Sears, Roebuck: A Lament.

In March this year, I published a blog: “Americans Need To Go Shopping.” The article pointed out the staggering number of U.S. retail companies at potential risk of defaulting on their debts and that a host of companies in the retail sector, including many household names, are facing financial struggles.

Last week, I was saddened by the news that Sears had filed for Chapter 11 bankruptcy and that 142 stores will be closed. Sears, or Sears, Roebuck as it used to be known, was in business for 126 years. Stores were located in every American city, often as an anchor tenant in shopping malls. How did this happen? Was Sears’ decline inevitable?

Sears supplied middle-class America with all manner of household goods and clothing. Thirteen years ago, Sears merged with Kmart. The two stores weren’t a happy fit, appealing to different sectors of the market. The chairman, Eddie Lampert, is no retailer. His management methods pitted the two businesses against each other. Sears was starved of investment and its stores became dirty and badly stocked with precious little customer care. No wonder customers fled elsewhere.

According to USA Today, Lampert and his hedge fund loaned Sears millions upon millions of dollars as business declined. The hedge fund also bought up a few hundred million in secured Sears’ debt. Therefore, Lampert’s hedge fund will be first in line at bankruptcy court.

Where there is a retail bankruptcy, Wall Street firms are not far behind. Private equity and hedge funds get first bite taking money out through all manner of debt schemes. Money that could have been used to invest in the business, for example to keep it stocked with strong sale items, went elsewhere. This was what happened to Toys R Us. It looks like Sears has followed suit.

Over the past five years, The Pension Benefit Guaranty Corp. demanded the company come up with about $2 billion to help fund the company’s chronically underfunded pensions. Oddly, between 2005 and 2010, Sears paid out approximately $5 billion on share buybacks, depriving it of cash to invest in much needed upgrades for its stores, not to mention bailing out its own pension fund. So Sears has become a wreck, a tribute only to bygone days.

In 1890, America was very different. The census stated America had a population of some sixty three million, more than half of whom lived on farms and in small communities. In 1897, with the advent of railroads, Sears, Roebuck and Co. published a mail-order catalogue. Anyone living anywhere in USA could buy anything. The Sears catalogue offered everything from lingerie to tractors and agricultural equipment, from porcelain dolls to motorcars, kitchen goods and tyres. All that could be imagined was for sale and would be delivered. In its way, Sears, Roebuck was the forerunner of Amazon without the Internet.

Every year in virtually every household throughout America, the Sears, Roebuck annual catalogue would arrive. I have seen one. It was fatter than an old-style telephone directory.  Americans found nothing odd, even in the 1960s, about buying paint and neckties from the same place. Sears became the largest retailer to the great American consumer. But then shopping malls appeared, Walmart revolutionized the management of inventory and the Internet took over. Sears was left way behind. Its demise was inevitable because its top management would not keep abreast of the times.

I suppose what we see is economist Schumpeter’s “creative destruction.” A prospering economy rewards enterprises that leverage fresh ideas to meet future needs and wants. Older businesses, no matter how large and powerful, will either keep up or die. May I be permitted some schaudenfreude by reminding merchant bankers and hedge funds that no enterprise is too big to fail. Creative destruction applies to them too.

Sears was a part of American folklore. It is sad to see business America caring more for its future than its past but I suppose this is the way of modern life.

 

Mid Term Elections: Redisrtricting

Mid Terms – Redistricting.

I cannot claim the best track record when it comes to predicting American elections. I like to think I came close in the 2016 Presidential election, when I went on record that Trump would come second. I missed but only by one place and that’s no disgrace! Anyway, I am not laying odds on which Party will be the winner in next month polls.

American newspapers, media outlets and political web sites are making their predictions and the opinion polls are all over the place. What is at stake? Republicans currently hold both Houses of Congress. If the Democrats don’t reverse the position, more conservative policies and laws will be approved. There may be more tax concessions for the rich, more damage to Obamacare and Mr Trump may even get his Mexican wall funded. A Democratic held Congress will prevent such a process. Even if the Democrats regain power in just one House, it gives them a valuable bargaining chip in slowing down the Trump administration until the next elections in 2020.

The state elections have caught my eye. This time around, they are really important. Every two years, federal elections are mirrored by most states. Many lawmakers and judges have to ask the state electorate for approval, district by district. This is healthy for the political process. However, it is unlikely that Democrats will overturn Republican state congress majorities in this year’s local elections.

Women’s rights are bound to be an issue. There will be lawmakers who will want to see restrictive abortion laws on the statute books. I don’t see the federal government enacting such laws but a number of states, especially those in the deep South, may be tempted to tell women what they can and cannot do with their bodies. With two new conservative justices on the Supreme Court bench, there is a risk that Roe v Wade will be challenged successfully. Other women’s issues may flounder.

If a state Congress enacts a law, it is not the finish. The state governor has a right of veto. Each state will have its rules about overriding a veto but governors have real power. A governor is the chief executive of the state. It follows that it is crucial for the Democratic cause to win as many of this year’s 36 gubernatorial races as possible.

There is one vital issue that will become front and centre in two years’ time. The American Constitution requires a census and redistricting for state legislatures every ten years, when maps of all election districts have to be redrawn by the lawmakers. A valid redistricting process is open and transparent, allowing communities to ask questions and give input. Redistricting laws are often complex. There are federal statutes which impose requirements that apply to all states: equal population districts, single-member congressional districts and provisions for voting rights. States may impose additional requirements, such as drawing districts that respect existing political boundaries, physical boundaries and or communities of interest; districts that are compact; and districts that are politically fair.

Over the past decade, Republicans have re-drawn district boundaries to their advantage because the Democrats have been locked out of state power in most states since 2010, especially key swing states. According to The Washington Post, three quarters of state congressional districts nationwide are now controlled by the Republican Party. As an example, Florida, where election contests are usually close, has had state Republican control its Congress for the past decade, albeit by small percentage points. This is now the way the local political game is played these days.

In most states, redistricting is carried out by state lawmakers who use new census population data to assess voter numbers. After the 2010 census, Republicans had power to re-draw a huge number of districts, sometimes fairly, other times benefiting the Party by carving out districts friendly to Republican causes and preventing Democrats from winning those districts.

There has been wrongful redistricting in Ohio, Wisconsin, Illinois and Michigan, Trump’s political base. The governors’ seats in these states, as well as Florida, are up for election this time around. At the moment, the polls are showing Democrats in the lead in those states, although the Wisconsin and Florida races are tight.

It is wrong for any political party to enjoy a monopoly over its legislature. The Republican Party controls far too much of America’s political process. Monopoly rule has happened before. In the 1930s, the Republicans did not get a look-in politically. FDR not only enjoyed large majorities in Congress but the Democrats also controlled state and city politics too.

Gerrymandering, the manipulation of district lines to protect or change political power, has become the bread and butter of state politics. Sometimes, the lengths to which politicians will go are staggering. In Texas, it is not unknown for town boundary lines to be drawn in strange designs so that a promising student footballer will attend a high school in a particular district, improving that school’s prospects for the football season.

Should the Democrats regain power in the states, this might be a good thing. However, it is in the nature of politics for the victor to undo what its opponents have done and introduce their own partisan policies. If the Democrats were to do this, what a waste of time the elections would be, not to mention a mockery of the obligation of lawmakers to act in the interests of all voters.

The Politics of Climate Change

The day will come when our sun will expand sufficiently to subsume the planets Mercury and Venus. By then, planet Earth will be on fire and life as we know it will cease to exist here. No need to reach for the Valium. It will be approximately four billion years before this happens. However, there is a much more immediate problem for Earth. According to the United Nations, if dramatic changes are not made now in the manner in which energy is generated, in thirty years’ time climate change will make life markedly worse.

The report on climate change released by the UN last week contrasted the specific rate of warming with likely additional warming. The difference between an increase in 1.5 and 2 degrees Celsius is dramatic. The report by eminent scientists who, apparently, have no axe to grind highlighted the effects of a potential devastating chain reaction of tipping points for the world’s climate.

People, if not their leaders, seem to accept our planet is getting hotter. We know that over hundreds of thousands of years, Great Britain has been covered by ice more than once and has also been a desert. But I believe the UN scientists who highlight the extraordinary damage caused by use of fossil fuels. Something more needs to be done urgently.

The director of the Earth Institute at Columbia University has set out numerous negative repercussions which will arise in a warmer world: increased health risks, such as heat stroke; drought; wildfires; shifts in growing areas for crops, for example in USA, the Midwest could become the best growing area for cotton and corn; broader spread of disease; a benefit of living in a colder climate is that winter kills insects such as mosquitoes; more moisture in the atmosphere will cause big precipitation events so it will be rainier and snowier; there will be increased flooding and rising sea levels, melting ice at the poles and greater storm precipitation, not to mention damage to sea life.

The world needs leadership, especially from its major polluters, China, Russia and the United States. China is not a democracy. The people do not vote for their leaders. The Chinese leader has changed his country’s constitution and he is now chairman-for-life. Over the past two decades, Chinese administrations have overseen a phenomenal growth in power stations, some coal fired, others nuclear, to generate sufficient energy to make China into the world’s leading manufacturer. What chance is there of persuading the current Chinese leadership to stop burning fossil fuels and find another way, despite the fact that China is a signatory to the Paris Accords? How will the agreement be enforced against the Chinese?

Russia has no manufacturing industry worth mentioning. How many of you have gone to a shopping mall, picked up an item and exclaimed: “Wow! Made in Russia.” Russia’s wealth emanates from supplying energy, gas, oil and coal. What would persuade them to stop? The damage to the Russian economy would be huge. Russia is a signatory to the Accords but has not ratified the treaty.

As for the United States, the current administration has promoted the renewal of coal mining and steel manufacturing from old plants fuelled by coal. No wonder the voters in Pennsylvania, Ohio and Michigan are Trump fans. He has given them jobs. In addition, Trump decided to withdraw America from the Accords, a landmark agreement to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future. Why did America withdraw? Some believe Trump wants to undo everything with the Obama stamp. More likely, the Accords got in the way of the Trump administration’s desire to deregulate dirty industry and create jobs, part of the Make America Great Again program.

The world is crying out for climate change leadership. I look at world leadership and find little sign of it. The EU is too engaged in squabbles about Brexit to look at the big picture. The countries who should lead - China, Russia and United States – are the three, major offenders on use of greenhouse gases. They are too fixated by and concerned with promoting their countries interests at the expense of global interest.

As I look back in history, there was one man, former President Richard Nixon, who might have led the world out of this environmental black hole. I hear you laughing. Tricky Dicky, the liar and discredited President of the Watergate affair, how could he be the choice? First, he presided over détente with Russia as he brought the closed Chinese society back into world citizenship. He was masterly in the way he played these two nations off against each other in the cause of peace. Second, he was the first modern environment President. It came as a surprise when, in his second State of the Union address, he outlined the major steps in a series of environmental programs.

Nixon sent dozens of environmental proposals to Congress, including a revised Clean Air Act, 1970, one of the most significant pieces of environmental legislation ever passed. There was a major shift in the federal government's role in air pollution control. The legislation authorized the development of comprehensive federal and state regulations to limit emissions from both stationary (industrial) sources and mobile sources. Nixon created two new agencies, the Department of Natural Resources and the Environmental Protection Agency, to oversee environmental matters. The agencies remain in charge, although Trump has installed anti-environmentalist chairmen to destabilise their work.

Nixon is no more, nor is there anyone of his intellect available among the current crop of world leaders to help the world out of this climate predicament. As a truly long shot, I’d choose Bill Clinton. His administration had a strong record on environment. Since 2000, he has played a prominent role in the World Economic Forum, so he knows all the players. And he is a silky and skilled negotiator. But that’s the extent of my solutions. I regret to write that I do not see a likely way out of the road to hell. People of my age won’t see the deluge but I fear for the future of my children and grandchildren.

 

 

 

Who Judges the Judger? The Politics Surrounding the Supreme Court

Who Judges the Judges? The Politics Surrounding the Supreme Court.   

The events of the past few weeks relating to the Kavanaugh nomination to the Supreme Court have been shocking. A female University professor has been put in the pillory for accusing Kavanaugh of disgraceful behaviour some thirty years ago. Kavanaugh’s Senate defence, to me, was unedifying, mere bluster, and demonstrating conduct falling well short of any Supreme Court justice. But politics has often been the driver of the Court.

Whilst the atmosphere in which Supreme Court proceedings are conducted is almost invariably collegiate and polite, behind the scenes politics bubbles. The Supremes are no slouches when it comes to butting heads with each other, not to mention taking on the other two branches of American government.

From almost the birth of the nation, the Court challenged the rights of both the executive and legislative branches. In 1803, Chief Justice John Marshall wrote the opinion of a unanimous court in the landmark ruling in Marbury v Madison, when the court struck down an act of Congress, the Judiciary Act, 1789. It ruled the Act unconstitutional because it conflicted with the Constitution by giving the Supreme Court more authority than given to it by the Constitution.

In the face of attacks on the judiciary launched by Thomas Jefferson and some senators, Marshall maintained the status of the Supreme Court as the head of a co-equal branch of government. By asserting power of judicial review to declare acts of Congress unconstitutional, Marshall established the paramount position for the Court as interpreter of the Constitution. He handled the tricky politics like a master.

In 1954, the Supreme Court handed down a unanimous verdict in Brown v Board of Education, Topeka, Kansas. The ruling sought to end racial segregation in federal public schools ‘as soon as reasonably practicable.’ (It took more than a decade until Nixon’s busing policy resolved the issue.) The Brown case, which had five other Board of Education defendants, had already been heard by the Supreme Court but Chief Justice Fred Vinson died before a ruling was made. The new chief justice, Earl Warren, had the case re-tried and took time to persuade his fellow justices to reach a unanimous ruling. When it was given, President Eisenhower and Southern Democrats in Congress were both astonished and angry. Warren had played politics in taking the first concrete steps to end racist segregation.

The Court asserted rights against the executive branch in the Nixon Tapes case. By a majority of 8-0, the President was ordered to disclose Oval Office recordings, including the infamous ‘smoking gun’ tape. Over the years, conservative lawyers have questioned the ruling on grounds that it was more political than legal. Incidentally, the ninth justice, William Rehnquist, recused himself as he was nominated by Nixon. Here was a justice doing the right thing.

Arguably, the Court’s most political decision was the 2000 ruling in Gore v Bush, when the Supremes decided 5-4 to reverse a Florida Supreme Court request for a selective manual recount of that state’s US Presidential election ballots. The Supremes effectively handed the election to Bush. The most significant sentence of the majority opinion stated that the decision would not be regarded as a precedent. In simple terms, the ruling was political, not legal.

America has watched the grubby side of judicial politics as the Kavanaugh nomination reached the end game. On Saturday, the Senate confirmed him by 50 votes to 48 in a partisan political vote. Normally, i.e. before 1992 and Clinton, the confirmation process for a Supreme Court justice was straightforward. But over the years, politics has reared its head. It is not unusual for a nominee to get a bumpy ride, not only from the Senate but the partisan media. When Elena Kagan was nominated, I watched astonished when a Fox News person – I will not give her the title of journalist – said: “She looks like a dike, so she will be favoring women’s issues.” Yes, it happened. I kid you not.

Recently, the confirmation process has become badly skewed in the Senate where merits seem not to count and partisan politics rules. The Republicans in the Senate blocked President Obama from filling a Supreme Court vacancy in the last two years of his term for spurious and blatantly political reasons. They wanted and hoped for an opportunity for the next president, hopefully a Republican, to fill vacancies. Trump has put two conservatives on the Court.

When the Court has a vacancy, a short list of candidates is prepared by senior White House advisers. The Justice Department, the American Bar Association and many other interest groups are consulted and temperatures taken. The FBI carries out background checks.

Once the President announces his decision from the short list, the process moves to the Senate. The Senate Judiciary Committee interviews the nominee at length, then votes to approve or disapprove the nomination. This is serious business for a President. If his nominee is rejected, it sends out messages of poor approval process in the White House and poor judgment by the President. George W Bush nominated Harriet Miers. She was the Bush family lawyer. She withdrew from the process when politicians and lawyers alike decried the choice, further damaging Bush’s already tarnished reputation.

Once the Judicial Committee approves the nomination, it goes to the Senate for a straight up and down vote, i.e. a simple majority is all that is needed to confirm the choice. In the event of a tied vote in the Senate, the Vice-President has the casting vote.

Kavanaugh’s nomination was at risk of being derailed by the claims of college professor Dr Christine Blasey Ford. In a televised hearing, she gave a lengthy statement and was dignified, and to my mind credible, under cross examination. Subsequently, the President waded in to help his beleaguered nominee. In a rally in Mississippi, a Trump stronghold, he posed some questions: “How did she get to the house? She doesn’t remember. How did she get home? She doesn’t remember. Where was the place? She doesn’t remember.” All these questions were fair until you listen to the mockery and scorn in Trump’s voice. But, unlike the UK Prime Minister, a President can wade into the argument, undignified as it may be. Sub-judice rules would not operate in America in any event as the Senate is not a court of law.

Trump has been savvy. By supporting the beleaguered Kavanaugh, he energized the Republican base in seats of the eight Senate elections which are Republican held. If Republicans continue to hold their Senate majority, it will be two years more before the Democrats can challenge court appointment. In that time, how many more Supreme Court vacancies will there be?

Now Kavanaugh is nominated, is that the end? Not necessarily. These days, anything can happen, especially if the Democrats win majorities in both Houses of Congress in next month’s mid-term elections. A Democratic held Congress could impeach the new justice if new evidence is found to prove he lied before the Senate. However, the only impeachment precedent for a Supreme Court justice was that of Samuel Chase in 1804 and he was acquitted. As I have often said, impeachment is political, not legal.

Another potential move would require a Democrat in the White House, as well as Democrats holding majorities in both Houses of Congress. The numbers of Supreme Court judges could be increased. Congress has this right. The Constitution does not specify the numbers of Supreme Court justices. The move was tried by FDR in 1937. The “Court Packing Plan,” as it was known, failed because both Houses of Congress did not like the chief executive interfering with the judicial branch. But times have changed and I would not put it past the Democrats to try.

In the Kavanaugh fiasco, SCOTUS, and by extension the American people, is the biggest loser. The events of the past two years, especially the last month, put the court into serious disrepute. When a former Supreme Court justice and more than one hundred college law professors all call for the nomination to be withdrawn and are ignored, one has to wonder if the Senate Republicans are not only deaf but dumb.

The November Mid-Term Elections.

In November, America goes to the polls. All 435 seats in the House of Representatives are up for grabs, as well as 34 seats in the U.S. Senate. In addition, there are 33 Governors’ mansions, some of which may find new occupants, as well as innumerable other elections at the state level. If a democracy is judged solely on the amount of vote options given to the ordinary citizens, America would be Trump’s favourite, Number One.

Many observers of American politics have stated that these mid-terms are a test of the Trump presidency. Will America vote to support his policies or will there be a national thumbs down? Presently, there is massive instability in the White House. Books, like Robert Woodward’s “Fear” paint a sorry picture of the chief executive and the chaos in the White House. The Mueller Inquiry has bagged a huge prize in the conviction of Paul Manafort. Trump wants to remove Deputy Attorney General Rosenstein from heading the Russia Inquiry but he seems powerless to do so. In addition, the Kavanaugh nomination for the Supreme Court is beleaguered. I’ll say no more on the topic this week. So, if the mid-terms are indeed a test of the Trump administration, there is a public relations mountain to climb.

However, I believe the mid-terms have a modest relevance to approval or disapproval of the Trump administration. Let me explain. The anticipated turnout of eligible voters is approximately 40%. In a presidential election year, the turnout rarely exceeds 60%. If only 40% of voters cast a ballot in November, the inevitable conclusion is that the rest of the voters either don’t care or see no relevance to their lives or believe they are disenfranchised whatever the result. It would be interpreted by observers as a condemnation of the American political system and the lack of nexus between federal politicians and the voters at large. However, some American newspapers suggest the voters are fired up by the administration, both in a good and bad way, and that the turnout may be a lot higher than the norm.

The 115^th Congress will remain in power until January 2019 when new people come and the losers leave. In the House, all 435 seats will be contested. Currently 236 seats are held by Republicans, 193 by Democrats and 6 are vacant. It is rare for a political party to lose its House majority. It has happened only six times since 1945. Why would the House change hands this year? Many political observers predict this will happen but as much depends on local issues as the events in D.C. A Congressman or woman is inclined to listen far more carefully to their constituents who are concerned by local burning issues, rather than do the bidding of the executive branch in Washington. The length of the President’s coat-tails, i.e. his influence as a vote getter, is always less in House elections than the Senate. Therefore the “Trump Influence and Popularity Test” will not be as strong as you might think.

To win the House, the Democrats need 218 seat. Currently, they hold 193, which means they need another 25 seats. This is a tall order. Seats in the House don’t change hands if the holder is believed to have done a good job in his district. I could look at the close races and analyse them but if I did, this blog would increase by ten pages and the reader would be asleep in no time.

What of the Senate? Currently, there are 50 Republican and 49 Democratic senators. The vacant seat was held by John McCain. 34 seats are up for election this year. On the face of it, the Democrats need to hold all their seats and flip just two Republican seats to take control. However, 26 of the seats to be contested are held by Democrats. Only eight contested seats are held by Republicans. Flipping two seats out of eight is a tall order.

I have not yet looked closely at individual races. It’s early. The primaries have only recently been completed. The Senate races may get caught up in what former British Prime Minister Harold MacMillan called “events,” extraneous occurrences that can’t be predicted.  The loss of the Kavanaugh nomination or Mueller and the Russian enquiry can put a spanner in the works.

There are three Senate races where a Republican incumbent is facing a close challenge: Tennessee, Nevada and Texas. Of the three, Texas is the most surprising. The state has not had a US Democratic senator since 1994. The incumbent, Ted Cruz, has national recognition. His opponent, Beto O’Rourke, is depicted by Cruz as a Bernie Sanders-style socialist, seeking to wreck America with left wing policies on healthcare, gun control, climate change and reforming immigration to make it more humane.

The poll swing predictions are wild, from a nine-point lead for Cruz to a two-point lead for O’Rourke. Should O’Rourke be victorious, the Republicans will feel the chill. Without the Texas Electoral College vote in a presidential election, they may as well kiss goodbye to the White House. But these are still early days. Much can happen in five weeks.

This would be so much fun if I didn’t live in a country whose politicians have twisted, turned, lied and tied themselves up in knots, making themselves look like complete idiots and incompetents, whilst leading UK into the Brexit disaster of disasters. So I’m not pointing a finger, or two for that matter.