have much effect on ACA. There are lots of legitimate reasons to object to this nomination on both substantive and procedural grounds. But the Obamacare issue is unlikely to be one of them.

I summarized the convoluted history of the case here:

[T]he case arose because, in December 2017, the then-GOP-controlled Congress passed a tax reform law that zeroed out the monetary penalty attached to the Obamacare health insurance mandate, but left the mandate itself on the books. The ACA still officially has a provision requiring most Americans to purchase government-approved health insurance. But violators suffer no penalty if they choose not to follow this requirement.

In  its controversial 2012 ruling in NFIB v. Sebelius, the Court narrowly rejected a previous challenge to the constitutionality of the mandate. But Chief Justice John Roberts’ controlling opinion for the Court only reached this conclusion by reinterpreting the mandate as a tax, thereby saving it from being declared unconstitutional.

After the 2017 tax reform bill eliminated the monetary penalty attached to the mandate, twenty red states filed a lawsuit arguing that what’s left of the mandate was no longer constitutional, because it could not be a tax, if it doesn’t raise any revenue. Much more controversially, they also contended that the rest of Obamacare must fall with the mandate, because the latter is such an important part of the statute that it cannot be “severed” from it.

In 2018, federal district Judge Reed O’Connor issued a highly dubious ruling embracing the plaintiffs’ arguments on both points. In December 2019, a 2-1 decision by the US Court of Appeals for the Fifth Circuit upheld O’Connor’s decision on the unconstitutionality of the mandate, but vacated and remanded his ruling on the severability issue, in effect requiring him to redo that analysis almost from scratch.

The Supreme Court’s decision to hear the case [issued in March] cuts short what might have been prolonged further litigation in the lower courts.

The Trump administration has largely endorsed the plaintiff states’ position in this case. Thus, the defense of the ACA has fallen to a coalition of liberal states who have chosen to intervene in the litigation, led by California.

There is a small kernel of truth to the Democrats’ fears about Barrett, in so far as it is indeed likely that she would vote to overturn what’s left of the individual mandate. We know that because, in a 2017 law journal review essay, she criticized Chief Justice Roberts’ NFIB ruling upholding the individual mandate by construing it as a tax. Interestingly, the essay in question was a quite critical review of co-blogger Randy Barnett’s book Our Republican Constitution, which I myself reviewed (more favorably) here.

Then-Professor Barrett wrote that “Chief Justice Roberts pushed the Affordable Care Act beyond its plausible meaning to save the statute. He construed the penalty imposed on those without health insurance as a tax, which permitted him to sustain the statute as a valid exercise of the taxing power…. Had he treated the payment as the statute did—as a penalty—he would have had to invalidate the statute as lying beyond Congress’s commerce power.”

If Barrett didn’t think the original version mandate could plausibly be considered a tax back when it had a monetary penalty attached to it and could potentially raise some revenue, it’s highly unlikely she believes the the post-2017 version qualifies as a tax, now that it cannot raise any revenue at all. That reasoning strikes me as sound. For reasons I described here, a Supreme Court decision invalidating the residual mandate would set a valuable precedent for the enforcement of constitutional limits on federal power.

But, with the exception of myself and a few other legal scholars, hardly anyone cares about the future of the residual mandate. Since Congress zeroed out the penalty in 2017, that provision no longer plays any meaningful role in the ACA. For everyone else, what matters is the severability issue, which will determine the future of the rest of Obamacare.

And on that point, the one indication of Barrett’s views that we have is her vote—in a moot court—against the plaintiffs’ position (though it is possible she based it on procedural considerations rather than substantive ones). A moot court vote is far from a definitive guide to her views on the subject. But it is at least suggestive.

Perhaps more importantly, the argument that the residual mandate is inseverable from the rest of the ACA is at odds with both the Court’s current severability jurisprudence (which the Court recently reaffirmed in the robocall case), and alternative approaches recently put forward by conservative justices Neil Gorsuch and Clarence Thomas. The reasons why are explained more fully in an amicus brief I joined in the case, along with co-blogger Jonathan Adler and several other legal scholars.

It’s unlikely that Barrett has a novel view of severability so restrictive that it would require collapsing the rest of the ACA in this case. Earlier challenges to the ACA split legal experts along conventional ideological lines. With few exceptions, conservative and libertarian judges and legal scholars (myself included) argued that the individual mandate was unconstitutional, while liberal ones took the opposite view. It’s unsurprising that Barrett, too, had the same view of it as most other conservative academics.

By contrast, most conservative and libertarian experts take a dim view of the severability argument in the present case. The fact that Adler and I joined an amicus brief against it is just one example of the trend, since both of us were heavily involved in previous legal challenges to the individual mandate. Thus, there is no reason to presume that Barrett’s political views or judicial philosophy would predispose her to support the plaintiffs’ position on severability.

For all these reasons, it seems unlikely that Barrett has such a restrictive approach to severability that she would vote to rule the mandate inseverable from the rest of the ACA. To the extent you believe cynical political calculations might influence her decision, it’s worth noting that she likely realizes that voting against the Trump administration position in this case would be an easy way to prove her independence and improve her image in the media and in elite legal circles.

But let’s say that Barrett nonetheless chooses to endorse the plaintiffs’ argument. Even in that scenario, it’s unlikely to lead to the demise of the ACA. That’s because the plaintiffs are still highly unlikely to get the necessary five votes for their position.

In  Barr v. American Association of Political Consultants, decided this past June, seven Supreme Court justices reaffirmed the Supreme Court’s traditional approach to severability, which is highly unfavorable to the plaintiffs’ position in the ACA case. The death of Justice Ruth Bader Ginsburg reduces that number to six. But six is more than enough for a majority.

Moreover, an opinion written by Justice Brett Kavanaugh and joined by Samuel Alito and Chief Justice Roberts emphasizes the following:

The Court presumes that an unconstitutional provision in a law is severable from the remainder of the law or statute. For example, in Free Enterprise Fund v. Public Company Accounting Oversight Bd., the Court set forth the “normal rule”: “Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem, severing any problematic portions while leaving the remainder intact.” 561 U. S. 477, 508 (2010)…

Applying the presumption, the Court invalidates and severs unconstitutional provisions from the remainder of the law rather than razing whole statutes or Acts of Congress. Put in common parlance, the tail (one unconstitutional provision) does not wag the dog (the rest of the codified statute or the Act as passed by Congress). Constitutional litigation is not a game of gotcha against Congress, where litigants can ride a discrete constitutional flaw in a statute to take down the whole, otherwise constitutional statute.

In Kavanaugh’s terms, the residual mandate is a textbook example of a “tail” that cannot be allowed to “wag the dog” of the rest of the ACA. Indeed, it’s a much smaller and less important tail than the one the Court ruled was severable in the robocall case. Kavanaugh and the others knew the ACA case would soon be coming to the Court when they wrote and endorsed these words. It’s unlikely they would have joined such an opinion if they were interested in using the residual mandate as a lever to strike down the whole ACA.

As Jonathan Adler  explains, the plaintiffs’ position also doesn’t square well with the revisionist challenge to traditional severability doctrine put forward by Gorsuch and Thomas in the robocall case. But even if he has the Gorsuch-Thomas approach wrong, the six current justices who endorsed the traditional strong “presumption” against severability are more than enough to sustain the ACA.

As I have noted before, the history of Obamacare litigation is filled with many failed expert predictions, including some of my own. Thus, some humility is appropriate. Nonetheless, after the robocall case, I would be extremely surprised if there were more than two or three votes (including Barrett) on the Supreme Court for the plaintiffs’ position on severability in Texas v. California.

To avoid misunderstanding, I should emphasize that none of this necessarily proves that Barrett deserves to be confirmed, or that the GOP is justified in ramming through her nomination before the election. For reasons I have explained here, I think a rushed confirmation process is a bad idea, and that the nomination should be held until after the winner of the election takes office.

I have also long argued that it is perfectly legitimate to oppose a judicial nominee based on  ideology and judicial philosophy, even if her qualifications are otherwise impeccable, and even if her views are in “the mainstream” of current legal thought. People who object to Barrett’s views therefore have entirely legitimate reasons to oppose her, even aside from procedural complaints about the process. But it would be better if the debate over those views focused on the many legal issues where she has actually taken a clear position, and those positions are actually likely to make a difference. The ACA case doesn’t qualify on either count.

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Circuit Court Nominations and Senate Obstruction

It is rapidly becoming a talking point among some activists on the left that Mitch McConnell busted all norms in obstructing Barack Obama’s circuit court nominees, and thus it is only fair that the Democrat pack the Court at the earliest opportunity. (Let us save for another day the other trending claim, fed by Joe Biden himself, that filling ordinary judicial vacancies is itself a form of court “packing” indistinguishable from expanding the size of the Court.)

President Donald Trump has not helped matters by repeatedly bragging that Obama left “a big, beautiful present” of judicial vacancies. Critics of Trump’s judicial appointees have been quick to answer that the only reason those vacancies exist is because of Senate Majority leader Mitch McConnell’s unprecedented obstruction of Obama’s nominees.

In truth, Trump inherited a number of vacant circuit-court seats that was only slightly larger than what Obama inherited (Trump did inherit significantly more district court vacancies). If Obama left him a “big, beautiful present,” Bush left the same present for Obama. Bill Clinton inherited a comparable number of vacancies when he was first inaugurated, though George W. Bush was somewhat more fortunate. Trump inherited far more open seats than did Ronald Reagan, but otherwise he found himself in much the same position as recent presidents. Neither Trump nor Obama were unique. They were reflective of what judicial appointment politics have looked like for the last three decades.

There is endless finger pointing in the war over judicial appointments that gets in the way of any effort at potentially deescalating what is a very unhealthy situation. There is plenty of bad blood and hurt feelings on both sides, and there is little to be gained by trying to determine who hurt whom first.

But we should at least be clear that Obama was not uniquely mistreated in regard to his circuit court appointments (the question of Merrick Garland is a separate issue, but Garland seems to be becoming a mere symbol of general obstruction of judicial nominees). The problem of Senate obstructionism was not a two-year anomaly in 2014-2016 (though those two years were an extreme version). It has been far more deep rooted and persistent than that.

There is no question that Donald Trump has benefited from the combination of a relatively large number of open seats in the lower courts, procedural reforms that made it possible for the Senate to confirm judges on a simple majority basis (starting when Democratic leader Harry Reid nuked the filibuster in 2013), and same-party control of the Senate (the Democrats promptly lost control of the Senate in 2014 and so had little opportunity to take advantage of the new rules). As a result, Trump has been able to appoint a relatively large number of circuit court judges in a single term. He would not have been able to do so had not all three things been true.

Details on circuit court nominations and confirmations over the past forty years below.

As I have detailed in a paper that can be found here, the obstruction that Obama encountered for his lower court nominations had become par for the course over several presidencies of both political parties. Trump found a lot of vacancies on the circuit courts because the Senate had not allowed presidents to fill available seats—and they had done so not merely in the last two years of Obama’s presidency under a GOP Senate. The Senate had done so for nearly a quarter of a century. 

 

As the above figure shows, there has been a fair amount of variation in the percentage of circuit court nominations that result in a confirmation since the beginning of the Reagan administration in 1981. Presidents predictably have more trouble getting their nominees confirmed when the other party controls the Senate and they particularly tend to struggle when a presidential election looms. (Notably, circuit court nominations are hardly ever defeated in a floor vote; unsuccessful nominations are either returned or withdrawn.)

But things have been different since the Clinton era. Presidents of both parties have found their nominations stymied by senators of the other party. It has taken much longer to get a nominee confirmed. More nominees fail to ever reach the bench. Presidential behavior matters as well as Senate behavior. Some presidents flood the Senate with nominees, and others do not (Obama had few successful appointments in his last years in office but he also made very few nominations. Even when Obama enjoyed a Democratic-controlled Senate, he advanced relatively few nominees. Despite having a Democratic Senate, Obama began his second term of office with as many judicial vacancies as when he first arrived in the White House.). Some presidents return nominees to the Senate over and over again, and others pull the plug when nominees get bogged down.

We get a somewhat different picture of recent developments if we focus not on individual nominations but on individual nominees. Unsuccessful nominees to the circuit courts do not get a floor vote; they are just left dangling in the wind. Given the delay in confirming, some nominees who are eventually successful go through several nominations. If we track the fate of particular individuals to their final fate, we see an increasing obstruction by the Senate that peaked in the George W. Bush administration. Over a third of the individuals put forward for a circuit seat by Bush were not confirmed by the end of his presidency. No other president has had such a dismal record. Obama’s overall record was good by comparison.

When we focus on individual nominees (rather than nominations, as I did in the paper here), divided government appears to be a significant culprit. George W. Bush had extraordinary struggles putting nominees on the bench even with a Republican majority in the Senate as minority obstruction peaked. He did even worse with a Democratic-controlled Senate, which was even less willing to confirm his nominees that the Republican-controlled Senate had been with Bill Clinton. Obama enjoyed a Democratic Senate for most of his presidency, and his success rate was quite high (though not quite at historical expectations). When Obama lost the Senate in the last two years of his presidency, however, his success in seating circuit court nominees ground to a halt. Opposition Senates were likewise hard to please at the end of the Clinton and Bush presidencies, but Obama’s success rate was low even by those standards.

At the end of the day, recent presidents have been able to seat a sizable number of circuit court judges. Donald Trump likes to brag that he has seated an unprecedented number of federal judges, and he has done quite well for a single presidential term. But he has seated fewer circuit-court judges who in turn make up a smaller percentage of the federal bench than did the one-term president Jimmy Carter, who benefited from not only an accommodating Senate but also an expanded judiciary. If he is defeated in November, he will have left a mark on the circuit courts that is comparable to what Obama left, and only slightly less than what Clinton and Bush left.

Senate obstructionism has been a pervasive problem for decades. The Senate reached new lows of obstruction over the last two years of the Obama presidency, but it was the continuation of a trend not a sudden departure. If the Senate Republicans had been willing and able to do the same thing earlier in the Obama presidency or at the start of a Hillary Clinton presidency, then it truly would have been an extraordinary sea change in interbranch relations (even by modern standards), but those circumstances never arose. What seems apparent is that Trump has enjoyed the same kind of confirmation success that most presidents enjoy with same-party Senates. Unfortunately, there is little reason to think the recent trends would have reversed themselves had he faced an opposition Senate.

We might have solved the confirmation dysfunction for unified government, but the dysfunction that has recently prevailed during divided government seems likely to still be with us.

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