If S&P Hits 3,630 By Election Day, This Would Be The Greatest Rally Of All Time

If S&P Hits 3,630 By Election Day, This Would Be The Greatest Rally Of All Time

Tyler Durden

Fri, 08/28/2020 – 16:20

It’s amazing to think that just five short months ago, the S&P was just over 2,100 and Goldman was issuing fire and brimstone reports, warning the S&P could tumble to 2,000 in the “near-term.” What happened next was unprecedented: on March 23 the Fed crossed a Rubicon that even Bernanke left alone when the central bank effectively nationalized the bond market, buying corporate bonds and ETFs while injecting hundreds of billions of liquidity in the bond market and even hinting it could start buying stocks next. The response was unprecedented, with the S&P surging a historic 56% since the March 23 lows…

… driven obviously not by some surge in profits, but by a record 90% increase in forward P/E multiples, which as of today are at 26.795 based on the Bloomberg forward consensus, surpassing the dot com bubble high and just shy of the all time high hit in December 1998.

The question, of course, is what happens next. On one hand it is easy to say that stocks have never been more overvalued, which is a fact. On the other, the activist Fed yesterday made it clear that it will (probably never) hike rates again (if anything, we will get NIRP and equity purchases first), prompting traders to frontrun even more liquidity, even easier financial conditions, and even higher stock prices.

According to one hypothetical scenario – and certainly a plausible one – proposed by BofA’s Michael Hartnett, with the S&P already at 3,500, it would only take another 130 points in the S&P, pushing it less than 4% higher to 3,630 by Election Day, to make this rally Greatest Of All Time in both speed & magnitude, surpassing the rally off the 1938 lows.

And speaking of the Fed, the genie is now well out of the bottle with even Hartnett admitting that “central banks are encouraging asset price inflation/moral hazard in attempt to use wealth effect to reduce unemployment & “trickle down” inflation to Main St; at some point race to $3000 gold, $3tn Apple, 300bps HY bond spreads will cause bond yields to jump; but unlike 1999, Fed not tightening in 2020.

To be sure, there is a risk some time in Sept, when we hit peak policy stimulus, resulting in rising pre-election correction risk as bond yields trough, at which point Hartnett says “watch key “floors” for MOVE (40), VIX (20), IG spreads (125bps)…if floors hold signals “peak stimulus.”

Of course, fundamentals, technicals, and even market feedback loops no longer matter in a world where the central bank has given Robinhooders the greenlight to buy any dip. And most importantly, there is nothing Trump would want more than to tell the world on the eve of the election that the S&P just enjoyed the biggest and fastest recovery in history. Whether 99% of the population would care is a different story…

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Powell Pumps S&P To Best August Since ’86, Dollar & Bonds Puked

Powell Pumps S&P To Best August Since ’86, Dollar & Bonds Puked

Tyler Durden

Fri, 08/28/2020 – 16:00

August 2020’s 6.89% surge in the major US market index is the largest August gain since 1986 (when the S&P 500 rose 7.12%), but as the chart below shows Trannies almost doubled those gains…

Source: Bloomberg

This is the S&P’s 7th straight daily gain, 5th straight weekly gain, and 5th straight monthly gain…

“Do you want to play this game?”

And that strong month sent The Dow back into the green for 2020…

Source: Bloomberg

All thanks to an epic squeeze in the most-shorted stocks (doubling the S&P’s performance)…

Source: Bloomberg

The 5th month in a row…

Source: Bloomberg

With the strength being concentrated in fewer and fewer stocks…

Source: Bloomberg

As AAPL nears the same size as the entire Russell 2000!!!!

Source: Bloomberg

VIX was lower on the day after ‘unusually’ trading higher along with a higher stock market two days in a row…

Source: Bloomberg

It was an ugly month for bonds with the long-end up over 30bps…

Source: Bloomberg

10Y Yields spiked 20bps on the month – the biggest absolute monthly spike since Sept 2018 – back above 70bps (30Y back above 1.50%)…

Source: Bloomberg

But still some context for this rate move is needed…

Source: Bloomberg

Breakevens ripped higher this month (and up 6 days in a row) to their highest since Jan 2020…

Source: Bloomberg

Real yields ended marginally lower (down from -1.00% to -1.04% on the month)…

Source: Bloomberg

The dollar was pummeled for the 5th straight month to its lowest since May 2018…

Source: Bloomberg

Cryptos were mixed with Ethereum strong (DeFi boom), Bitcoin Cash weak, and Bitcoin flat…

Source: Bloomberg

Copper and Crude had a strong month, gold ended lower, silver the big winner…

Source: Bloomberg

Gold rallied back to yesterday’s Powell-spooked highs today…

But Gold ended the month unchanged…

Source: Bloomberg

But despite a big roundtrip early on, Silver rallied notably on the month…

Source: Bloomberg

Which meant the Gold/Silver ratio cratered (for the 4th month in the last 5)…ending the month at the lowest level (silver strongest relative to gold) since April 2017…

Source: Bloomberg

And finally there’s this!

Source: Bloomberg

And this…

Source: Bloomberg

And this…

  • *BULLARD: WANT TO GUARD AGAINST ASSET BUBBLES GOING FORWARD

Because it’s different this time…

Source: Bloomberg

Probably nothing!

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Felony Warrant Against Jacob Blake Has Been Vacated, Handcuffs Removed At Hospital Bed

Felony Warrant Against Jacob Blake Has Been Vacated, Handcuffs Removed At Hospital Bed

Tyler Durden

Fri, 08/28/2020 – 15:45

Local ABC affiliate WISN-TV in Milwaukee is reporting Friday afternoon that Jacob Blake’s attorney has told the station that the felony warrant against Blake has just been vacated.

Further, deputies have been reported as removing the handcuffs that kept Blake shackled to his hospital bed at Froedtert Hospital in Wauwatosa.

Hours prior on Friday Wisconsin Attorney General Josh Kaul refused to confirm whether Kenosha police knew beforehand that Blake had a knife in his vehicle before they opened fire when he reached into the driver’s side.

“We’re not commenting on that detail at this point in the investigation. Mr. Blake stated to investigators that he had a knife in his possession and there was one that was found on the driver’s side floorboard,” Kaul told ABC News on “Good Morning America.”

Blake’s family says he’s been paralyzed from the waist down after the police shot him in the back seven times after a severe altercation with police, which has sparked violent riots over the past multiple days.

It’s as yet still unclear what precise criminal charges are still pending against the 29-year old, however.

Reuters Legal reports that anArrest warrant was vacated after Blake’s lawyer and Kenosha authorities agreed to court date on criminal charges,” according to Blake’s lawyer. Also, CNN details further:

Kenosha County Sheriff’s Department spokesman Sgt. David Wright on Friday explained that Blake was handcuffed to the bed because he “has felony warrants for his arrest from crimes he committed prior to the shooting incident.”

The police statement confirmed that the warrants have been vacated. This after coming under pressure on Friday over the fact that a heavily medicated Blake has been shackled to his hospital bed.

The Kenosha County Sheriff spokesman explained of the controversial restraints: “Jacob Blake has felony warrants for his arrest from crimes he committed prior to the shooting incident. Anyone with this classification level that we are guarding in the hospital would be treated in this manner.”

Family statements on Thursday about the handcuffs had set off a media firestorm, resulting in mounting pressure on both the Wisconsin Attorney General’s office and the local sheriff.

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Nixon May Be Trump’s ‘Law and Order’ Model, but He Was Smarter on Crime

Nixon-1968-RNC-speech

Donald Trump consciously modeled his 2016 presidential campaign on Richard Nixon’s in 1968, presenting himself as “the law and order candidate” who would eliminate the “violence in our streets and the chaos in our communities,” despite historically low crime rates. But while Nixon recognized that continuing to describe the country as unsafe and crime-ridden while seeking a second term would not reflect well on his own performance in office, Trump still sounds like a harsher, less eloquent, and less subtle version of the 1968 Nixon.

By 1972, Nixon had stopped talking about a country beset by violence, notwithstanding a substantial increase in crime during his first term. Trump, by contrast, is still hitting that theme, notwithstanding a decrease in crime.

In 2016, Trump promised that “the crime and violence that today afflicts our nation will soon come to an end” and that “beginning on January 20, 2017, safety will be restored.” In his inaugural address six months later, he vowed, “This American carnage stops right here and stops right now.” Now he is trying to get re-elected by decrying the “rioting, looting, arson and violence” happening on his watch.

Trump tries to gloss over the contradiction between his pledges and the chaotic situation he is still describing four years later by blaming the latter on bad governance in “Democrat-run cities.” He thereby emphasizes that the president has no power over local policing, which makes both the extravagant promises he made in 2016 and the contrast he is trying to draw now with Joe Biden look pretty silly.

“Your vote will decide whether we protect law-abiding Americans, or whether we give free rein to violent anarchists, agitators, and criminals who threaten our citizens,” Trump said while accepting his party’s nomination last night. “If you give power to Joe Biden, the radical left will defund police departments all across America. They will pass federal legislation to reduce law enforcement nationwide. They will make every city look like Democrat-run Portland, Oregon. No one will be safe in Biden’s America.”

Trump did not explain how Biden would “defund police departments,” how Congress would “reduce law enforcement nationwide,” or how either would turn “every city” into a Portland-esque hellscape. If Trump, by his own account, is powerless as president to stop the “violence and danger in the streets of many Democrat-run cities throughout America,” how would Biden as president make the situation worse?

Nixon in 1968, like Trump in 2016, exaggerated the federal government’s role in fighting crime, a perennial habit of national politicians. But during a year more turbulent than 2016 or even 2020, he was still careful not to make any commitments regarding public safety and order that would be impossible to keep.

“As we look at America, we see cities enveloped in smoke and flame,” Nixon said in his acceptance speech. “We hear sirens in the night….We see Americans hating each other, fighting each other, killing each other.”

What did Nixon propose to do about it? “Tonight I do not promise the millennium in the morning,” Nixon said in a passage the Trump and his speechwriters must have missed. “I don’t promise that we can eradicate poverty, and end discrimination, eliminate all danger of war in the space of four, or even eight, years. But I do promise action—a new policy for peace abroad; a new policy for peace and progress and justice at home.”

Regarding domestic peace and justice, Nixon promised to appoint judges who would be friendlier to law enforcement. “Let us always respect, as I do, our courts and those who serve on them,” he said, expressing a sentiment foreign to Trump. “But let us also recognize that some of our courts in their decisions have gone too far in weakening the peace forces as against the criminal forces in this country, and we must act to restore that balance.”

Nixon also promised to appoint an attorney general who would “launch a war against organized crime in this country.” That attorney general, he said, “will be an active belligerent against the loan sharks and the numbers racketeers that rob the urban poor in our cities.” He would “open a new front against the filth peddlers and the narcotics peddlers who are corrupting the lives of the children of this country.” Nixon’s most extravagant promise was that “time is running out for the merchants of crime and corruption in American society.”

In his acceptance speech four years later, Nixon said he had kept his pledge to appoint judges who “recognize that the first civil right of every American is to be free from domestic violence.” He added, “I want the peace officers across America to know that they have the total backing of their president in their fight against crime.” And that was pretty much it. Unlike Trump this year, Nixon was no longer depicting a country plagued by crime and violent unrest.

So far we have been talking about rhetoric. What about the corresponding realities?

In 1972, the violent crime rate in the United States was more than 25 percent higher than it was in 1968. The homicide rate had risen nearly as much. Unsurprisingly, Nixon did not mention those trends, let alone dwell on them.

From 2016 to 2018, the last year for which the FBI has released final numbers, the violent crime and homicide rates fell. While those numbers were higher than the record lows recorded in 2014, they were still down nearly 50 percent from their peaks in 1991. Preliminary FBI numbers for the first half of 2019 indicate that homicides fell again. Jeff Asher of AH Datalytics found that murders spiked in major cities during the first half of this year, although overall violent crime was down. Yet Trump is portraying a country where violence is spinning out of control, a trend he says will only get worse if Biden is elected.

On the face of it, that strategy makes little sense. But it fits with Trump’s general approach to politics, which requires demonizing the opposition to scare people into voting for someone they otherwise might not find particularly appealing.

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Short Circuit: A Roundup of Recent Federal Court Decisions

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

Way back in 1983, in Bearden v. Georgia, the U.S. Supreme Court ruled that judges must inquire into defendants’ ability to pay before jailing them for not paying court-ordered fines and fees. The practice is widespread today, however, spreading misery and hardship among the least fortunate. (One guy we know calls Bearden the “25-hour speed limit” of constitutional law because no one follows it.) Please do click here for a look at model legislation that would codify Bearden and curtail the abuse of fines and fees.

New on the Short Circuit podcast: Can a city hold on to your car for three years for no reason? Plus, the costs of campaign finance disclosure.

  • Gitmo detainee, a tribal sheikh and Yemeni citizen, has been held without trial going on 16 years. A violation of the Due Process Clause? D.C. Circuit: Whether it’s “procedural” or “substantive” due process, the Clause does not apply to aliens detained outside the sovereign territory of the United States.
  • Connellsville, Penn. police accuse a woman of murder on the basis of bite-mark evidence and accusations from an ex-boyfriend and two inmates. But bite-mark evidence is not supported by science, the men’s statements conflict, and the ex-boyfriend recants on the stand. A judge dismisses the charges. Undeterred, the DA recharges her a few months later. She’s convicted and then exonerated after 11 years in prison. Third Circuit: The then-DA (now judge) is entitled to absolute immunity for approving the criminal complaint and to qualified immunity for directing police to investigate bite-mark evidence and sitting by while police engaged in a reckless investigation. Neither of the latter two had been clearly established as unconstitutional at the time of the investigation.
  • Following a sniper attack on a Pennsylvania State Troopers barracks, troopers learn of a man with a rifle walking down a highway 15 miles away. They identify him, arrest him on a Florida arrest warrant, and then charge him with another crime before dismissing the Florida charges. Man: A trooper fabricated evidence to support the Florida charge and my arrest, which violates the Fourth and Fourteenth Amendments. District court: It didn’t violate the Fourth Amendment. Third Circuit: And the Fourteenth Amendment doesn’t apply to an unlawful arrest claim before a court appearance. (Another man was later convicted of the sniper attack.)
  • Transgender high-school student challenges school policy that requires him to use the bathroom of his birth-assigned sex (female) or a private unisex bathroom. The student sues, alleging violations of Title IX and the Fourteenth Amendment. Fourth Circuit: “The proudest moments of the federal judiciary have been when we affirm the burgeoning values of our bright youth, rather than preserve the prejudices of the past.” Dissent: “The majority opinion devotes over 20 pages to its discussion of [the student’s] transgender status, both at a physical and psychological level. Yet, the mere fact that it felt necessary to do so reveals its effort to effect policy rather than simply apply law.”
  • Congress enacted the Anti-Riot Act in 1968, an era, observes the Fourth Circuit, “not unlike our own.” And while the law sweeps up substantial amounts of constitutionally protected speech, including advocacy intended to “promote” or “encourage” a riot, the unconstitutional provisions can be severed from the remainder—which, in turn, can permissibly be applied to two California residents who traveled through interstate commerce to attend the “Unite the Right” rally in Charlottesville.
  • Ronnie Wallace Long has spent the last 44 years in prison serving a life sentence for rape, a crime he insists he did not commit. But now it is undisputed that the state withheld evidence including: (1) evidence of lies by two police witnesses; (2) the disappearance of a rape kit; and (3) a “legion” of test results that did not implicate Long. Is Long entitled to habeas relief? Fourth Circuit (en banc): The trial court needs to hold a hearing on actual innocence ASAP. Concurrence: No need for that; no reasonable jury could have convicted if it’d known this evidence. Dissent: “[I]njustice may have occurred,” but it’s debatable, so habeas relief should be denied.
  • Allegation: After a chain of Texas liquor stores refuses to pay $8 mil to resolve violations allegedly uncovered during an investigation by the Texas Alcoholic Beverage Commission, the TABC sues, seeking cancelation of all 164 of the chain’s permits and $713 mil in civil penalties. An administrative law judge rules for the chain on all charges but one, for which he recommends a warning. The chain sues the TABC, and the district court, relying on a variety of immunity doctrines, dismisses the case. Fifth Circuit: Most of which were correct. But the court was wrong to dismiss claims based on the TABC’s alleged concealment of evidence, so back you go.
  • Because of the high cost of treatment for hepatitis C, Tennessee prison officials provide medication only for inmates with the most severe and advanced cases. Sixth Circuit: No doubt the best practice would be to treat every sick prisoner, but that is not always possible in the real world of limited resources. No violation here. Dissent: If prisons cannot afford to house inmates in conformity with the Constitution, those inmates should be released.
  • Protesters block Columbus, Ohio intersection for 45 minutes, begin to disperse after police pepper spray them. One protester lingers but then retreats, hunching over from the effects of the pepper spray. An officer allegedly puts a hand on her shoulder, stopping her briefly, and sprays her directly in the face. Excessive force? Sixth Circuit: There’s no prior case that says so (nor is there one now), so qualified immunity. But her state law claims can proceed.
  • The City of Oakland sues Wells Fargo, alleging that the bank has a practice of issuing predatory loans to black and Latino residents, which violates the Fair Housing Act and has harmed the city by reducing property tax revenue and increasing city expenses (to deal with foreclosed properties). Ninth Circuit: The claim for damages based on reduced property tax revenue can go forward, but the city hasn’t plausibly alleged that the bank caused municipal expenses to go up.
  • Allegation: Kennesaw, Ga. pet store sells woman a puppy infected with parvovirus, a sometimes-lethal disease that the store certified the dog was free of. When she takes the dog to a store-affiliated vet, he provides no care, doesn’t inform her of its demise, and falsely claims not to have the body. Eleventh Circuit: Sorry, but the Racketeer Influenced and Corrupt Organizations Act doesn’t provide a cause of action here.
  • Mentally ill soldier deserts his post in Afghanistan in a misguided bid to trigger a search that he believed would end with him getting face-to-face time with a commanding general he wanted to address. Instead, he’s captured by the Taliban and spends several years in a small iron cage. Court of Appeals for the Armed Forces (over partial dissents): Public comments by President Trump and the late Senator McCain did not place an intolerable strain on the public’s perception of the fairness of his court martial (which resulted in a dishonorable discharge and $10k forfeiture).

Friends, did you know that Pennsylvania law requires applicants for cosmetology licenses to prove that they’re good people, yet barbers in the same salon don’t have to? That meant dozens of applicants with unrelated criminal records couldn’t get licensed, even though Pennsylvania teaches cosmetology in prisons. IJ thinks this distinction is absurd, and earlier this week, the Commonwealth Court of Pennsylvania agreed. This “good moral character” requirement violates Pennsylvania’s promise of equal protection, and the state can no longer enforce it. And as a part of wider legislative reform, good moral character requirements will soon be removed for other professions as well. It’s a two-part win for freedom in the Keystone State. Click here to read more.

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Antonin Scalia Law School’s Commitment to Open Dialogue and Debate

I am happy to share the Antonin Scalia Law School’s statement of principles concerning open dialogue and debate:

Commitment to Open Dialogue & Debate

In November 2019, the Dean appointed an ad hoc faculty committee on Classroom Dialogue and Debate. Based on the work of the committee, in August 2020, the faculty adopted the following Statement of Faculty Principles pertaining to respectful debate and the full and open exchange of ideas at the law school.

Statement of Faculty Principles

In light of the current state of dialogue and debate in this country, the faculty of the Antonin Scalia Law School hereby reaffirms our commitment to freedom of inquiry and freedom of speech for all members of our community.

Starting some years ago, many schools have promulgated official speech codes that seek to prevent students from expressing unpopular opinions. Thanks largely to the efforts of Scalia Law faculty, George Mason University as a whole has earned the highest rating for freedom of speech from the Foundation for Individual Rights in Education. We are proud of that accomplishment.

Recently, it has become far too common for colleges and universities to impose sanctions on faculty members whose research or public statements do not conform to the reigning climate of approved opinion. As pressures for conformity increase throughout our society, it is even becoming dangerous to show insufficient enthusiasm for certain causes and beliefs.

This faculty has always rejected the imposition of any political or ideological orthodoxy by us or on us. We recognize no hierarchy of authority in the world of ideas. Professors and students each have exactly the same right to express their opinions, to challenge views with which they disagree, and to participate as they see fit in the public life of the nation. They also have the same moral obligation to foster an atmosphere of civility and tolerance. The faculty strongly opposes efforts—whether from within our community or from outside—to pressure us or the school’s administration to engage in the repression of unpopular opinions, whether we as individuals agree or disagree with those opinions.

In the classroom, of course, there is necessarily an inequality between the instructor and the students. We think it is self-evident that professors should not use their authority in the service of political or ideological indoctrination. We also think it is self-evident that professors should not belittle or intimidate students who express views with which the instructor disagrees, or encourage students to belittle or intimidate their classmates.

Conversely, students should recognize that professors exercise a special authority in the classroom because they have special responsibilities and obligations. The faculty as a whole establishes the curriculum. Individual professors decide what will be studied in their courses, what topics will be discussed in class, and what questions will be dealt with in the limited time that is available. Students are welcome to express their own opinions about these matters, but the professors are responsible for the decisions, and they have an obligation to exercise their own judgment in making those decisions.

Students should also recognize that professors are not doing them a service when they treat our educational mission as a popularity contest. Several years ago, President Hannah Holborn Gray of the University of Chicago made the following observation:

Education should not be intended to make people comfortable, it is meant to make them think. Universities should be expected to provide the conditions within which hard thought, and therefore strong disagreement, independent judgment, and the questioning of stubborn assumptions, can flourish in an environment of the greatest freedom.

President Gray’s statement has important applications throughout any university, but her words are especially relevant to law schools. Effective legal training requires that students be challenged—by their instructors and by their classmates—to make well-reasoned arguments, often about topics that are controversial or personally painful. Lawyers are frequently compelled to grapple with issues that they would really prefer not to think about at all. Nobody enjoys having the shortcomings of their own arguments exposed, or being forced to acknowledge that serious arguments can be made in support of conclusions with which they strongly disagree. These experiences are not by any means the only components of legal education, but professors who focus on sparing their students from unpleasant disagreements are actually cheating them.

This faculty aspires to provide our students with a genuine education. We will therefore maintain our commitment to respectful debate and the full and open exchange of ideas. That commitment extends to our classrooms, to our scholarship, and to any other public discussions in which we choose to participate. As Daniel D. Polsby put it several years ago, when he was our Dean, “There has to be a place in the world where controversial ideas and points of view are aired out and given space. This is that place.”

More faculties should take such a principled stance on open dialogue and debate. I am proud of my alma matter.

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The Republican Convention’s Defense of Trump’s Trade War Fell Flat

sipaphotosten992084

It’s telling that one of the few speakers at this week’s Republican National Convention who directly addressed President Donald Trump’s trade policies ended up inadvertently undermining the White House’s case for protectionism.

The speaker was Debbie Flood, owner of the Melron Corporation, an architectural foundry and machine shop in Schofield, Wisconsin. “We really make things, and we love it,” Flood explained in pre-recorded remarks aired Thursday.

Flood’s speech followed a predictable line of argument. In the early part of the 21st century, as China became a global manufacturing force, she watched as orders dwindled away. “When we lost nearly 50 percent of our business to China,” she said, “we wonder how a small company like ours could continue to compete.” She accused Joe Biden of being indirectly responsible for the damage to her business, because he’d supported efforts to normalize trade with China and to bring China into the World Trade Organization in the 1990s, even though those actions “were hurting American companies like ours.”

This argument has been, essentially, the root of Trump’s economic nationalist agenda for the past four years. Trump believes that increased trade with China has been a losing prospect for the United States and that the political establishment has been complicit in letting China “continue stealing our jobs, ripping us off, and robbing our country blind,” as the president said in his acceptance speech later that night. He has erected new barriers to trade with China—though they’ve mostly been ineffective—and has promised to take even more aggressive action if re-elected.

Given all that, you’d expect Flood to tell us how Trump’s intervention in the global marketplace has saved her business, or at least allowed her to regain some of what she’d lost.

Instead, her story took an unexpected turn.

“We are tenacious and we’re creative,” she said. “We took a risk and purchased a 3D printer. 3D printing technology allows us to do things that China can’t. Now, we can take a customer’s idea from sketch to sample to production in just a few weeks. This opened up new opportunities for us.”

In short, Flood argued that increased competition from China forced her company to innovate, to invest in new technology, and to seek out new customers. Instead of making the case for protecting American businesses from overseas competition, she ended up essentially offering the opposite.

Flood’s brief remarks highlighted the economic and intellectual contradiction at the center of Trump’s “America First” economic strategy. The president and his supporters claim that our businesses are the most successful in the world and that our workers are the best to be found anywhere; then they immediately suggest that the only way American companies can survive is with expensive and expansive government protection.

In reality, outsourcing low-level manufacturing to other parts of the world has allowed American manufacturing to reach new heights. You wouldn’t know it from watching the Republican convention this week—or the Democratic convention last week, for that matter—but the United States is a global manufacturing powerhouse. The narrative about declining manufacturing jobs has been outdated for years.

American manufacturing has never been more valuable than it is now. America’s industrial production last year was 48 percent higher than in 1995, according to the Federal Reserve. The number of American manufacturing jobs bottomed out at 11.4 million in 2010, at the depths of the Great Recession in 2010. Jobs in that sector had grown by 12 percent since then, before sharply declining this year as the COVID-19 pandemic shuttered factories and disrupted supply chains.

Outsourcing low-end manufacturing has allowed America to focus on manufacturing more expensive goods while maintaining access to cheap consumer goods that are now mostly made elsewhere. That shift has had negative consequences for some individuals, but those human costs can be addressed without the large-scale reorientation of global supply chains envision by Trump and others on the right, such as Sen. Josh Hawley (R–Mo.).

Meanwhile, businesses can adapt to changing economic circumstances—as Flood’s did—better than governments can. Trump’s trade policies have had huge unintended (but not unexpected) consequences for the very American manufacturers that Trump believes he is helping. More than two years after his trade war with China began, the most obvious consequence has been increased costs for American businesses that make them less competitive in the global market.

Unfortunately, the president doesn’t seem to have learned his lesson. In his acceptance speech, Trump promised to wage his trade war even harder in his second term. If reelected, Trump said, he would seek to “provide tax credits to bring jobs out of China back to America.” He also threatened to “impose tariffs on any company that leaves America to produce jobs overseas.”

That, too, is telling. Tariffs are not imposed on specific companies or their products, but on whole categories of imported goods. If a company that builds widgets moves their widget factory to Denmark, for example, the president can’t put tariffs on that company’s widgets without also imposing tariffs on all other widgets imported into the United States from Denmark.

Trump sees tariffs as a magic wand that can accomplish anything he wants. In fact they are a dull sword—a relic that’s difficult to wield effectively and that cuts both ways. Unfortunately, the president doesn’t appear to be ready to put the sword down.

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Short Circuit: A Roundup of Recent Federal Court Decisions

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

Way back in 1983, in Bearden v. Georgia, the U.S. Supreme Court ruled that judges must inquire into defendants’ ability to pay before jailing them for not paying court-ordered fines and fees. The practice is widespread today, however, spreading misery and hardship among the least fortunate. (One guy we know calls Bearden the “25-hour speed limit” of constitutional law because no one follows it.) Please do click here for a look at model legislation that would codify Bearden and curtail the abuse of fines and fees.

New on the Short Circuit podcast: Can a city hold on to your car for three years for no reason? Plus, the costs of campaign finance disclosure.

  • Gitmo detainee, a tribal sheikh and Yemeni citizen, has been held without trial going on 16 years. A violation of the Due Process Clause? D.C. Circuit: Whether it’s “procedural” or “substantive” due process, the Clause does not apply to aliens detained outside the sovereign territory of the United States.
  • Connellsville, Penn. police accuse a woman of murder on the basis of bite-mark evidence and accusations from an ex-boyfriend and two inmates. But bite-mark evidence is not supported by science, the men’s statements conflict, and the ex-boyfriend recants on the stand. A judge dismisses the charges. Undeterred, the DA recharges her a few months later. She’s convicted and then exonerated after 11 years in prison. Third Circuit: The then-DA (now judge) is entitled to absolute immunity for approving the criminal complaint and to qualified immunity for directing police to investigate bite-mark evidence and sitting by while police engaged in a reckless investigation. Neither of the latter two had been clearly established as unconstitutional at the time of the investigation.
  • Following a sniper attack on a Pennsylvania State Troopers barracks, troopers learn of a man with a rifle walking down a highway 15 miles away. They identify him, arrest him on a Florida arrest warrant, and then charge him with another crime before dismissing the Florida charges. Man: A trooper fabricated evidence to support the Florida charge and my arrest, which violates the Fourth and Fourteenth Amendments. District court: It didn’t violate the Fourth Amendment. Third Circuit: And the Fourteenth Amendment doesn’t apply to an unlawful arrest claim before a court appearance. (Another man was later convicted of the sniper attack.)
  • Transgender high-school student challenges school policy that requires him to use the bathroom of his birth-assigned sex (female) or a private unisex bathroom. The student sues, alleging violations of Title IX and the Fourteenth Amendment. Fourth Circuit: “The proudest moments of the federal judiciary have been when we affirm the burgeoning values of our bright youth, rather than preserve the prejudices of the past.” Dissent: “The majority opinion devotes over 20 pages to its discussion of [the student’s] transgender status, both at a physical and psychological level. Yet, the mere fact that it felt necessary to do so reveals its effort to effect policy rather than simply apply law.”
  • Congress enacted the Anti-Riot Act in 1968, an era, observes the Fourth Circuit, “not unlike our own.” And while the law sweeps up substantial amounts of constitutionally protected speech, including advocacy intended to “promote” or “encourage” a riot, the unconstitutional provisions can be severed from the remainder—which, in turn, can permissibly be applied to two California residents who traveled through interstate commerce to attend the “Unite the Right” rally in Charlottesville.
  • Ronnie Wallace Long has spent the last 44 years in prison serving a life sentence for rape, a crime he insists he did not commit. But now it is undisputed that the state withheld evidence including: (1) evidence of lies by two police witnesses; (2) the disappearance of a rape kit; and (3) a “legion” of test results that did not implicate Long. Is Long entitled to habeas relief? Fourth Circuit (en banc): The trial court needs to hold a hearing on actual innocence ASAP. Concurrence: No need for that; no reasonable jury could have convicted if it’d known this evidence. Dissent: “[I]njustice may have occurred,” but it’s debatable, so habeas relief should be denied.
  • Allegation: After a chain of Texas liquor stores refuses to pay $8 mil to resolve violations allegedly uncovered during an investigation by the Texas Alcoholic Beverage Commission, the TABC sues, seeking cancelation of all 164 of the chain’s permits and $713 mil in civil penalties. An administrative law judge rules for the chain on all charges but one, for which he recommends a warning. The chain sues the TABC, and the district court, relying on a variety of immunity doctrines, dismisses the case. Fifth Circuit: Most of which were correct. But the court was wrong to dismiss claims based on the TABC’s alleged concealment of evidence, so back you go.
  • Because of the high cost of treatment for hepatitis C, Tennessee prison officials provide medication only for inmates with the most severe and advanced cases. Sixth Circuit: No doubt the best practice would be to treat every sick prisoner, but that is not always possible in the real world of limited resources. No violation here. Dissent: If prisons cannot afford to house inmates in conformity with the Constitution, those inmates should be released.
  • Protesters block Columbus, Ohio intersection for 45 minutes, begin to disperse after police pepper spray them. One protester lingers but then retreats, hunching over from the effects of the pepper spray. An officer allegedly puts a hand on her shoulder, stopping her briefly, and sprays her directly in the face. Excessive force? Sixth Circuit: There’s no prior case that says so (nor is there one now), so qualified immunity. But her state law claims can proceed.
  • The City of Oakland sues Wells Fargo, alleging that the bank has a practice of issuing predatory loans to black and Latino residents, which violates the Fair Housing Act and has harmed the city by reducing property tax revenue and increasing city expenses (to deal with foreclosed properties). Ninth Circuit: The claim for damages based on reduced property tax revenue can go forward, but the city hasn’t plausibly alleged that the bank caused municipal expenses to go up.
  • Allegation: Kennesaw, Ga. pet store sells woman a puppy infected with parvovirus, a sometimes-lethal disease that the store certified the dog was free of. When she takes the dog to a store-affiliated vet, he provides no care, doesn’t inform her of its demise, and falsely claims not to have the body. Eleventh Circuit: Sorry, but the Racketeer Influenced and Corrupt Organizations Act doesn’t provide a cause of action here.
  • Mentally ill soldier deserts his post in Afghanistan in a misguided bid to trigger a search that he believed would end with him getting face-to-face time with a commanding general he wanted to address. Instead, he’s captured by the Taliban and spends several years in a small iron cage. Court of Appeals for the Armed Forces (over partial dissents): Public comments by President Trump and the late Senator McCain did not place an intolerable strain on the public’s perception of the fairness of his court martial (which resulted in a dishonorable discharge and $10k forfeiture).

Friends, did you know that Pennsylvania law requires applicants for cosmetology licenses to prove that they’re good people, yet barbers in the same salon don’t have to? That meant dozens of applicants with unrelated criminal records couldn’t get licensed, even though Pennsylvania teaches cosmetology in prisons. IJ thinks this distinction is absurd, and earlier this week, the Commonwealth Court of Pennsylvania agreed. This “good moral character” requirement violates Pennsylvania’s promise of equal protection, and the state can no longer enforce it. And as a part of wider legislative reform, good moral character requirements will soon be removed for other professions as well. It’s a two-part win for freedom in the Keystone State. Click here to read more.

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Antonin Scalia Law School’s Commitment to Open Dialogue and Debate

I am happy to share the Antonin Scalia Law School’s statement of principles concerning open dialogue and debate:

Commitment to Open Dialogue & Debate

In November 2019, the Dean appointed an ad hoc faculty committee on Classroom Dialogue and Debate. Based on the work of the committee, in August 2020, the faculty adopted the following Statement of Faculty Principles pertaining to respectful debate and the full and open exchange of ideas at the law school.

Statement of Faculty Principles

In light of the current state of dialogue and debate in this country, the faculty of the Antonin Scalia Law School hereby reaffirms our commitment to freedom of inquiry and freedom of speech for all members of our community.

Starting some years ago, many schools have promulgated official speech codes that seek to prevent students from expressing unpopular opinions. Thanks largely to the efforts of Scalia Law faculty, George Mason University as a whole has earned the highest rating for freedom of speech from the Foundation for Individual Rights in Education. We are proud of that accomplishment.

Recently, it has become far too common for colleges and universities to impose sanctions on faculty members whose research or public statements do not conform to the reigning climate of approved opinion. As pressures for conformity increase throughout our society, it is even becoming dangerous to show insufficient enthusiasm for certain causes and beliefs.

This faculty has always rejected the imposition of any political or ideological orthodoxy by us or on us. We recognize no hierarchy of authority in the world of ideas. Professors and students each have exactly the same right to express their opinions, to challenge views with which they disagree, and to participate as they see fit in the public life of the nation. They also have the same moral obligation to foster an atmosphere of civility and tolerance. The faculty strongly opposes efforts—whether from within our community or from outside—to pressure us or the school’s administration to engage in the repression of unpopular opinions, whether we as individuals agree or disagree with those opinions.

In the classroom, of course, there is necessarily an inequality between the instructor and the students. We think it is self-evident that professors should not use their authority in the service of political or ideological indoctrination. We also think it is self-evident that professors should not belittle or intimidate students who express views with which the instructor disagrees, or encourage students to belittle or intimidate their classmates.

Conversely, students should recognize that professors exercise a special authority in the classroom because they have special responsibilities and obligations. The faculty as a whole establishes the curriculum. Individual professors decide what will be studied in their courses, what topics will be discussed in class, and what questions will be dealt with in the limited time that is available. Students are welcome to express their own opinions about these matters, but the professors are responsible for the decisions, and they have an obligation to exercise their own judgment in making those decisions.

Students should also recognize that professors are not doing them a service when they treat our educational mission as a popularity contest. Several years ago, President Hannah Holborn Gray of the University of Chicago made the following observation:

Education should not be intended to make people comfortable, it is meant to make them think. Universities should be expected to provide the conditions within which hard thought, and therefore strong disagreement, independent judgment, and the questioning of stubborn assumptions, can flourish in an environment of the greatest freedom.

President Gray’s statement has important applications throughout any university, but her words are especially relevant to law schools. Effective legal training requires that students be challenged—by their instructors and by their classmates—to make well-reasoned arguments, often about topics that are controversial or personally painful. Lawyers are frequently compelled to grapple with issues that they would really prefer not to think about at all. Nobody enjoys having the shortcomings of their own arguments exposed, or being forced to acknowledge that serious arguments can be made in support of conclusions with which they strongly disagree. These experiences are not by any means the only components of legal education, but professors who focus on sparing their students from unpleasant disagreements are actually cheating them.

This faculty aspires to provide our students with a genuine education. We will therefore maintain our commitment to respectful debate and the full and open exchange of ideas. That commitment extends to our classrooms, to our scholarship, and to any other public discussions in which we choose to participate. As Daniel D. Polsby put it several years ago, when he was our Dean, “There has to be a place in the world where controversial ideas and points of view are aired out and given space. This is that place.”

More faculties should take such a principled stance on open dialogue and debate. I am proud of my alma matter.

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The Republican Convention’s Defense of Trump’s Trade War Fell Flat

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It’s telling that one of the few speakers at this week’s Republican National Convention who directly addressed President Donald Trump’s trade policies ended up inadvertently undermining the White House’s case for protectionism.

The speaker was Debbie Flood, owner of the Melron Corporation, an architectural foundry and machine shop in Schofield, Wisconsin. “We really make things, and we love it,” Flood explained in pre-recorded remarks aired Thursday.

Flood’s speech followed a predictable line of argument. In the early part of the 21st century, as China became a global manufacturing force, she watched as orders dwindled away. “When we lost nearly 50 percent of our business to China,” she said, “we wonder how a small company like ours could continue to compete.” She accused Joe Biden of being indirectly responsible for the damage to her business, because he’d supported efforts to normalize trade with China and to bring China into the World Trade Organization in the 1990s, even though those actions “were hurting American companies like ours.”

This argument has been, essentially, the root of Trump’s economic nationalist agenda for the past four years. Trump believes that increased trade with China has been a losing prospect for the United States and that the political establishment has been complicit in letting China “continue stealing our jobs, ripping us off, and robbing our country blind,” as the president said in his acceptance speech later that night. He has erected new barriers to trade with China—though they’ve mostly been ineffective—and has promised to take even more aggressive action if re-elected.

Given all that, you’d expect Flood to tell us how Trump’s intervention in the global marketplace has saved her business, or at least allowed her to regain some of what she’d lost.

Instead, her story took an unexpected turn.

“We are tenacious and we’re creative,” she said. “We took a risk and purchased a 3D printer. 3D printing technology allows us to do things that China can’t. Now, we can take a customer’s idea from sketch to sample to production in just a few weeks. This opened up new opportunities for us.”

In short, Flood argued that increased competition from China forced her company to innovate, to invest in new technology, and to seek out new customers. Instead of making the case for protecting American businesses from overseas competition, she ended up essentially offering the opposite.

Flood’s brief remarks highlighted the economic and intellectual contradiction at the center of Trump’s “America First” economic strategy. The president and his supporters claim that our businesses are the most successful in the world and that our workers are the best to be found anywhere; then they immediately suggest that the only way American companies can survive is with expensive and expansive government protection.

In reality, outsourcing low-level manufacturing to other parts of the world has allowed American manufacturing to reach new heights. You wouldn’t know it from watching the Republican convention this week—or the Democratic convention last week, for that matter—but the United States is a global manufacturing powerhouse. The narrative about declining manufacturing jobs has been outdated for years.

American manufacturing has never been more valuable than it is now. America’s industrial production last year was 48 percent higher than in 1995, according to the Federal Reserve. The number of American manufacturing jobs bottomed out at 11.4 million in 2010, at the depths of the Great Recession in 2010. Jobs in that sector had grown by 12 percent since then, before sharply declining this year as the COVID-19 pandemic shuttered factories and disrupted supply chains.

Outsourcing low-end manufacturing has allowed America to focus on manufacturing more expensive goods while maintaining access to cheap consumer goods that are now mostly made elsewhere. That shift has had negative consequences for some individuals, but those human costs can be addressed without the large-scale reorientation of global supply chains envision by Trump and others on the right, such as Sen. Josh Hawley (R–Mo.).

Meanwhile, businesses can adapt to changing economic circumstances—as Flood’s did—better than governments can. Trump’s trade policies have had huge unintended (but not unexpected) consequences for the very American manufacturers that Trump believes he is helping. More than two years after his trade war with China began, the most obvious consequence has been increased costs for American businesses that make them less competitive in the global market.

Unfortunately, the president doesn’t seem to have learned his lesson. In his acceptance speech, Trump promised to wage his trade war even harder in his second term. If reelected, Trump said, he would seek to “provide tax credits to bring jobs out of China back to America.” He also threatened to “impose tariffs on any company that leaves America to produce jobs overseas.”

That, too, is telling. Tariffs are not imposed on specific companies or their products, but on whole categories of imported goods. If a company that builds widgets moves their widget factory to Denmark, for example, the president can’t put tariffs on that company’s widgets without also imposing tariffs on all other widgets imported into the United States from Denmark.

Trump sees tariffs as a magic wand that can accomplish anything he wants. In fact they are a dull sword—a relic that’s difficult to wield effectively and that cuts both ways. Unfortunately, the president doesn’t appear to be ready to put the sword down.

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