The Great Unraveling

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In 1929, Ford sold 1,507,132 cars. Chevrolet sold 1,328,605. Then came the stock market crash. Sales dropped dramatically each year until 1932, when sales bottomed at 210,824 for Ford and 313,404 for C…

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Stockman: “What’s Going On Today Is Complete Insanity”

In his recent TV appearance, last week David Stockman suggested that President Trump would be better suited to spend some time actually addressing economic issues instead of the administration’s travel ban for immigrants from Middle Eastern countries, which Stockman called “a giant misfire.” Employing the 1992 Clinton Campaign motto of “it’s the economy, stupid,” Stockman noted “Trump was elected because flyover America is hurting economically. The voters of Racine, Wisconsin and Johnstown, Pennsylvania are imperiled not because of some refugees, they’re imperiled because their jobs have all been disappearing for decades.” He added, correctly, that “the problem is far more the Federal Reserve, Janet Yellen, the bubbles they’re creating on Wall Street.”

Stockman went on to suggest that the Trump Administration is showing decreased interest in “draining the swamp”, having surrounded himself with, as he himself has now realized, the “Goldman Guys.”

Then, in a follow up interview with CNBC, Stockman once again discussed the impact of Trump, this time on markets, and warned that while stocks are booming under Trump, with the S&P now up 12%  since the election (with banks up 25% and Goldman 35% higher), traders are living in a “fantasy land” that can’t last —and Trump’s policies will derail the market for years to come.

Stockman reiterated his concern that Trump has lost his focus on the economy, and has become distracted by other issues which should be a particular point of worry for investors.

Most of Trump’s actions “[have] nothing to do with the economic agenda” he’s proposed, Stockman told CNBC. That, along with a debt ceiling debate that will take place on March 15 in Congress, and a market rally that has gone on for a while, has the bearish Stockman worrying about a big downturn, which however not only refuses not to come, but the S&P hasn’t had a 1% drop in 85 days.

“What’s going on today is complete insanity,” said Stockman. “The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that’s going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history.”

He added that “there’s going to be no tax action this year,” said Stockman, echoing repeated concerns by Goldman who have said, mostly recently this morning, that Trump’s plans for the economy are facing mounting political risks. Last week, the president vowed that tax reform could happen this year, and promised to unveil a “phenomenal” tax plan within the next few weeks, which however has drawn skepticism from Washington insiders.

“If there’s any next year it will be deficit neutral, which means it’s not going to add the $15 to earnings like these people expect,” Stockman said. In fact, as reported earlier, with the Border Adjustment Tax becoming a virtual impossibility, the extent of corporate tax cuts will likely be far less than what the market is pricing in currently. 

“My argument is there is not going to be any economic rebound, there is not going to be any profit surge,” Stockman added. “Therefore the market will be repricing dramatically downward once it’s clear that that’s the case.”

For now, the market blissfully refuses to listen. In a prior appearance on CNBC in November, Stockman argued that a recession was coming in 2017 thanks to Trump. For now it is Stockman’s word of caution against that of Gartman, who earlier today predicted that because “Illogic reigns” the market “melt Up” has begun in earnest and it will stop when it stops and not a moment before.”

Needless to say, everyone would like to know when that “moment” is.

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Republican Version Of ‘Cadillac Tax’ In Obamacare Replacement Drawing Fire From Employers And Unions

Back in 2009, the Obama administration drew a lot of fire from employers and labor unions over Obamacare’s so-called “Cadillac Tax”, a tax on healthcare premiums over a certain threshold.  Apparently, the United Auto Workers in the Midwest had grown accustomed to their unlimited supply of Viagra, completely free of charge, and were unwilling to ‘go down’ without a fight.

Fast forward eight years and now several Republican plans for replacing the ACA include their own curb on generous health plans: a cap on how much of employer-provided health benefits could be shielded from taxes. Such a cap could force certain workers to start paying income tax on a portion of the cost of their coverage.

Currently, when an employee receives health insurance, the value of that benefit isn’t subject to either income or payroll taxes. On average, employer coverage for a single worker last year ran $6,435, while for a family, the tab was $18,142, according to a survey by the Kaiser Family Foundation. Employers bore about 82% of the cost for single plans, and about 70% for family coverage.

While the Republican plan would limit the deductibility of premium payments as opposed to implementing a special tax, as the Wall Street Journal points out, “in the end, they both would have similar effects,” including pushing companies toward skinnier health plans, according to Steve Wojcik, an official with the National Business Group on Health, which represents employers. “It’s six of one, a half-dozen of the other.”

Cadillac Tax


Of course, many politicians in Washington D.C. view a tax on “Cadillac” plans as a huge revenue opportunity that could add $20 billion annually to federal coffers by 2025.

House Speaker Paul Ryan (R., Wis.) said recently he has long supported a cap on the health-benefits tax exclusion, but that it was an “open question” where Congress would end up on the issue. Mr. Hatch in a statement said, “We must study the open-ended tax preference and its impact on costs for employees and increased spending by employers.”


The tax exclusion for employer health benefits represents a huge pool of potential federal revenue, estimated at $266 billion in 2016, according to the Congressional Budget Office. Capping the exclusion would bring in a small fraction of that total. The Cadillac tax, the CBO said, would raise federal revenue by $2 billion in 2020, growing to $20 billion in 2025—money that could help defray the cost of expanded health coverage under the ACA.

That said, it’s not just C-suite executives who would be hit by the “Cadillac tax” as many unionized employees are also at risk, after decades of negotiating ever better healthcare plans far in excess of what their counterparts in non-unionized, private-sector jobs get.

Still, the current proposals to limit the tax exclusion are drawing sharp pushback from employers, which say the change could limit their flexibility and add to their costs, and labor groups, which fear their members could end up paying additional taxes. A December letter to members of Congress that criticized both the Cadillac tax and the health-benefits exclusion cap was signed by groups including the U.S. Chamber of Commerce and the National Retail Federation.


The cap is also drawing opposition from the Alliance to Fight the 40, a coalition that lobbies against the Cadillac tax, which would impose a 40% levy on the value of health plans above certain cutoff levels. Last month, the group, which includes employers, unions and health companies, paid to blast an ad at electronic devices in the vicinity of congressional Republicans’ Philadelphia retreat, with the message: “Taxes on employer-sponsored health care are a bad idea.”


Members of unions that have negotiated robust health benefits are among those likely to be hit by taxes tied to high-cost plans. Capping the health-benefits exclusion “would be a huge tax increase on the middle class,” said D. Taylor, president of Unite Here, which represents hospitality workers.

Meanwhile, economists have long said the tax exclusion for health benefits has negative effects, encouraging employers to offer too-generous health coverage. That, they argue, leads to excessive health spending because employees are shielded from the full cost of medical care.  The existing health-benefits tax exclusion “has been an important factor in promoting the kinds of inefficiencies in the health-care system that we have seen,” said Joseph Antos, an expert at the conservative-leaning American Enterprise Institute, who supports a cap on the employer health-benefits tax exclusion.

Of course, the real question is how Trump’s largely unionized supporters in Michigan, Wisconsin and Pennsylvania will respond to an assault on their unlimited chiropractic visits, ‘therapeutic’ massages and Viagra.

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“A Never-Happened-Before Event”: As Oroville Dam Drains, A Problem Remains

As discussed previously, the biggest priority for California officials tasked with restoring the damaged Oroville Dam as they race against a coming Wednesday storm, is to plug the hole in the damaged spillway while draining as much water as possible ahead of the coming rainfall.

The good news, as the chart below shows, is how the water level at the Oroville reservoir has been declining over the last 24 hours. According to a spokesman for the Department of Water Resources water is pouring down the facility’s damaged main spillway at a rate of about 100,000 cubic feet per second, or more than twice the rate as water flowing into it. By 10 a.m., the lake’s water level was 4 feet lower than the emergency spillway, which suffered damage during its first ever water release over the weekend. Officials added that the water level of Lake Oroville has been steadily dropping at a rate of roughly 3 to 4 inches per hour.

9am- Lake Oroville down ~5.5feet since its peak early Sunday @CA_DWR

— Eileen Javora (@kcrajavora) February 13, 2017

A subsequent tweet by the California Office of Emergency Services updated that as of 12:30pm Pacific, the lake level had declined to 6 feet below the damaged emergency spillway.

Video from 12:30 today. Water released over Lake Oroville spillway at 100K cfs. Lake level 6′ below Emerg. spillway.

— Cal OES (@Cal_OES) February 13, 2017

Workers with the CA Department of Water Resources are scrambling to reduce the lake’s overall water level to 50 feet below the emergency spillway elevation of 901 feet. That mission has taken on added urgency ahead of the previously reported heavy rains expected later in the week. According to a subsequent tweet by the California DWR, the dam is now releasing over 110,000 cubic feet per second from the main Oroville Spillway, with the lake level dropping around 8′ per day.

The current flows from the dam can be seen in the tweet below:

Current flows at the #OrovilleSpillway #OrovilleDam

— Cal OES (@Cal_OES) February 13, 2017

Asked about the outflow, authorities admitted their confusion: “It’s hard to look at a crystal ball and predict how it’s going to evolve,” said Kevin Lawson of Cal Fire. The flow into the lake is roughly 37,000 cubic feet per second, so they’re shedding a net 60,000 or so cubic feet per second.  They’re hoping to drop 8 feet per day.

It’s unclear if they’ll hit the target of lowering the lake by 50 feet before the next rain hits. But they’re expecting a smaller level of precipitation at a cooler temperature, so it may not run into the lake as quickly, giving them more time.

“We’re going to deal with that as it comes in,” said acting state Department of Water Resources Director Bill Croyle.

There were also questions about problems with the emergency spillway, which began eroding instead of serving its function.

“I’m not sure anything went wrong,” Croyle said. “This was a new, never-happened-before event.”

* * *

Earlier in the day, California authorities released various photos showing the situation at the Oroville Dam as of noon Pacific time. As noted, water levels at the reservoir have receded, and the damaged emergency spillway is no longer receiving water. But the damaged main spillway is still going strong, as the photos below show. The photos also show the erosion along the emergency spillway.

Current images of the #OrovilleDam from @CHP_Valley Air Operations’ H24, which is providing law enforcement support. @Cal_OES @CaltransHQ

— Commissioner Farrow (@CHPCommissioner) February 13, 2017

A view from Chopper 5 over the #OrovilleDam Monday morning. Latest:

— KCBS 106.9 FM/740 AM (@KCBSNews) February 13, 2017

Oroville Dam current outflow 100K cfs, water level dropping +4ft since releases increased yesterday. Update planned for 12pm @kcranews

— Vicki Gonzalez (@KCRAVicki) February 13, 2017

While the lack of deterioration is good news, the LA Times has released the following map showing the areas which are still at risk of flooding near Lake Oroville.

And in addition to the threat of the upcoming rains, a residual risk with the emergency spillway is that the erosion from the overflowing water may erode the earth by the dam, destabilizing the structure. According to AP, the erosion at the head of the emergency spillway threatens to undermine the concrete wall and allow large, uncontrolled releases of water from Lake Oroville. Those flows could overwhelm the Feather River and other downstream waterways and levees and flood towns in three counties.

Department engineer and spokesman Kevin Dossey told the Sacramento Bee the emergency spillway was rated to handle 250,000 cubic feet per second, but it began to show weakness Sunday after flows peaked at 12,600 cubic feet per second.

The aerial photo above of the emergency spillway at Lake Oroville shows signs of major damage.

Meanwhile, perhaps because the worst possible outcome has failed to materialize, local officials have been forced to defend the order to evacuate nearly 200,000 people in the affected areas. The Butte County Sheriff Kory Honea on Monday defended his decision a day earlier calling for evacuations of more than 100,000 residents down river from the Oroville Dam after concerns that a spillway could fail and unleash a 30-foot tall wall of water on the region.

“I recognize and absolutely appreciate the frustration people who were evacuated must feel,” Honea said at a press conference. “It wasn’t a decision I made lightly.”

The calls for cities and towns downriver from Lake Oroville to evacuate were unexpected and triggered panic Sunday evening. Some people abandoned their cars on the highway and left with the clothes on their back after the Department of Water Resources announced that an emergency spillway would fail within the hour.

Honea shot down rumors the evacuation could end Monday afternoon. They’re working on a “repopulation” plan but there’s no timeline. “Getting those people home is important to me. But I have to be able to sleep at night knowing they’re back in that area,” he said.  His department had to move 500 inmates from Butte to Alameda County jail during the evacuation. They’re being held there for the time being.

This means that the over 188,000 residents of Yuba, Sutter and Butte counties who were ordered to leave their homes, are now in limbo and may not be able to return until the barrier at the nation’s tallest dam is repaired, according to Sheriff Honea. He did not say how long the fixes could take and offered no timetable for lifting the evacuation order. It also remains unclear what the current status of the plan to drop loads of rock on the eroded spillway at Oroville using helicopters.

Meanwhile, recalling the evacuation, local resident Nancy Borsdorf described a scene of chaos on her way out, including drivers abandoning cars as they ran out of gas. “People were just panicking,” said Borsdorf, who was at a shelter Monday in Chico.

“We’ve always loved and trusted our dam,” she said, having lived in Oroville for 13 years. “I’m really hopeful Oroville wasn’t flooded.”

Asked if the spillway was supposed to handle far more water, the acting head of California’s water agency said he was “not sure anything went wrong” on the damaged spillway according to AP. Bill Croyle said sometimes low-flow water can be high energy and cause more damage than expected. His comments came after officials assured residents for days that the damage was nothing to be concerned, then ordered everyone to get out in an hour.

The water level in the lake rose significantly in recent weeks after storms dumped rain and snow across California, particularly in northern parts of the state. The high water forced the use of the dam’s emergency spillway, or overflow, for the first time in the dam’s nearly 50-year history on Saturday. 

The sudden evacuation panicked residents, who scrambled to get their belongings into cars and then grew angry as they sat in bumper-to-bumper traffic hours after the order was given. Raj Gill, managing a Shell station where anxious motorists got gas and snacks, said his boss told him to close the station and flee himself. But he stayed open to feed a steady line of customers.

“You can’t even move,” he said. “I’m trying to get out of here too. I’m worried about the flooding. I’ve seen the pictures — that’s a lot of water.”

“It was so scary. It was like a bad movie, everyone was panicking and driving crazy. It was really scary,” said Maribel Cervantes, 35, of Yuba City. Cervantes threw some clothes in a hamper and joined throngs of evacuees fleeing Yuba City late Saturday. She said she’s worried about getting back to work as a nursing assistant, but she still has deep concerns about potential flooding.

“How can they assure us that it’s safe?” she asked. “How can we be 100 percent sure when one minute they’re saying the spillway was about to collapse?”

Raul Nava, 29, waited until about midnight to leave his home in Yuba City. “We’re scared about flooding, our house is right next to the levees,” he said. “We just packed food, water, you know the basics, and headed out.”

Nava said he and his wife and his dad first tried to get in to an evacuation center in Colusa but were turned away. It took them five hours to reach the shelter in Woodland, he said. With him he brought his two pit bulls, and 10 pit bull puppies. “We’re ready to go home,” he said.

Merida Lozano, 40, of also of Yuba City, said she too left in a hurry Saturday afternoon. She and her four kids got to the emergency shelter at the Yolo County Fairgrounds around 1 a.m. after being turned away from several area hotels that were full, she said. “We had no clue what was going on until about 4, when we heard about the evacuation orders,” Lozano said. “The roads were empty and all of the sudden there were cars everywhere. My emotions are all over the place…at least we made it here with the kids.” Lozano said her sister stayed behind in Yuba City.

“We’re just waiting to go home right now,” she said. “I hope they learn from this and reinforce the spillway so that we aren’t in this position if this were to ever happen again.”

A Red Cross spokeswoman said more than 500 people showed up at an evacuation center in Chico, California. The shelter ran out of blankets and cots, and a tractor-trailer with 1,000 more cots was stuck in the gridlock of traffic fleeing the potential flooding Sunday night, Red Cross shelter manager Pam Deditch said. A California Highway Patrol spokesman said two planes would fly Monday to help with traffic control and possible search-and-rescue missions.

Other shelters have been reporting they are now full.

The Paradise Alliance Church is not longer accepting new evacuees. If seeking shelter visit for updated list.

— Butte County, CA (@CountyofButte) February 13, 2017

While some shelter sites were at capacity, people were still trickling in to the Yolo County Fairgrounds Monday morning. The parking lot was about half full, and deliveries of cots and water were still coming in. Yolo County health officials, law enforcement and mental health experts were on site to assist.

To manage the chaotic exodus and ensure evacuated towns do not become targets for looting or other criminal activity, at least 250 California law enforcement officers were posted near the dam and along evacuation routes. 

This afternoon Oroville vice mayor Janet Goodson, who is marooned in Red Bluff after evacuating Sunday night, said she respects and understands the sheriff’s call for continued evacuations, and says that safety is the foremost issue, but she said she also feels frustrated.

“To be honest with you, there is a degree of frustration,” she said quoted by the SacBee. Asked whether it was a mistake not to have done more to improve the spillway earlier, she said she prefers to look forward.

“We are where we are,” she said. “We can learn from mistakes, things we failed to recognize. We have to move forward in a collaborative fashion and make sure this does not happen in the future. This is a learning experience for us.”

* * *

The California National Guard notified all its 23,000 soldiers and airmen to be ready to deploy, the first time an alert for the entire California National Guard had been issued since the 1992 riots in Los Angeles. So far their services have not been needed and the only incident to date came after Oroville police said they made one arrest and have identified a second suspect in connection with two looting crimes that occurred Sunday night.

Suspects smashed windows at a Dollar General and a liquor store, stealing alcohol and food. “Is it looting? That (term) probably does apply. We’re just calling it burglary,” Police spokesman Joe Deal said.

Otherwise, there have been few calls for service and few problems in town since the Sunday night evacuation call. Deal said 25 officers are on patrol, focused on residential areas and low-lying areas near the river. Oroville police are being supplemented by officers from the Orland police department, the CHP, and the sheriff’s department. Most calls Monday have been from people asking police to check on the welfare of relatives or friends.

* * *

But the biggest criticism facing officials is that the sudden decision Sunday to evacuate tens of thousands of people was a departure from earlier assurances, when officials had stressed the Oroville Dam itself was structurally sound. Unexpected erosion chewed through the main spillway during heavy rain earlier this week, sending chunks of concrete flying and creating a 200-foot-long, 30-foot-deep hole that continues growing.

Officials are most concerned about the dam’s emergency, earthen spillway that began taking on water after water was diverted from the main concrete spillway because of the damage. Engineers do not know what caused the cave-in. Chris Orrock, a Department of Water Resources spokesman, said it appears the dam’s main spillway has stopped crumbling even though it is being used for water releases.

The lake is a central piece of California’s government-run water delivery network, supplying water for the state’s Central Valley agricultural heartland and homes and businesses in Southern California.

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