Shippers’ Revenge Is Coming For Truckload Carriers

Shippers’ Revenge Is Coming For Truckload Carriers

By Craig Fuller, CEO of FreightWaves

The freight market is a pendulum — and when it swings, it may be the buyers or sellers of capacity that now have the power in rate negotiations. Ever since the summer of 2020, trucking companies have largely held all of the power in rate negotiations, based on their ability to squeeze their shipper customers for rate premiums. 

If the trucking firms didn’t get a rate increase in a contract rate negotiation, they would simply move the capacity to the spot market to exploit market conditions and much higher spot rates. And whether these negotiations are made through direct confrontation or in a passive- aggressive manner through tender rejections, the outcome is largely the same. 

Along the way, carrier executives convinced themselves that the freight market was “different this time” and their ability to have pricing power would remain in place indefinitely.

In the world of trucking, the market has two parties — a buyer and seller. While a buyer of capacity can be a broker that plays the role of both the buyer and seller, in every trucking transaction, you have a carrier (seller) and shipper (buyer) of capacity.

Over the past two years, not all trucking companies exploited market conditions; many of the more seasoned players understood that the pricing power pendulum was temporary and would eventually revert back to give power to the shippers. 

But, for those carriers that did exploit market conditions for their favor, get ready for “shippers’ revenge.”

A truck being loaded at a dock. (Photo: Shutterstock)

The freight market pendulum

Trucking companies gain all of their pricing power when capacity in a market is tight. If there is more freight demand than capacity to service loads offered, trucking companies are able to leverage this for freight rate concessions. Often, it works. 

Last year, shippers faced unprecedented challenges trying to move massive volumes of cargo through their supply chains, disruptions due to raw material and component shortages, runaway inflation, and labor shortages. At the same time, everyone living through COVID has experienced an enormous amount of personal pressure and home-life challenges. 

Trucking executives have also faced many of their own challenges and would be rightfully cynical about the plight of a supply chain executive who wasn’t able to empathize with their challenges. 

But people that control supply chains are humans. They have egos and frustrations like everyone else. CFOs at shipper organizations have been putting pressure on supply chain executives to tackle inflationary cost acceleration throughout their operations.

And if the past few months have been any indication, the market pendulum has quickly shifted back in favor of the shippers. 

This is most obvious in truckload spot rates, which have collapsed since the start of the year. The National Truckload Index, available on SONAR, which tracks U.S. truckload spot rates on a daily basis, is reporting that the current spot rate for a truckload is down from $3.57/mile at the start of the year to $2.67/mile — a 25% reduction. Remove the price of diesel from the rate and the drop is even more dramatic, dropping from $2.99/mile to $1.89/mile — or a 37% reduction. 

Spot rates are far more responsive to market conditions than contract rates, but following the Waterfall Theory of Freight and how tender rejection rates provide a reliable barometer for truckload capacity, we know that capacity is rapidly loosening and carriers are being less selective in which contracted loads they will accept. 

SONAR’s outbound tender rejection index is now down to 5.43%, a new cycle low. Tender rejections haven’t been this low since May 24, 2020, in the earliest days of the COVID economy. Normally, when tender rejections drop, contract rates follow.

However, in this cycle, contract rates have dropped much more slowly than spot rates or tender rejections would suggest. 

SONAR’s van contract rate index, which is derived as the national average contract rate from over $40 billion of actual contracted loads between shippers and carriers, is currently at $2.74/mile, down from a high of $2.98/mile set on June 3, 2022. The drop of $0.24/mile represents a 9% drop in two months — and reverses all of the contracted rate increases that carriers gained in the first half of 2022. 

Shippers took a “wait and see” approach to contract rates, but that is over

Shippers were initially reluctant to renegotiate contract rates out of fear that they would lose capacity in the event of a capacity crunch. There was plenty of news for shippers to worry about and some analysts and market commentators warned that the drop in freight volume was either a temporary blip or a misreading of data.

Warnings about port strikes, rail strikes, labor shortages and a potential “tsunami of containers” as China reopened made every supply chain executive nervous about losing capacity. After all, not having capacity is far worse than paying more for it. Moreover, carriers reminded shippers that a pull-back in their commitments or rates would mean that carriers would reject any load tenders from that shipper.

But none of the warnings actually played out.

The railroads got back to work and settled their disputes, the West Coast ports have continued to operate unabated, and container imports bound for the U.S. actually dropped once China reopened. Furthermore, the U.S. goods economy also pulled back as consumers slowed their consumption of goods after facing record inflation and a post-COVID shift toward services.

Port of Long Beach Container Terminal. (Photo: Jim Allen/FreightWaves)

The Federal Reserve, hell-bent on taming inflation that it largely caused, has focused almost singularly on smothering demand in an effort to control out-of-hand price hikes. There is no market that has felt the pain more than consumer discretionary purchases, which have an outsized role in driving the U.S. trucking economy.

Basically, for all of the warnings of rough waters ahead, supply chain professionals are navigating increasingly stable conditions. The storm had passed — and that fact has become glaringly apparent.

In fact, hope for a fourth quarter peak surge seems very unlikely, if you believe that import volume data is a reliable indicator of future truckload demand.

The Daily Watch, a morning email that is sent by FreightWaves to all current SONAR subscribers, reported that the ports of Los Angeles/Long Beach are seeing the lowest weekly maritime import shipments since 2020. The note states:

“Using SONAR’s WCSTM tickers, we monitor U.S. maritime imports coming into a trucking market for a given week. By this measure, the Los Angeles trucking market (WCSTM.LAX — measures all U.S. ports within that trucking market — in this case, including Los Angeles and Long Beach) saw the lowest weekly total for maritime import shipments since June 2020. While Los Angeles and Long Beach (LAX/LGB) have both kept a steady stream of import volumes through the first seven months of 2022, the weakness in aggregate U.S. import demand is finally beginning to materialize at these ports as well. Other U.S. West Coast ports such as Oakland and the Northwest Seaport Alliance (Seattle/Tacoma) have been posting significant year-over-year (y/y) declines in maritime import volumes for the past two months. Now, LAX/LGB will be joining the downward trend in significant y/y declines. This does not bode well for surface-side transportation markets, in which the ports of LAX/LGB feed a massive amount of demand from U.S. imports from overseas. July 2022 was likely the last month that the Port of Los Angeles will publish any y/y gains in loaded imports for the foreseeable future.”

Shippers, recognizing that the market is “out of the woods” will seek revenge on carriers that sought record increases or didn’t service their loads over the past two years.

With shippers realizing that a repeat of the 2021 capacity crunch is unlikely, they will go out and try to claw back as much as possible of the rate increases that they offered carriers over the past year. Carriers will find it incredibly difficult to withstand this pressure, as rejecting a decrease in contract rates will likely mean that a competitor will haul the freight at the newly negotiated price.

Freight brokers we’ve spoken with have suggested that this is part of their strategy. In essence, they seek to pick off the freight that truckload carriers have under contract, undercutting the rates by more than 30%. As long as the broker can service the load consistently and there isn’t a threat of an imminent service failure, the broker can hold onto the freight, albeit at the reduced price.

For the winning broker and shipper, it is a win/win, but for the incumbent carrier, it will end up losing.

Trucks use highways to move America’s goods. (Photo: Jim Allen/FreightWaves)

Contract rates will continue to fall and could easily drop to $2.25/mile

A few months ago, the controversy in the trucking market was whether the freight market was in a recession or if it was a short-term blip. It is pretty clear that the recession camp has won and the market fundamentals will continue to be challenging.

Now the question is how far back could contract rates revert before we see a bottom? While it is incredibly hard to predict exact numbers, FreightWaves does have some historical data to draw from.

We can point to the spread indices inside of SONAR, which measure the difference between the current contract and spot trucking rates. The indices tend to stay within a tight range, largely because contract and spot inevitably follow one another. This is  due to the fact that spot and contract capacity tends to be fungible between the two markets.

RATES12.USA, a SONAR index that measures the spread of contract and spot with a $1.20 fuel-surcharge base, is currently at $0.65/mile. Pre-COVID, the average was $0.24/mile.

If the index reverts back to normal patterns, contract rates will settle back to $2.25/mile before fuel surcharges.

This additional 20% drop would still put the truckload contract rates well above pre-COVID levels — but well off the highs.

Trucking carriers will cry foul, threatening that it is likely to put them out of business since they’ve had to eat massive cost increases over the past two years.

But the market doesn’t care; it only worries about the laws of supply and demand. However, for some shippers, the past two years have felt personal and now it’s their chance to get revenge.

Tyler Durden
Thu, 09/01/2022 – 15:19

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Zelensky Renting Beachside Mansion Sparks Italian Media Frenzy

Zelensky Renting Beachside Mansion Sparks Italian Media Frenzy

A new controversy in Italian media is the story that Ukrainian President Volodymyr Zelensky’s alleged mansion in Italy was rented to a Russian couple for a staggering 50 thousand euros in August. 

On Aug. 31, centered on the front page of the Italian newspaper Il Tirreno,” is the title “Zelensky affitta a russi” (translated into English: “Zelensky Rent To Russians”). A picture of the luxury villa was also featured on the front page. 

The villa in Forte dei Marmi, a seaside town in Tuscany, is said to be owned by “an Italian company that belongs to another in Cyprus, and belongs to Zelensky’s wife,” according to la Repubblica

La Repubblica noted a media frenzy has erupted over reports of an “alleged Russian couple who would have rented the villa of the Ukrainian leader.” 

“The news of the alleged Russian couple who would have rented the villa of the Ukrainian leader, had been circulating for a few days in Versilia and was reported by the Tyrrhenian, who writes about some photos that appeared on social media portraying a Russian tourist in the park of the villa, in Vittoria Apuana.”

Remember, in the early days of the Russian invasion of Ukraine, Zelensky urged Italy to stop Russian oligarchs from using the country as a safe haven. 

“Almost all of them use Italy as a place for vacation. So don’t be a resort for murderers,” the Ukrainian president said in March. 

Zelensky recently convinced Europe to suspend the 2007 visa facilitation agreement with Moscow to curb Russian tourist inflows entering the bloc.

La Repubblica quoted the mayor of the town who said this about the mansion:

“We did not have any news and frankly until the outbreak of the war, the only information we had about the villa, which is located in the Villa Apuana area, is that it was owned by a company, among other things, it has always been rarely inhabited.” 

Meanwhile, there were denials that Russians stayed in Zelensky’s alleged mansion:

“There were no Russians or Ukrainians in the villa of the President of Ukraine Volodymyr Zelensky”. The real estate agent of Real Estate Forte dei Marmi Villas speaks, Claudio Salvini, who denies the rumors: “What has been written is a conjecture. The villa was rented to a couple for the summer, I won’t tell you if they reside in London or not, but I assure you it can’t be Russians because we are absolutely forbidden to rent to Russians and Ukrainians “Salvini stresses. — la Repubblica

People have protested in front of the villa, holding signs that read: “Stop the weapons to the war comedian (Zelensky).” 

Even state media chimes in on the controversy. 

We doubt US mainstream media will cover this — or perhaps if they do – there will only be denials. 

Tyler Durden
Thu, 09/01/2022 – 15:00

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Is China Using Cyberattacks To Maintain Its Rare Earth Dominance?

Is China Using Cyberattacks To Maintain Its Rare Earth Dominance?

Via Ag Metal Miner,

  • China currently controls as much as 80% of the global rare earth supply.

  • As more firms aim to chip away at China’s dominance, there are growing suspicions that the CCP is using cyberattacks against rare earth companies to maintain its influence.

  • US cybersecurity firm Mandiant and Albert Zhang, a researcher at the Australian Strategic Policy Institute, both allege these attacks were China’s deliberate attempt to block President Joe Biden’s efforts to build a critical minerals industry in the US.

For the longest time, the world relied solely on China for its supply of rare earths. Now, it seems that most countries have woken up to the “rare earths reality.” That is, we are starting to understand how important these elements are for vital sectors like defense as well as for products we use every day, like cars. Moreover, we’re starting to realize that we can’t let one single nation control the entire supply chain.

This changing attitude has encouraged many countries, including the US, to start tapering their reliance on China for critical metals and minerals. However, it’s possible this shift has not gone over well with the Chinese government. This is particularly evident given the growing number of cyber attacks on rare earth producers of late.

The most recent example targeted Australia’s Lynas Rare Earths Ltd. According to reports, the company fell victim to a series of cyber attacks from social media accounts potentially linked to the Chinese Communist Party. A few months prior, US cybersecurity firm Mandiant alleged that Chinese government-funded programs were spreading disinformation. This time, the target of their ire was Canadian rare earths miner Appia Rare Earths & Uranium Corp.

Why Attack Rare Earths Firms?

Experts believe that China simply doesn’t want any other country to develop rare earth production capabilities. After all, their success would quickly erode China’s position as the world’s largest rare earths miner. Therefore, these cyber attacks are likely a way of destabilizing the investment plans of Western companies in the field.  

This isn’t the only strategy at work. For instance, earlier this year, China announced it was setting up a new state-owned enterprise, China Rare Earth Group. This new organization will control 60-70% of the country’s rare earth production, which amounts to 30-40% of the global supply.

It represents the next logical step in the country’s market domination. Even back in the early 2000s, Chinese state-owned companies were already investing billions in foreign nations to secure long-term supplies of critical minerals.

Lynas, the victim of the latest cyber attack, is actually the world’s largest producer of rare earths outside China. It already has an operating processing plant in Malaysia and is constructing multiple other facilities in the US and Australia. In fact, reports indicate the recent attack largely focused on this upcoming US plant. Indeed, the same bot campaign against Lynas, known as “Dragonbridge,” was also identified by Mandiant.

Are We Witnessing the Beginning of a New Commodities Strategy?

The real question at hand: will this become the “new normal” for non-Chinese rare earths companies? According to Albert Zhang, a researcher at the Australian Strategic Policy Institute, these attacks are just the beginning. In fact, both Zhang and Mandiant claim these attacks were China’s deliberate attempt to block President Joe Biden’s efforts to build a critical minerals industry in the US.

Rare earths are important because of their use in a range of high-tech, green technology, and military applications. Given the current growth rate of these sectors, there’s no denying these minerals will become more important. Right now, the US Geological Survey estimates that China controls about 80% of the rare earths industry, which certainly gives them a lot to lose.

As Canada, Australia, and the US make efforts to establish their own supplies, China may retaliate in any number of ways. In fact, corporate sabotage may already be on the table. We’ll have to wait to see what else the CCP has up its sleeve.

Tyler Durden
Thu, 09/01/2022 – 14:40

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BofA Launches Zero-Down Mortgages… But Only For Black And Latino Neighborhoods

BofA Launches Zero-Down Mortgages… But Only For Black And Latino Neighborhoods

With mortgage rates about to crack 6%, the housing market rolling over, and mortgage apps collapsing as even Blackstone halts home purchases, Bank of America has found a new bagholder to keep the party going: blacks and latinos.

In a move which has sparked outrage over ‘discriminatory’ preferential treatment – BofA will be offering zero-down payment mortgages with no closing costs or minimum credit scores to first-time home buyers in Black and Hispanic neighborhoods in Dallas, Detroit, Los Angeles, Miami and Charlotte, North Carolina, Bloomberg reports.

Applicants won’t have to disclose their race, as the bank will use US Census data to determine which neighborhoods are predominately black or hispanic. The program will have no minimum or maximum loan size for the new offering, which qualifies as a FDIC “special purpose credit program.”

Those who apply for the loans will be considered based on nontraditional factors such as reliable payment of rent, utilities, cell phones and auto-insurance, the company said in a Tuesday statement.

According to AJ Barkley, head of neighborhood and community lending at BofA, the program will ditch credit scores so that “people can use other mechanisms to define their creditworthiness, buy a home and build their wealth” (for various values of ‘building wealth’, we assume).

BofA says the pilot program, called the Community Affordable Loan Solution, will “help make the dream of sustained homeownership attainable for more Black and Hispanic families, and it is part of our broader commitment to the communities that we serve.”

And what happens when all these houses are underwater amid a deteriorating economic backdrop and even higher interest rates? For starters, BofA is giving the borrowers $10,000 to $15,000 so they have ‘immediate equity in their homes.

While no-down-payment mortgages potentially make it easier for lower-income borrowers to buy homes, they’re not without risks. If the housing market were to slump, homeowners without a significant amount of equity may have little incentive to keep paying their mortgages, hurting their credit scores and sticking lenders with foreclosed homes. Under the BofA program, the lender is giving homebuyers down-payment grants of $10,000 to $15,000 so they have immediate equity in their homes. -Bloomberg

In order to qualify, first time home buyers need to obtain certification from the US Department of Housing and Urban Development and counseling, according to Barkey.

“We will qualify applicants to confirm they have demonstrated an ability to repay,” she said, adding “What we don’t want to do with this program is place people in homes they cannot stay in.”

Tyler Durden
Thu, 09/01/2022 – 14:20

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Sam’s Club Raising Annual Membership Fees

Sam’s Club Raising Annual Membership Fees

By Marieanne Wilson of Chain Store Age

Annual membership fees at Sam’s Club are about to cost consumers a little bit more…

The Walmart-owned warehouse club retailer will raise its annual fees this fall.  Beginning on Oct. 15, the fee will increase from $45 to $50 for club members and from $100 to $11o for members of its higher level “Plus” program, which offers extra perks such as free shipping.

It is the first time in nine years that Sam’s Club has raised its annual entry-level membership fee and is the first hike in the “Plus” fee since the program was  introduced in 1999.  Costco Wholesale Corp., whose basic membership fee rings in at $60 and its higher-level Gold fee at $120,  last  increated its fee in 2017. 

In a letter to Sam’s Club members, president and CEO Kath McLay, acknowledged the inflation pressures that shoppers face, saying: “We are mindful of the financial pressure on wallets right now.”

As a result, the retailer will basically take care of the extra fee for renewal memberships this year. It will give $5 in Sam’s Cash to regular club members and $10 in the same to Plus” customers, as a one-time offer, in digital cash shortly after membership renewals this year.

Sam’s Club, which operates nearly 600 stores across the U.S. and in Puerto Rico, has been on a roll as consumers search out bulk items for deals.  In Walmart’s most recent second quarter,  Sam’s same-store sales rose 9.5%  compared to 6.5% growth at Walmart U.S.

In a CNBC report, Sam’s Club chief member and marketing officer Ciara Anfield said that Sam’s decided to make the move because of investments it has made in recent years, ranging from bringing in new upgraded brands to adding new and convenient ways for consumers to shop. The company has also given its private label Member’s Mark a makeover.

“There’s an expectation that after you invest in this home, it will be worth more,” Anfield said. “We’ve made investments and we believe our proposition, our membership is now worth more.”

Tyler Durden
Thu, 09/01/2022 – 14:01

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These Emails Show How the Biden Administration’s Crusade Against ‘Misinformation’ Imposes Censorship by Proxy


Surgeon General Vivek Murthy

On July 16, 2021, the day that Joe Biden accused Facebook of “killing people” by failing to suppress misinformation about COVID-19 vaccines, a senior executive at the social media platform’s parent company emailed Surgeon General Vivek Murthy in an effort to assuage the president’s anger. “Reaching out after what has transpired over the past few days following the publication of the misinformation advisory, and culminating today in the President’s remarks about us,” the Meta executive wrote. “I know our teams met today to better understand the scope of what the White House expects from us on misinformation going forward.”

Murthy had just published an advisory in which he demanded a “whole-of-society” effort to combat the “urgent threat to public health” posed by “health misinformation,” possibly including “appropriate legal and regulatory measures.” Biden’s homicide charge came the next day, and Meta was keen to address the president’s concerns by cracking down on speech that offended him.

The email, which was recently disclosed during discovery in a federal lawsuit that Louisiana Attorney General Jeff Landry and Missouri Attorney General Eric Schmitt filed in May, vividly illustrates how the Biden administration engages in censorship by proxy, pressuring social media platforms to implement speech restrictions that would be flagrantly unconstitutional if the government tried to impose them directly. Landry and Schmitt, both Republicans, argue that such pressure violates the First Amendment.

“Having threatened and cajoled social-media platforms for years to censor viewpoints and speakers disfavored by the Left,” the lawsuit says, “senior government officials in the Executive Branch have moved into a phase of open collusion with social-media companies to suppress disfavored speakers, viewpoints, and content on social media platforms under the Orwellian guise of halting so-called ‘disinformation,’ ‘misinformation,’ and ‘malinformation.’…As a direct result of these actions, there has been an unprecedented rise in censorship and suppression of free speech—including core political speech—on social-media platforms.”

Landry and Schmitt reiterate that point in a “joint statement of discovery disputes” they filed yesterday in the U.S. District Court for the Western District of Louisiana. “Under the First Amendment, the federal Government should have no role in policing private speech or picking winners and losers in the marketplace of ideas,” they say. “But that is what federal officials are doing, on a massive scale—a scale whose full scope and impact [are] yet to be determined.”

So far, Schmitt reports, documents produced by the government in response to a court order have identified 45 federal officials who “communicate with social media platforms about ‘misinformation’ and censorship.” Schmitt and Landry think many other officials are involved in “a vast ‘Censorship Enterprise’ across a multitude of federal agencies,” and they are seeking additional documents to confirm that suspicion.

In response to inquiries, Landry and Schmitt say, “Facebook and Instagram identified 32 federal officials, including eight current and former White House officials,” who have contacted them regarding “misinformation and censorship of social-media content.” YouTube “identified 11 federal officials, including five current and former White House officials,” while Twitter “identified nine federal officials, including at least one White House official.”

Judging from the examples that Schmitt cites, the tenor of these communications has been cordial and collaborative. The social media companies are at pains to show that they share the government’s goals, which is precisely the problem. Given the broad powers that the federal government has to make life difficult for these businesses through public criticism, litigation, regulation, and legislation, the Biden administration’s “asks” for stricter moderation are tantamount to commands. The administration expects obsequious compliance, and that is what it gets.

“Thanks again for taking the time to meet earlier today,” the Meta executive says in a July 23, 2021, email to Murthy. “I wanted to make sure you saw the steps we took just this past week to adjust policies on what we are removing with respect to misinformation, as well as steps taken to further address the ‘disinfo dozen.'” The executive brags that Meta has removed objectionable pages, groups, and Instagram accounts; taken steps to make several pages and profiles “more difficult to find on our platform”; and “expanded the group of false claims that we remove to keep up with recent trends.”

Twitter also was eager to fall in line. “I’m looking forward to setting up regular chats,” says an April 8, 2021, message from Twitter to the Centers for Disease Control and Prevention (CDC). “My team has asked for examples of problematic content so we can examine trends. All examples of misinformation are helpful, but in particular, if you have any examples of fraud—such as fraudulent covid cures, fraudulent vaccine cards, etc, that would be very helpful.”

Twitter responded swiftly to the government’s censorship suggestions. “Thanks so much for this,” a Twitter official says in an April 16, 2021, email to the CDC. “We actioned (by labeling or removing) the Tweets in violation of our Rules.” The message, which is headed “Request for problem accounts,” is signed with “warmest” regards.

Twitter’s desperation to please the Biden administration went beyond deleting specific messages. Landry and Schmitt note “internal Twitter communications” indicating that senior White House officials “specifically pressured Twitter to deplatform” anti-vaccine writer Alex Berenson, “which Twitter did.” In an April 16, 2021, email about a “Twitter VaccineMisinfo Briefing” on Zoom, Deputy Assistant to the President Rob Flaherty tells colleagues that Twitter will inform “White House staff” about “the tangible effects seen from recent policy changes, what interventions are currently being implemented in addition to previous policy changes, and ways the White House (and our COVID experts) can partner in product work.”

Like Twitter, Facebook was thirsty for government guidance. In a July 28, 2021, email to the CDC headed “FB Misinformation Claims_Help Debunking,” a Facebook official says, “I have been talking about in addition to our weekly meetings, doing a monthly disinfo/debunking meeting, with maybe claim topics communicated a few days prior so that you can bring in the matching experts and chat casually for 30 minutes or so. Is that something you’d be interested in?” The CDC’s response is enthusiastic: “Yes, we would love to do that.”

The communications uncovered so far mainly involved anti-vaccine messages, many of which are verifiably false. But Americans have a First Amendment right to express their opinions, no matter how misguided or ill-informed. That does not mean social media platforms are obligated to host those opinions. To the contrary, they have a First Amendment right to exercise editorial discretion. But that’s not what is really happening when their decisions are shaped by implicit or explicit threats from the government. Notwithstanding all the friendly words, Facebook et al. have strong incentives to cooperate with a government that otherwise might punish them in various ways.

Ostensibly, the Biden administration is merely asking social media companies to enforce their own rules. But those rules are open to interpretation, and the government is encouraging the companies to read them more broadly than they otherwise might.

Maybe Twitter would have banished Alex Berenson even if White House officials had not intervened, but maybe not. Multiply that question across the myriad moderation decisions that social media platforms make every day, and you have a situation where it is increasingly difficult to tell whether they are exercising independent judgment or taking orders from the government.

“Although a ‘private entity is not ordinarily constrained by the First Amendment,'” Supreme Court Justice Clarence Thomas noted in a 2021 concurrence, “it is if the government coerces or induces it to take action the government itself would not be permitted to do, such as censor expression of a lawful viewpoint….The government cannot accomplish through threats of adverse government action what the Constitution prohibits it from doing directly.” That is the gist of the argument that Landry and Schmitt are making in their lawsuit.

The danger posed by the Biden administration’s creepy crusade against “misinformation” is magnified by its broad definition of that concept, which encompasses speech that the government deems “misleading,” even when it is arguably or demonstrably true. “Claims can be highly misleading and harmful even if the science on an issue isn’t yet settled,” Murthy says, and “what counts as misinformation can change over time with new evidence and scientific consensus.”

In other words, the “scientific consensus,” however Murthy defines it, can be wrong, as illustrated by the federal government’s ever-evolving advice about the utility of face masks in preventing COVID-19 transmission. The CDC initially dismissed the value of general masking, then embraced it as “the most important, powerful public health tool we have.” More recently, it has conceded that commonly used cloth masks do little, if anything, to stop coronavirus transmission.

“Twitter’s ‘COVID-19 misleading information policy,’ as of December 2021, noted that Twitter will censor (label or remove) speech claiming that ‘face masks…do not work to reduce transmission or to protect against COVID-19,'” Schmitt says. “Other platforms had similar policies. Both Senator Rand Paul and Florida Governor Ron DeSantis were censored by Youtube for questioning the efficacy of masks.” Twitter even removed a mask-skeptical tweet by Scott Atlas, a member of the Trump administration’s coronavirus task force. But “now,” Schmitt says, “a growing body of science shows that masks, especially cloth masks, are ineffective at stopping the spread of COVID-19, and can impose negative impacts on children.”

Landry and Schmitt’s lawsuit also notes Twitter’s blocking of the New York Post‘s story about Hunter Biden’s laptop, which was deemed “disinformation” prior to the 2020 presidential election but turned out to be accurate. Social media companies have made similarly questionable decisions regarding discussion of the COVID-19 “lab leak” theory, which remains contested but has not been disproven.

Even acting on their own, social media platforms are bound to make bad calls. But  when the government demands that they all hew to an officially recognized “consensus,” the threat to free inquiry and open debate is far graver.

The post These Emails Show How the Biden Administration's Crusade Against 'Misinformation' Imposes Censorship by Proxy appeared first on Reason.com.

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California Legislators Vote To Keep Diablo Canyon Nuclear Plant Running


aerial view of Diablo Canyon nuclear plant

In the face of impending power blackouts, the California State Assembly and Senate did abrupt turns toward sanity and voted to extend the operating life of the Diablo Canyon nuclear power plant. “This is a victory of pro-civilization values, including love of humanity and reason, over the forces of pro-scarcity nihilism,” tweeted Michael Shellenberger, founder of the pro-nuclear power activist group Environmental Progress.

Due to pressure from anti-nuclear activists, California’s Public Utility Commission voted 5-0 in 2018 to shut down both of the Diablo Canyon reactors by 2025. The new legislation reverses this ill-advised decision and extends their operating life by at least another five years. The Diablo Canyon reactors generate enough electricity to supply power for 3 million of the Golden State’s 13 million households.

Growing dependence on unreliable wind and solar power generation led not only to rolling blackouts in California in 2020 but also increased the price of electricity for California’s consumers. Shutting down Diablo Canyon’s reactors is counterproductive for those people who are concerned about the effects of greenhouse gas emissions on climate change. A point made, according to the New York Times, by Democratic Sen. Dianne Feinstein in a letter sent to California state legislators: “The alternative to the closure of the reactors at Diablo Canyon will most likely be additional natural gas generation, which would reverse progress on emissions reductions and worsen air quality,” she wrote.

This consideration was apparently lost on numerous other politicians who supported the closure of nuclear power plants in their states. These include New York’s Democratic Gov. Andrew Cuomo (Indian Point 2021), Massachusetts’ former Democratic Gov. Michael Dukakis and Democratic Sen. Ed Markey (Pilgrim 2019), and Vermont’s Democratic Gov. Peter Shumlin (Vermont Yankee 2014). The closure of these nuclear power plants has not surprisingly resulted in an increase in greenhouse emissions in those states.

More broadly, subsidized wind and solar power along with the advent of cheap fracked natural gas have made it hard for the ridiculously overregulated nuclear power industry to compete. Recognizing that both nuclear and renewable generation does not emit greenhouse gases, some states have adopted zero emissions credits to subsidize nuclear power generation as a way to level the playing field by countering the renewable energy credits their wind and solar power competitors receive. But as I argued back in 2016:

If man-made global warming is a problem, it is self-defeatingly idiotic for environmentalists to oppose nuclear power, a safe and reliable source of climate-friendly electricity. I just wish the nuke boosters would aim to roll back restrictions rather than adding yet more subsidies to the marketplace.

Shellenberger also makes the obvious point that if most electricity is generated using safe, reliable, climate-friendly nuclear power, there is no reason for a massive build-out of renewable power generation. As he savors the Diablo Canyon victory, Shellenberger observes, “We still have a lot of nuclear plants to save, and we have many, many more to build. This is the work of many lifetimes.”

The post California Legislators Vote To Keep Diablo Canyon Nuclear Plant Running appeared first on Reason.com.

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California Wants Everybody To Buy an Electric Car, but Its Own Energy Grid Can’t Support It


Electric car recharging

A massive heatwave has come to California, so citizens of the Golden State may be enduring triple-digit temperatures for a week. The pressure the heat will throw onto the state’s power grid has prompted an emergency call for citizens to reduce electricity use during peak early evening hours. Democratic Gov. Gavin Newsom has declared a state of emergency that temporarily eases some state regulations limiting operations of thermal power plants and portable generators.

Part of this call for citizens to reduce electricity consumption from 4 p.m. to 9 p.m. also includes a request that citizens “avoid charging electric vehicles while the Flex Alert is in effect.” This request comes only a week after California leaders moved forward with a plan to ban most gasoline-powered vehicle sales in the state (with an exception for hybrid vehicles) by 2035.

Though it is true that such a ban will reduce emissions, switching to electric vehicles will over time dramatically increase the strain on California’s power grid. If everybody in California went out and bought electric vehicles tomorrow, it would probably be an energy disaster.

That’s probably not going to happen for a few reasons. California solely plans to ban sales, not all operation of gasoline-powered cars. Millions of Californians won’t and probably can’t afford to transition to electric vehicles within the next 13 years. Though California has the most electric vehicles registered of any state (550,000), that’s out of more than 14 million total vehicles, so still a drop in the bucket.

In that sense, the slow-but-steady adoption of electric vehicles should give the state the opportunity to actually plan for an increase in energy demand. On Wednesday, lawmakers voted to keep the nuclear power plant, Diablo Canyon, open until at least 2030. It had been scheduled to be decommissioned by 2025.

A 2017 report from the California Energy Commission which forecasted energy demand until 2030 did so by assuming an increase in adoption of electric vehicles in the state. Their highest estimate assumes 3.9 million of these vehicles on the road in California by 2030. The increase in electricity demand would thus be significant, jumping from less than 1,000 gigawatt hours in 2017 to about 16,000 by 2030. California consumes about 260 terawatt hours of electricity annually, according to U.S. Department of Energy statistics. It would be an increase in energy demand of around 6 percent per year by 2030.

A single nuclear plant could handle a good chunk of this new demand, but the amount of energy generated would still be far less than needed to achieve California’s long-term goal of getting rid of gas-powered vehicles entirely and switching to electric.

The government shouldn’t be forcing people to purchase—or abstain from purchasing—certain types of vehicles in the first place. But beyond that, signaling to the public that the electricity grid is being overtaxed during the summer does not instill residents with confidence that California is prepared for the transition it’s trying to mandate.

The post California Wants Everybody To Buy an Electric Car, but Its Own Energy Grid Can't Support It appeared first on Reason.com.

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Guardrails of Democracy, Extended: Comparing Notes On The Team Libertarian Report


Guardrails NCC

One of the fun conditions of this project is that the three teams did not in any way collaborate with each other or get an advance look at what the others were going to say. As a result some recommendations overlap between teams in a positive way, some conflict, and many others simply don’t engage one way or the other. For example, we at Team Libertarian reached very similar conclusions to Team Progressive on reforming the Electoral Count Act, but a mostly opposite conclusion (as Prof. Foley has noted) on whether government should seek to regulate false statements about elections. And although Team Conservative’s comments on restricting presidential emergency powers both dovetail with ours and add useful detail, few of our other recommendations engage.

Although we and Team Conservative may have marched off in different directions, I and many Cato Institute colleagues are on board with much of what they say. Runaway administrative agencies usurping legislative power? Yes, a big problem. Congressional abdication of power stretching over for a half-century or more, shifting responsibility to the President and the judiciary? Definitely.  I agree too that there’s a decent case for making it at least a bit easier to amend the U.S. Constitution. (Here’s a Cato fellow writing in 2011 proposing a modest reduction in the threshold number of states needed for proposing and ratifying an amendment.)  The need to move past a broken primary system in which candidates with independent and crossover appeal get knocked out because they can’t appease their party’s most zealous base voters? Right again.

On the topic of elections, we’re also in agreement with Team Conservative’s observation that campaign finance reforms have backfired and that we should be repealing such laws rather than adding more. But let’s also get real: the election world wasted much of 2021 in a battle over whether Democrats would succeed in ramming through an omnibus package expanding these laws yet further. As I’ve argued, this package, the so-called For The People Act, 1) put its thumb in the eye of libertarian and constitutionalist principle, and 2) was supremely irrelevant to the distinctive challenges of the events leading up to Jan. 6. Shouldn’t we focus on reform efforts that have a chance of doing relevant good between now and the next grave election crisis down the road – which we might find ourselves in the middle of by a date as early as, say, 2024?

Which brings me to some policy disagreements with Team Conservative. I can’t say I’m persuaded by the idea of letting Congress override presidential vetoes by simple majority vote, as Tennessee does. The Founders meant to establish serious checks and balances against the dangers of hasty legislation, and gutting the power of the president’s veto would knock out one of the most important of those checks. (For what it’s worth, my home state of Maryland sets its veto-override threshold at three-fifths rather than two-thirds – not that I’m recommending that, either.) On bringing back the legislative veto, I share the misgivings about that innovation expressed by Antonin Scalia, then editor of Regulation, many years ago.

Now on to Team Progressive. On one major point we agree strongly: it’s incredibly dangerous when a controlling faction of one of the two great political parties wrongly contends that honest and correctly tabulated elections were stolen or rigged. The Progressive report gives this problem a central place in its analysis, and that seems right to me.

Yet there are differences of mood and terminology in our approaches as well. As I commented on Twitter the other day, I continue to search for phrases other than “Big Lie” and “election denier” that would let us criticize both these things without using terminology associated with you-know-what. Millions of persons sincerely believe the false claims in question. They are truly convinced that they, not we, are doing the right thing and standing up for fair and free elections. There are some genuine villains out there feeding them lies, as well as crazies irresponsibly stoking mass delusion. But the ordinary believers are also our friends, our relatives, and our neighbors. We cannot stop being those things to them if America is to gather back its wits and turn back down the road toward some semblance of unity.

As to policy, I’m a convinced advocate of ranked-choice voting, but I’d caution that its advantages are relatively subtle; it won’t put out the fire of public disbelief in election results. The fact is that in some key states, election fabulists may presently be popular enough to win, or at least put up a strong contest, under whichever set of rules is used. (I also think the plain-vanilla version of RCV, sometimes called instant-runoff voting, is better suited to today’s America than the more complex “round-robin” variant that Foley recommends.)

We and Team Progressive likely part company on some issues of federalism and decentralization. Ned Foley and Ilya Somin have already discussed this a bit as to foot voting, and I suspect that our teams may also diverge on to what extent the federal government should play a greater role in supervising the states in election administration; we caution against this at several points.

Also on the Foley-Somin exchange linked above, I’ll mention for what it’s worth that I’m probably a little more positive about civics education than Ilya is.  Still, I do recognize there can be difficult problems in legitimately educating the public about how the electoral system works, on the one hand, while avoiding the specter of taxpayer-funded propaganda campaigns, on the other. (As an example of the challenges involved, here’s how the Nebraska Secretary of State set about refuting myths and rumors about the 2020 count.)

Thanks to the National Constitution Center for making possible this summer’s exchange of views with writers and scholars we respect, and to the Volokh Conspiracy for hosting this shorter symposium this week.

The post Guardrails of Democracy, Extended: Comparing Notes On The Team Libertarian Report appeared first on Reason.com.

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Virginia Can’t Force Bookstores To Card Kids for Books on Gender and Sexuality


Virginia Book Ban Effort Thwarted By judge

On Tuesday, a Virginia Beach court dealt a serious blow to would-be book-banners who were trying to restrict private bookstores from selling two books to minors.

Their lawsuit targeted Gender Queer by Maia Kobabe and A Court of Mist and Fury by Sarah J. Maas. Gender Queer has been at the center of many book-banning battles for its graphic sexual scenes, particularly its visual illustrations of oral sex. The petitioners argued that A Court of Mist and Fury is “sexually offensive in nature” for its illustrations of sexual acts and descriptions of “abusive and intrusive sexual contact.” Circuit Judge Pamela S. Baskervill, who came out of retirement to try the case since all other judges recused themselves, dismissed the suit on free speech and due process grounds.

In May, former congressional candidate Tommy Altman and state Del. Tim Anderson (R–Virginia Beach), his legal counsel, filed two petitions under Virginia’s obscenity law to have the books deemed obscene for minors. They attempted to require booksellers to obtain parental consent before selling those books to minors.

Virginia residents may file an obscenity petition when they believe someone “is engaged in the sale or commercial distribution of any obscene book.” An obscenity petition may result in the court issuing “a temporary restraining order against the sale or distribution” of the book in question, which then assumes knowledge of the restriction among those who distribute the title even before a full trial has taken place.

In Virginia, obscenity involves “a shameful or morbid interest in nudity, sexual conduct, sexual excitement, excretory functions or products thereof or sadomasochistic abuse” as its “dominant theme or purpose.”

“Taken as a whole,” a book must also lack “serious literary, artistic, political or scientific value” to be considered obscene.

Altman and Anderson specifically sought to keep minors from purchasing Gender Queer and A Court of Mist and Fury from Barnes & Noble and independent sellers. Barnes & Noble filed a brief supporting motion to dismiss the petitions, noting that they fell “woefully short of the constitutional standards governing obscenity.”

For one, even though the petitions allege the books have “no serious literary, artistic, political, or scientific value to minors,” this is a conflation of “two statutes that employ different legal standards.” Though Virginians may file petitions under the obscenity clause, nothing in that clause specifically names or applies to minors. Thus, Barnes & Noble argued that the books could not be considered “obscene only…to juveniles.”

Nor did the petitioners make an effective case that the books meet the general standards for obscenity. Barnes & Noble’s brief points out that the petitions single out only small portions of the books as inappropriate for minors, defying the established standard to consider material “as a whole” in order to deem it obscene.

The petitions “ignore the language of the Virginia statutes under which they were filed and assume that developments in First Amendment law over the past sixty-five years never occurred,” notes Barnes & Noble’s brief.

Baskervill didn’t actually determine whether the books were obscene for minors, but she did find that the petitioners didn’t “allege facts sufficient to support” a general obscenity finding. Moreover, Baskervill found that the Virginia Code’s obscenity statute “is unconstitutional on its face.” It “authorizes a prior restraint that violates the First Amendment and the Constitution of Virginia,” she wrote, and “violates due process by authorizing judgment without notice to affected parties.”

In some ways, this case was an unprecedented extension of the modern culture war’s book front. Since 1973, the Supreme Court “has accepted no cases involving literary obscenity, nor has it found any book to be obscene,” notes Barnes & Noble’s brief. The Virginia Beach petitions also represent an unusual strategy by attempting to harness a little-used section of state law to block the distribution of certain books to minors. They were attempts “to manufacture jurisdiction” by “mashing together” unrelated statutes, according to the Barnes & Noble brief.

But this case was especially notable—and concerning—since the petitioners attempted to target private book distributors under a criminal statute. Rather than just affecting public schools, where many book battles take place, these petitions aimed to limit activities in the private sphere. Regardless of what one thinks about the literary value of these two books or the age level for which they’re appropriate, these circumstances alone are deeply troubling.

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