Im-Politic: Why It Sure Looks Like Fauci Lied

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Anthony S. Fauci, Biden administration, CCP Virus, Centers for Disease Control and Prevention, Congress, coronavirus, COVID 19, EcoHealth Alliance, gain-of-function research, Im-Politic, Medium.com, MERS, National Institute of Allergy and Infectious Diseases, National Institutes of Health, Nature, NIAID, Nicholas Wade, NIH, perjury, Rand Paul, SARS, Shi Zheng-li, Washington Post, Wuhan Institute of Virology, Wuhan virus

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 Medium.com 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.       

 

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

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aircraft, aluminum, appliances, automotive, CCP Virus, China, coal, coronavirus wuhan virus, COVID 19, Delta variant, electrical equipment, facemasks, Federal Reserve, industrial production, inflation-adjusted growth, inflation-adjusted output, infrastructure, lockdowns, machinery, manufacturing, masks, medical devices, metals, petroleum refining, pharmaceuticals, PPE, real growth, recovery, reopening, steel, stimulus, tariffs, Trump, vaccines, {What's Left of) Our Economy

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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Biden, CCP Virus, coronavirus, COVID 19, Delta variant, Im-Politic, The New York Times, vaccines, Washington Post, Wuhan virus

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. 

(What’s Left of) Our Economy: Chip Derangement Syndrome

Tags

CCP Virus, Chad Bown, China, coronavirus, COVID 19, East Asia, export controls, fabless, Foreign Affairs, Huawei, infotech, lockdowns, Mainstream Media, manufacturing, metals, offshoring lobby, Peterson Institute for International Economics, reopening, semiconductor shortage, semiconductors, supply chains, tariffs, Trade, Trump Derangement Syndrome, Wuhan virus, {What's Left of) Our Economy

As some RealityChek regulars may have noted, I’m spending somewhat less time lately batting down ill-conceived, off-base, and downright incoherent individual books or articles etc on key subjects like trade and globalization, foreign policy, and immigration. It’s not that there’s any less “nonsense out there” these days. Goodness knows there remain enough mouthpieces of the Offshoring-, Forever Wars-, and Cheap Labor-Lobbies in and out of the Mainstream Media paid handsomely cranking out this bilge.

It’s just that they’re clearly so much less important these days, as the American political system has so markedly been ignoring their missives. I mean, even a longtime China coddler and offshoring trade deal supporter like President Biden knows – at least politically – that these stances don’t fly any more. Not that enough progress has been made. But champions of what I think can fairly be called the pre-Trump conventional wisdom in these areas are increasingly giving off those “wrong side of history” vibes – and lashing out at Trump policies in ever more desperate and arguably deranged ways.

I’m making an exception today, however, because Chad P. Bown’s new article in Foreign Affairs blaming the former president significantly for the global semiconductor shortage, appeared in such a (still) influential publication, and is such a thoroughly pathetic example of the marginalized trade policy establishment’s Get Trump and Trumpism obsession.

For the last few years, Bown has served as the MSM’s go-to economist for swipes at Trump’s tariffs and trade wars – every single one of them. As a result, it’s almost inevitable that, with Trump out of power, and Mr. Biden now having retained for months the principal Trump China and metals tariffs – every single one of them – that he’d be looking for new ways to show how mistaken these measures have been.

Although Bown admits that the unprecedened stop-start nature of the CCP Virus-era U.S. economy, the suddently booming demand for microchip-intensive infotech products during the pandemic, and weather-related production disruptions all contributed substantially to the shortage, he also claims that Trump’s trade and tech policies also “squeezed supply” – by definition enough to write about.

His main arguments: First, Trump’s tariffs on semiconductors made in China reduced U.S. imports on net because American purchases from other countries didn’t make up for those chips. Second, his restrictions on the sale of American-made semiconductors to Huawei led the Chinese telecommunications gear giant and other Chinese tech companies to start hoarding chips from everywhere for fear of inadequate overall supplies, and left fewer semiconductors for other users to buy. Third, these curbs on sales of U.S.-made semiconductor to such an enormous customer discouraged chip-makers from all over the world from investing in production capacity in the United States in favor of building factories that could supply China from elsewhere.

But even though, as noted above, Bown admits that other culprits deserve responsibility as well, he not only downplays their effects. He completely ignores the impact of much more fundamental, indeed root, causes. Highly conspicuous, for example, are the consequences of decades of the kinds of offshoring-happy trade policies so strongly supported by Bown and his Offshoring Lobby-funded think tank, the Peterson Institute for International Economics. These policies persuaded U.S.-owned semiconductor manufacturers to move to China and the rest of East Asia much production capacity that could have been installed in America – in large part because they sent to China and the rest of East Asia so much production of the infotech hardware production that buys so many semiconductors.

Nor does Bown mention the dangerously shortsighted decisions of so many U.S.-owned semiconductor companies to eschew manufacturing for a “fabless” business model of researching and designing chips and then farming out the production “foundries” run by separate contract companies – mainly in Asia. Largely as a result, the growth of inflation-adjusted American semiconductor output fell by fifty percent between the U.S. economic expansion of 2001-2007 and the longer expansion of 2009-2019. (See my National Interest article on the subject from last October for the statistics presented above and below.) 

The growth during the latter period (73.68 percent) seems impressive in isolation. But it wasn’t nearly enough to prevent the U.S. share of global semiconductor manufacturing capacity from sinking to 12 percent – less than half the percentage in 1990. And it’s not like the growth of this global capacity has been killing it lately, especially considering it’s an archetypical “industry of the future.”

You wouldn’t know this if you if you were relying solely on Bown, but by one key measure, this capacity’s 2013-2019 cumulative expansion (14.29 percent, as shown in the chart below (which comes from the main trade association of the global semiconductor manufacturing equipment industry) was actually slower than the after-inflation growth of total global output of everything (18.29 percent). And if that’s not a surefire formula for a global shortage to me, tariffs and export controls or not, I don’t know what is. Nor do Chad Bown, or the Foreign Affairs editors who published a diatribe that’s factually unhinged even by the rock bottom standards of Mainstream Media coverage of U.S. trade policy.      

(What’s Left of) Our Economy: Latest Figures Leave the U.S. Trade Picture as Foggy as Ever

Tags

aerospace, aircraft, Boeing, Canada, CCP Virus, China, coronavirus, COVID 19, Donald Trump, exports, goods trade, imports, Made in Washington trade deficit, manufacturing, non-oil goods deficit, reopening, services trade, tariffs, Trade, trade deficit, Wuhan virus, {What's Left of) Our Economy

With huge Chinese ports newly suffering the kind of congestion that’s clogged America’s West Coast ports for months, the U.S. and other national economies reopening at widely varying rates from their CCP Virus-induced shutdowns, and a worldwide shortage of semiconductors still undermining production throughout the world’s manufacturing industries, it’s tougher than ever to figure out what to make of the latest monthly U.S. trade figures (for May).

Oh, and I almost forgot: America’s long-time export and trade surplus standout, Boeing, keeps making bad news on the intertwined manufacturing and safety fronts, which means that its domestic and overseas sales could be depressed for months more.

So since they’re of such little help in figuring out the two biggest trade policy questions facing the country – about how different a post-pandemic trade normal may look from its pre-virus counterpart, and whether and how well the Trump tariffs are still working – it seems the best course to follow is simply reporting the highlights of the May report from the Census Bureau (and voicing some very tentative analyses where I have the courage).

These new data, which came out last Friday, revealed that the combined U.S. goods and services trade deficit increased by 3.14 percent between April and May – from $69.07 billion to $71.24 billion. The total was the second highest ever, trailing only March’s $75.03 billion.

The same general pattern characterized the goods trade gap, which widened by 2.76 percent (from $86.78 billion to $89.17 billion), also hit the second highest total on record, and also fell short of a March all-time high ($92.86 billion).

The best trade balance-related news came on the services side – which has been especialy hard hit by the virus and its effects, and where the surplus widened by 0.74 percent (from $17.80 billion to $17.93 billion) and improved for the first time since January.

Total exports advanced for the fourth straight month in May (by 0.64 percent, from $204.70 billion to $206.02 billion), and attained their highest level since December, 2019, just before the CCP Virus seems to have begun spreading from China.

Goods exports were something of a laggard – growing sequentially in May by just 0.30 percent (from $145.09 billion to $145.28 billion. More encouragingly, this level set its second straight monthly record.

Services exports fared better, up 1.47 percent on-month in May (from $59.62 billion to $60.49 billion) and producing their best monthly total since semi-pandemic-y March, 2020’s $60.62 billion.

But on all counts, U.S. imports rose faster.

The total import amount reached $277.26 billion in May, rising 1.27 percent from April’s $273.78 billion and representing the second highest total ever. Only the $277.69 billion figure from…yes…March has been higher.

Goods imports rose by a slower 1.18 percent, from $231.96 billion to $234.70 billion. And the total was another second highest, lagging only March’s $236.52 billion.

Despite their surplus growing, services imports rose considerably faster, by 1.77 percent, from $41.84 billion to $42.56 billion. That total was the highest since February, 2020 ($47.06 billion) – just before the virus’ arrival.

To a noteworthy degree, the worsening of the overall and goods deficits in May looks like a Boeing story. The narrowing of the U.S. civilian aircraft trade surplus (by $1.388 billion) accounted for nearly 64 percent of the increase deterioration in the overall trade balance, and 58.05 percent of the monthly growth of the goods trade gap.

Boeing’s troubles can’t be blamed for the entire year’s lofty deficit numbers. Far from it. In fact, between the January-to-May periods last year and this year, the $917 million shrinkage of the aircraft surplus has equalled less than one percent of the overall deficit’s increase during this time and just slightly more of the goods deficit. Aircraft trade numbers can be pretty volatile, too. But is the Boeing effect on the May data a portent of things to come? Stay tuned.

As known by RealityChek regulars, the best measure of how tariffs and similar trade policies are influencing U.S. trade flows is non-oil goods trade, which strips out oil (which hardly ever comes up in trade policymaking) and services (where global trade liberalization remains modest). And in this context, what jumps out right away from the May trade results (or what should jump out) is that this portion of the trade deficit rose much more slowly on month (0.33 percent) than the combined goods and services deficit (3.14 percent) or the total goods deficit (2.76 percent). And interestingly, without the poor civilian aircraft numbers, the “Made in Washington” trade deficit would have fallen month-to-month.

Moreover, on a January-to-May year-to-date basis, the non-oil goods trade deficit worsened just about half as much (by 23.99 percent) as the overall deficit (45.82 percent), and somewhat more slowly than the goods deficit (26.44 percent). Given that the Trump China tariffs alone of some $350 billion amounted to some 15.21 percent of total U.S. non-oil goods imports in 2019 (and remain in place today), that could be a sign that the levies have succeeded in restraining that deficit’s growth. When it comes to the Boeing effect, however, it’s negligible here, too.

May was an especially bad month for U.S. manufacturing trade, as its chronically huge shortfall jumped by 3.01 percent, from $103.60 billion to 106.72 billion. Huge as that sounds, it was only the fifth worst such figure ever. Exports increased by 0.91 percent while the much greater amount of imports climbed by 2.01 percent. Again, the Boeing effect generated much (nearly 45 percent) of the monthly deficit worsening but less than one percent of the $116.57 billion year-to-date difference.

May was also a bad month for China tariff supporters. The U.S. goods deficit with the PRC grew by 1.90 percent on month – much faster than the 0.33 percent increase in the non-oil goods deficit that’s its closest worldwide proxy. U.S. goods exports to the PRC advanced by a healthy 5.54 percent. May monthly imports grew much more slowly (3.04 percent), but they’re more than three times greater.

On a year-to-date basis, moreover, the Sino-American trade gap is 26.92 percent wider than last year, which stands not only as faster growth than that of the non-oil goods deficit (23.99 percent), but another sign that of tariff failure, as the China deficit by this measure has been rising faster non-oil goods deficit since March. Still, it’s difficult drawing firm conclusions, since the recovery of China’s export-heavy economy from its pandemic experience has been faster than that of most other (often also export-reliant) U.S. trade partners. Moreover, the difference between the growth rates of the two deficits has narrowed dramatically since March, so it’s possible that the pre-pandemic pattern – which reflected much better on the tariffs – is steadily returning.

And let’s end on an unexpected note: In May, the U.S. goods deficit with Canada surged by 56.98 percent sequentially, to $3.69 billion. That’s the highest level since December, 2019’s $4.95 billion and the fastest monthly increase since January’s 74.04 percent. This monthly rise, moreover, was driven by U.S. imports, which reached $29.08 billion – the biggest monthly total since October, 2014 ($30.72 billion). The monthly increase: a strong but hardly record breaking 5.86 percent. American goods exports to its northern neighbor, however, rose by just 1.09 percent, to $25.39 billion. And year-to-date, the U.S. goods deficit with Canada has more than doubled, soaring by a 108.93 percent.

Im-Politic: From Inside the Wuhan Lab

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Anthony S. Fauci, Bloomberg.com, CCP Virus, coronavirus, COVID 19, Danielle Anderson, gain-of-function research, Im-Politic, lab leak, Michelle Fay Cortez, National Institute of Allergy and Infectious Diseases, National Institutes of Health, NIH, Ralph Baric, Shi Zeng-li, virologists, virology, WIV, Wuhan Institute of Virology, Wuhan virus

That was some scoop by Bloomberg.com’s Michelle Fay Cortez the other day, bagging an interview with the last (and only) non-Chinese scientist to work in the Wuhan, China lab suspected of being the origin point of the CCP Virus and the pandemic it’s spawned.

Danielle Anderson apparently wasn’t working on coronaviruses per se, but her views are of special interest not only because she has first-hand knowledge of the Chinese researchers who were, and of the safety standards at the Wuhan Institute of Virology (WIV). Her views are of special interest because she’s the only person with such knowledge who isn’t vulnerable to Chinese regime threats against herself or her family or friends.

So when the Australian virologist speaks highly of the integrity of Wuhan colleagues and of the lab’s safety policies, she deserves to be taken seriously. Ditto for her claim that, although U.S. intelligence agencies are reported to have determined that three WIV researchers became sick enough with flu-like symptoms to have sought hospitalization in November, 2019 – about a month before physicians in Wuhan first reported to Chinese health officials the appearance of a novel coronavirus – she knew of no such illness among Institute staff. So that appears to undercut the argument that the three researchers’ illness tightly connect the pandemic to work done at the lab.

Nonetheless, in many ways, Anderson’s statements generally leave the lab leak theory – as opposed to the contention that the virus’ emergence had nothing to do with the WIV and jumped naturally from animals to humans – decidedly alive and kicking.

For example, Anderson’s praise of the WIV’s safety culture seems retricted to its BSL-4 facility – a lab that supposedly met the highest internationally used standards for handling dangerous pathogens. But Dr. Shi Zheng-li, China’s lead bat virus expert, has stated on the record that she’s conducted her coronavirus research in facilities at the Institute that meet less exacting safety requirements.

Moreover, her suggestion that using a form of gain-of-function research known as reverse genetics to increase the infectiousness of viruses is too difficult to have taken place at the WIV is contradicted by two important facts. First, this is precisely the kind of work at that lab that was paid for grants from the U.S. government’s National Institutes of Health and National Institute of Allergy and Infectious Diseases (the latter of course headed by Dr. Anthony S. Fauci). Second, the WIV doubtless got the grants largely because Shi and a U.S. coronavirus researcher named Ralph Baric had in fact used the technique to create a novel coronavirus as early as 2015. (See this post for documentation.)

Perhaps most important, although she doubts the WIV gave the world the CCP Virus, Anderson made clear that she “could foresee how [an accident spawning the virus] could maybe happen, declared that “I’m not naive enough to say I absolutely write this off,” and said that she thinks, in Cortez’ words, that “an investigation is needed to nail down the virus’s origin once and for all.”

Which leaves me with only one criticism of Cortez’ interview: Given her distinctive vantage point, why didn’t she ask Anderson why she thought China has done everything possible to prevent such a probe?

(What’s Left of) Our Economy: If Australia Can Do It….

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Australia, CCP Virus, China, competition, coronavirus, COVID 19, economics, exports, free trade, globalization, Reuters, Swati Pandey, Trade, Wuhan virus, {What's Left of) Our Economy

For almost as long as I’ve been writing systematically about trade policy (since the start of the 1990s), I’ve been convinced that however valid the centuries-old economic theories supporting the desirabiity of the most open possible trade policies may be , they’re largely irrelevant to the United States.

The main reason? With its abundance of a huge percentage every kind of product imaginable, its huge scale, and its dynamic free market-dominated economic system, America can satisfactorily duplicate on its own the global conditions supposedly needed to promote the greatest degree of competition. As a result, it’s amply capable of maximizing the incentives for cost-reduction, quality, efficiency, and innovation and thus realize the benefits of what’s loosely termed free trade that most other national economies can realize only by opening wide to foreign competition. (See this recent article for the most complete statement of my thinking.)

So it’s been especially gratifying to see evidence for these views continuing to pile up, and I’m pleased to report that more appeared in a Reuters report yesterday.

The gist of Swati Pandey’s article was nicely summed up in the non-clickbait-y headline: “Shut off from the world, Australia fosters red-hot growth a home.”

As the author writes, the country has recovered from its own CCP Virus-induced recession faster than expected, its economy is already bigger than before the pandemic, and “the very constraints that were expected to hurt demand, such as closed international borders and limited domestic mobility, have serendipitously channelled new sources of growth.”

Fiscal and monetary stimulus have played a big role in Australia’s renewed expansion, but as Pandy observes, although “the country is in the midst of a worsening trade war with the world’s largest trading nation, China, Australia’s exports are miraculously booming, thanks to soaring prices of iron ore and newer markets in Asia and Middle East to sell to.”

Australia seems to be overturning the conventional wisdom on immigration, too, for it’s been prospering even though “tens of thousands of Australian citizens still stuck overseas” because due to virus-related fears, “Australia has pledged to keep borders shut well into next year, which also means skilled migration – which was propelling the economy until 2019 – is practically impossible.”

An entirely predictable result: Because of these tight external border controls, and continuing restrictions on internal movement, wages are rising healthily.

All of which raises the question: If Australia, whose economy is less than a fifteenth the size of America’s and much less diverse industrially and technologically, can thrive while combating China on the trade front and, more generally, while relying largely on its own devices, why can’t the United States – in spades?

The Reuters piece doesn’t say that Australia can rely on this growth formula forever. And similarly, I’ve never urged America to shut itself off from all trade or immigration, either. Moreover, exports remain a leading growth driver. But if Australia’s potential for autonomous prosperity is this impressive, imagine the possibilities for the United States (including without significant export dependence because of its gargantuan home market). And that’s even after decades of Washington seeming to prioritize fostering interdependence (i.e., link itself ever more tightly to the global economy), and inevitably creating the kinds of vulnerabilities whose full dangers finally attracted broad attention during a health catastrophe. Maybe Americans and especially their leaders could learn some lessons from Australia before the next pandemic strikes?  

Im-Politic: A Pandemic of Coverups?

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Anthony S. Fauci, CCP Virus, censorship, coronavirus, COVID 19, EcoHealth Alliance, Facebook, Fauci, Fauci emails, Google, Im-Politic, lab leak, Mark Zuckerberg, National Institutes of Health, NationalPulse.com, natural origin, NIH, Peter Daszak, social media, The New York Times, Wuhan Institute of Virology, Wuhan lab, Wuhan University, Wuhan virus, Zeynep Tufekci

What a June it’s been so far for anyone who’s always been skeptical of claims that anyone linking the CCP Virus’ emergence to virology facilities in Wuhan was trafficking in fringe-y conspiracy theories. Many crucial pieces of the puzzle are still missing. But June’s developments should make it harder than ever to dismiss not only the possibility that a natural or engineered version of the virus escaped from the lab, but that U.S. public health authorities ignored official prohibitions on funding so-called gain-of-function work at the Wuhan Institute of Virology, and that they and other powerful American institutions even acted to suppress news of their Wuhan connections.

After all, it’s already been a month in which no less than Anthony S. Fauci appeared to emphasize that the virus featured characteristics not normally found in the wild. The longtime head of the U.S. National Institute of Allergy and Infectious Diseases and President Biden’s chief science advisor told a New York Times interviewer that

“This is an unusual virus because about a third to 40 percent of the people get no symptoms at all. Yet it’s capable of killing 600,000 Americans. We’ve never had a situation like that where a virus that would be benign or almost half the people or 40 percent of the people and yet kill so many people.”

And this after declaring that

“I’m not an evolutionary virologist, but those who are look at the virus, and they say it’s absolutely totally compatible with something that evolved from bat viruses because of the closeness to. But we don’t have that extra link that’s come in, but there’s nothing they see in there that makes you think it was something that came from a lab.”

Clear as mud, right?

It was also a week in which another New York Times contributor made an observation indicating that even if the the Wuhan Institute of Virology whose research Fauci and the National Institutes of Health (NIH) overall helped finance wasn’t engaged in federally prohibited gain-of-function experiments, it still might have created the pathogen in question where none existed before. According to Zeynep Tufekci,

“Just trying to culture bat viruses in the lab can create risks that the scientists may not even be aware of. While trying and failing to cultivate one strain, they might inadvertently culture another one they don’t even know about. It’s even possible, [Stanford University neurobiologist and bioengineer Michael Lin] told me, that viruses can coexist in a single sample and quietly recombine, giving rise to something novel but undetected.”

In other words, creating the specific SARS-CoV-2 virus that has swept over the world might not have been the goal of the Chinese scientists in question. But this virus might have resulted from their efforts to simulate natural processes. If you or loved ones have suffered from the virus medically, or from the economic and other public health damage it’s caused, this is likely to look like a distinction without a difference. It’s also likely to raise further questions about why U.S. public health agencies funded clearly risky research in a facility they’ve acknowledged they couldn’t monitor adequately.

It’s also been a month in which, thanks in part to that New York Times Fauci interview, more reasons emerged to wonder whether Fauci and social media giants Facebook and Google conspired (yes, the word would be justified in these instances) to suppress reporting on the lab leak theory – in Google’s case because it, too, had helped pay for the Wuhan lab’s work at various times recently.

In January, 2020 – when the CCP Virus was declared a public health emergency by the World Health Organization (WHO) – Facebook began a campaign to “keep harmful misinformation about COVID-19 from spreading on our apps” and direct customers “to resources from the WHO and other health authorities through our COVID-19 Information Center and pop-ups on Facebook and Instagram with over 350 million people clicking through to learn more.” Throughout the pandemic period, WHO of course has been a major actor trying to debunk any version of the lab leak theory.

Given Fauci’s own clear interest in drawing public attention away from the possibility that his agency helped create the virus, it’s more than a little interesting that in March of that year, Facebook founder and CEO Mark Zuckerberg sent Fauci an email that the recipient told Times interviewer Kara Swisher, who covers Big Tech, “hey, is there anything that we can do to help out to get the messages out, the right public health messages? I have a very important medium here in Facebook. Can I help? And as a matter of fact, if you guys don’t have enough resources and money to do some of the things you want, just let us know.”

Fauci took Zuckerberg up on his offer but nothing is known about the details of this arrangement because although this email exchange has been made public (with redactions that are odd to say the least since it’s hard to imagine any national security secrets changed hands), the content of follow-up communications (which surely included not only emails but phone conversations) remain under wraps.

Can we all agree that all of this material should be released ASAP, so that we won’t have to accept Fauci’s word that “any thought” that his dealings with Zuckerberg had to do with censoring inconvenient virus-related truths “is total conspiracy theory and total flight of fantasy”? Especially since Facebook didn’t announce until May 26 of this year that “we will no longer remove the claim that COVID-19 is man-made or manufactured from our apps.” (The company has said nothing about the possibility that the virus escaped a Chinese lab in natural form.)

As for Google, news of its own dodgy CCP Virus-related practices came out on June 9. Shortly thereafter, the company’s own virus and China connection was revealed. A website called TheNationalpulse.com produced proof that Google “funded research conducted by Peter Daszak’s EcoHealth Alliance – a controversial group which has openly collaborated with the Wuhan Institute of Virology” on that controversial bat virus research.

Google insists that “The one-off philanthropic grants referenced are years old and had nothing to do with COVID,” and that ‘We have engaged precisely zero times with this organization on any work related to COVID or the Wuhan lab.” But as the National Pulse post showed, one of the studies co-sponsored by Google – from 2018 – described itself “conducted in Guangdong Province, China, to characterize behaviors and perceptions associated with transmission of pathogens with pandemic potential in highly exposed human populations at the animal-human interface….” So it’s easy to conclude that Google also wanted to draw attention away from and discredit the idea that the Institute had anything to do with the pandemic’s outbreak.

Finally, June has been a month when the news came out that in June, 2020, a group of Wuhan University scientists asked the NIH to delete from a key medical genomics database data CCP Virus genome sequences they gathered from patients in that city in January and February.

The scientists claimed their reasons for the request were technical, and no evidence of deceitful intent has appeared. For its part, the NIH says that it receives such requests all the time, and typically complies. Fair enough. But given the importance of such very early pandemic stage information in determining the virus’ origins, and given China’s extensive efforts to keep data from this crucial early pandemic period secret, why on earth didn’t the NIH at least report the request and its response right away? Could it be because of its own funding of virus research in Wuhan?

As I said above, many major pieces of these puzzles remain missing.  But many are now in place also, and if ever there was a subject that screamed out for a comprehensive official investigation of the relevant actions and relationships at least of the U.S. players, with broad subpoena power, you’d think a pandemic that’s killed more than 600,000 Americans and sickened and disrupted or flat-out ruined the lives of tens of millions more amply fits the bill.  

 

(What’s Left of) Our Economy: Can the U.S. Really Eliminate All Its Lousy Jobs?

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automation, CCP Virus, coronavirus, COVID 19, Daniel Alpert, elder care, Ezra Klein, hospitality, hotels, Jobs, low-wage jobs, productivity, restaurants, seniors, technology, The New York Times, wages, workers, Wuhan virus, {What's Left of) Our Economy

Over the last month, two noted and anything-but-radical economics commentators have voiced an idea that’s really radical. How radical? It could produce much more fundamental change in the U.S. economy than any actual or even potential effects of the CCP Virus if its policy implications (which they may not be fully aware of) are acted on.

The idea is that the pre-virus economy (they didn’t specify for how long, but there’s no reason to believe the development began recently) was highly dependent on creating huge numbers of crappy, dead end, low-wage jobs, and that a combination of labor cost-boosting factors – like worker shortages created largely by sudden economic reopening, higher minimum wage requirements, and mandates for businesses to adopt more family-friendly practices – is bringing that era to an end.

The implications: Enormous numbers of the companies and even critical masses of entire industries relying on such jobs may go under, and that nothing should be done to restore the previous status quo because in economic terms (which are also reflecting the public’s non-economic preferences) those exploitative business models are simply becoming thoroughly uncompetitive.

In other words, especially in sectors like restaurants, retail, hospitality, and elder care, where the quality of personal service is valued by customers (not that they always get the quality they want), many and even most employers simply may find significantly higher labor costs unaffordable. And many may not be able to persuade enough customers to pay the higher prices they’d need to charge to stay afloat. So they wouldn’t – and good riddance.

The analyst who first led me to these thoughts was Daniel Alpert, a Cornell University Law School fellow, economist, and Wall Street investor. In a June 1 New York Times op-ed article, he argued that:

“The chronic problem we face as we put Covid-19 in the rearview mirror is that the U.S. economy before the pandemic was incredibly dependent on an abundance of low-wage, low-hours jobs. It was a combo that yielded low prices for comfortably middle-class and wealthier customers and low labor costs for bosses, but spectacularly low incomes for tens of millions of others.”

Less than two weeks later, The Times published another article, by columnist Ezra Klein, that similarly contended:

“The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages….We discuss the poor as a pity or a blight, but we rarely admit that America’s high rate of poverty is a policy choice, and there are reasons we choose it over and over again.”

Klein also wrote about some of the likely tradeoffs of mandates that created higher labor costs: “[S]ome small businesses would shutter if they had to pay their workers more. There are services many of us enjoy now that would become rarer or costlier if workers had more bargaining power.” But this prediction seems greatly to low ball the downsides and the collateral damage.

For example, according to this normally reliable source, the number of restaurants in the United States numbered about 660,000 in 2018. That’s more than 18 percent of all the 3,618,550 businesses with more than five employees that the Census Bureau says existed in the United States as of 2019 (the last pre-pandemic year). Since some dining establishments are very small and employ between one and five staff, the percentage of all U.S. businesses that are restaurants is probably somewhat lower. And surely not all of these would close their doors if labor costs rose meaningfully. But it should be obvious that lots of nationwide economic disruption would surely result.

As I’ve repeatedly written, (e.g., here) there’s an alternative to employers offsetting these higher labor costs. Rather than raise their prices significantly (a tactic that may not accomplish all or most of is goal), they could increase productivity. After all, many of these labor-intensive industries are labor-intensive because they’ve been such laggards on the productivity front. For example, between 1987 (the first year such data are available) and 2019 (the last pre-pandemic year), overall labor productivity in U.S. businesses outside the financial sector grew by 71.74 percent, in non-casino hotels and motels by just 51.33 percent, and in restaurants and other eating places, a mere 18.34 percent. And as known by RealityChek regulars, this period hasn’t exactly been a bang-up time for U.S. productivity growth.

There’s no doubt that more automation in particular would wind up displacing jobs – which certainly wouldn’t leave many workers better off on net. It’s entirely possible, though, that even greater net national employment opportunities could be created by these more efficient companies’ greater ability to service more customers affordably, thereby spurring the need to hire to staff expanded operations in other capacities. And in theory, anyway, more automation and use of new technologies could create entire new industries – and impressive employment opportunities. That’s certainly been the case with the internet. But there’s a big rub: Not all the displaced workers might possess the skills or other qualifications to handle any of these new positions.

Moreover, as suggested by my reference to the quality of service, for non-economic reasons, boosting productivity may not be enough to save many of these businesses. For many customers might be turned off by the prospect of dealing with machines rather than courteous and personable human beings, and decide not to patronize these businesses even if automation etc restored affordability.

And in fields such a elder care, it’s doubtful that machines could safely replace humans in quality terms for many years – and that seniors and their family members would find them acceptable on any grounds for many more years. Given America’s aging population, that of course portends a problem transcending economics. One way out: Much greater government subsidies for elder care businesses, or even outright nationalization of this sector. But don’t expect such proposals to uncontroversial.

Another possible way out of this dilemma for business owners generally in low-pay sectors where wages are surging is to accept much lower profits. But any industries that experience such a shift seem doomed to stagnation and even gradual extinction. For how many would want to invest their capital and effort in sectors where the best or even likeliest possible return is scraping by?

The cumulative effect of all these developments on society, as opposed to the economy, wouldn’t be trivial, either. For example, before the CCP Virus’ arrival, dining out and taking out in particular had surged in popularity in the United States for decades. One indication: “In 1955, 25 cents of every $1 spent on food went to restaurants. Today, it’s more than half.” One reason of course is the rise of the two-income household, and the resulting decrease in hours available for food preparation.

In addition, though, as more Americans patronized dine-in restaurants in particular, more surely came to value their particular pleasures. Could they find an adequate substitute if they needed to? And how would such a shift change the rest of their home and work lives? As for society itself, what would the impact be of the disappearance or great scaling back of one major form of communal activity?

The situation is potentially even more dire for the nation’s bars. Between 1987 and 2019, their labor productivity actually plunged by 14.50 percent. Will elevated labor costs spell the end, at least in America, of an institution that’s been around and central to human life for…how many centuries? Millennia? Or will customers get used to robot bar-tenders?

The answers to all the questions posed here are definitely above my pay grade. But something I do know: Despite the pressing need to improve the earnings and lives of low-wage workers, some significant and possibly unprecedented tradeoffs will emerge. And it will be far from easy to make sure that a genuinely New Normal is better on net for these workers and the country at large than the Old.

Im-Politic: Another CCP Virus Failure by “The Science”

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Alison Young, Anthony S. Fauci, CCP Virus, coronavirus, COVID 19, Daily Mail, Dany Shoham, Francis Collins, Glenn Kessler, Im-Politic, Kristian Anderson, Marcia McNutt, National Academy of Science, National Institutes of Health, Peter Daszak, The Lancet, The Washington Times, Tom Cotton, USAToday, virologists, Washington Post, Wuhan Institute of Virology, Wuhan lab, Wuhan virus

America’s official scientific establishment is in a huff over the CCP Virus origins theory controversy. “There’s sniping going on in all directions,” groused National Academy of Sciences president Marcia McNutt to a Washington Post reporter. “Her message to everyone,” correspondent Joel Achenbach continued, “cool it.”

Added McNutt:

“If anyone is going to come out strongly on one hypothesis or another, the scientific method says that there should be evidence to back it. I worry when some people are very willing to be firm about one origin or the other but fail to either have the evidence or the expertise to back it up.”

All of which I strongly endorse. But a recent statement of hers, co-signed by her counterparts at the National Academies of Engineering and Medicine, let off the hook the main culprits in turning this debate over whether the pandemic came directly from nature or escaped from a Chinese lab into a brawl. For the record clearly shows that the mudslingers who have sown “public confusion” and risk “undermining the public’s trust in science and scientists, including those still leading efforts to bring the pandemic under control,” first came from the national and global scientific establishments themselves.

Possibly worse, even if you ignore compelling evidence of their powerful self-interest in brushing off the lab leak theory (see, e.g., here) Washington’s own science leaders apparently put up no resistance.

Let’s use for documentation a recent lab leak-related timeline compiled by the Washington Post, which – as compiler Glenn Kessler shows – was one of many mainstream media outlets that portrayed this view as a wild and crazy notion.

According to Kessler, two of the first four presentations of lab leak claims and potentially related views (in January, 2020) came from an apparent Hong Kong democracy supporter on Twitter, and from a study by Chinese researchers published in the prestigious medical journal, The Lancet and actually funded by Chinese government agencies.

This study found that, in Kessler’s words, “13 of the 41 cases [of the CCP Virus], including the first documented case, had no link to the seafood marketplace that originally was considered the origin of the outbreak.” In other words, at this admittedly early stage, the natural origin supporters had some major explaining to do.

The other two reports that linked the Chinese facility in question – the Wuhan Institute of Virology (WIV) came in the British newspaper Daily Mail and the American newspaper The Washington Times.

The former simply noted that a 2017 article in the (also prestigious) science publication nature reported that “A laboratory in Wuhan is on the cusp of being cleared to work with the world’s most dangerous pathogens” and that “Some scientists outside China worry about pathogens escaping….”

The latter, titled “Coronavirus may have originated in lab linked to China’s biowarfare program,” was based on an interview with a former Israeli intelligence officer with a biowarfare specialty and a microbiology Ph.D. who contended that “Certain laboratories in the [WIV] have probably been engaged, in terms of research and development, in Chinese [biological weapons], at least collaterally….”

He turned out to be right – as even the Biden administration has acknowledged.

Yet this specialist, Dany Shoham, also said that “In principle, outward virus infiltration might take place either as leakage or as an indoor unnoticed infection of a person that normally went out of the concerned facility. This could have been the case with the Wuhan Institute of Virology, but so far there isn’t evidence or indication for such incident.”

So no conspiracy-mongering there, either.

Arkansas Republican Senator Tom Cotton, as Kessler noted, has been widely accused of “repeating a coronavirus fringe theory that scientists have disputed.” But as already made clear, many non-fringe-y types had been making similar statements, too, by the time he spoke out in late January.

Moreover, all Cotton said at various time then and in mid-February was:

>”…Wuhan has China’s only biosafety level-four super laboratory that works with the world’s most deadly pathogens to include, yes, coronavirus.”

>”…super-lab is just a few miles from that [Wuhan seafood] market. Where did it start? We don’t know.” He did add more provocatively that “China lied about virus starting in Wuhan food market.”

But he also argued that “burden of proof is on you & fellow communists” – a claim that was eminently unreasonable given the secrecy with which China had been handling virus-related issues and its outright intimidation of a Chinese researcher who had posted a paper charging that “the killer coronavirus probably originated from a laboratory in Wuhan” and who (in Kessler’s words) “pointed to the previous safety mishaps and the kind of research undertaken at the lab. He withdrew the paper a few weeks later after Chinese authorities insisted no accident had taken place.”

>And on February 9, after Beijing called his remarks “absolutely crazy,” Cotton tweeted the following description of four possible virus origin scenarios:

“1. Natural (still the most likely, but almost certainly not from the Wuhan food market) 2. Good science, bad safety (e.g., they were researching things like diagnostic testing and vaccines, but an accidental breach occurred). 3. Bad science, bad safety (this is the engineered-bioweapon hypothesis, with an accidental breach). 4. Deliberate release (very unlikely, but shouldn’t rule out till the evidence is in). Again, none of these are ‘theories’ and certainly not ‘conspiracy theories.’ They are hypotheses that ought to be studied in light of the evidence.”

Sorry, but there’s no fear-mongering here, either.

But how did the scientific community respond? Twenty-seven of its members published a statement in The Lancet declaring: “We stand together to strongly condemn conspiracy theories suggesting that covid-19 does not have a natural origin.” Scientists, they continued “overwhelmingly conclude that this coronavirus originated in wildlife.”

This statement, however, suffered fatal conflict of interest flaws in that, as Kessler writes, “it was drafted and organized by Peter Daszak, president of EcoHealth Alliance, which funded [coronavirus] research at WIV with U.S. government grants.” That is, the statement was the product of someone who had everything to lose either if a naturally occurring virus leaked from a lab in a country whose dodgy safety procedures were no secret, or if this lab had – and possibly in cooperation with the Chinese military – created this pathogen and lost control of it (or, as indeed currently seems less likely, at least to me, let it loose).

And although the 27 signers of Daszak’s statement certainly didn’t represent the entire U.S. or global virology or bio-sciences communities, evidently no one in these larger communities’ ranks thought to point out Daszak’s thoroughly compromised position. (Unless – improbably – none of them knew anything about his relationship with the lab?). Even more damningly, neither National Institutes of Health Director Francis Collins or U.S. National Institute of Allergy and Infectious Diseases Anthony S. Fauci (who approved these grants) called out Daszak, either.

Nor were Daszak and the other signers (three of whom have now endorsed investigating the lab leak theory) the only scientists smearing all lab leakers. Last week, a USAToday probe of Fauci’s role in the early stages of the virus origins debate showed that Kristian Anderson, an infectious disease expert at California’s Scripps Research Translational Institute belongs on the list, too. And again, Fauci himself maintained a conspicuous silence.

It was Anderson who first alerted Fauci at the end of January, 2020 to the possibility that the virus might have been a human creation. He subsequently changed his mind – which is perfectly fine, except that his own explanation for the switch contains some contradictions – but for some reason, Anderson wasn’t content to set forth his own views. Just a few days later, in very early February, according to USAToday author Alison Young, he was “telling another group of scientists” that “suggestions of engineering [were] ‘fringe’ and ‘crackpot’ theories.”

Indeed, Anderson went so far as to suggest to the top career U.S. government science officials drafting a letter on the virus (including its origins) that they “be more firm on the question of engineering. The main crackpot theories going around at the moment relate to this virus being somehow engineered with intent and that is demonstrably not the case. Engineering can mean many things and could be done for either basic research or nefarious reasons, but the data conclusively show that neither was done…”

Anderson continued, “If one of the main purposes of this document is to counter those fringe theories, I think it’s very important that we do so strongly and in plain language….”

To the credit of the government scientists (and possibly Fauci, who was involved in the drafting) Anderson’s proposals were rejected. But as the controversy over the virus’ origins continued, and scornful dismissals of the lab leak theory hardened into conventional wisdom, instances of the scientific community, especially inside U.S. government, warning “Not so fast” simply can’t be found. In fact, as detailed in Kessler’s timeline, the only such examples from the professionals that appeared in public during this time came to the in the form of research outside the federal government explaining why the lab leak theory retained varying degrees of plausibility. 

As I’ve previously written, I’m fine with “following the science” when dealing with crises like the pandemic – though not with leaving policy decisions with far-reaching and gigantic ramifications outside science to this particular group of specialists.  But if “the science,” or at least the current group of government officials and advisers, wants continued major input, a much better job will need to be done in carrying out what should a priority responsibility – recognizing and encouraging legitimate scientific debates.  That is, they’ll need to “follow the science” and the actual evidence themselves, instead of simply parroting conventional wisdoms and especially narratives whose origins require thorough investigations themselves.