Im-Politic: A Solution to the Big Tech Misinformation/Censorship Quandary


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Don’t look now (a heckuva way to begin a piece of writing!), but I may have come up with one solution to the incredibly complex and just as important national dilemma over regulating how gargantuan social media platforms like Facebook and Twitter handle Americans’ speech rights.

First, let me stipulate that I’m anything but an expert on the Constitution, law and regulation of any kind (except maybe in the international trade field), or technology of any kind. But maybe I know enough to have produced a plan that’s outside-the-box enough to break the various legal and political and philosophical logjams that have left the nation with a status quo that seems to satsify no one, but that’s anchored in reality.

In addition, the thoughts below were prompted by a very stimulating panel discussion involving genuine experts in all these fields that took place this past weekend at a wide-ranging policy conference held by the Intercollegiate Studies Institute. (I spoke on a separate panel on China.) So my ideas aren’t coming from completely out of the blue.

The nub of the problem is that Americans across the political spectrum are furious with the platforms’ speech policies, but for radically different reasons. Those to the left of center blast them for posting what they view as misinformation. Their conservative counterparts claim that right-of-center views are too often censored – typically because they’re bogusly accused of spreading misinformation.

All sides seem to agree that the platforms’ practices matter greatly because, due largely to their algorithmic amplification powers, they have such power to turn material viral that they’ve achieved the massive scale needed to become a leading  – and often the leading – way in which Americans receive news, opinion, and other forms of information that affect politics and public policy. But towering obstacles stand in the way of pretty much every proposal for reform advanced so far.

For example, their status as private companies would appear to block any move to empower government to influence their speech practices. Antitrust specialists disagree strongly as to whether they’re now monopolistic or oligopolistic enough under current or even proposed legal standards to warrant breaking up. The companies themselves of course deny any such allegations, and contend that if they needed to downsize, they wouldn’t be able to compete effectively around the world with foreign counterparts – especially those from China. Some have proposed turning them into public utilities, but opponents call that a great way to stifle any further innovation.

So here’s my idea: Turn the platforms into a new type of entity that would be subject to a new body of regulation reflecting both the distinctive importance of free expression in American life and the distinctive (and indeed predominant) role that the platforms now play in enabling individuals and organizations both to disseminate material, and (stemming from an aspect of free expression rights that’s often overlooked, but that’s now unquestionably vulnerable due to the main platforms’ sheer scale and reach) to reach their potential audiences. One possible name: Electronic Speech Companies (ESCs).

As history demonstrates, there’s nothing unusual about the federal government organizing private business into different categories for tax purposes, and there’s nothing unusual about government at any level regulating such businesses with an unusually heavy hand because of their outsized role in providing vital goods and services. That should be clear from the long-established policy of creating utilities. So I don’t see any Constitutional problems with my idea.

I agree that government’s price-setting authority over utilities can stymie innovation. But ensuring that these entities don’t curb free expression any more than (legally) necessary (see below) wouldn’t require creating such authority. I’d permit these ESCs to charge whatever they want for their services and to make money however they like (including selling users’ personal information – which does raise problems of its own, but which are unrelated to the speech issue). As currently required by the controversial Section 230 provision of the Communication Decency Act of 1996, they wouldn’t be able to disseminate any content that’s already illegal under federal criminal law, intellectual property law, electronic communications privacy law, or (most recently) criminal and civil sex trafficking law.

I’d also make them subject to current libel law – which means that plaintiffs would need to prove that false and defamatory information had been spread maliciously and knowingly. Could this rule mean that now-incredibly clogged U.S. courts would become more incredibly clogged? Sure. So let’s also set up a separate court system to handle such cases. Since a dedicated tax court system already exists, why not?

Frivolous suits could be reduced with “loser pays” requirements for court costs. The Big Tech defendants would doubtless still hold a huge advantage by being able to hire the very best legal minds and driving those costs up by dragging out proceedings. But a number of legal non-profits have emerged over the years to help the little guys and gals in these situations, so maybe at least the potentially most important and promising suits wouldn’t be deterred by financial considerations.

What the ESCs wouldn’t be permitted to do is bar or delete or modify any content, or any users, on misinformation grounds. Advocates of continuing to permit and even further encourage or require such practices argue that the platforms’ vast scale requires greater discretionary and often required authority along these lines in the name of any number of good causes – election integrity, public safety, national security, etc. (See, e.g., here.)

But three counter-arguments are more persuasive to me. First, I can’t imagine developing any legal definition of misinformation (as opposed to libel or other well-established Constitutional speech curbs) that would be genuinely neutral substantively and that therefore wouldn’t be easy to abuse massively – and to the great detriment of our democracy’s health, due to the platforms’ scale.

Second, that’s no doubt why such regulations have absolutely no precedent in U.S. history, despite past periods and instances of intolerance dating from the passage of the Alien and Sedition Acts of 1798.

Third, if the ESCs are going to be held liable for disseminating etc misinformation, what excuse will there be to maintain protection for the rest of the news media? I’ve spent much of my multi-decade career in policy analysis finding instances that would unmistakably qualify. Not that ongoing and arguably worsening conventional media irresponsibility is any cause for complacency. But would a government remedy for such an intrinsically nebulous offense really result in a net improvement?

Individual victims of ESC censorship would, however, need remedies for these forms of cancellation, and as with libel and slander, a special court system could handle accusations, using the aforementioned provisions aimed at leveling the legal costs playing field. The Justice Department could file its own suits, too, and some seem likely if only because its own inevitable political sympathies are bound to shift as power in Washington changes hands over time. This prospect, moreover, should help keep the ESCs on their best behavior.

The big danger of my proposal, of course, is that misinformation would keep appearing and metastasizing online, and spreading like wildfire offline due to the ESCs’ extraordinary reach. That can’t be a healthy development. But it’s surely an unavoidable development for anyone valuing any meaningful version of free expression and its crucial corollary – the marketplace of ideas. For empowering a handful of immense ESCs to restrict misinformation threatens to narrow greatly and even fatally the competitive essence of this marketplace.

Throughout U.S. history, Americans have relied on these dynamics, and the common sense of the public, to crown as winners the best ideas and the benefits they bring, and declare as losers those that have either caused or threatened serious dangers. Is anyone out there prepared to deny seriously that the results, though imperfect, have been historically excellent, that the potential for improvement remains just as impressive, or that any alternative yet proposed looks superior? If not, then I hope you’ll consider this ESC plan at least a promising framework for ensuring that these digital giants don’t become the ultimate arbiters.

Those Stubborn Facts: How the U.S. Lost the Global Semiconductor Manufacturing Tech Lead


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North America-” (i.e., U.S.-) Owned Firms’ Share of Global Semiconductor Capital Spending, 1990: 31 percent

North America-” (i.e., U.S.-) Owned Firms’ Share of Global Semiconductor Capital Spending, 2019: 28 percent

Asia-Pac/Others*- Owned Firms’ Share of Global Semiconductor Capital Spending, 1990: 10 percent

Asia-Pac/Others*-Owned Firms’ Share of Global Semiconductor Capital Spending, 2019: 63 percent

*Excludes Japan. Includes Taiwan, South Korea, and China

(Source: “A Path to Success for the EU Semiconductor Industry,” by Michael Alexander and Thomas Kirschstein, Roland Berger, February 12, 2021,

Im-Politic: Why It Sure Looks Like Fauci Lied


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Kentucky Republican Senator Rand Paul wants the Justice Department to investigate whether President Biden’s top medical adviser, Dr. Anthony S. Fauci, committed the crime of lying to Congress when he claimed that the National Institutes of Health (NIH), in which he’s a senior official “has not ever and does not now fund gain-of-function research in the Wuhan Institute of Virology (WIV)” in China.

And if I was Fauci, who is also the long-time director of NIH’s National Institute of Allergy and Infectious Diseases, I would be lawyering up. For if the Biden Justice Department is a truly non-political law enforcement agency, Fauci is going to have a heck of a time proving both that his statement (which he’s made in testimony at least twice) wasn’t a deliberately told falsehood. (See here and here for these instances.)  

Before I explain why, it’s important to specify what Paul’s charge is not about. It’s not about whether the grants given by Fauci’s agency to the WIV funded any research that went into actually creating the CCP Virus specifically. Therefore, contrary to Fauci’s statement (found in the Washington Post report linked above), it’s not about whether he bears any responsibility for causing this pandemic.

Nor is Paul’s charge about whether these U.S. government agencies financed such research in defiance of a three-year pause on such activity mandated by the Obama administration in October, 2014.

Nor – and this is crucial – does Paul’s charge have anything to do with the controversy among virologists about defining gain-of-function research.

As I explained in this post, these kinds of questions are all important, and should be looked into.

But what Paul is claiming is that Fauci lied in contending that NIAD and NIH never funded activity that is defined explicitly by the U.S. government. That matters because as a federal official, Fauci presumably is required to use this definition as his definition. And whereas in the above-linked May 30 post, I wasn’t convinced of Fauci’s guilt, the evidence demonstrating that NIAD and NIH funded work that matches now looks pretty cut and dry to me – especially since Paul last week gave Fauci a chance to climb down from his claim, and since new evidence has emerged.

Let’s start with that definition of gain-of-function: According to the announcement of the gain-of-function pause, new funding would be suspended

for gain-of-function research projects that may be reasonably anticipated to confer attributes to influenza, MERS, or SARS viruses such that the virus would have enhanced pathogenicity and/or transmissibility in mammals via the respiratory route. The research funding pause would not apply to characterization or testing of naturally occurring influenza, MERS, and SARS viruses, unless the tests are reasonably anticipated to increase transmissibility and/or pathogenicity.”

Now for the two pieces of evidence that should have Fauci awfully worried.

The first consists of an article published in 2015 in the journal Nature by a team of U.S., Swiss, and Chinese scientists (the latter from the WIV), which examined the disease potential of a SARS-like virus, SHC014-CoV, which is currently circulating in Chinese horseshoe bat populations.”

The authors went on to explain that, using reverse genetics, they “generated and characterized a chimeric virus expressing the spike of bat coronavirus SHC014 in a mouse-adapted SARS-CoV backbone.” A chimeric virus, according to this definition, is one “made by inserting the genetic material of one virus into the genome of another, safe surrogate, and these introduced sequences are passed on when the virus replicates.”

The article is important because it lists among funders for this project the two NIH branches – one of which is Fauci’s NIAID. Moreover, it specifies that

Experiments with the full-length and chimeric SHC014 recombinant viruses were initiated and performed before the GOF research funding pause and have since been reviewed and approved for continued study by the NIH.”

Talk about a smoking gun! The authors obviously made this statement to preempt charges that either they or the NIH violated the pause. But just as obviously, they were concerned about it to begin with because they themselves considered the work to be “GOF” (gain-of-function).

And why wouldn’t they? The purpose of using reverse genetics to create a virus that doesn’t exist in nature was to examine “the disease potential of a SARS-like virus, SHC014-CoV, which is currently circulating in Chinese horseshoe bat populations” because such naturally occuring pathogens had demonstrated the ability of “cross-species transmission” that could affect humans.

They created the new virus precisely in order to mimick the kind of natural mutation that could theoretically take place in the original virus to find out whether such a mutated pathogen could infect human respiratory systems. And they discovered that some of them could.

Even more important: so evidently did Fauci. On Saturday, February 1, 2020 – during the very earliest stages of the virus’ spread in the United States, Fauci sent the following email message to aide Hugh Auchincloss:

It is essential that we speak this AM. Keep your cell phone on. I have a conference call at 7:45 AM with [Secretary of Health and Human Services Alex] Azar. It will likely be over at 8:45 AM. Read this paper as well as the email that I will forward to you know. You will have tasks today that must be done.”

The paper was the 2015 Nature article. Auchincloss’ response began:

The paper you sent me says the experiments were performed before the gain of function pause but have since been reviewed and approved by NIH.”

He continued, “Not sure what means since Emily is sure that no Coronavirus work has gone through the P3 framework.” And then somewhat oddly, he concluded, “She will try to determine if we have any distant ties to this work abroad.”

Emily is Emily Erbelding, who heads much of NIAID’s international research program. The P3 framework is a system created by the Health and Human Services Department to guide “funding decisions on individual proposed research that is reasonably anticipated to create, transfer, or use enhanced PPPs [potential pandemic pathogens].

That last sentence is odd because the Nature article clearly credited NIAID as a funder.

In any event, though, what’s most important is that Auchincloss’ main concern seemed to have been whether any NIAID gain-of-function funding was approved during the pause (which he notes the authors denied). He doesn’t seem to dispute that the experiments qualified as GOF.

Fauci’s main concerns are less clear. Did he understand the broader possibility that NIAD may have helped create the virus? Not strictly according to his phrasing. But his words plainly connote major concern about something. Moreover, there’s no public record shere or anywhere else of him denying that the grant financed GOF work until Paul raised it in May.

Yet this Nature article-related evidence doesn’t exhaust the list of concerns Fauci should have. In his excellent May examination on of the debate over the virus’ origins, former New York Times science writer Nicholas Wade describes in detail NIAID grants in 2018 and 2019 that he contends clearly funded research that falls under the official definition of GOF.

In his words, the grants were intended to enable WIV virologist Shi Zheng-li

create novel coronaviruses with the highest possible infectivity for human cells. Her plan was to take genes that coded for spike proteins possessing a variety of measured affinities for human cells, ranging from high to low. She would insert these spike genes one by one into the backbone of a number of viral genomes …creating a series of chimeric viruses. These chimeric viruses would then be tested for their ability to attack human cell cultures…and humanized mice….And this information would help predict the likelihood of ‘spillover,’ the jump of a coronavirus from bats to people.”

These grants appear to have been compliant with U.S. government policy when they were approved, since the funding pause was lifted at the end of 2017. But again, that isn’t what Paul believes may be a crime on Fauci’s part. The alleged crime has to do with Fauci’s claim that neither NIH nor NIAID ever funded GOF experiments in Wuhan at any time.

The most detailed defense of Fauci has come from the NIH sub-contracter through which its funds were funneled to the WIV – a non-profit called the EcoHealth Alliance. But they don’t even come close to letting Fauci off the hook.

For example, Alliance spokesman Robert Kessler told the Washington Post that

the EcoHealth funding was not related to the experiments, but the collection of samples. The NIH grant includes language that some say suggests gain-of-function research; NIH says that is a misinterpretation.”

But of course, collecting the samples was integral to the project. And since NIH is in the dock here, its claim of misinterpretation proves nothing.

Moreover, even Kessler didn’t seem satisfied with this argument, as he went on to contend that “As described in the paper, all but two of the viruses cultured in the lab failed to even replicate.” Not only does this mean that two of them did. His claim recalls notoriously spurious claims on the order of “Sure, I stole the money. But I didn’t steal very much.”

As for Kessler’s insistence that “GoF was never the goal here,” the authors’ own reference to abiding by U.S. government GOF guidelines shows that this was exactly the goal.

Finally, as indicated by my reference to the (legitimate) scientific debate over defining GOF, Kessler may have been right when he told the Post that “gain of function research is the specific process of altering human viruses in order to increase their ability (the titular gain of function) either to spread amongst populations, to infect people, or to cause more severe illness.”

But this position has nothing to do with the charge against Fauci, since the U.S. government definition that should have been controlling his decisions never limited its scope to “altering human viruses.” And in fact, how could it? The origins of the MERS and SARS viruses it mentions still haven’t been pinned down. But according to the NIH itself, research suggests they both “originated in bats.” And of course, the authors of the 2017 Nature paper agree, since they described called their work investigating whether viruses found in non-human mammals could mutate to infect humans.

In the U.S. criminal justice system, you’re innocent until proven guilty.  So legally speaking, Fauci deserves the benefit of the doubt.  Also, evidence might be uncovered absolving him of Paul’s charge.  But the existing evidence looks so compelling, a perjury charge is so serious, and Fauci’s role in CCP Virus-fighting policy remains so important, that Paul’s planned investigation request looks entirely reasonable. 

Moreover, Fauci himself should welcome the probe, for if conducted properly, it could lift this cloud over his head once and for all.  Opposing an investigation, by the same token, can only fuel suspicions that he has something to hide.       


Making News: Speaking at a Major Economic Conference this Weekend


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I’m pleased to announce that I’ll be participating this Friday and Saturday in a fascinating conference on the future of the American economy – including the political trends that will help shape it. In fact, the event, convened by the Delaware-based Intercollegiate Studies Institute, is titled “The Future of American Political Economy Conference.”

Click here and scroll down, you’ll see that the list of speakers in impressive indeed, including Florida Republican Senator Marco Rubio, Hillbilly Elegy author and Ohio Senate candidate J.D. Vance, former Trump Attorney General and U.S. Senator Jeff Sessions, and leading conservative populist thinkers Oren Cass and Julius Krein.

My session, focusing on U.S.-China relations, starts promptly at 8:40 AM on Saturday, so I can easily forgive those who’d rather sleep in than tune in to the livestream. Here’s hoping that a video will be posted on-line before long. But I’m sure you’ll find the rest of the event well worth your while in real time, and you can sign up via the link at the bottom of the web page mentioned above.

And don’t forget to keep checking in with RealityChek for news of upcoming media appearances and other developments.

Im-Politic: Don’t Forget About All the Systemic Anti-Racism


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There’s a big concept that’s been utterly and conspicuously missing in the floods of verbiage sloshing across the nation about systemic racism, and it’s badly distorting the picture of how bigoted America and all its institutions remain. Think of it as “systemic anti-racism.” So far, it seems as good a term as any for all the official and unofficial efforts launched and maintained over the course of decades to help victims of discrimination overcome its lingering effects. And they have been legion.

Oddly, the unofficial programs seem to be by far the best known. Surely they’ve been the highest profile, and the most prominent have been the affirmative action policies long in effect throughout American higher education. This post discusses a study indicating just how many minority students have been provided with opportunities to attend colleges and universities by revealing how significantly state government bans on these programs since the 1990s have reduced the shares of “underrepresented” youth in the student bodies of their public institutions.

And if these data don’t convince you, here’s the verdict on such programs from no less than Ibram Kendi, one of the nation’s leading propounders of critical race theory – which of course contends that systemic racism still defines much and even most of American life: “Affirmative action programs in education have been demonstrated to increase diversity and increase access specifically for underrepresented groups.” (There’s evidence, though, according to the aforementioned CBS News post, that such underrepresentation has worsened since the 1970s at the most selective colleges.)

Yet the reach of affirmative action and related initiatives has extended far beyond the campus. As this history of the idea puts it (all the while emphasizing how fuzzy and confusing it’s long been):

The actual programs that come under the general heading of affirmative action are a diverse lot; they include policies affecting college and university admissions, private-sector employment, government contracting, disbursement of scholarships and grants, legislative districting, and jury selection. Numerous affirmative-action programs have been enacted into law at local, state, and federal levels. In addition to programs that have been mandated by law, many private corporations and universities have developed affirmative-action programs voluntarily.”

The federal government’s measures have been especially impressive. Since 1961, because of an executive order issued by President John F. Kennedy, Washington has not only required all companies doing business with Washington to end racial discrimination in their own hiring practices (a policy with roots in the immediate pre-World War II period), but to promote equal opportunity in employment actively, and to document such practices and their effects in detail. Penalties for non-compliance were severe.

In 1965, President Lyndon B. Johnson expanded these obligations with a directive that all federal contractors and subcontractors act to expand opportunities for minorities.

The Johnson years also saw the first small-scale federal efforts to use the Small Business Administration (SBA) “to award contracts to firms willing to locate in urban areas and hire unemployed individuals, largely African Americans, or sponsor minority-owned businesses by providing capital or management assistance.” These practices were strengthened and expanded during the 1970s until in 1978, Congress expressly authorized the agency to focus such activity on “socially and economically disadvantaged small business concerns” (as the statute states) or “on businesses that are least 51% owned by one or more socially and economically disadvantaged individuals and whose management and daily operations are controlled by such individual(s)” (according to a history prepared by the Library of Congress).

It’s important to note that the SBA has also used this authority to help such businesses win contracts throughout the federal bureaucracy. In addition, every federal agency that authorized to buy any product from the private sector is required to operate an Office of Small and Disadvantaged Business Utilization whose mandate includes ensuring that minority-owned small businesses “are treated fairly and that they have an opportunity to compete and be selected for a fair amount of the agency’s contract dollars.”

And don’t forget “set asides” – which means that a certain number of federal contracts are either reserved completely for minority-owned businesses or businesses “in historically underutilized business zones” (including in economically depressed areas with big minority populations), or that such businesses be given preferential pricing in the contracting process. To cite one example, since 2015, Congress has required the Transportation Department’s Disadvantaged Business Enterprise program (which exists separately from the above SBA operations) to award a specified percent of its contracts to companies defined as having dealt with “ongoing discrimination and the continuing effects of past discrimination in federally-assisted highway, transit, airport, and highway safety financial assistance transportation contracting markets nationwide.”

Nor is the federal government the only level of government in America offering such preferences. As of 2016, the National Council of State Legislatures reported that “At least 38 states, Washington D.C. and Puerto Rico have state-level MBE development programs involving certification for participation in state government procurement….” And such policies are in place in many U.S. cities, too.

I don’t want to present an overly rosy view of the American race relations scene. As many of the sources above make clear, the scope for using racial preferences in higher education admissions and in government contracting has been steadily narrowed by the courts. Some of these government programs were underperforming even before these restrictions came into force. None of them seem to have made a satisfactory impact on the nation-wide racial wealth gap yet (especially lately). And prejudice continues to mar policing in many areas of the country. So race relations Nirvana is still a long way off.

Nor is my purpose in this column to make the case either for or against any of them. (For the record, I’m generally supportive.) And no one should come away from this post thinking that it’s examined or listed all of these preferential programs exhaustively. 

What I am emphasizing here is that these efforts to overcome historical racial injustice show that the inadequacy of progress hasn’t been for lack of trying -at least to a noteworthy extent. As a result, they call into question the extent to which American racism today is still actually systemic. As a result, any teaching of race relations in the schools, or government or private business efforts to raise employees’ awareness of racial issues, or even any discussions or press coverage of these subjects, would do well to include discussions of these systemic anti-racist policie. Otherwise, it would seem fair to criticize them as systemically biased.

(What’s Left of) Our Economy: Automotive’s Still in the U.S. Manufacturing Growth Driver’s Seat


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Talk about annoying! There I was last Thursday morning, all set to dig into the new detailed Federal Reserve U.S. manufacturing production numbers (for June) in order to write up my usual same-day report, and guess what? None of the new tables was on-line! Fast forward to this morning: They’re finally up. (And here‘s the summary release.) So here we go with our deep dive into the results, which measure changes in inflation-adjusted manufacturing output.

The big takeaway is that, as with last month’s report for May, the semiconductor shortage-plagued automotive sector was the predominant influence. But there was a big difference. In May, domestic vehicles and parts makers managed to turn out enough product to boost the overall manufacturing production increase greatly. In June, a big automotive nosedive helped turn an increase for U.S.-based industry into a decrease.

The specifics: In May, the sequential automotive output burst (which has been revised up from 6.69 percent in real terms to 7.34 percent) helped push total manufacturing production for the month to 0.92 percent after inflation (a figure that’s also been upgraded – from last month’s initially reported already strong 0.89 percent). Without automotive, manufacturing’s constant dollar growth would have been just 0.47 percent.

In June, vehicle and parts production sank by an inflation-adjusted 6.62 percent , and dragged industry’s total performance into the negative (though by just 0.05 percent). Without the automotive crash, real manufacturing output would have risen by 0.40 percent.

Counting slightly negative revisions, through June, constant dollar U.S. manufacturing production in toto was 0.60 percent less than in February, 2020 – the economy’s last full pre-pandemic month.

Domestic industry’s big production winners in June were primary metals (a category that includes heavily tariffed steel and aluminum), which soared by 4.02 percent after inflation; the broad aerospace and miscellaneous transportation sector, which of course contains troubled Boeing aircraft, (more on which later), and which turned in 3.75 percent growth, its best such performance since January’s 5.62 percent pop; petroleum and coal products (up 1.36 percent); and miscellaneous durable goods, which includes but is far from limited to CCP Virus-related medical supplies (up 1.21 percent).

The biggest losers other than automotive? Inflation-adjusted production of electrical equipment, appliances, and components, which dropped sequentially by 1.73 percent in real terms; the tiny, remaining apparel and leather goods industry (1.44 percent); and the non-metallic minerals sector (1.07 percent).

Especially disappointing was the 0.55 percent monthly dip in machinery production, since this sector’s products are used so widely throughout the rest of manufacturing and in major parts of the economy outside manufacturing like construction and agriculture.

But in one of the biggest surprises of the June Fed data (though entirely consistent with the aforementioned broad aerospace sector), real output of aircraft and parts shot up by 5.24 percent – its best such performance since January’s 6.79 percent. It’s true that the May production decrease was revised from 1.47 percent to 2.61 percent. But with Boeing’s related and manufacturing and safety-related woes continuing to multiply, who would have expected that outcome?

And partly as a result of this two-month net gain, after-inflation aircraft and parts output as of June is 7.83 percent higher in real terms than in pre-pandemicky February, 2020 – a much faster growth rate than for manufacturing as a whole.

The big pharmaceuticals and medicines sector (which includes vaccines) registered a similar pattern of results, although with much smaller swings. May’s originally reported 0.22 percent constant dollar output improvement was revised down to 0.15 percent. But June saw a 0.89 percent rise, which brought price-adjusted production in this group of industries to 9.33 percent greater than just before the pandemic.

Some good news was also generated by the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators. Its monthly May growth was upgraded all the way up from the initially reported 0.19 percent to 1.18 percent. And that little spurt was followed by 0.99 percent growth in June.

Yet despite this acceleration, this sector is still a mere 2.27 percent bigger in real terms than in February, 2020, meaning that Americans had better hope that new pandemic isn’t right around the corner, that the Delta variant of the CCP Virus doesn’t result in a near-equivalent, or that foreign suppliers of such gear will be a lot more generous than in 2020.

As for manufacturing as a whole, the outlook seems as cloudy as ever to me. Vast amounts of stimulus are still being pumped into the U.S. economy, which continues to reopen and overwhelmingly stay open. That should translate into strong growth and robust demand for manufactured goods. The Trump tariffs are still pricing huge numbers of Chinese goods out of the U.S. market. And the shortage of automotive semiconductors may actually be easing.

But the spread of the Delta variant has spurred fears of a new wave of local and even wider American lockdowns. This CCP Virus mutation is already spurring sweeping economic curbs in many key U.S. export markets. Progress in Washington on an infrastructure bill seems stalled. And for what they’re worth (often hard to know), estimates of U.S. growth rates keep coming down, and were falling even before Delta emerged as a major potential problem. (See, e.g., here.)

I’m still most impressed, though, by the still lofty levels of optimism (see, e.g., here)  expressed by U.S. manufacturers themselves when they respond to surveys such as those sent out by the regional Federal Reserve banks (which give us the most recent looks). Since they’re playing with their own, rather than “other people’s money,” keep counting me as a domestic manufacturing bull.

Im-Politic: The Latest Off-Base CCP Virus Narrative


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There’s no doubt that a new CCP Virus narrative is quickly becoming established in the United States, and it was succinctly expressed by Predident Biden last month:

[T]he data is clear: If you are unvaccinated, you’re at risk of getting seriously ill or dying or spreading it. People getting seriously ill and being hospitalized due to COVID-19 are those who have not been fully vaccinated. The new variant will leave unvaccinated people even more vulnerable than they are a month ago — over a month ago.

This is a serious concern, especially because of what experts are calling the…the ‘Delta’ variant. It’s a variant that is more easily transmissible, potentially deadlier, and particularly dangerous for young people.

But the good news is, we have the solution.The science and the data are clear: The best way to protect yourself against these variants are to get fully vaccinated.”

And earlier this week, the nation’s supposed newspaper of record, The New York Times, dutifully presented this analysis as the kind of information that’s factual and uncontroversial enough (among anyone but fanatics and troglodytes) to be used as routine background material:

While nationwide cases and hospitalization numbers remain relatively low, more local hot spots are emerging and the national trends are moving in the wrong direction, fueled by the spread of the more contagious Delta variant. Vaccines are effective against the variant. Counties that voted for Mr. Biden average higher vaccination levels than those that voted for former President Donald J. Trump. Conservatives tend to decline vaccination far more often than Democrats.”

And practically in lock step, today’s Washington Post tells us, “Federal health officials sounded an alarm Friday about a surge in U.S. coronavirus infections fueled by the twin threats posed by the highly transmissible delta variant and a stagnation in efforts to vaccinate as many Americans as possible.”

It’s now nearly a month after the Biden remarks, though, and the only reasonable conclusion to reach is “Not so fast.” It is indeed clear so far that the vaccines available to Americans work against Delta. It’s also clear that the new variant is extremely contagious. It’s anything but clear, though, that its rapid spread justifies even a doubling down on lagging national vaccination efforts, much less the kind of shaming campaign against vaccine hesitancy and related “misinformation” behind which the Biden administration is marshaling the power of the federal government.

The main reasons? First, contrary to the Biden claims about Delta’s dangers, the U.S. numbers show no sign of unusual lethality or other forms of severity. Second, although Delta has quickly become the dominant form of new infection, the relationship between its appearance and vaccination rates looks awfully weak.

Regarding Delta’s characteristics, evidence of its high transmissibility can be seen in the rising numbers of U.S. virus cases. Since the President spoke out last month, the seven-day average of reported infections is up by just over 139 percent as of yesterday. (I’m using the Washington Post’s virus tracking feature as my source unless otherwise indicated.)

But not to minimize the risks to certain segments of the population (the elderly, the obese, those with other underlying health problems), when it comes to healthy non-senior Americans generally, this statistic per se means almost nothing.

After all, it’s long been known that one of the most vexing properties of the virus is its asymptomatic spread. That is, huge numbers of Americans have been infected and simply didn’t know it because they never detected any effects. Many others doubtless had symptoms so mild that they didn’t bother reporting them.

In this vein, it’s more than a little interesting that former U.S. Food and Drug Administration chief Dr. Scott Gottlieb (no virus minimizer or vaccine skeptic) just told CNBC that “he believes the U.S. is significantly undercounting the number of Covid delta infections, making it difficult to know whether the highly transmissible strain is causing higher-than-expected hospitalization and death rates.”

Why the undercount? Because “people who are vaccinated, who might develop some mild symptoms or might develop a breakthrough case, by and large are not going out and getting tested. If you’ve been vaccinated and you develop a mild cold right now, you don’t think you have Covid.” Wouldn’t the same hold for the un-vaccinated, whether they have natural immunity or not?

That’s surely why even though since the Biden remarks, while total CCP Virus infections have more than doubled, reported virus-related deaths are actually down (by nearly six percent according to that seven-day average measure). Deaths are indeed a lagging indicator (because the disease doesn’t reach mortality level right away), and there’s evidence that in “some cases,” “Long-Haul COVID” can kill (and sicken) for months after the initial infection.

But if the Delta variant was nearly as lethal as it is virulent, since it’s accounted for a skyrocketing – and now the biggest – share of total national infections, you wouldn’t expect the national death rate to be falling for the past month.

Nor do the national rates of hospitalization and intensive-care unit (ICU) bed use  signal that Delta will overwhelm the healthcare system (the fear that originally spurred the lockdown-/shutdown-/social distancing-/mask-heavy CCP Virus response throughout the country) unless vaccination rates surge. Indeed, according to the U.S. Centers for Disease Control and Prevention, between the week of the Biden remarks and the week ending July 10, hospitalizations, new weekly hospitalizations fell, too – from 597 to 523.

Meanwhile, the feebleness of the link between vaccination rates and the Delta variant’s proliferation comes through from an examination of state-specific data.

Below is a list of the states whose hospitalization rate increases over the last week (in descending order, through yesterday) are above that national average of 25 percent, with their specific rates on the left and their (full) vaccination rates on the right:

Alaska:                 +114%            44.7%

Kansas:                   +61%           42.8%

Mississippi:            +50%            33.6%

Louisiana:               +50%            36.0%

Idaho:                      +48%           36.8%

Connecticut:            +47%           62.0%

Arkansas:                +44%           35.1%

Oklahoma:              +42%           39.3%

Florida:                   +42%           47.3%

Texas:                     +39%           42.6%

Nebraska:               +38%           48.5%

Alabama:                +35%           33.6%

Georgia:                  +32%          37.5%

California:              +30%           51.4%

Arizona:                 +30%           44.3%

Tennessee:             +27%            38.2%

Nevada:                 +25%             43.1%

Now keep in mind that the national average full vaccination rate for the country was 48.3 percent, and several big anomalies should stick out immediately, beginning with Alaska. Its hospitalizations apparently soared, yet its vaccination rate was pretty close to the national average. How can that be, if vaccination is so crucial to slowing or stopping the spread of any of the variants?

Of course, with Alaska, the absolute numbers are very small, so any time they change, big percentage changes tend to result. But a very similar pattern also holds for much more populous states like Kansas, Florida, Texas, and Arizona, and a slightly less similar pattern holds for Nevada. As for Florida, moreover, its infections have been growing at the same rate as Oklahoma’s, but its vaccination rate is a good deal higher.

And then there’s Nebraska. Its hospitalization has risen strongly, but its vaccination rates is actually above the national average. Conversely, Connecticut’s vaccination rate is way above the national average, but hospitalizations are increasing robustly anyway.

So that’s eight states out of the sixteen with above-average infection growth (eight if you count Oklahoma) where the narrative doesn’t hold up well.

But maybe the narrative’s relationship between infection growth and vaccination rates is stronger for states where virus spread has been relatively slow – i.e., below the national average? Here are the states with the best infection numbers, from the gold standard to the merely good. Again, infection change rates are on the left and vaccination rates on the right:

North Dakota:            -18%        39.5%

Rhode Island:             -15%        60.2%

Minnesota:                  -14%       52.9%

Maryland:                   -12%       57.5%

Pennsylvania:             -11%       51.0%

West Virginia:            -11%       38.8%

South Dakota:             -7%        46.2%

Illinois                         -3%        47.4%

Maine:                         -2%        62.7%

Virginia:                      -1%        53.2%

Iowa:                            -1%       48.8%

Ohio:                           +2%       45.6%

Washington:                +2%        56.3%

New Jersey:                +2%        56.7%

Michigan:                   +2%        48.1%

New York:                  +3%        55.7%

Indiana:                      +3%        44.3%

Wisconsin:                 +4%        50.9%

Oregon:                    +11%        54.9%

D.C.:                        +12%         53.7%

Delaware:                +16%         51.4%

Colorado:                 +12%        53.3%

Montana:                 +17%         43.6%

Wyoming:                +18%        35.9%

North Carolina:        +18%        42.8%

New Mexico:           +18%        55.2%

Hawaii:                     +19%       52.8%

Kentucky:                 +21%       44.6%

Missouri:                  +22%        40.0%

Utah:                         +22%       43.6%

New Hampshire:      +22%       57.5%

South Carolina:        +23%        39.7%

Again, as should be obvious, the relationship between virus prevalence and vaccination rates is far from obvious. In fact, here again, the state at the top of the list seems to undermine the narrative most thoroughly. North Dakota’s vaccination rate is one of the country’s worst, yet its infection record is the very best on a percentage basis.

Of course, North Dakota’s population is so small that, as with Alaska, changes in absolute numbers can produce big percentage swings. The same goes for the results for West Virginia and South Dakota. But Illinois, Ohio, and Michigan boast big populations, and despite subpar vaccination rates, have seen CCP Virus case numbers fall a bit and rise a bit, respectively. The situation in somewhat less populous Indiana looks like theirs, too. Maybe there’s something about the Big Ten?

At the other end of this spectrum, New Mexico, Hawaii, and New Hampshire have excellent vaccination rates, but lousy virus spread numbers.

And here are some strange coincidences. South Carolina and North Dakota have nearly identical, and very low, vaccination rates. But in the former, CCP Virus cases are up 23 percent on week whereas they’re down by 18 percent in the latter. Conversely, New Hampshire and Maryland both have very high vaccination rates, but infections are up 22 percent in the former and down 12 percent in the latter over the last week. And although North Carolina and New Mexico have seen weekly cases rise at identical 18 percent rates, their vaccination rates are more than twelve and a half percentage points apart.

As I’ve written previously, when comparing the virus story in different states, it’s important to keep in mind how different population structures and different weather patterns can lead to very different results regardless of the policy choices they’ve made. That’s why, for example, I didn’t call attention to the virtually identical weekly case growth rates of Idaho and Connecticut (48 percent and 47 percent, respectively) and their dramatically different vaccination rates (36.8 percent and 62 percent, respectively). Two less alike states you couldn’t even create out of whole cloth.

Of course I can’t find it in my too-often chaotic personal library, but in David Halberstam’s masterpiece on the Vietnam War, The Best and the Brightest, I recall the author writing of Walt W. Rostow – one of the hubristic crew of Ivy League academics who became leading architects of this disaster – that he was constantly seeing connections between trends and events where none existed. I strongly suspect that history will judge purveyors of the latest, Delta-centric CCP Virus narrative just as harshly. 

Those Stubborn Facts: Race, Class, and Crime in NYC


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Share of college-graduate New Yorkers wanting more police on the subway: 62%

Share of non-college-grad New Yorkers wanting more policy on the subway: 80%

Share of New Yorkers earning $50K-plus per year wanting more police on the subway: 66%

Share of New Yorkers earning less than $50K per year wanting more police on the subway: 75%

Share of white New Yorkers wanting more police on the subway: 62%

Share of Latino New Yorkers wanting more police on the subway: 69%

Share of African American New Yorkers wanting more police on the subway: 77%

Share of Manhattan-ites saying they feel safe from crime riding the subway: 65%

Share of Bronx residents saying they feel safe from crime riding the subway: 43%

(Sources: “Progressives in Denial About Crime Are Catering to Elites and Losing Elections,” by Zaid Jilani, Newsweek, July 14, 2021, Progressives in Denial About Crime Are Catering to Elites and Losing Elections | Opinion ( )

Im-Politic: Good Luck to Biden Keeping Up with Immigration’s Root Causes


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Remember that advertising campaign launched by Jamaica a few decades ago, reminding Americans that “We’re more than a beach. We’re a country”? Lately it seems that the area’s islands are doing their best to reinforce this message, in the process presenting yet more reasons to doubt that President Biden’s policy of stemming immigration largely by addressing its “root causes” in the sending countries (especially in Central America’s “Northern Triangle”) will produce results in the policy- (and politics-relevant) future.

After all, in the last week alone, not only has Haiti lapsed into chaos again, but Cuba has been roiled by what are being described the biggest protests in decades against Communist rule. So undoubtedly heading state-side is looking especially attractive in those countries now. In addition, Venezuela keeps looking like a candidate for a political explosion (its migrant outflows have already been considerable for years as the left-wing regime’s policies keep destroying the economy).

Nor do these countries exhaust the list of deeply troubled countries whose inhabitants are increasingly flocking to the U.S.-Mexico border. As the Washington Post reported earlier this month, U.S. government data show that “From South America, the Caribbean, Asia and beyond tens of thousands of migrants bound for the United States have been arriving to Mexico each month.” Further, the shares represented by Mexico and Central America are going down, and those of nationals from “beyond” are going up. Many more migrants from regions further afield, moreover, are apparently on the way.

Indeed, in 2018, Gallup research found that more than 150 million adults worldwide want to live in the United States permanently. Of course, not every one will try to migrate. Nor does every one come from a homeland afflicted by various combinations of poverty, dictatorship, corruption, major disorder, and out-and-out conflict. But clearly most of them do. Meaning that there’s a massive amount of root causes out there to be addressed if that approach is to be the Biden strategy’s main pillar long term.

And it’s not like Washington has a great record in promoting the kind of nation-building (see, e.g., here) or even narrower economic development needed to root out those causes, or that lots more money – public or private – will be forthcoming (assuming that money is even the biggest obstacle to begin with). Heck – Americans haven’t even done a decent job of addressing the root causes of violence in many of their own inner cities.

Therefore, given the high and growing amount of turmoil in the United States’ backyard and beyond, to avoid swamping the nation with ever greater numbers of migrants, the Biden administration will need to return American policy to a border security-centric approach. It’s true that both Vice President and immigration point person Kamala Harris and Homeland Security Secretary Alejandro Mayorkas have both publicly warned not to try to enter the country.

But this message clearly has been drowned out by dozens of other administration decisions that de facto put out the welcome mat (see, e.g., here) – including a virtual halt to interior enforcement that supercharges the odds that newcomers who make it into the United States will be able to stay in the United States. Which is why the longer the current Biden policy mix lasts, the more the root causes dimension of his administration’s immigration strategy looks like a dodge aimed at greasing the skids for much wider border opening.

(What’s Left of) Our Economy: The New U.S. Inflation Figures Still Look Pretty Transitory to Me


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Today’s official U.S. inflation figures made it somewhat more difficult to argue that the recent strong price increases recorded in the American economy are “transitory,” as the Federal Reserve and many observers (like me) have been claiming. But they don’t make these contentions that much harder, and that goes at least double for warnings about rampant wage inflation – which today’s related real wage figures debunk in an especially powerful way.

At the same time, the price surges that have taken place deserve to be emphasized in another, generaly neglected sense: However temporary, they represent another cost of the unprecedentedly powerful and not-surprisingly chaotic, bottleneck-ridden U.S. economic reopening – and one that’s followed unprecedentedly sudden CCP Virus-related lockdowns that in retrospect look to have been needlessly sweeping because the pandemic’s worst health effects were so highly concentrated among vulnerable groups like the elderly.

The most troubling development revealed in the new inflation report was the May-June acceleration in price increases overall – from 0.74 percent to 0.88 percent. That was indeed the largest monthly rise in absolute terms since June, 2008 (1.05 percent). But that May figure represented a deceleration from April’s 0.92 percent. So it looks way too early to claim that we’re seeing even the start of one of the most dangerous threats posed by inflation – a pickup in its momentum created by cost rises in various parts of the economy fueling efforts in other sectors to compensate with price increases in a process that eventually ripples widely, and with lasting effects, as in the 1970s.

(As with previous posts, I’m not too concerned with the year-on-year comparisons, since pricing trends in lockdown-y 2020 were so – artificially – weak.)

More evidence for the transitory faction: Leading the price increase charge in June were products and services like used cars and trucks (up 10.5 percent month-to-month), vehicle rentals (up 5.2 percent), and hotel and motel rates (up 7.9 percent). The first is a clear result of the stop-start nature of the economy during the pandemic period (see here for a cogent explanation), and the second and third just as obviously spring from the cabin fever-spurred burst of vacation travel in which Americans are engaged with the arrival of summer and the waning of the virus.  

Even in sectors like these, moreover, signs of weakening inflation can be seen. For example, the monthly rate of hotel and motel inflation was much higher than May’s 0.4 percent. But it was lower than April’s 8.8 percent. As for airline fares, their monthly price increases have fallen from 10.2 percent in April to seven percent in May to 2.7 percent in June.

As for wages – they keep falling in real terms in most of the economy. That is, they’re rising more slowly than inflation for goods and services. According to this morning’s data (which also cover June), after-inflation wages both for all private sector workers and for private sector production and other non-supervisory employees fell sequentially for the sixth straight month. And for both groups, the monthly June declines (0.53 percent for the former, 0.62 percent for the latter), were the biggest in roughly a year (June for the former, July for the latter).

(As known by RealityChek regulars, the U.S. government doesn’t track real or pre-inflation wages in the public sector because pay levels there are determined largely by politicians’ decisions, and therefore say relatively little about the status of the labor market.)

These new June wage figures are even more striking because the declines last year stemmed largely from businesses letting go less of experienced and usually therefore lower-paid staff as the economic outlook remained highly uncertain, and pushing up the average pay levels of remaining employees even though actual raises were rarely handed out.

It’s true that real wage increases continued in June in the leisure and hospitality super-category – whose eating and drinking establishments and hotels and motels and resorts were hit so hard during the peak pandemic months. But the June sequential increase for all employees in this sector inched up at the lowest rate (just under 0.15 percent) since January (just over 0.15 percent).

Leisure and hospitality production and non-supervisory workers fared better last month – their constant dollar wages rose by 1.16 percent, a big speed up from May’s 0.50 percent. But the April (1.87 percent) and February (1.21 percent) hourly inflation-adjusted pay hikes were stronger still. So again, it seems awfully premature to talk about raging wage inflation even here.

Moreover, there’s an important difference within leisure and hospitality between real wages in the restaurants etc sector and those in the hotels etc sector. Specifically, the latter have been growing faster for production and non-supervisory employees – and especially for June alone (0.94 percent versus 0.52 percent).  

The January-June results are even more striking for these service workers as a whole, since during this period, real wages for their counterparts in the overall private sector are actually down 1.83 percent.

Good luck to you if you believe these numbers describe a crisis-level national labor shortage, or even close.  And as I see it, it’s nearly as much of a stretch to argue on the basis of these hot June numbers that comparably hot inflation is here to stay.