Amid all the competing headlines of the 2024 election, there may be no more bread-and-butter issue—literally—than how much Americans are paying to put food on their tables. The GOP is gearing up to attack the Biden-Harris administration for escalating grocery store bills, while presumptive Democratic nominee Kamala Harris has now responded with her own plan to fight higher food prices. 

One of the hottest items in this political food fight is unquestionably the ongoing litigation from the Federal Trade Commission (FTC) attempting to block the Kroger-Albertsons grocery store merger. A host of Democratic lawmakers recently joined the legal fight, arguing that any potential merger would raise prices, increase food deserts, and disproportionately hurt unionized labor. As part of her new food price plan, Harris included a call for aggressive antitrust crackdowns in the food and grocery industry, mentioning the Kroger-Albertsons merger by name in her speech this week.

None of the arguments against the merger make much sense on the merits, but the FTC—and the Democratic Party writ large—are stacking the legal deck to achieve a predetermined outcome that conveniently aligns with their policy priorities.

The saga started back in October 2022, when The Kroger Company and Albertsons Companies Inc. (the parent company for popular grocery chains like Safeway and Acme, among others) announced their plans for a $24.6 billion merger. The FTC promptly launched a 16-month investigation, culminating in a lawsuit in federal court to block the proposed merger.

Kroger is the fourth-largest grocery store chain in America—behind Walmart, Amazon, and Costco—and Albertsons is the fifth-largest. Once merged, the combined company would rise to third on the list. On the surface, this may seem to provide some support for the FTC's position, but American shoppers would be wise to read the fine print.  

In truth, if the deal were to proceed, a merged version of Kroger and Albertsons would still only make up 9 percent of overall grocery sales. To put this in further perspective, consider that Walmart—the nation's largest grocery provider—would continue to operate more stores (including its Sam's Club outlets) than a Kroger-Albertson combo and maintain grocery revenue that is more than twice that of the merged company. 

One could easily argue, in other words, that far from being a monopoly, a Kroger-Albertsons joint venture would be the best hedge against potential monopolies forming among the even-more-dominant firms above it on the grocery store food chain. But incredibly, the FTC pretends that two of those larger companies don't exist in the marketplace at all simply by working with their own definitions.

The FTC contends that only local brick-and-mortar supermarkets (what one might think of as a "traditional" grocery store) and hypermarkets (such as Walmart or Target, which sell groceries alongside other goods) count in the market for groceries. This narrow definition completely circumvents wholesale-club stores (such as Costco) and e-commerce companies that sell groceries (such as Amazon). 

Given that Amazon and Costco just happen to be the second- and third-largest grocery retailers in the United States, the agency is blatantly gerrymandering the definition of the marketplace. The agency's longstanding position is that the only relevant market is stores where consumers can buy all or nearly all of their weekly groceries, which begs the question: Has anyone at the FTC stepped foot inside a Costco recently? Many Americans use club stores like Costco and BJ's Wholesale Club as their primary grocery stores, with around 15 percent of Americans ages 18–34 reporting that they do most of their grocery shopping at Costco.  

Pretending that the internet doesn't exist makes even less sense. As the International Center for Law and Economics notes, 25 years ago a mere 10,000 households took part in online shopping, whereas today 12.5 percent of consumers (or over 16 million people) purchase their groceries "mostly or exclusively" online. Amazon is also preparing to make its own big push into brick-and-mortar grocery retailing as well, with CEO Andy Jassy saying last year that the company must "find a mass grocery format that we believe is worth expanding broadly."

Beyond the FTC's tortured marketplace definitions, its arguments for the alleged harms of a conjoined Kroger-Albertsons are equal parts unconvincing and outdated. In its complaint, the agency points to escalating grocery prices in recent years, and Harris echoed this by stating that she would enact a "ban on price gouging on food and groceries" by directing the FTC to impose "harsh penalties" on grocers. She also pledged to continue aggressive antitrust enforcement in the food sector, going so far as to highlight the Kroger-Albertsons merger as an example of the type of deal that could increase prices. However, as many commentators have pointed out, food price increases likely have more to do with inflation than any lack of competition in grocery markets.

In addition to the consumer price harms the FTC alleges, over half of the agency's legal complaint focuses on the alleged harm the proposed merger would cause to the unionized workers at Kroger and Albertsons. Both companies are heavily unionized—in contrast to Walmart and Amazon—and the agency claims that a combined company would have more leverage over unions given that the unions would no longer be able to play one company off against the other as a negotiating tactic. This glosses over the fact that the demand for labor is particularly competitive in the retail sector broadly, and workers could easily just jump ship to a different employer in the face of any exploitative terms pushed by the merged firm.

A final concern highlighted by some Democratic lawmakers is that a merged company could result in more store closures that lead to geographical areas within which there are few or no grocery options. Once again, this ignores the rise of club stores like Costco and online/home delivery grocery options. These alternatives reduce the plausible areas within which such food deserts can take hold, showing once again a poor understanding of the modern grocery marketplace.

Despite the many dubious underpinnings of the FTC's challenge, it fits with the Biden administration's aggressive antitrust emphasis over the past four years. While some observers were holding out hope that a Harris administration might curtail overzealous antitrust enforcement, her new food price agenda has poured cold water all over that (already wishful) thinking.

The post Harris Joins the FTC's Food Fight Against Kroger-Albertsons Merger appeared first on Reason.com.

It's OK to calm down about the economy. Yes, Friday's unemployment news was bad. Yes, the NASDAQ and Dow Jones neared correction territory on Friday morning. And yes, the Sahm Rule Recession Indicator has now been triggered. Odds are, though, a recession is not imminent. 

Here are three reasons why, in descending order of optimism. One, recent growth has been strong. Two, the economy has been near full employment for a while, and some kind of job growth slowdown is almost inevitable. Three, we're past the window where Federal Reserve actions can influence the election, though its recent behavior is still worrying.

Last week, the media's manic mood swing was on the exuberant side from news of a strong 2.8 percent gross domestic product (GDP) growth in the second quarter of 2024, which ended on June 30. This was a surprise improvement on the previous quarter's 1.4 percent growth. A normal reading is around 2 percent. Better, most of that growth was in the private sector, especially in consumer spending and inventory investment.

The current quarter's GDP growth estimate will come out on October 30. It would take a drastic swing to move from 2.8 percent to negative in just one quarter, though it has happened before. It typically takes two consecutive quarters of negative growth for the National Bureau of Economic Research to declare a recession, though its official standard is to call it as they see it.

The unemployment rate went up from 4.1 percent in June to 4.3 percent in July. June's reading snapped a 30-month streak of unemployment at or under 4 percent. This was the longest such streak since the 1960s.

For context, anything under 5 percent is considered pretty good. The eurozone's unemployment rate is currently 6 percent and often tops 10 percent, even in good times.

When an economy is essentially at full employment, a slowdown in job growth isn't necessarily cause for worry. The economy still has 8 million job openings, and the labor force still grew by 114,000 jobs. That annualizes to more than a million more jobs per year. 

That is slower than population growth, which isn't ideal. The labor force participation rate is also still below prepandemic levels. But a sane immigration policy combined with labor reforms like loosening occupational licensing requirements would fill more of those job openings while creating more opportunities for workers who are still outside the labor force.

The Federal Reserve's recent actions spark some worry. The Fed has spent the last two-and-a-half years walking back its panicked overreaction to COVID-19, which caused high inflation in the first place, along with a bipartisan deficit spending explosion. Inflation is finally slowing and getting back close to its 2 percent target, down from its 9.2 percent peak.

The trouble is that Fed Chairman Jerome Powell indicated that the Fed will stop focusing solely on inflation and will now pay attention to the labor market as well. The Fed has a dual mandate that tasks it with both keeping inflation low and keeping employment high. These can contradict each other, as Powell might soon find out.

If unemployment continues to worsen, look for the Fed to counteract that with stimulus in the form of interest rate cuts and monetary expansion. The tradeoff to this stimulus is higher inflation—exactly what the Fed has been fighting.

While an expected interest rate cut in September isn't a big deal by itself, if it's the start of a larger stimulus campaign, any short-term economic boost will come at the cost of a slowdown later.

The Fed's actions have lag times ranging from about six months to 18 months, so anything it does now will not impact the election. This is good news for the Fed's independence, but it does not inspire faith in Powell's commitment to fighting inflation. It would be better for the Fed to stay focused on inflation. Monetary policy is a poor tool for job creation. Entrepreneurs have a much better track record.

As usual, the big picture is a mix of short-term pessimism and long-term optimism. Whether or not the current recession doommongering comes true, the long-term trend of increasing superabundance will hold. That's as good a reason for calm as any.

The post Recession Is Not Inevitable, Despite Stock Market Slump appeared first on Reason.com.

Robert F. Kennedy Jr. won applause at the Libertarian National Convention by criticizing government lockdowns and deficit spending, and saying America shouldn't police the world.

It made me want to interview him. This month, I did.

He said intelligent things about America's growing debt:

"President Trump said that he was going to balance the budget and instead he (increased the debt more) than every president in United States history—$8 trillion. President Biden is on track now to beat him."

It's good to hear a candidate actually talk about our debt.

"When the debt is this large…you have to cut dramatically, and I'm going to do that," he says.

But looking at his campaign promises, I don't see it.

He promises "affordable" housing via a federal program backing 3 percent mortgages.

"Imagine that you had a rich uncle who was willing to cosign your mortgage!" gushes his campaign ad. "I'm going to make Uncle Sam that rich uncle!"

I point out that such giveaways won't reduce our debt.

"That's not a giveaway," Kennedy replies. "Every dollar that I spend as president is going to go toward building our economy."

That's big government nonsense, like his other claim: "Every million dollars we spend on child care creates 22 jobs!"

Give me a break.

When I pressed him about specific cuts, Kennedy says, "I'll cut the military in half…cut it to about $500 billion….We are not the policemen of the world."

"Stop giving any money to Ukraine?" I ask.

"Negotiate a peace," Kennedy replies. "Biden has never talked to Putin about this, and it's criminal."

He never answered whether he'd give money to Ukraine. He did answer about Israel.

"Yes, of course we should,"

"[Since] you don't want to cut this spending, what would you cut?"

"Israel spending is rather minor," he responds. "I'm going to pick the most wasteful programs, put them all in one bill, and send them to Congress with an up and down vote."

Of course, Congress would just vote it down.

Kennedy's proposed cuts would hardly slow down our path to bankruptcy. Especially since he also wants new spending that activists pretend will reduce climate change.

At a concert years ago, he smeared "crisis" skeptics like me, who believe we can adjust to climate change, screaming at the audience, "Next time you see John Stossel and [others]… these flat-earthers, these corporate toadies—lying to you. This is treason, and we need to start treating them now as traitors!"

Now, sitting with him, I ask, "You want to have me executed for treason?"

"That statement," he replies, "it's not a statement that I would make today….Climate is existential. I think it's human-caused climate change. But I don't insist other people believe that. I'm arguing for free markets and then the lowest cost providers should prevail in the marketplace….We should end all subsidies and let the market dictate."

That sounds good: "Let the market dictate."

But wait, Kennedy makes money from solar farms backed by government guaranteed loans. He "leaned on his contacts in the Obama administration to secure a $1.6 billion loan guarantee," wrote The New York Times.

"Why should you get a government subsidy?" I ask.

"If you're creating a new industry," he replies, "you're competing with the Chinese. You want the United States to own pieces of that industry."

I suppose that means his government would subsidize every industry leftists like.

Yet when a wind farm company proposed building one near his family's home, he opposed it.

"Seems hypocritical," I say.

"We're exterminating the right whale in the North Atlantic through these wind farms!" he replies.

I think he was more honest years ago, when he complained that "turbines…would be seen from Cape Cod, Martha's Vineyard… Nantucket….[They] will steal the stars and nighttime views."

Kennedy was once a Democrat, but now Democrats sue to keep him off ballots. Former Clinton Labor Secretary Robert Reich calls him a "dangerous nutcase."

Kennedy complains that Reich won't debate him.

"Nobody will," he says. "They won't have me on any of their networks."

Well, obviously, I will.

I especially wanted to confront him about vaccines.

In a future column, Stossel TV will post more from our hourlong discussion.

COPYRIGHT 2024 BY JFS PRODUCTIONS INC.

The post RFK Jr. Pays Lip Service to the Debt While Pushing Policies That Would Increase It appeared first on Reason.com.

Congressional Budget Office (CBO) projections provide valuable insights into how a big chunk of your income is being spent and reveal the long-term consequences of our government's current fiscal policies—you may endure them, and your children most certainly will. Yet, like most other projections looking into our future, these numbers should be taken with a grain of salt. So should claims that CBO projections validate anyone's fiscal track record.

So much can and likely will happen to make projections moot and our fiscal outlook much grimmer. Unforeseen events, economic changes, and policy decisions render them less accurate over time. The CBO knows this and recently released alternative scenarios based on different sets of assumptions, and it doesn't look good. It remains a wonder that more politicians, now given a more realistic range of possibilities, aren't behaving like it.

First, let's recap what the situation looks like under the usual rosy growth, inflation, and interest rate assumptions. Due to continued overspending, this year's deficit will be at least $1.6 trillion, rising to $2.6 trillion by 2034. Debt held by the public equals roughly 99 percent of our economy—measured by gross domestic product (GDP)—annually, heading to 116 percent in 2034.

The only reason these numbers won't be as high as projected last year is that a few House Republicans fought hard to impose some spending caps during the debt ceiling debate. The long-term outlook is even scarier, with public debt reaching 166 percent of GDP in 30 years and all federal debt reaching 180 percent.

No one should be surprised. To be sure, the COVID-19 pandemic and the Great Recession made things worse, but we've been on this path for decades.

Unfortunately, if any of the assumptions underlying these projections change again, things will get a lot worse. That's where the CBO's alternative paths help. Policymakers and the public can better see the potential risks and opportunities associated with various fiscal policy choices, enabling them to make more informed decisions.

For instance, the CBO highlights that if the labor force grows annually by just 0.1 fewer percentage points than originally projected—even if the unemployment rate stays the same—slower economic growth will lead to a deficit $142 billion larger than baseline projections between 2025 and 2034. A similarly small slowdown in the productivity rate would lead to an added deficit of $304 billion over that period.

Back in 2020, the prevalent theory among those who claimed we shouldn't worry about debt was that interest rates were remarkably low and would stay low forever. As if. These guys have since learned what many of us have known for years: that interest rates can and will go up when the situation gets bad enough. So, what happens if rates continue to rise above and beyond those CBO used in its projections? Even a minuscule 0.1-point rise above the baseline would produce an additional $324 billion on the deficit over the 2025-2034 period.

The same is true with inflation, which, as every shopper can see, has yet to be defeated. If inflation, as I fear, doesn't go away as fast as predicted by CBO—largely because debt accumulation is continuing unabated—it will slow growth, increase interest rates, and massively expand the deficit. To be precise, an increase in overall prices of just 0.1 points over the CBO baseline would result in higher interest rates and a deficit of $263 billion more than projected.

Now, imagine all these variations from the current projections happening simultaneously. It's a real possibility. The deficit hike would be enormous, which could then trigger even more inflation and higher interest rates. The question that remains is: Why aren't politicians on both sides more worried than they seem to be?

What needs to happen before they finally decide to treat our fiscal situation as a real threat? President Joe Biden doesn't want to tackle the debt issue. In fact, he's actively adding to the debt with student loan forgiveness, subsidies to big businesses, and other nonsense. Meanwhile, some Republicans pay lip service to our financial crisis, but few are willing to tackle the real problem of entitlement spending.

The time for political posturing is over. The longer we wait to address these issues, the more severe the consequences will be for future generations. It's time for our leaders to prioritize the nation's long-term economic health over short-term political gains and take bold steps toward fiscal responsibility. Only then can we hope to secure a stable and prosperous future for all Americans.

COPYRIGHT 2024 CREATORS.COM.

The post The Congressional Budget Office's Alternative Scenarios Forecast a Dire Economic Picture appeared first on Reason.com.

In May 2023, OpenAI founder Sam Altman testified before the Senate Judiciary Committee about ChatGPT. Altman demonstrated how his company's tool could massively reduce the cost of retrieving, processing, conveying, and perhaps even modifying the collective knowledge of mankind as stored in computer memories worldwide. A user with no special equipment or access can request a research report, story, poem, or visual presentation and receive in a matter of seconds a written response.

Because of ChatGPT's seemingly vast powers, Altman called for government regulation to "mitigate the risks of increasingly powerful AI systems" and recommended that U.S. or global leaders form an agency that would license AI systems and have the authority to "take that license away and ensure compliance with safety standards." Major AI players around the world quickly roared approval of Altman's "I want to be regulated" clarion call.

Welcome to the brave new world of AI and cozy crony capitalism, where industry players, interest groups, and government agents meet continuously to monitor and manage investor-owned firms.

Bootleggers and Baptists Have a 'Printing Press Moment'

ChatGPT has about 100 million weekly users worldwide, according to Altman. Some claim it had the most successful launch of a consumer product in history, and Altman anticipates far more future users. He's now seeking U.S. government approval to raise billions from United States, Middle East, and Asian investors to build a massive AI-chip manufacturing facility.

In his testimony, Altman referred to Johannes Gutenberg's printing press, which enabled the Enlightenment, revolutionized communication, and—following the dictum "knowledge is power"—destabilized political and religious regimes worldwide. Altman suggested that, once again, the world faces a "printing press moment": another time of profound change that could bring untold benefits as well as unimaginable disturbances to human well-being. A related letter signed by Altman, other AI industry executives, and scores of other leaders in the field, underlined their profound concern and said: "Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war."

Altman's call for regulation also has a parallel in the early history of printing. Something similar to the licensing control suggested by Altman was used by Queen Elizabeth I in 16th century England. She assigned transferable printing rights to a particular printing guild member in a frustrated effort to regulate and censor printing.

Altman's moral appeal rests on the notion of preserving a nation of people or their way of life. In that way, it satisfies the "Baptist" component of the bootleggers and Baptists theory of regulation, which I developed decades ago and which explains why calls to "regulate me" may be seen as just about businesses earning extra profits.

An especially durable form of government regulation takes hold when there are at least two interest groups supporting it, but for decidedly different reasons. One supports the pending regulation for widely held moral reasons (like old-school Baptists who want to bar legal Sunday liquor sales). The other is in it for the money (like the bootleggers who see opportunity in a day without any legal competition).

Altman's "Baptist" altar call may well be altruistic—who can know?—but it shows his hand as a potential bootlegger, too. After all, a government-sheltered AI market could provide a first-mover advantage as his entity helps to determine the appropriate standards that will be applied to everyone else. It could yield a newer, cozier crony capitalism that has not previously existed in quite the same form.

Apparently, some other potential bootleggers heard the altar call too and liked the idea of being in a cozy cartel. Soon, Microsoft insisted that thoroughgoing government regulation of AI would be necessary. In another Baptist-like appeal, Microsoft President Brad Smith said:"A licensing regime is fundamentally about ensuring a certain baseline of safety, of capability. We have to prove that we can drive before we get a license. If we drive recklessly, we can lose it. You can apply those same concepts, especially to AI uses that will implicate safety."

Google felt the call as well and provided a statement recommending AI regulation on a global and cross-agency basis. Google CEO Sundar Pichai emphasized, "AI is too important not to regulate and too important not to regulate well." Another February 2024 policy statement from Google contains a litany of plans to cooperate with competitors and government agencies to advance a safe and effective generative AI environment.

How AI Will Regulate AI

In a December 2023 report on U.S. government agency activity for FY 2022, the Government Accountability Office indicated that 20 of the 23 agencies surveyed reported some 1,200 AI activities, including everything from analyzing data from cameras and radar to preparing for planetary explorations.

Bootlegger and Baptist–inspired regulatory episodes in the past typically involved in-depth studies and hearings and ended up with lasting rules. That was the case through most of the 20th century, when the Interstate Commerce Commission regulated prices, entry, and service in specific industries, and in the 1970s, when the Environmental Protection Agency was equipped with command-and-control regulations in an alleged attempt to correct market failures.

Sometimes it took years to develop regulations to address a particular environmental problem. By the time the final rules were announced and frozen in time, the situation to be resolved may have changed fundamentally.

Cheap information enabled by generative AI changes all this. By using AI, the generative AI regulatory process—pending at the level of California, the federal government, and other governments worldwide—so far favors ongoing, never-ending governance processes. These will focus on major generative AI producers but involve collaboration among industry leaders, consumer and citizen groups, scientists, and government officials all engaged in a newly blossomed cozy cronyism.Under the European Union's AI Act, an AI Office will preside over processes that continually steer and affect generative AI outcomes.

If more traditional command-and-control or public utility regulation were used, which raises its own challenges, AI producers would be allowed to operate within a set of regulatory guardrails while responding to market incentives and opportunities. They would not be required to engage in cooperative engagement with regulators, their own competitors, and other supposed stakeholders in this larger enterprise. In this AI world, bootleggers and Baptists now sit together in the open.

Specifically, this burgeoning approach to AI regulation requires the implementation of "sandboxes," where regulated parties join with regulators and advisers in exploring new algorithms and other AI products. While sandboxes have some beneficial things to offer industries in new or uncertain regulatory environments, members of the unusually collaborative AI industry are poised to learn what competitors are developing as government referees look on.

The risk, should this environment persist, is that radically new products and approaches in the arena never get a chance to be developed and benefit consumers. The incentives to discover new AI products and profit from them will be blunted by cartel-like behavior in a new bootleggers and Baptists world. Countries and firms that refuse to play by these rules would likely become the only fountainhead for major new AI developments.

The End of the AI Wild West

No matter what form of regulation holds sway, generative AI is out of the box and will not go away. Already, computer capacity requirements for processing the software are falling, and already, generative AI's applications to new information challenges are exploding. At the same time, government agents' ability to regulate is improving and the payoff to the regulated for working hand-in-hand with government and organized interest groups is growing.

Generative AI's Wild West days may be drawing to a close. This is when invention, expansion, and growth can occur unconstrained by regulation while within the bounds of local courts, judges, property rights, and common law. Novel developments will still occur, but at a slower pace. The generative AI printing press moment may expand to become an era. But just as the Gutenberg invention led initially to the regulation and even outlawing of the printing press across many major countries, new information technologies emerged anyway and effective regulation of real knowledge became impossible.

A renaissance was set in motion despite official attempts to stymie the technology. Freer presses emerged, and eventually the telegraph, telephones, typewriters, mimeograph, Xerox, fax, and the internet itself. Knowledge flows cannot be stopped. We moderns may learn again that the human spirit cannot be forever bottled up, and over the long run market competition will be allowed, if not encouraged, to move mankind closer to a more prosperous era.

America's Founders were enlightened and well aware of Europe's troublesome efforts to regulate Gutenberg's printing press. They insisted on freedom of speech and a free press. We may eventually see similar wisdom applied to generative AI control—but don't hold your breath.

The post AI's Cozy Crony Capitalism appeared first on Reason.com.

The recent wave of headlines about shoplifting and retail theft, accompanied by viral videos of people brazenly walking out of stores with stolen goods, has captured the attention of the media and politicians. The tough-on-crime crowd has advocated for a crackdown on shoplifters through more aggressive prosecution and harsher penalties. Others have emphasized the need for rehabilitation for offenders. 

One group of progressive California lawmakers claims to have found an even better solution: banning self-checkout machines from stores in the name of fighting crime. In reality, this "anti-crime" bill is nothing more than naked protectionism for union jobs. 

The proposed legislation would prohibit groceries and other retail stores from using self-checkout machines unless a host of conditions are met. These include having at least one staffed employee for every two self-checkout machines (and the employee must be exempt from any other duties), only permitting the machines to be used by shoppers with 10 items or fewer, and ensuring at least one regular cashier lane is also available at all times.

The bill's sponsor, state Sen. Lola Smallwood-Cuevas (D–Los Angeles), calls her approach "smart" on crime instead of "hard on crime," telling The New York Times: "We have so many bills in this Legislature that are trying to increase penalties….We know that what makes our community safe is not more jail time and penalties. What makes our community safe is real enforcement, having real workers that are on the floor." 

To underscore her point, Smallwood-Cuevas cites a study suggesting that retail theft is up to 16 times more likely to occur at self-checkout machines than at traditional registers, leading to an estimated $10 billion in annual losses for retailers. 

A closer look at the fine print of the bill, however, reveals the true intent behind it. The legislation mandates that any store seeking to install self-checkout machines must first produce a study analyzing, among other things, the number of employees "whose duties would be affected by the workplace technology," as well as the "total amount of salaries and benefits that would be eliminated as a result of the workplace technology." The study must then be provided to employees potentially impacted by the technology (or their collective bargaining representatives) and posted "in a location accessible to employees and customers."

Were this a game of poker, this mandated study would be the tell: Smallwood-Cuevas and her fellow progressives are trying to tuck a pro–union jobs bill inside the Trojan horse of crime prevention. 

Smallwood-Cuevas was a labor organizer before her legislative career, and some of the bill's biggest sponsors are labor unions. A press release on the United Food and Commercial Workers' website lauds the legislation, with the president of the local chapter complaining that "employers have increasingly implemented automated checkout to drastically cut staffing and reduce labor costs." The press release does not mention the word crime at all and only uses theft twice and shoplifting once. In contrast, jobs, staffing, and worker displacement are referenced a total of 10 times. 

Efforts to limit self-checkout in other blue states provide corroborating evidence, such as a proposed anti-self-checkout ballot initiative in Oregon that labor interests tried to get on the 2020 ballot, explicitly positioned as a pro–union jobs measure. 

While a pro-labor bill in California may seem utterly unremarkable, some on the right may be buying the bill's anti-crime framing. Both Fox Business and the New York Post ran articles highlighting the bill as an anti-theft measure, with little reference to the real motivations behind the legislation. Given the right's increasing embrace of labor unions, it is not hard to envision an unholy alliance of pro-labor progressives and tough-on-crime populist conservatives supporting bills around the country to eliminate self-checkout.

Supporters of the bill and numerous media outlets have cited two examples of large retail chains making their own internal decisions to reduce or remove self-checkout machines to clamp down on theft. The aforementioned statistics about self-checkout lanes leading to more shoplifting are also frequently referenced. But these points ironically cut against the need for government involvement: If self-checkout machines are really leading to massive inventory losses for stores, then retailers themselves have a direct bottom-line incentive to scrap self-checkout. 

No one cares more about inventory loss than store owners, whose entire business model is predicated on customers actually paying money for their products. That is why some retailers are reevaluating the efficacy of self-checkout and experimenting with new monitoring tactics such as "smart video" cameras that can halt the self-checkout process if they notice a customer declining to scan any items. 

There already is a built-in market response to theft concerns around self-checkout—more government interference is simply not needed. If lawmakers still want to ban self-checkout machines anyway, they should at least be honest about why.

The post The Real Reason for Self-Checkout Bans appeared first on Reason.com.

American federalism is struggling. Federal rules are an overwhelming presence in every state government, and some states, due to their size or other leverage, can impose their own policies on much or all of the country. The problem has been made clearer by an under-the-radar plan to phase out diesel locomotives in California. If the federal government provides the state with a helping hand, it would bring nationwide repercussions for a vital, overlooked industry.

Various industry and advocacy groups are lining up against California's costly measure, calling on the U.S. Environmental Protection Agency (EPA) to deny a waiver needed to fully implement it. In the past month, more than 30 leading conservative organizations and individuals, hundreds of state and local chambers of commerce, and the U.S. agricultural sector have pleaded with the EPA to help stop this piece of extremism from escaping one coastal state.

Railroads may not be something most Americans, whose attention is on their own cars and roads, think about often. But rail is the most basic infrastructure of interstate commerce, accounting for around 40 percent of long-distance ton-miles. It's also fairly clean, accounting for less than 1 percent of total U.S. emissions. Private companies, like Union Pacific in the West or CSX in the East, pay for their infrastructure and equipment. These facts haven't stopped the regulatory power grab.

Most importantly, the California Air Resources Board (CARB) regulation would have all freight trains operate in zero-emission configuration by 2035. At the end of the decade, the state is mandating the retirement of diesel locomotives 23 years or older, despite typically useful lives of over 40 years. Starting in 2030, new passenger locomotives must operate with zero emissions, with new engines for long-haul freight trains following by 2035. It limits locomotive idling and increases reporting requirements.

Given the interstate nature of railway operations, California needs the EPA to grant a waiver. If the agency agrees, the policy will inevitably affect the entire continental United States.

The kicker is that no technology exists today to enable railroads to comply with California's diktat, rendering the whole exercise fanciful at best.

The Wall Street Journal's editorial board explained last November that while Wabtec Corp. has introduced a pioneering advance in rail technology with the launch of the world's first battery-powered locomotive, the dream of a freight train fully powered by batteries remains elusive. The challenges of substituting diesel with batteries—primarily due to batteries' substantial weight and volume—make it an impractical solution for long-haul trains. Additionally, the risk of battery overheating and potential explosions, which can emit harmful gases, is a significant safety concern. As the editorial noted, "Even if the technology for zero-emission locomotives eventually arrives, railroads will have to test them over many years to guarantee their safety."

The cost-benefit analysis is woefully unfavorable to the forced displacement of diesel locomotives. To "help" the transition, beginning in 2026, CARB will force all railroads operating in California to deposit dollars into an escrow account managed by the state and frozen for the explicit pursuit of the green agenda. For large railroads, this figure will be a staggering $1.6 billion per year, whereas some smaller railroads will pay up to $5 million.

Many of these smaller companies have signaled that they will simply go out of business. For the large railroads, the requirement will lock up about 20 percent of annual spending, money typically used for maintenance and safety improvements.

Transportation is the largest source of U.S. emissions, yet railroads' contribution amounts to not much more than a rounding error. The industry cites its efficiency improvements over time, allowing railroads today to move a ton of freight more than 500 miles on a single gallon of diesel. Its expensive machines, which last between 30 to 50 years and are retrofitted throughout their life cycles, are about 75 percent more efficient than long-haul trucks that carry a comparative amount of freight.

As Patricia Patnode of the Competitive Enterprise Institute, which signed the aforementioned letter to the EPA, recently remarked, "Rather than abolish diesel trains, CARB should stand in awe of these marvels of energy-efficient transportation."

President Joe Biden talks a lot about trains, but his actions since taking office have consistently punished the private companies we should value far more than state-supported Amtrak. In this case, EPA Administrator Michael Regan and the White House need not think too hard. They should wait for reality to catch up before imposing on the rest of us one state's demands and ambitions.

COPYRIGHT 2024 CREATORS.COM

The post How California's Ban on Diesel Locomotives Could Have Major National Repercussions appeared first on Reason.com.

President Joe Biden says, "I know how to make government work!"

You'd think he'd know. He's worked in government for 51 years.

But the truth is, no one can make government work.

Biden hasn't.

Look at the chaos at the border, our military's botched withdrawal from Afghanistan, the rising cost of living, our unsustainable record-high debt.

In my new video, economist Ed Stringham argues that no government can ever work well, because "even the best person can't implement change….The massive bureaucracy gets bigger and slower."

I learned that as a consumer reporter watching bureaucrats regulate business. Their rules usually made life worse for consumers.

Yet politicians want government to do more!

Remember the unveiling of Obamacare's website? Millions tried to sign up. The first day, only six got it to work.

Vice President Joe Biden made excuses: "Neither [Obama] and I are technology geeks."

Stringham points out, "If they can't design a basic simple website, how are they going to manage half the economy?"

While bureaucrats struggled with the Obamacare site, the private sector successfully created Uber and Lyft, platforms like iCloud, apps like Waze, smartwatches, etc.

The private sector creates things that work because it has to. If businesses don't serve customers well, they go out of business.

But government is a monopoly. It never goes out of business. With no competition, there's less pressure to improve.

Often good people join government. Some work as hard as workers in the private sector.

But not for long. Because the bureaucracy's incentives kill initiative.

If a government worker works hard, he might get a small raise. But he sits near others who earn the same pay and, thanks to archaic civil service rules, are unlikely to get fired even if they're late, lazy, or stupid.

Over time, that's demoralizing. Eventually government workers conclude, "Why try?"

In the private sector, workers must strive to make things better. If they don't, competitors will, and you might lose your job.

Governments never go out of business.

"Companies can only stay in business if they always keep their customer happy," Stringham points out. "Competition pushes us to be better. Government has no competition."

I push back.

"Politicians say, 'Voters can vote us out.'"

"With a free market," Stringham replies, "the consumer votes every single day with the dollar. Under politics, we have to wait four years."

It's another reason why, over time, government never works as well as the private sector.

Year after year, the Pentagon fails audits.

If a private company repeatedly does that, they get shut down. But government never gets shut down.

A Pentagon spokeswoman makes excuses: "We're working on improving our process. We certainly are learning each time."

They don't learn much. They still fail audits.

"It's like we're living in Groundhog Day," Stringham jokes.

When COVID-19 hit, politicians handed out almost $2 trillion in "rescue" funds. The Government Accountability Office says more than $100 billion were stolen.

"One woman bought a Bentley," laughs Stringham. "A father and son bought a luxury home."

At least Biden noticed the fraud. He announced, "We're going to make you pay back what you stole!

No. They will not. Biden's Fraud Enforcement Task Force has recovered only 1 percent of what was stolen.

Even without fraud, government makes money vanish. I've reported on my town's $2 million toilet in a park. When I confronted the parks commissioner, he said, "$2 million was a bargain! Today it would cost $3 million."

That's government work.

More recently, Biden proudly announced that government would create "500,000 [electric vehicle] charging stations."

After two years, they've built seven. Not 7,000. Just seven.

Over the same time, greedy, profit-seeking Amazon built 17,000.

"Privatize!" says Stringham. "Whenever we think something's important, question whether government should do it."

In Britain, government-owned Jaguar lost money year after year. Only when Britain sold the company to private investors did Jaguar start turning a profit selling cars people actually like.

When Sweden sold Absolut Vodka, the company increased its profits sixfold.

It's ridiculous for Biden to say, "I know how to make government work."

No one does.

Next week, this column takes on Donald Trump's promise: "We'll drain the Washington swamp!"

COPYRIGHT 2024 BY JFS PRODUCTIONS INC.

The post No One Can Make Government Work appeared first on Reason.com.

The censors who abound in Congress will likely vote to ban TikTok or force a change in ownership. It will likely soon be law. I think the Supreme Court will ultimately rule it unconstitutional, because it would violate the First Amendment rights of over 100 million Americans who use TikTok to express themselves.

In addition, I believe the Court will rule that the forced sale violates the Fifth Amendment. Under the Constitution, the government cannot take your property without accusing and convicting you of a crime—in short, without due process. Since Americans are part of TikTok's ownership, they will eventually get their day in court.

The Court could also conclude that naming and forcing the sale of a specific company amounts to a bill of attainder, legislation that targets a single entity.

These are three significant constitutional arguments against Congress' forced sale/ban legislation. In fact, three different federal courts have already invalidated legislative and executive attempts to ban TikTok.

If the damage to one company weren't enough, there is a very real danger this ham-fisted assault on TikTok may actually give the government the power to force the sale of other companies.

Take, for example, Apple. As The New York Times reported in 2021, "In response to a 2017 Chinese law, Apple agreed to move its Chinese customers' data to China and onto computers owned and run by a Chinese state-owned company."

Sound familiar? The legislators who want to censor and/or ban TikTok point to this same law to argue that TikTok could (someday) be commanded to turn over American users' data to the Chinese government.

Note that more careful speakers don't allege that this has happened, but rather that it might. The banners of TikTok don't want to be troubled by anything inconvenient like proving in a court of law that this is occurring. No, the allegation is enough for them to believe they have the right to force the sale of or ban TikTok.

But back to Apple. It's not theoretical that it might turn over data to the Chinese Communist government. It already has (albeit, Chinese users' information). Nevertheless, it could be argued that Apple, by their actions, could fall under the TikTok ban language that forces the sale of an entity: under the influence of a foreign adversary.

(Now, of course, I think such legislation is absurdly wrong and would never want it applied to Apple, but I worry the language is vague enough to apply to many entities.)

As The New York Times explains: "Chinese government workers physically control and operate the data center. Apple agreed to store the digital keys that unlock its Chinese customers' information in those data centers. And Apple abandoned the encryption technology it uses in other data centers after China wouldn't allow it."

This sounds exactly like what the TikTok censors describe in their bill, except so far as we know, only Americans who live in China might be affected by Apple's adherence to China's law. TikTok actually has spent a billion dollars agreeing to house all American data with Oracle in Texas.

Are there other companies that might be affected by the TikTok ban? Commentary by Kash Patel in The Washington Times argues that Temu, an online marketplace operated by a Chinese company, is even worse than TikTok and should be banned. He makes the argument that Temu, in contrast with TikTok, "does not employ any data security personnel in the United States."

And what of the global publishing enterprise Springer Nature? It has admitted that it censors its scientific articles at the request of the Chinese Communist government. Will the TikTok bill force its sale as well?

Before Congress rushes to begin banning and punishing every international company that does business in China, perhaps they should pause, take a breath, and ponder the ramifications of rapid, legislative isolationism with regard to China.

The impulse to populism is giving birth to the abandonment of international trade. I fear, in the hysteria of the moment, that ending trade between China and the U.S. will not only cost American consumers dearly but ultimately lead to more tension and perhaps even war.

No one in Congress has more strongly condemned the historical famines and genocides of Communist China. I wrote a book, The Case Against Socialism, describing the horrors and inevitability of state-sponsored violence in the pursuit of complete socialism. I just recently wrote another book called Deception, condemning Communist China for covering up the Wuhan lab origins of COVID-19.

And yet, even with those searing critiques, I believe the isolationism of the China hysterics is a mistake and will not end well if Congress insists on going down this path.

The post If They Ban TikTok, Is Apple Next? appeared first on Reason.com.

The Securities and Exchange Commission (SEC) has gone rogue. The commission has now finalized a rule that will bully publicly traded companies into reporting environmental information that has no relevance to the financial concerns that matter to investors. As much as environmental activists may want this information to shame companies into embracing their political agenda, it is not the SEC's role to demand financially irrelevant disclosures—much less to demand companies speak on political and social issues like climate change.  

The SEC's new rule requires companies to give a public accounting of their annual greenhouse gas emissions. Still worse, the rule strong-arms companies into telling the public whether they are taking steps to combat climate change and forces companies to hazard guesses about how climate change might affect their operations far into the future. But none of that has anything to do with the SEC's statutory mission of helping investors understand the financial risks and rewards of investment. 

The SEC was established to regulate public companies in the wake of the financial crisis that triggered the Great Depression. Toward that end, the law requires companies to disclose to investors "material information…as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading." For example, companies must provide information about market volatility, pending lawsuits, and significant management changes, because that type of information could affect a company's financial performance.

Disclosures about whether a company is prioritizing climate change concerns are categorically different from the sort of disclosures the SEC has long required, for at least two reasons. First, the new rule requires disclosures across the board from all large companies. That's a marked departure from the "facts and circumstances" test the SEC has long employed, which requires information that could affect the financial performance of individual companies, not environmental or social conditions.

With its extraordinary unpredictability, and a time horizon crossing decades, climate change's impact on any given company is practically impossible to assess. Requiring disclosure of greenhouse gases thus tells investors nothing relevant to a company's financial situation; it will lead to baseless speculation and reams of information that investors cannot possibly apply to investment decisions now.

Of course, none of this is news to supporters of the rule. Their goal is not to inform investors, but to bludgeon companies into toeing the climate change line. The new rule has nothing to do with financial considerations and everything to do with political considerations. As SEC Commissioner Mark Uyeda declared in dissent, "shareholders will be footing [the] bill" to institutionalize an ESG department in every publicly traded corporation in America. 

The SEC's power grab is unprecedented and dangerous. While some investors may care about greenhouse gas emissions, their desires do not justify compelling companies to make disclosures about whether they are prioritizing climate change concerns. If that low bar could trigger SEC regulation, there would be no end to the subjects the agency could require companies to report, including their positions on abortion, gay marriage, and immigration. But forcing companies to parrot the party line on the environment is not the SEC's job.

If the SEC is going to be transformed into the environmental and social thought police, that decision must come from Congress. Our Constitution empowers only Congress to make the law—and, importantly, to take responsibility for the consequences. As SEC Commissioner Hester Peirce stated, "Wading into non-economic issues involves tradeoffs that only our nation's elected representatives have the authority and expertise to make."

The consequences of the greenhouse gas rule are grave. It will fundamentally alter the SEC's mission. It will force companies to play a larger role in politics—something that neither the major political parties nor most companies seem to want. By peppering investors with irrelevant information, it will make them less informed about what actually matters. It will divert companies from their core purpose of maximizing shareholder wealth and creating products that increase everyone's standard of living. And it will violate the First Amendment by compelling companies to disclose information that is not intrinsically linked to their financial performance.

Pacific Legal Foundation, where we work, will file a lawsuit against the SEC in the coming days to block enforcement of this rule and vindicate constitutional principles. Here's hoping that the courts will not allow this rule to stand.

The post The SEC Conscripts Corporate America in Its New Climate Change Fight appeared first on Reason.com.

Is a painting of a giant burger a sign or a mural? The answer to that question could determine whether Steve Howard can keep some half-finished burger art on the side of his restaurant or be forced to take it down.

Howard is the owner of The Cozy Inn in Salina, Kansas—a restaurant known for the sliders it serves with a generous helping of aromatic onions.

Back in November, Howard commissioned a local artist to decorate the side of The Cozy Inn with a large burger mural, some smaller slider-shaped UFOs, and a caption reading, "Don't fear the smell! The fun is inside!!"

Within a few days, a Salina official was telling Howard to halt the paint job. The city reasoned that because Howard's wall art would depict a product his restaurant also sold, it was not a mural (which the city doesn't regulate), but rather a sign (for which it has extensive rules).

Under Salina's sign code, Howard's business could only post signs totaling 62 square feet in size and he'd already used up 52 of those feet with existing signage. His planned burger wall art would take up 528 square feet. Downtown businesses' signs also need approval from the city's Design Review Board.

Since being told to stop work on his burger painting, Howard has been going back and forth with the city over whether he'll be able to complete the work. Earlier this month, the city sent him a letter telling him to hold off on the painting while it "reviewed" its signage regulations.

Rather than wait, Howard filed a federal lawsuit arguing that because the legality of his mural turns on the particular images it depicts, his free speech rights are being violated. If he had commissioned wall art of car parts or some other product his business didn't sell, he'd be well within his rights to proceed with the mural.

"In our view, this is a clear content-based restriction on speech," says Sam MacRoberts of the Kansas Justice Institute, which is representing Howard.

The U.S. Supreme Court theoretically put limits on this kind of sign regulation with its decision in the 2015 case Reed v. Gilbert, which struck down an Arizona town's regulations on temporary signs that applied stricter rules to nonpolitical signage.

"The town definitely was drawing lines based on what messages the signs conveyed," says Betsy Sanz, an attorney with the Institute for Justice (which is not affiliated with the Kansas Justice Institute). "The court said that was not allowed."

Nevertheless, cities post-Reed continue to enforce restrictions on business murals that include images of what the business sells.

The Institute for Justice has litigated multiple mural cases, pre- and post-Reed. It is currently representing business owner Sean Young in a First Amendment lawsuit against Conway, New Hampshire, which has told him a donut mural painted by local art students on his bakery violates the town's sign code.

Despite the likely unconstitutionality of many towns' sign restrictions, business owners are often reluctant to challenge them.

That means businesses will often just paint over their murals or change them so that they're no longer showing products the business sells.

In 2012, The Washington Post reported on a smoke shop in Arlington, Virginia (a hotspot of mural censorship), that changed its mural of a man smoking a cigar to a man holding a whale to comply with county regulations.

Sanz urges the Supreme Court to take up the issue of towns' regulation of business murals, saying, "There are still government bodies that wish to control speech. The Supreme Court is going to need to take signs up again to help clarify things for individuals."

The post Town Says Burger Joint's Mural Can't Show Any Burgers appeared first on Reason.com.

Italian aviation officials blocked a British Airways flight from leaving Milan for London after a surprise inspection found some of the seat cushions were too thick and too wide. Seat cushions on exit rows over the wings are supposed to be smaller to create more room in case of an evacuation. The air crew called out serial numbers for the correct seats and had passengers see if any of the cushions on their seats matched those numbers. They were able to locate enough cushions to swap out for those over the exit rows, and the flight departed after a delay of an hour.

The post Brickbat: This One Is Just Right appeared first on Reason.com.

During the height of the pandemic summer of 2020, the proprietors of the Burning Bridge Tavern worked with local officials in Wrightsville, Pennsylvania, to host a series of outdoor gatherings for the community.

For their trouble, the bar's owners got slapped with a series of citations by the Pennsylvania Liquor Control Board (PLCB), the government agency that oversees and manages the sale of alcohol in the state. The citations were ticky-tack offenses, according to Burning Bridge's chief financial officer, Mike Butler. Twice, the bar was cited for noise violations because they'd allowed a band playing at the gathering to plug into the tavern's electricity supply. Another offense occurred when the owners and some family members were drinking inside the tavern, which was closed to the public, during a period when indoor dining was prohibited.

A frustrating situation, but not the end of the world. Burning Bridge's owners paid the fines associated with the citations and assumed that was that. But then the bar had to renew its liquor license.

"They denied it. They said, 'Oh, you're the guys that got all those citations,'" Butler says. "It was a real gut punch."

Turns out, over the past two years the PLCB has pushed dozens of Pennsylvania establishments that racked up pandemic-​related citations to sign "conditional licensing agreements" to renew their liquor permits. In some cases, those agreements have forced the sale of licenses—but in most cases, as with Burning Bridge, they've added additional conditions to the license that could prevent a future renewal from being approved.

While the PLCB cannot revoke existing licenses, the board is empowered to object to the renewal of a license or to demand the license can only be renewed conditionally. "In extreme cases," PLCB Press Secretary Shawn Kelly says, the PLCB can force the sale of a liquor license, though the board only pursues that option when "there is an operational and citation history that calls for such an agreement."

Even though Burning Bridge's owners weren't forced to sell their license, Butler says signing the conditional licensing agreement has come with real costs: The bar's insurance premium tripled as a result of being viewed as a greater risk.

Typically, those agreements have been used to curb nuisance bars or force establishments with a history of legal problems, like serving underage patrons, to clean up their acts. Recently, however, the PLCB has taken a hardline stance against establishments that violated pandemic-era rules.

"The people who violated the governor's mandates and orders should face some consequences," argued Mary Isenhour, one of the PLCB's three board members, at a January 2022 meeting where the first several of the COVID-related conditional licensing agreements were approved.

Isenhour was responding to an objection raised by a fellow board member, Michael Negra, who argued that the PLCB should take the view that businesses had "paid their dues" during the pandemic and should not face additional sanction now. Negra left the PLCB in June 2022 and now works for a ​Pittsburgh-based lobbying firm. He did not return requests for comment.

After Negra's departure, the PLCB has unanimously approved dozens of conditional licensing agreements for COVID-​related violations, including at least 10 that have required the sale of a license, based on a review of PLCB meeting minutes.

Kelly, the PLCB spokesman, maintains that licensees are "under no obligation" to sign conditional licensing agreements.

But any licensee that refuses would face a set of unattractive alternatives: not having the license renewed, or being drawn into a legal battle against the PLCB in state court.

"Do you risk your entire business, your license, the loans, all of that to fight" in a real court, asks Butler. "Or do you just kind of hold your nose and take your medicine? Tactically, for us, we weren't in a position to say, 'Yeah, we'll run that risk.'"

Chuck Moran, executive director of the Pennsylvania Licensed Beverage and Tavern Association, acknowledges that pandemic-era public health orders left many establishments with a difficult choice between following the law and surviving financially. Fairly or unfairly, "those who broke the rules went the wrong way and now they're paying the price," he says.

The whole matter raises some complicated questions about how our political institutions ought to handle, with the benefit of hindsight, the unprecedented circumstances created by the pandemic and policy makers' response to it.

"The feeling was that our government really isn't working to try and help us," says Butler. "At this point, it feels like they're coming after us."

The post Liquor Regulators Are Seeking Revenge on Bars That Broke Pandemic Rules appeared first on Reason.com.

The government and private companies spy on us.

My former employee, Naomi Brockwell, has become a privacy specialist. She advises people on how to protect their privacy.

In my new video, she tells me I should delete most of my apps on my phone.

I push back. I like that Google knows where I am and can recommend a "restaurant near me." I like that my Shell app lets me buy gas (almost) without getting out of the car.

I don't like that government gathers information about me via my phone, but so far, so what?

Brockwell tells me I'm being dumb because I don't know which government will get that data in the future.

Looking at my phone, she tells me, "You've given location permission, microphone permission. You have so many apps!"

She says I should delete most of them, starting with Google Chrome.

"This is a terrible app for privacy. Google Chrome is notorious for collecting every single thing that they can about you…[and] broadcasting that to thousands of people…auctioning off your eyeballs. It's not just advertisers collecting this information. Thousands of shell companies, shady companies of data brokers also collect it and in turn sell it."

Instead of Google, she recommends using a browser called Brave. It's just as good, she says, but it doesn't collect all the information that Chrome does. It's slightly faster, too, because it doesn't slow down to load ads.

Then she says, "Delete Google Maps."

"But I need Google Maps!"

"You don't." She replies, "You have an iPhone. You have Apple Maps…. Apple is better when it comes to privacy…. Apple at least tries to anonymize your data."

Instead of Gmail, she recommends more private alternatives, like Proton Mail or Tuta.

"There are many others." She points out, "The difference between them is that every email going into your inbox for Gmail is being analyzed, scanned, it's being added to a profile about you."

But I don't care. Nothing beats Google's convenience. It remembers my credit cards and passwords. It fills things in automatically. I tried Brave browser but, after a week, switched back to Google. I like that Google knows me.

Brockwell says that I could import my credit cards and passwords to Brave and autofill there, too.

"I do understand the trade-off," she adds. "But email is so personal. It's private correspondence about everything in your life. I think we should use companies that don't read our emails. Using those services is also a vote for privacy, giving a market signal that we think privacy is important. That's the only way we're going to get more privacy."

She also warns that even apps like WhatsApp, which I thought were private, aren't as private as we think.

"WhatsApp is end-to-end encrypted and better than standard SMS. But it collects a lot of data about you and shares it with its parent company, Facebook. It's nowhere near as private as an app like Signal."

She notices my Shell app and suggests I delete it.

Opening the app's "privacy nutrition label," something I never bother reading, she points out that I give Shell "your purchase history, your contact information, physical address, email address, your name, phone number, your product interaction, purchase history, search history, user ID, product interaction, crash data, performance data, precise location, course location."

The list goes on. No wonder I don't read it.

She says, "The first step before downloading an app, take a look at their permissions, see what information they're collecting."

I'm just not going to bother.

But she did convince me to delete some apps, pointing out that if I want the app later, I can always reinstall it.

"We think that we need an app for every interaction we do with a business. We don't realize what we give up as a result."

"They already have all my data. What's the point of going private now?" I ask.

"Privacy comes down to choice," She replies. "It's not that I want everything that I do to remain private. It's that I deserve to have the right to selectively reveal to the world what I want them to see. Currently, that's not the world."

COPYRIGHT 2023 BY JFS PRODUCTIONS INC.

The post Government Is Snooping on Your Phone appeared first on Reason.com.

In this week's The Reason Roundtable, Katherine Mangu-Ward is in the driver's seat, alongside Nick Gillespie and special guests Zach Weissmueller and Eric Boehm. The editors react to the latest plot twists in Donald Trump's various legal proceedings and the death of Russian opposition leader Alexei Navalny.

00:41—The trials of Donald Trump in Georgia and New York

25:04—Weekly Listener Question

33:23—Sora, a new AI video tool

43:55—The death of Alexei Navalny

49:58—This week's cultural recommendations

Mentioned in this podcast:

"How a New York Judge Arrived at a Staggering 'Disgorgement' Order Against Trump," by Jacob Sullum

"Prosecutor Fani Willis Touts the Value of Cash, but What About the Rest of Us?" by J.D. Tuccille

"Trump Ordered To Pay $364 Million for Inflating His Assets in Civil Fraud Trial," by Joe Lancaster

"Alvin Bragg Is Trying To Punish Trump for Something That Is Not a Crime," by Jacob Sullum

"Alexei Navalny's Death Is a Timely Reminder of How Much Russia Sucks," by Eric Boehm

"Why Is Nike Stomping on Independent Creators?" by Kevin P. Alexander

"Bury My Sneakers at Wounded Knee," by Nick Gillespie

"Creation Myth: Does innovation require intellectual property rights?" by Douglas Clement

"A Private Libertarian City in Honduras," by Zach Weissmueller

"The Real Reasons Africa Is Poor—and Why It Matters," by Nick Gillespie

Bono's Ukraine Speech

"Justice or persecution? The Trump dilemma"

Send your questions to [email protected]. Be sure to include your social media handle and the correct pronunciation of your name.

Today's sponsor:

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Audio production by Ian Keyser; assistant production by Hunt Beaty.

Music: "Angeline," by The Brothers Steve

• Producer: Hunt Beaty

The post Goodbye, Navalny appeared first on Reason.com.

On Friday, New York County Supreme Court Justice Arthur Engoron ordered Donald Trump to pay a staggering $355 million for repeatedly inflating asset values in statements of financial condition submitted to lenders and insurers. When the interest that Engoron also approved is considered, the total penalty rises to $450 million. All told, Trump and his co-defendants, including three of his children and former Trump Organization CFO Allen Weisselberg, are on the hook for $364 million, or about $464 million with interest.

On its face, a penalty of nearly half a billion dollars is hard to fathom given that no lender or insurer claimed it suffered a financial loss as a result of the transactions at the center of the case, which was brought by New York Attorney General Letitia James. But the law under which James sued Trump and his co-defendants does not require any such loss. The money demanded by Engoron's 92-page decision, which goes to the state rather than individual claimants, is styled not as damages but as "disgorgement" of "ill-gotten gains." It is aimed not at compensating people who were allegedly harmed by Trump's misrepresentations but at deterring dishonesty that threatens "the financial marketplace."

Proving "common law fraud," Engoron notes, requires establishing that the defendant made a "material" statement he knew to be false, that the plaintiff justifiably relied on that statement, and that he suffered damages as a result. Section 63(12) of New York's Executive Law, by contrast, authorizes the attorney general to sue "any person" who "engage[s] in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business." The attorney general can seek "an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages and, in an appropriate case, cancelling" the defendant's business certificate.

"The statute casts a wide net," Engoron observes. It defines "fraud" to include "any device, scheme or artifice to defraud and any deception, misrepresentation, concealment, suppression, false pretense, false promise or unconscionable contractual provisions." Although Engoron found substantial evidence that lenders and insurers relied on the Trump Organization's misrepresentations, the state did not have to prove that they did or that they suffered damages as a result.

"Timely and total repayment of loans does not extinguish the harm that false statements inflict on the marketplace," Engoron writes. "Indeed, the common excuse that 'everybody does it' is all the more reason to strive for honesty and transparency and to be vigilant in enforcing the rules. Here, despite the false financial statements, it is undisputed that defendants have made all required payments on time; the next group of lenders to receive bogus statements might not be so lucky. New York means business in combating business fraud."

Engoron ruled that the appropriate standard of proof was a preponderance of the evidence, which typically applies in civil cases and requires showing that an allegation is more likely than not to be true. "Defendants have provided no legal authority for their contention that the higher 'clear and convincing' standard does, or should, apply," he writes. "A clear and convincing standard applies only when a case involves the denial of, addresses, or adjudicates fundamental 'personal or liberty rights' not at issue in this action."

Engoron had previously ruled that disgorgement of profits is one of the remedies allowed by Section 63(12) in this case. "In flagrant disregard of prior orders of this Court and the First Department [court of appeals], defendants repeat the untenable notion that 'disgorgement is unavailable as a matter of law' in Executive Law §63(12) actions," he wrote in that September 2023 decision, which held that Trump had committed fraud within the meaning of the statute. "This is patently false, as defendants are, or certainly should be, aware that the Appellate Division, First Department made it clear in this very case that '[w]e have already held that the failure to allege losses does not require dismissal of a claim for disgorgement under Executive Law § 63(12).'"

In Friday's decision, Engoron reviews the examples of fraud that he described in the earlier ruling. Most notoriously, they include the claim that Trump's triplex apartment in Manhattan's Trump Tower was 30,000 square feet, nearly three times its actual size. That misrepresentation was included in Trump's statements of financial condition (SFCs) from 2012 through 2016 and was not corrected until after Forbes made the glaring discrepancy public in 2017.

In 2012, former Trump International Realty employee Kevin Sneddon testified, Weisselberg asked him to assess the apartment's value. "In response to the request," Engoron writes, "Sneddon asked Weisselberg if he could see the Triplex, to which Weisselberg responded that that was 'not possible.' Sneddon then asked if Weisselberg could send him a floorplan or specs of the Triplex to evaluate, to which Weisselberg also said 'no.' Sneddon then asked Weisselberg what size the Triplex was, to which Weisselberg responded 'around 30,000 square feet.' Sneddon then used the 30,000 square foot number in ascertaining a value for the Triplex."

The value of Mar-a-Lago, Trump's golf resort in Palm Beach, also figured prominently in the case. The deed to Mar-a-Lago precluded it from ever being used as private residential property, a clause that made it eligible for a lower tax rate. Yet SFCs repeatedly valued Mar-a-Lago as if it could be sold for residential purposes. Engoron notes that Trump "insisted that he believed Mar-a-Lago is worth 'between a billion and a billion five' today, which would require not only valuing it as a private residence, which the deed prohibits, but as more than the most expensive private residence listed in the country by approximately 400%"

Other examples of misrepresentations included treating rent-stabilized apartments as if they were not subject to that restriction, assuming regulatory permission for construction that had not in fact been approved, failing to discount expected streams of revenue, dramatically departing from estimates by professional appraisers, and counting Trump's limited partnership interest in a real estate company as cash even though he could not access the money without the company's consent. More generally, expert testimony indicated, Trump tended to value properties based on rosy "as if" assumptions rather than the "as is" valuations preferred by lenders.

The defendants argued that the accountants charged with compiling the SFCs were responsibile for verifying their accuracy. But as Engoron notes, the accounting firms' role was limited to assembling information provided by the Trump Organization, which they assumed to be accurate. "There is overwhelming evidence from both interested and non-interested witnesses, corroborated by documentary evidence, that the buck for being truthful in the supporting data valuations stopped with the Trump Organization, not the accountants," he says. "Moreover, the Trump Organization intentionally engaged their accountants to perform compilations, as opposed to reviews or audits, which provided the lowest level of scrutiny and rely on the representations and information provided by the client; compilation engagements make clear that the accountants will not inquire, assess fraud risk, or test the accounting records."

Trump also argued that the SFCs were unimportant because lenders and insurers would perform their own due diligence. Engoron was unimpressed by that defense, especially with regard to the insurers. "Because the Trump Organization is a private company, not a publicly traded company," he says, "there is very little that underwriters can do to learn about the financial condition of the company other than to rely on the financial statements that the client provides to them."

Were the Trump Organizations overvaluations "material"? Engoron had already concluded that "the SFCs from 2014-2021 were false by material amounts as a matter of law." Under Section 63(12), he says, materiality "is judged not by reference to reliance by or materiality to a particular victim, but rather on whether the financial statement 'properly reflected the financial condition' of the person to which the statement pertains."

If fraud "is insignificant," Engorion concedes, "then, like most things in life, it just does not matter." But that "is not what we have here," he adds. "Whether viewed in relative (percentage) or absolute (numerical) terms, objectively (the governing standard) or subjectively (how the lenders viewed them), defendants' misstatements were material….The frauds found here leap off the page and shock the conscience."

While there is no precise numerical standard for materiality, Engoron says, "this Court confidently declares that any number that is at least 10% off could be deemed material, and any number that is at least 50% off would likely be deemed material. These numbers are probably conservative given that here, such deviations from truth represent hundreds of millions of dollars, and in the case of Mar-a-Lago, possibly a billion dollars or more."

Did those deviations ultimately matter in the decisions that lenders and insurers made? Engoron's summary provides reason to doubt that they did. Deutsche Bank, he notes, routinely "applied a 50% 'haircut' to the valuations presented by" clients, which a witness "affirmed was the standardized number for commercial real assets." A defense witness opined that lenders generally just want to see "the engagement of a warm body of a billionaire to stand behind the loan in his equity infusion and capital."

James nevertheless argued that Trump, by systematically exaggerating his wealth and the amount of cash he could access, misled lenders about what would happen in the event that the Trump Organization could not meet its obligations. And those misrepresentations, she said, allowed the business to borrow more money on terms more favorable than it otherwise could have obtained.

The difference between the interest rates that lenders charged based on Trump's personal financial guarantee and the rates they would have charged without it was crucial to Engoron's calculation of how much the defendants should disgorge. Over their vigorous objections, he accepted the numbers offered by a state witness, investment bank CEO Michiel McCarty, who compared the rate that Deutsche Bank charged the Trump Organization based on Trump's personal guarantee with the rate it proposed for a loan without that guarantee. By McCarty's calculation, the Trump Organization saved a total of about $168 million in interest on loans for four projects.

By itself, that estimate accounts for nearly half of the disgorgement that Engoron ordered. He also included nearly $127 million in "net profits" from the 2022 sale of the Old Post Office in Washington, D.C., which Trump had converted into a hotel. That deal, James argued, was facilitated "through the use of false SFCs," without which it would not have happened. She also argued that "without the ill-gotten savings on interest rates, defendants would not even have been able to invest in the Old Post Office and/or other projects."

Taking into account the partnership interest "fraudulently labeled as cash," James said, "Trump would have been in a negative cash situation" by 2017 but for the $74 million or so "saved through reduced interest payments." She noted that "the Old Post office loan itself was a construction loan, and its proceeds were necessary to the construction and renovation of the hotel, which enabled the 2022 sale and resulting profits."

Engoron found these arguments, especially the first, persuasive. The profits from the sale of the Old Post Office, he concludes, "were ill gotten gains, subject to disgorgement, which is meant to deny defendants 'the ability to profit from ill-gotten gain.'"

Engoron also counted $60 million in profits from the 2023 sale of a license to operate a golf course at Ferry Point Park in the Bronx, which Trump had obtained from the New York City Department of Parks & Recreation in 2012. "By maintaining the license agreement for Ferry Point, based on fraudulent financials," Engoron says, "Donald Trump was able to secure a windfall profit by selling the license to Bally's Corporation."

Although reliance is not required to prove fraud under Section 63(12), it does implicitly figure in these disgorgement calculations. But for the "fraudulent financials," Engoron assumes, Trump would have had to pay higher interest rates on the four loans, and neither the Ferry Point deal nor the Old Post Office renovation and sale would have happened. The defendants, of course, dispute those counterfactuals.

Explaining the need for continued independent supervision of the Trump Organization, Engoron emphasizes Trump et al.'s "refusal to admit error." After "some four years of investigation and litigation," he says, "the only error (inadvertent, of course) that they acknowledge is the tripling of the size of the Trump Tower Penthouse, which cannot be gainsaid. Their complete lack of contrition and remorse borders on pathological. They are accused only of inflating asset values to make more money. The documents prove this over and over again. This is a venial sin, not a mortal sin. Defendants did not commit murder or arson. They did not rob a bank at gunpoint. Donald Trump is not Bernard Madoff. Yet, defendants are incapable of admitting the error of their ways. Instead, they adopt a 'See no evil, hear no evil, speak no evil' posture that the evidence belies."

Engoron "intends to protect the integrity of the financial marketplace and, thus, the public as a whole," he writes. "Defendants' refusal to admit error—indeed, to continue it, according to the Independent Monitor—constrains this Court to conclude that they will engage in it going forward unless judicially restrained. Indeed, Donald Trump testified that, even today, he does not believe the Trump Organization needed to make any changes based on the facts that came out during this trial."

Although Engoron says his court "is not constituted to judge morality," his outrage at Trump's financial dishonesty is palpable. That dishonesty, which is consistent with the ego-boosting lies that Trump routinely tells about matters small (e.g., the size of the crowd at his inauguration) and large (e.g., a presidential election he still insists was "rigged" by systematic fraud), is indeed striking. In this case, however, it did not result in any injuries that Trump's lenders or insurers could identify. Under New York law, Engoron says, that does not matter. But maybe it should.

The post How a New York Judge Arrived at a Staggering 'Disgorgement' Order Against Trump appeared first on Reason.com.