Foxconn’s on/off switch

The Milwaukee Business Journal:

Foxconn Technology Group on Friday said it will build an LCD screen fabrication facility in Mount Pleasant, a move that was put into question after reports earlier this week of the company reconsidering its plans.

The company said the decision came after “productive discussions between the White House and the company, and after a personal conversation between President Donald J. Trump and Chairman Terry Gou.” That Gen 6 plant will fabricate smaller, high-resolution LCD screens than the company had originally planned to make in its Mount Pleasant plant.

Reports from Reuters and Japanese news publication Nikkei Asian Review had called into question whether Foxconn would be fabricating any LCD screens in Wisconsin at all. The company earlier this week committed to building packaging plants, assembly facilities and research centers over the next 18 months in Mount Pleasant. But it fell short of committing to the Gen 6 fabrication plant to make TFT, or “thin-film-transistor” screens.

“Our decision is also based on a recent comprehensive and systematic evaluation to help determine the best fit for our Wisconsin project among TFT technologies,” Foxconn’s written statement Friday announced. “We have undertaken the evaluation while simultaneously seeking to broaden our investment across Wisconsin far beyond our original plans to ensure the company, our workforce, the local community, and the state of Wisconsin will be positioned for long-term success.”

That fabrication plant could break ground over the next 18 months, according to a Friday statement from Racine County, the village of Mount Pleasant and the Racine County Economic Development Corp. The company in April is expected to hold open houses regarding its upcoming construction plans.

Foxconn’s announcement ends a week where the firm’s Wisconsin plans attracted extreme scrutiny. A Reuters story on Tuesday raised speculation that Foxconn may not manufacture in Wisconsin at all, a point the company refuted.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, described it as watching “a Twitter world collide with a dynamic, global business decision.”

Foxconn’s strategy in Wisconsin has evolved over the past six months, which is in keeping with the company’s reputation of being flexible and responsive to market conditions.

Foxconn first announced last year it was backing off from plans for a Gen 10.5 facility in Wisconsin to make very large LCD screens. Instead, the Gen 6 plant will produce small to mid-sized displays that would be used in televisions and by automakers.

“Over the last year at least, the capacity for the large LCD screen manufacturing in China has grown exponentially, and the cost has been cut in half,” Sheehy said.

The actual fabrication of screens in Wisconsin is significant. The company is building Gen 10.5 plants in China, but such operations don’t exist in the United States. Fabricating the screens, versus assembling products around the finished LCD displays, was expected to attract a new supply chain of manufacturers to Foxconn’s plant.

Sheehy said there is value to Foxconn’s research and development operations planned for Wisconsin, but the fabrication plant creates “an opportunity for supply chain and a more robust capital investment.”

Contractors over the last several months have leveled an estimated 3-million-square-foot plot of land near Interstate 94 in Mount Pleasant that was intended for the fabrication facility. That facility is to be the centerpiece of a larger manufacturing and technology campus Foxconn is developing.

That campus will also include extensive research and development operations to explore new applications of Foxconn’s technology in health care and other arenas. Foxconn earlier this week also planned to build a data center and rapid prototyping center at its Mount Pleasant campus.

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Ambisjon og frihet

On many Independence Days I repeat the words of former Facebook Friend (former because he’s not on Facebook anymore) Tim Nerenz:

Americans are the perfected DNA strand of rebelliousness.  Each of us is the descendant of the brother who left the farm in the old country when his mom and dad and wimpy brother told him not to; the sister who ran away rather than marry the guy her parents had arranged for her; the freethinker who decided his fate would be his own, not decided by a distant power he could not name.  How did you think we would turn out?

Those other brothers and sisters, the tame and the fearful, the obedient and the docile; they all stayed home.  Their timid DNA was passed down to the generations who have endured warfare and poverty and hopelessness and the dull, boring sameness that is the price of subjugation.

They watch from the old countries with envy as their rebellious American cousins run with scissors.  They covet our prosperity and our might and our unbridled celebration of our liberty; but try as they might they have not been able to replicate our success in their own countries.

Dan Mitchell somewhat brings this up in comparing here with the “old country” for those of us of Scandinavian heritage:

The most persuasive data, when comparing the United States and Scandinavia, are the numbers showing that Americans of Swedish, Danish, Finnish, and Norwegian descent produce much more prosperity than those who remained in Sweden, Denmark, Finland, and Norway.

This certainly suggests that America’s medium-sized welfare state does less damage than the large-sized welfare state in Scandinavian nations.

But maybe the United States also was fortunate in that it attracted the right kind of migrant from Scandinavia.

Let’s look at some fascinating research from Professor Anne Sofie Beck Knudsen of Lund University in Sweden.

If you’re in a rush and simply want the headline results, here are some excerpts from the abstract.

This paper examines the joint evolution of emigration and individualism in Scandinavia during the Age of Mass Migration (1850-1920). A long-standing hypothesis holds that people of a stronger individualistic mindset are more likely to migrate as they suffer lower costs of abandoning existing social networks. …I propose a theory of cultural change where migrant self-selection generates a relative push away from individualism, and towards collectivism, in migrant-sending locations through a combination of initial distributional effects and channels of intergenerational cultural transmission. …the empirical results suggest that individualists were more likely to migrate than collectivists, and that the Scandinavian countries would have been considerably more individualistic and culturally diverse, had emigration not taken place.

If you’re interested in more detail, here are passages from the study.

We’ll start with the author’s description of why she studied the topic and what she wanted to determine.

People of Western societies are unique in their strong view of themselves… This culture of individualism has roots in the distant past and is believed to have played an important role in the economic and political development of the region… differences in individualism and its counterpart, collectivism, impact processes of innovation, entrepreneurship, cooperation, and public goods provision. Yet, little is known about what has influenced the evolution of individualism over time and across space within the Western world. …I explore the relationship between individualism and a common example of human behavior: migration. I propose a theory, where migration flows generate cultural change towards collectivism and convergence across migrant-sending locations.

Keep in mind, by the way, that societies with a greater preference for individualism generate much more prosperity.

Anyhow, Professor Knudsen had a huge dataset for her research since there was an immense amount of out-migration from Scandinavia.

During the period, millions of people left Europe to settle in New World countries such as the United States. Sweden, Norway, and Denmark experienced some of the highest emigration rates in Europe during this period, involving the departure of approximately 25% of their populations. …Total emigration amounted to around 38% and 26% in Norway and Sweden respectively.

Here are some of her findings.

I find that Scandinavians who grew up in individualistic households were more likely to emigrate… people of individualistic mindsets suffer lower costs of leaving existing social networks behind… the cultural change that took place during the Age of Mass Migration was sufficiently profound to leave a long-run impact on contemporary Scandinavian culture. …If people migrate based, in part, on individualistic cultural values, migration will have implications on the overall evolution of cultures. Emigration must be associated with an immediate reduction in the prevalence of individualists in the migrant-sending population.

Here is her data on the individualism of emigrants compared to those who stayed in Scandinavia.

As an aside, I find it very interesting that Scandinavian emigrants were attracted by the “American dream.”

…historians agree that migrants were motivated by more than hopes of escaping poverty. Stories on the ‘American Dream‘ and the view of the United States as the ‘Land of Opportunities‘ were core to the migration discourse. Private letters, diaries, and newspaper articles of the time reveal that ideas of personal freedom and social equality embodied in the American society were of great value to the migrants. In the United States, people were free to pursue own goals.

And this is why I am quite sympathetic to continued migration to America, with the big caveat that I want severe restrictions on access to government handouts.

Simply stated, I want more people who want that “American dream.”

But I’m digressing. Let’s now look at the key result from Professor Knudsen’s paper.

When the more individualistic Scandinavians with “get up and go” left their home countries, that meant the average level of collectivism increased among those remained behind.

Several observations are worth mentioning in light of the revealed actual and counterfactual patterns of individualism. First, one observes a general trend of rising individualism over the period, which is consistent with accounts for other countries… Second, the level of individualism would have been considerably higher by the end of the Age of Mass Migration in 1920, had emigration not taken place. Taking the numbers at face value, individualism would have been between 19.0% and 20.3% higher on average in Sweden, 17.8% and 27.9% in Norway, and 7.6% and 12.5% in Denmark, depending on the measure considered.

… To wrap this up, here’s a restatement of the key findings from the study’s conclusion.

I find that people of an individualistic mindset were more prone to migrate than their collectivistic neighbors. …Due to self-selection on individualistic traits, mass emigration caused a direct compositional change in the home population. Over the period this amounted to a loss of individualists of approximate 3.7%-points in Denmark, 9.4%-points in Sweden, and 13.6%-points in Norway. …The cultural change that took place during the Age of Mass Migration was sufficiently profound to impact cross-district cultural differences in present day Scandinavia. Contemporary levels of individualism would thus have been significantly higher had emigration not occurred. …The potential societal implications of the emigration-driven cultural change are of great importance. The period of the Age of Mass Migration was characterized by industrialization, urbanization, and democratization in Scandinavia. Individualism was generally on the rise, in part due to these developments, but it seems conceivable that the collectivistic turn caused by emigration played a role in subsequent institutional developments. While economic freedom is high in contemporary Scandinavia, the region is known for its priority of social cohesion and collective insurance. This is particularly clear when contrasting the Scandinavian welfare model with American liberal capitalism.

This is first-rate research.

Professor Knudsen even understands that Scandinavian nations still have lots of economic freedom by world standards.

Imagine, though, how much economic freedom those countries might enjoy if the more individualism-minded people hadn’t left for America? Maybe those nations wouldn’t have dramatically expanded their welfare states starting in the 1960s, thus dampening economic growth.

The obvious takeaway is that migration from Denmark, Sweden, and Norway to the United States was a net plus for America and a net minus for Scandinavia.

P.S. When she referred in her conclusion to “American liberal capitalism,” she was obviously referring to classical liberalism.

All

Karma, media ownership edition

USA Today is owned by Gannett, which means USA Today is reporting on its owners and its would-be owners:

In a cost-cutting move last year, The Denver Post relocated from the city’s downtown, where the newspaper had been based for more than a century, to quarters in its printing plant in a neighboring county. Reporters and editors found that their new workplace had the feng shui of a run-down casino, with no windows to let in sunlight and a constant ambient hissing from the presses.

But they hoped the move represented an end to the bloodletting that had occurred at the newspaper since hedge fund Alden Global Capital took over in 2010, said Larry Ryckman, then a senior news editor. Layoffs and turnover had left only about 100 journalists in the newsroom, a third of its staff during the paper’s heyday.

That hope was dashed a couple of months after moving offices, when it was announced 30 more positions would be cut. It was then that Ryckman came to believe that the firings would only end when the newspaper closed for good: “We were under attack by our own owners.”

What would follow was a newspaper mutiny, including editorials slamming its own ownership, allegations of censorship and mass resignations.

Most any journalist who has worked at a newspaper in the last couple of decades has come to expect layoffs and other cuts as the new reality of the industry, including at Gannett Co., USA TODAY’s owner. As audience has shifted to digital products, including online news, the unrelenting trend has ravaged profits from print circulation and advertising. Increasing digital subscriptions have not easily offset print’s legacy profit sources.

But journalists and industry insiders familiar with Alden regard its methods of acquisition and management of distressed newspaper properties as a particularly ominous force in the industry in which staffs are decimated and properties sold off for investment elsewhere at the expense of a newspaper’s prospects for long-term survival.

If Alden’s latest plans come to fruition, it will be bringing its ownership style to a newspaper near virtually every American. MNG Enterprises, which also operates as Digital First Media and is owned by the hedge fund Alden, has launched a hostile takeover bid for Gannett, the nation’s largest newspaper publisher by paid circulation. With a national newspaper in USA TODAY and 109 local brands in cities around the country, Gannett would make for a unique – and landscape-shifting – acquisition for MNG.

In a note to clients on Monday, analysts Douglas Arthur and Craig Huber described Alden’s reputation for “strip-mining” newspapers it purchases “until the very last iota of cash flow has been squeezed from it.”

Ken Doctor, an analyst who writes about the media business on his website, Newsonomics.com, said the hedge fund is alone among owners of struggling media properties in that it doesn’t reinvest in its journalism or harbor any long-term survival strategy for the newspapers it owns. Doctor said that MNG purchasing Gannett “would signal a local newspaper capitulation to the inevitability of further decline toward closure at some point.”

But in a letter sent Monday, MNG derided Gannett, of which it says it already owns a 7.5 percent stake, for a “series of value-destroying decisions made by an unfocused leadership team” and cast itself as a guardian angel for the industry. “We save newspapers and position them for a strong and profitable future so they can weather the secular decline,” MNG declared.

Gannett has said it is reviewing the proposal. Some analysts have said they believe MNG’s offer, of $1.4 billion, is too low. Gannett declined to comment on what impact the potential sale might have on the company’s journalism.

In interviews with roughly a dozen journalists who experienced Alden’s takeover in Denver, a dire picture emerges of what happens when the hedge fund comes for the newspaper in your town. They described crippling personnel cuts, corporate meddling and a stewardship that results in a newspaper being hollowed out to a shell of what it once was.

A spokesperson for MNG, Paul Caminiti, did not respond to specific questions for this article but issued a statement crediting the company’s “successful track record” enabling it “to run newspapers profitably and sustainably so that they can continue to serve their local communities.”

Alden’s Digital First owns about 200 publications, including The Mercury News in San Jose, California, the Los Angeles Daily News and the Boston Herald. Perhaps nowhere has its ownership been as contentious as in Denver, a city with a storied history of once-thriving newspapers.

The Denver Post, first published in 1892, had waged a decades-long war with the Rocky Mountain News. In 2007, each newspaper employed more than 200 journalists, according to Kevin Vaughan, a former reporter at both papers. But shrinking profits gave close quarters to the feud when the rival newspapers were forced to move into the same office building, and ended it altogether in 2009, when the Rocky shut down for good.

In 2010, when Alden acquired the Post’s bankrupt parent company, the newspaper’s journalists were expecting the kind of cuts that have become commonplace in the industry – but not the carnage that ensued, Ryckman said.

Chuck Plunkett, then The Post’s editorial page editor, described a “yearly grind” in which layoffs followed even the best journalistic results, such as when he said roughly twenty staffers were cut after The Post won its ninth Pulitzer Prize in 2013 for coverage of the Aurora movie theater massacre.

That’s a familiar pattern for the company, according to Kat Anderson, an administrative officer at the Pacific Media Workers Guild, a union representing journalists at several San Francisco area newspapers. She said that MNG also laid off about twenty staffers at the East Bay Times in the wake of the Oakland-area newspaper’s Pulitzer win for its coverage of the “Ghost Ship” warehouse fire.

Dana Coffield, whose decade-long tenure at The Post until 2018 included a stint as its second-in-command editor, said the ongoing cuts crippled the newspaper. “If you lose a pint of blood you don’t notice it, but if you lose 6 of your 8 pints you’re going to feel it,” Coffield said. “That’s how it felt at the end – like not knowing if you could stand up and keep going.”

Making the layoffs more troubling to those weathering them are revelations that the company apparently was earning ample profits but reinvesting them in non-journalistic enterprises with questionable results.

Doctor, the analyst, has obtained financials showing that Digital First earned a $160 million profit in 2017. The privately held company has disputed the figure while not releasing detailed financial information. On Monday, the company boasted of a profitability margin exceeding 16 percent in 2018.

In a contentious meeting with staffers at The Post’s office last June, MNG Chairman Joe Fuchs described a strategy of “survivability and consistency,” which included making “Warren Buffett-style investments in some other things.”

In the recorded meeting, Fuchs allowed that at least one of those investments, into the struggling Fred’s pharmacy chain, was “not very successful.” The $158 million investment is now worth roughly $20 million.

Alden has made a variety of investments in other publicly-traded companies unrelated to media and communications, federal regulatory filings show. The hedge fund made a quick profit by selling most of its stake in furniture store Pier 1 Imports in January 2017, before the company’s stock plummeted. Alden’s other investments have included holdings in Mechel PAO, a Russian mining giant that has been criticized for pollution, and a Brazilian state-run energy company, the filings show.

Ryckman said removing hard-fought profits from local journalism for such investments drove home his belief that “we were working for the bad guys. And none of us got in this business to work for the bad guys.”

The trouble in Denver reached a boil over last spring, when journalists in The Post’s opinion section responded to the continuing layoffs with a bold statement: a full page of columns blasting Alden as “vulture capitalists” and calling for new ownership to save the newspaper. Editorial page editor Plunkett said he was forced to resign soon thereafter.

Then-senior news editor Ryckman said he was effectively barred from assigning reporters to cover the backlash against the newspaper’s own ownership. When he insisted on writing an article about Plunkett’s resignation, Ryckman said, editor-in-chief Lee Ann Colacioppo only allowed the story to be published only after removing explicit references to Alden Global Capital. Colacioppo did not respond to a phone message seeking an interview for this story.

Ryckman said it was “the first time in my career I was told to take facts out of a story for no reason having to do with journalism.” He resigned the next day.

Post chairman and former owner Dean Singleton also quit, saying of Alden: “They’ve killed a great newspaper.”

Journalists from The Post traveled to Manhattan to protest outside of Alden’s offices last May. “They didn’t speak to us – they never do,” said current Post reporter Elizabeth Hernandez. “They don’t care about journalism. That’s very clear.”

Several editors and reporters who left the newspaper, including Coffield and Ryckman, have started a grassroots rival publication called The Colorado Sun.

Plunkett described the current state of The Denver Post now as “a shell of a newspaper” full of content repurposed from other sources. Ryckman called the loss of local reporting “not just bad news for journalists” but also “for communities. It’s bad news for democracy.”

Denver Mayor Michael Hancock, despite facing a raft of critical articles in The Post last year concerning a series of sexually suggestive text messages he sent to a member of his security detail, said he has considered government intervention to save publications like The Post from being gutted.

“It’s an essential part of our democracy and vital to those who value sound reporting for these mainstream publications to survive,” Hancock said.

Ryckman said: “It makes me sad to contemplate what’s going to happen to Gannett papers coast-to-coast if this sale goes through. … They’ve put these newspapers into a death spiral.”

Former Denver Post reporter Brian Eason, in describing corporate entities like MNG, said that he believed newspapers aren’t just “dying from natural causes. Greed is killing them.”

The irony here is that most of what this story accuses Gannett’s would-be buyer of is what Gannett has done in the past. When was the last time Green Bay-area readers read the Green Bay News–Chronicle? Gannett succeeded in buying and then closing the News–Chronicle in 2005, the culmination, if you want to call it that, of two decades to kill off the News–Chronicle, as chronicled in Richard McCord’s The Chain Gang, and by the News–Chronicle itself:

The Green Bay News-Chronicle is printing one more obituary today – its own.

The News-Chronicle, dead at 32, survived by its sister and stepsister newspapers. Remains on view in a red coin box near you – at least for 24 hours. Private burial in the bottom of a birdcage someplace.

Such, of course, is the fate of all newspapers; it’s a disposable medium. That, to those who work in them, is part of their charm. We may write something that is remembered, but there’s always a deadline the next day. We may botch something royally, but like a baseball player making an error, we have a chance to do something memorable the next day to make people forget it.

There’s always the next issue. Until today.

Volume 33, No. 175 marks the end of the line for a newspaper that was formed in strife and never seemed to lose that background. It was never the newspaper it could have been, but it was more than it had any right to be.

The biggest victims of Gannett have been readers of and advertisers in Gannett’s Oshkosh, Fond du Lac, Sheboygan and Manitowoc newspapers, which are essentially one not-very-good newspaper.

Don’t believe me? Facebook Friend Brian Fraley posted five Sunday front pages:

Gannett last year closed its Appleton printing plant and prints all 10 newspapers not named the Milwaukee Journal Sentinel in West Milwaukee. That may seem like inside baseball to you, but consider what WLUK-TV reported:

“Starting (Monday), our print deadlines will be moved up,” wrote Robert Zizzo, Press-Gazette editor. “That means we won’t be printing next-day results of UW-Green Bay, St. Norbert, Badgers, Brewers and Bucks games. Those results, as well as those of the leagues they play in, will be in the following day’s newspaper. Same with lottery numbers.”

Both Zizzo and Ed Berthiaume, news director for The Post-Crescent, emphasize the shift to digital products and away from the paper itself.

“Yes, we still publish print newspapers, but that is one piece of what we do, and the print edition is no longer a vehicle for breaking news. Maybe it never was. The bulk of our readers are now accessing our content on their phones, tablets or desktops long before the newspaper rolls off the presses,” Berthiaume wrote.

The move comes as the Gannett papers continue to see declines in circulation.

According to the Alliance for Audited Media, for the period ending on Dec. 31, 2017, the Press-Gazette’s daily circulation was 34,105, down from 52,993 on Sept. 30, 2007. In the same roughly 10-year period, Sunday circulation fell from 78,094 to 45,853.

The numbers are similar in Appleton. Daily circulation fell from 50,639 to 30,817. Sunday circulation fell from 64,989 to 37,614, according to Alliance figures.

“I’m not naïve enough to believe that these changes will be popular with our print-only readers. It will be painful for those of you who can’t or won’t activate the digital access that comes with your print subscription,” Zizzo wrote. “Believe me, if we could continue to give you the newspaper of 20 years ago, while still serving our growing digital audience, we would.”

“It’s a new reality for the print edition. We are going to do everything in our control to keep the print edition of The Post-Crescent alive, informative and entertaining. But reversing the hands of time is not an option,” Berthiaume said.

Journal Sentinel readers don’t appear enamored of the changes Gannett has imposed on them since the print side of the late Journal Communications was purchased by Gannett. And now Gannett appears to be in fear of having done to Gannett what Gannett has done to itself.

Didn’t build that?

Facebook Friend Michael Smith:

“There is nobody in this country who got rich on their own. Nobody. You built a factory out there – good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory… ”

Senator Elizabeth Warren, 2020 Democrat Presidential Candidate (2011)

“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business – you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

President Barack Obama, Democrat (2012)

“The President states a simple truth here. Business owners across America do not build their own roads and bridges, sewers and water systems; they do not single-handedly maintain the health of their employees; they do not finance their own court system; and they did not build their own Internet to market and sell their products. The public provides these things, together. The government manages our shared financial resources to make these things happen. That’s the government’s job.”

George P. Lakoff, cognitive linguist and progressive philosopher (2012)

The common fallacy in these quotes is that business owners across America did build that – they pay taxes specifically to support the creation and maintenance of roads and bridges, sewers and water systems, they pay for insurance to provide health care for their employees and they do pay for court systems from those very same taxes. The fact that other individual citizens in American are compelled to contribute through coercive taxation is immaterial. These arguments are like the crowing of the Obama administration about the number of “successful signups” for Obamacare and the subsequent fawning coverage by the media – shocker of all shockers – people who were commanded to sign up under penalty of law signed up! Excelsior! The program is so popular it had to be made mandatory.

Want to see evidence of what happens to coercive participation when it is no longer coercive?

Just have a look at that right to work laws and the removal of confiscatory union dues has done to union membership.

It is also notable that government seldom does such work itself, it hires businesses from the private sector to do it. For example, the Hoover Dam, cast as a great accomplishment of progressive government, was actually built by capitalist private contractors – the very independent businesses that progressives love to hate.

The idea that the individual owes his success to the collective and therefore should pay the collective with his productivity is nothing new. Here’s he very same idea that preceded the above statements by over 50 years:

“The man in Bedroom A, Car No. 1, was a professor of sociology who taught that individual ability is of no consequence, that individual effort is futile, that an individual conscience is a useless luxury, that there is no individual mind or character or achievement, that everything is achieved collectively, and that it’s masses that count, not men.”

~ Ayn Rand, “Atlas Shrugged” (1957)

We now have a House controlled once again by Randian looters – but this time, there is a batch of newbies who eschew the custom of hiding their true motives and desires. The Democrats are going to have a train car load of radical leftists running for president. The next two years is going to be as interesting on the Democrat side as 2015 and 2016 were on the GOP side.

One wonders if 2020 will be the year Atlas actually shrugs.</blockquote

The end of a competitor

Jim Geraghty of National Review:

If you want to gripe about William Kristol, fine; I have major beefs with folks who jump from anti-Trumpism to full-blown cheerleading for Democrats and abandoning their past views and positions on a wide variety of issues because of the rise of one particular political figure. But Kristol stopped editing The Weekly Standard back in December 2016, and he was always only one of many voices over there. If you’re cheering the demise of The Weekly Standard as a way of “getting” Kristol . . . one way or another, Kristol is going to be fine. Shutting down the Standard doesn’t punish Kristol. It punishes the John McCormacks, the Mark Hemingways, the Haley Byrds, the Rachel Larimores, all the folks in the art department, running the website, copy editors, the fresh-faced editorial assistants, ad-sales folks, and so on.

For those who argue that the Standard’s demise represents a triumph of the free market, note that almost no political magazine makes money. (My understanding is that National Review has done this twice. This is why it feels like we’re always asking for money. A broad base of small donors is more secure than being dependent upon one big one.) Advertisers are and probably always will be frightened of political magazines. If you want to run a profitable magazine, you probably make it look like Vogue, with lots of glossy pictures of models, showcasing the products of a luxury industry inclined to buy many pages of ads.

The Weekly Standard wasn’t much more or less profitable now than in previous years. If the money had simply run out, the story would be sad enough but common, for those of us who remember The American Enterprise, Policy Review, The Public Interest, the print version of Human Events and National Journal and when CQ and Roll Call were separate.

But in this case, there are claims that the owners of The Weekly Standard rebuffed inquiries from those interested in buying the magazine. They didn’t just want the financial loss taken off their hands; they allegedly wanted to eliminate a potential competitor for the relaunched Washington Examiner magazine. They closed it and laid off the entire staff, with little warning but plenty of ominous rumors, about a week before Christmas.

(Gee, it’s so hard to understand why employees are showing so little loyalty and respect to their employers, huh?)

The urge to see publications you disagree with fail is one step removed from censoriousness.

 

Book it! (maybe)

I have engaged in a mixed metaphor by using a term sometimes used by UW announcer Matt Lepay to describe a three-point field goal.

Lepay doesn’t announce the Bucks; legendary announcer Eddie Doucette did, with a catchprhase for nearly everything …

eddiewords_2100

… except a three (“Bango!” is for a slam dunk), perhaps because most of his time in Milwaukee came before the National Basketball Association added the three to its rules.

(I started with “Bango!,” not realizing Doucette used it for dunks and not threes, and then Mrs. Presteblog pointed out that almost no listeners even in the early 2000s would have any idea what “Bango!” was supposed to refer to, so I substituted “Bullseye!”, which has stuck.)

This long-winded preamble introduces this from Awful Announcing:

Sports Illustrated has been on the market for some time, and back in April we wrote about how Meredith was looking to sell SI for something like $150 million. Since then, there hasn’t been much movement on the sale front, although there was a fun stretch where Dan Gilbert and Tony Robbins were reportedly interested.

For a while, that lack of movement seemed to be a result of Meredith asking too much for SI. But according to a Reuters report from Carl O’Donnell and Liana B. Baker, Meredith’s patience might be paying off, as they’re apparently close to completing a deal. Not with an existing media company, but with a former NBA player.

Ulysses Lee “Junior” Bridgeman, a former U.S. basketball player who became a fast-food mogul, is in the lead to acquire Sports Illustrated magazine from U.S. media company Meredith Corp (MDP.N) for about $150 million, people familiar with the matter said on Friday.

The deal would be the result of a review that Meredith is carrying out in its portfolio, following its $1.84 billion acquisition of Time Inc last year. It has already sold off its Time and Fortune magazines and is exploring a sale of Money Magazine.

Bridgeman is in the final stages of negotiating a deal for Sports Illustrated after lining up acquisition financing, the sources added. If his effort is successful, a deal announcement could come by the end of the year, according to the sources.

Bridgeman is a former Indiana high school legend from East Chicago who went on to play at Louisville before a lengthy NBA career. After his playing days, he ended up going into an entirely different industry, becoming a restaurant franchise mogul. Bridgeman’s interest was first reported in October by the New York Post‘s Keith J. Kelly.

Considering Bridgeman is apparently willing to offer the asking price, it might be surprising that the deal hasn’t gone through yet, but as Reuters notes, it’s for a very simple reason: Bridgeman isn’t in media or publishing. That means a lack of infrastructure, which means the buyers will need a way to actually print the magazine, among other things.

One aspect of the deal still being hashed out in the negotiations is the outsourcing agreements related to printing and paper costs of the magazine, one of the sources said. These discussions are common when a buyer who does not own a media company purchases a magazine, the source added.

For example, when Marc and Lynne Benioff bought Time magazine for $190 million in cash in September, Meredith entered into a multiyear agreement with them to provide services such as subscription fulfillment, paper purchasing and printing.

If the deal goes through, it will be interesting to see how a new entrant to the world of media handles the Sports Illustrated brand going forward.

It would be great to see SI, which I have read since I was in high school (the first issue I received was the 1982 swimsuit issue) in the hands of an owner who can figure out a plausible yet profitable direction for the magazine. SI has taken its yearly swimsuit issue into its own brand (including models who don’t actually wear swimwear, or anything else), with no indication of financial success. SI.com is now covering the non-sport of “professional” wrestling and has delved into other areas that can’t really be called sports.

SI also now prints every other week instead of weekly. Perhaps that economic decision makes sense, but it tends to restrict covering events after the event, which was the ultimate downfall of Sport magazine and Inside Sports. Some of the greatest game stories have been written by SI writers over the years, but if the event took place two weeks ago, perhaps readers beyond fans of the participating teams have moved on. ESPN The Magazine also publishes every other week, but the magazine has a horrid and unreadable design, perhaps designed for people who don’t generally read. If you don’t cover news (as in what happened, as opposed to what you think is going to happen, failures in which created the infamous SI Cover Jinx), what’s the point of reading?

 

 

News of former and would-be employers

Readers know that the first newspaper job I ever had was a part-time sportswriting job in college.

Nearly all of my career I’ve worked in non-daily publications, except for 7½ months at the Beaver Dam Daily Citizen. The guy who hired me was Jeff Hovind, the editor. So this news from the Wisconsin Newspaper Association is sad to me:

Jeff Hovind, a Milwaukee native and former Wisconsin newspaper publisher and owner, died Thursday, Oct. 25 in Lincoln City, Oregon. He was 62.

After earning his journalism degree at UW-Eau Claire, Hovind started his career at the (Beaver Dam) Daily Citizen as a reporter and editor. He went on to serve as publisher of The (Waukesha) Freeman before purchasing the Merrill Courier.

Hovind, who moved with his wife Susan to Oregon in 2015, is remembered by colleagues for his journalistic passion.

“Jeff cared very much about local journalism and was a champion for open government,” said Bill Yorth, publisher and editor-in-chief for The Freeman. “I learned a lot from him. I always admired his dedication to the paper and to our profession.”

The Daily Citizen was, shall we say, an interesting place to work. Ninety minutes into my first day there someone tried to drive into the building. The driver was a job applicant who had a car whose engine would die when the car was taken out of Park, so she would gun the engine before shifting. Unfortunately for the building she shifted into Drive instead of Reverse, and the car jumped the parking lot curb and smacked into a floor-to-ceiling plate-glass window next to the ad manager’s desk. Fortunately for him the ad manager was out sick that day, but on my first day the newspaper was its own front-page news.

One early afternoon after that day’s paper was done I was sitting at my desk when I got an anonymous phone call with the ridiculous story that two eighth-grade girls had just gotten back from a bus trip to Mexico that resulted from their successfully claiming that they were the children of migrant farm workers who had left them in Wisconsin after the harvest season ended. Then when I started calling around I found out that the story may have been ridiculous, but it was true. One of the two apparently looked vaguely Hispanic, the other took Spanish class, and between the two of them they had convinced a Greyhound Bus terminal clerk and a police sergeant to put them on a bus to El Paso (where one of them had an aunt), whereupon they walked to the border into Mexico, came back and requested a ride home.

The Citizen was the most bureaucratic small business I had ever seen, and ever have seen since then. Somehow I got roped into the company’s Safety Committee, which meant I had to attend meetings with the publisher’s wife. Said publisher owned a late-1970s large Mercedes-Benz sedan, and as it turned out a few other management types, including Jeff, also owned Mercedes sedans, which appeared to me as the Cult of Mercedes.

One project I the education reporter worked on was an eight-day-long series about sex education in area schools. After the series the Citizen received a letter claiming that I was a liberal, which I imagine readers should find amusing. One thing I learned at the Daily Citizen was what we called The Fay Rule, named for one of our typesetters: If we put a name in a headline but Fay didn’t know who it was, the name had to be removed.

The funniest thing that happened was relatively late in my stay there. I was hired as the education reporter to replace another reporter who was moving to the police and courts beat. She then decided to leave, and she hosted a going-away party at her house in Watertown. The only person from the newsroom not at the party was the associate editor, who was legendary in the newsroom for speaking in clichés. Jeff brought a karaoke machine, and so over the course of several drinks each we composed The Tom Song, whose lyrics consisted completely of Tomspeak. Since we didn’t want him to feel left out, we called him around 10:45 p.m. and sang The Tom Song to him. On the other hand, the next day Tom was the only person in the newsroom who wasn’t hung over.

Jeff and his wife took me to lunch the next day and he seemed envious that I was getting into the world of newspaper ownership. (I should have told him it was overrated.) So I’m glad he got the publishing opportunity.

One of the Citizen’s competitors was the Watertown Daily Times, with which I interviewed twice, but the Times decided it was never time to hire me. Another competitor of the non-daily was the Dodge County Independent News in Juneau, which when I worked for the Daily Citizen was owned by Scott Fitzgerald, later to become state Senate Majority Leader. (Cue “It’s a Small World.”) Watertown is on the border of Dodge and Jefferson counties, which means that the Daily Times’ daily competition was the Daily Citizen to the north and the Daily Jefferson County Union in Fort Atkinson.

How do I wrap up every newspaper except the Citizen here? With this news:

Adams Publishing Group announced December 3, 2018 they have purchased the assets of the Watertown (WI) Daily Times and Dodge County Independent News from James M. Clifford. The Watertown Daily Times is published Monday through Friday and the Dodge County Independent News weekly. Terms of the agreement were not disclosed.

Members of the Clifford family have owned the Watertown Daily Times since 1919. James Clifford, chairman of the company said that this was a difficult day for the family but felt the Times would be in a stronger position to compete in a challenging and fast changing competitive environment if it were part of a larger group. Clifford went on to say, “My family and I have enjoyed being stewards of this important community institution the past 99 years. We believe we have selected a new owner that will carry on in the best interests of Watertown, the readers of the Daily Times and our wonderful employees.”

Clifford’s son, Kevin is the fourth generation of the Clifford family to have worked at the company and currently serves as the Editor and Publisher. Both James and Kevin Clifford have served in leadership roles in a number of state and national newspaper organizations. …

Adams Publishing Group announced December 3, 2018 they have purchased the assets of the Daily Jefferson County Union and the affiliated Hometown News Limited Partnership from W.D. Hoard & Sons Company. The Daily Jefferson County Union and the affiliated Hometown News Limited Partnership publish 13 community newspapers and shoppers, stretching across parts of six counties in south central Wisconsin.

Brian Knox, president of W. D. Hoard & Sons Company, will continue to operate its other businesses including the Hoard’s Dairyman magazine, a magazine aimed at the dairy industry with world-wide distribution, other agricultural publications, a dairy farm, recently launched cheese products and other businesses.

The Daily Jefferson County Union was founded in 1870 by William Dempster Hoard. The Knox family eventually acquired the company from the Hoard family. Brian Knox, the second generation of the Knox family and current publisher, has been with the newspaper for the past 41 years.

Hometown News publishes the Sun Prairie Star, a twice-weekly newspaper, plus eight weekly newspapers: Milton Courier, Cambridge News/Deerfield Independent, Lake Mills Leader, Herald-Independent/McFarland Thistle (covering Monona, Cottage Grove and McFarland), Waterloo/Marshall Courier, Waunakee Tribune, DeForest Times-Tribune and the Lodi Enterprise/Poynette Press.

Knox said in a statement that his family’s interests are refocusing on other sectors of the company. “148 plus years ago this company was founded on community journalism. When I became publisher, almost all of the 37 daily papers in the state were independently owned, either as single papers or in small groups. Now there are fewer dailies and just a handful of independents left. One of the reasons for this is that in the 41 years I have been publisher, the industry has had to technologically re-invent the way we do business every three or four years to continue on. We have done this successfully and even our circulation numbers have fought the industry trend and grown the last few years. But the reality is that we’ve reached the point where we need to be much bigger to spread those costs and to take advantage of rapidly changing technologies.”

I suppose I should add that the newspapers mentioned two paragraphs ago were all competitors once upon a time too.

 

Government Motors fails again

Investors Business Daily:

General Motors’ decision to close four U.S. plants and lay off 14,700 workers, 15% of its domestic workforce, is an economic tragedy. And it might have been avoided if GM had listened to the market, rather than the Obama administration.

During and after the financial crisis, GM decided to do the government’s bidding in exchange for billions in subsidies. At one point, the federal government owned more than 60% of its shares, costing it more than $50 billion. By the time it sold the shares in 2013, U.S. taxpayers had an $11.2 billion loss.

How’s that working out for GM now? Not very well.

GM’s CEO Mary Barra, who took over the company in early 2014, reshaped the company’s offerings to please the Obama White House’s leftist auto czars, as did her predecessor. Barra has bet the company’s future on electric cars and other less-popular offerings, instead of what people want.

“The (GM) restructuring reflects changing North American auto markets as manufacturers continue to shift away from towards SUVs and trucks,” Reuters noted. “In October, almost 65% of new vehicles sold in the U.S. were trucks or SUVs. That figure was about 50% cars just five years ago.”

So what was GM making? Well, electric cars, for one. But even with a $7,500 subsidy, they don’t sell fast enough. Why? As the joke goes, the extension cord isn’t long enough. For anyone who has a long commute or wants to take a road trip, an e-car makes no sense. As such, GM’s commitment to electric cars is emblematic of its recent market failures.

Worse, it’s based on a kind of environmental fraud. Electric cars aren’t “zero emission,” as we’re constantly told.

For one, building an electric car produces more CO2 than building a regular car. For another, if the car’s batteries get their charge from electricity generated by a coal-fired plant, that makes an “electric car” really a coal-fired car.

It’s the electric-car industry’s dirty secret, one that undermines GM’s rationale for making such a big bet on electric cars.

As for President Trump, he hasn’t directed his anger at electric cars per se. He has directed it at GM’s layoffs from closing four plants here in the U.S., idling nearly 15,000 people.

Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” but keeping plants in Mexico& China, Trump tweeted Tuesday. “The U.S. saved General Motors, and this is the THANKS we get!”

In particular, Trump’s says the corporate tax cuts and sharply lower taxes on repatriated profits from overseas should be going straight to the bottom line of comes like GM. So he’s now promising to look into cutting subsidies on electric cars and imposing tariffs on domestic car imports.

We understand Trump’s ire. But it’s misplaced.

Government shouldn’t pick winners and losers. Period. And that’s exactly what subsidies are: the government substituting its judgment for that of the marketplace. Why do we do it at all?

It never works as expected. It can’t. The government, despite delusions to the contrary, can’t possibly know what people want and need. Yet, a perpetual leftist dream remains an economy run and funded by government “experts.”

We see that in the Obama administration’s decision to subsidize GM during the financial crisis by investing tens of billions of taxpayer dollars in its stock and propping up money-losing operations. By ignoring the supply-and-demand signals of the marketplace, it only made GM’s problems worse.

More specifically, it led to GM committing itself to the unprofitable electric car market, one of President Obama’s pet projects. At one point, Obama even vowed to buy a Chevy Volt when he left office. He didn’t.

Not only has GM’s Barra embraced electric cars, but she sees the government as her partner in the enterprise, as she wrote in a recent USA Today op-ed. In it, she noted that her electric car plan “requires collaboration by the private and public sectors, supported by comprehensive federal policies.”

It’s no joke that some today call GM “Government Motors.”

Ironically, one of the victims of GM’s cutbacks will be the hybrid plug-in Chevy Volt. Even so,  GM’s commitment to the subsidy-sucking electric-car market remains unshaken, Barra says.

After all, who needs to please actual customers when government can compel people, either by huge subsidies or outright regulation, to buy your product?

And who buys those electric cars, anyway? Mainly those whom the left calls “the rich.”

“Overall, the top 20% of income earners receive about 90% of EV tax credits,”  noted The Hill. “Additionally, data from 2014 indicates that over 99% of total EV tax credits went to households with an adjusted gross income above $50,000.”

So we subsidize wealthy consumers at the expense of lower-income consumers, who can’t afford electric cars. That’s economic perversion, “regressive” not “progressive.”

“Barra wants taxpayers to foot the bill for her speculation on what the future will look like,” economics writer and Wall Street analyst John Tamny recently noted. “If Barra were truly certain, she wouldn’t ask for taxpayer support.”

Lest you think we’re being too harsh on GM, it’s not alone. Once-dominant GE’s shares have plunged nearly 60% this year. There’s a common theme here: GE’s long slide from grace began when Jeffrey Immelt, GE’s former CEO, began spending more time at the Obama White House than running his company.

There’s a lesson in this for other companies, summed up in Instapundit Glenn Reynolds’ catchphrase: “Get woke, go broke.” Immelt already learned that bitter lesson; Barra is learning it now.

Sadly, GM is just another once-great American company that went wrong trying please a government master, and not the customer. We can only hope other companies will learn from GM’s error.

The hazard$ of voting Democratic

The Washington Times:

The sizzling economy underpins President Trump’s final blitz for Republicans in the midterms, with dire warnings that the jobs boom and higher wages will slip away if Democrats seize Congress.

Mr. Trump enjoys the best first-term economy in three decades with the gross domestic product growing at a 3.5 percent annual rate last quarter, and Mr. Trump wants Republicans rewarded for it at the ballot box.

Analysts agree, however, that good times breed complacency among midterm voters and that grievance, such as the burning hatred harbored by Mr. Trump’s opponents on the left, is a stronger motivator for turnout at the polls.

“We have made so much progress. We don’t want to give up that progress. We can’t allow that to happen,” Mr. Trumpsaid at a rally Saturday in Murphysboro, Illinois. “Under Republican leadership, America is booming like never before because we are finally putting America first.” …

At every stop, Mr. Trump touts the historically low unemployment rate, rising wages and resurgence of manufacturing, mining and steel industries.

“More Americans are working today than at any point in the history of our country. How good is that as a sound bite?” Mr. Trump said in a speech to the Future Farmers of America convention in Indianapolis.

The strong economy provides a foundation in Mr. Trump’s stump speech for the rest of his pitch to keep Republicans in control of Congress. It’s the first item mentioned in a litany of “wins” that he promises to keep delivering if Republicans turn out to vote Nov. 6.

Last week, he dropped references in his stump speech to the stock market and soaring 401(k) balances after a massive sell-off that erased all of this year’s gains in the Dow Jones Industrial Average. The government also reported that the federal deficit is quickly soaring again and that the tax cuts and spending increases that are likely fueling the economy are set to create trillion-dollar deficits by the end of this decade.

But for now at least, Mr. Trump has the economy on his side.

Real gross domestic product grew at an annualized rate of 3.5 percent in the last quarter, which ran from July through September, the government reported Friday.

The last time a president had such a hot economy heading into congressional elections in his first term was in 1978, when President Carter was sitting on a 4.1 percent growth rate.

The country was in a recession in 1982, during President Reagan’s first midterm elections, and was growing at a rate of less than 1 percent for President George H.W. Bush. President Clinton managed a 2.4 percent rate, President George W. Bush oversaw a weaker 1.8 percent rate and President Obama had a solid 3 percent.

Mr. Trump took office with the growth rate at 1.8 percent in his first quarter, but the economy quickly heated up. He has since posted quarterly growth numbers of 3 percent, 2.8 percent, 2.3 percent, 2.2 percent, 4.2 percent and now 3.5 percent.

“These results are no accident. This is what happens when we pass policies to help American consumers, workers and businesses generate economic growth and opportunity,” said House Speaker Paul D. Ryan, Wisconsin Republican. …

Strong GDP growth hasn’t been a magic elixir for presidents in midterm elections.

The economy grew at 4.9 percent rate just ahead of the 2014 elections, yet Mr. Obama’s party lost the Senate and suffered even deeper losses in the Republican-led House. Those were his second midterm contests.

Meanwhile, Mr. Clinton’s 2.4 percent growth rate didn’t prevent a Republican wave in 1994.

Stephen Moore, senior economic contributor at the conservative group FreedomWorks and former economic adviser to the Trump presidential campaign, said the third-quarter report shows that consumers “went on a spending spree.”

“Unlike the previous report that was driven by business spending, this report was really driven by consumer spending,” Mr. Moore said in an interview. “That might be the best indication of how well workers are doing. They feel good about things. I think it’s the best indication yet of how widespread this recovery is.”

He said economic growth is averaging double what it was under the Obama administration.

“That’s a huge increase — more than doubling the growth rate in less than two years,” he said. “The liberal economists who gave us ‘Obamanomics’ were completely wrong about potential growth in the economy.”

More Trump bloviation? Maybe not. First, consider this CNBC chart (click on the link to look at the original):

Look particularly at the business confidence and consumer confidence numbers.

Now, consider some history. Over the last 60 years, the 1957–58, 1960–61, 1969–70, 1973–75, 1980 and 1990–91 recessions, plus the Great Recession, occurred with Democrats in control of Congress. (The first accomplishment of the 1987 Congress was the 1987 stock market crash, and Democrats’ taking control of Congress after the 2006 elections was followed less than a year later by the Great Recession.) Only the 1981–82 and 2001 recessions occurred with Republicans in control of at least one house of Congress. (Control was split in the 1982 recession.)

Notice that stock market ups and downs have been more or less following Trump’s perceived political fortunes? The big stock market jump started the day after his election in 2016, because investors evidently believed that the Obama administration’s anti-business policies were about to change. Of course, change can be positive or negative. Elections have consequences, not all of them political.

None of what you read should suggest that anyone should panic about his or her investments based on the stock market over a short period of time. The way one makes money in the market is by being a long-term investor. It is just that in the short term, depending on the Nov. 6 election results it may be a bumpy ride.

 

The Crash: Another view

Matthew D. Mitchell has a different opinion about The Crash of 2008 and the resulting bailouts:

As the 10th anniversary of the historic bailout of 2008 looms, many people will undoubtedly say —as President Bush said at the time—that it was necessary to abandon“free market principles to save the free market system.” They will tell us that the government had no alternative. And they will say that the bailout “worked” because the economy didn’t go from a recession to a depression.

The truth is that there were alternatives. As our George Mason University colleague Garett Jones has written, a process known as “speed bankruptcy”—endorsed by economists on the left and the right—would have permitted quick conversion of bank debt into bank equity, recapitalizing the banks while avoiding the use of taxpayer funds.

We can’t be certain of what would have happened had something like speed bankruptcy been tried. But we do know that even with the bailout, the economy fell into the deepest and longest-lasting recession since the Great Depression. That is hardly proof positive that it “worked.”

Moreover, we know from the history of bailouts that the true cost of a bailout is not the taxpayer expense (which is often recouped) but the expectation it sets for future bailouts, an expectation that invites future disaster.

In 1971, the US government gave Lockheed Aircraft Corporation $250 million in emergency loan guarantees. It was the first time the federal government ever came to the rescue of a single firm. Shortly thereafter, the bankrupt Penn Central Railroad and other struggling railroads received hundreds of millions of dollars in emergency grants and loan guarantees. That was followed by $1.5 billion in loan guarantees for the ailing Chrysler Corporation in 1979.

The phrase “too big to fail” entered the American lexicon in the wake of a federal bailout of Continental Illinois Bank in 1984. Next, the federal government bailed out the creditors of hundreds of savings and loan (S&L)associations in the late 1980s and early 1990s at a cost to taxpayers of around $150 billion. In the late 1990s, the Fed orchestrated the private bailout of hedge fund Long-Term Capital Management. No taxpayer money was involved, but the Fed’s keen interest in the case led many industry observers to believe that the Fed would not let large institutions—or their creditors—fail.

The record-setting federal bailout of 2008-09 showed that these expectations were accurate. First, the New York Federal Reserve made a $30 billion loan to J. P. Morgan Chase so that it could purchase Bear Stearns. Next, in order to save them from bankruptcy, the federal government took over mortgage giants Fannie Mae and Freddie Mac. Then the government paused, allowing Lehman Brothers and its creditors to fall on September 15, 2008. Two days later, bailouts resumed and the Federal Reserve made an $85 billion loan to the insurance firm American International Group. The culmination of this series of bailouts was the Troubled Asset Relief Program (TARP), a $700 billion bailout that gave hundreds of financial firms and auto companies emergency government assistance.

Although proponents of the Dodd-Frank financial reform legislation, passed after the 2008 meltdown, claimed it would help avoid future government bailouts, the perception that major financial interests are “too big to fail” remains an unfortunate reality. The Federal Reserve Bank of Richmond’s “Bailout Barometer” periodically estimates the extent to which the financial industry’s liabilities are explicitly and implicitly backed by the federal government. According to the most recent estimate, the share of financial sector liabilities subject to implicit or explicit government protection from losses grew from 45 percent in 1999 to 60 percent in 2016, by which time they amounted to $26 trillion. The authors succinctly note that “This protection may encourage risk-taking, making financial crises and bailouts more likely.”

As the Richmond Fed researchers explain in an accompanying document, the Bailout Barometer includes “other liabilities [that] are believed by many market participants to be implicitly guaranteed by the federal government.” The expectation that a company and its creditors will be bailed out by the government, should they find themselves in dire financial straits, can be an extraordinary privilege.

Take, for example, Fannie Mae and Freddie Mac. Well before they were rescued by the federal government, Fannie and Freddie benefited from the expectation of government assistance. The firms were chartered by Congress and widely assumed to have its financial support. This assumption meant that compared with firms lacking support from the federal government, Fannie and Freddie appeared to be safer investments. As the Congressional Budget Office explains, this expectation, in turn, provided the companies a competitive advantage against private competitors:

“Because of their implicit federal guarantee, Fannie Mae and Freddie Mac could borrow to fund their portfolio holdings at much lower interest rates than those paid by fully private financial institutions that posed otherwise comparable risks, and investors valued the GSEs’ credit guarantees more highly than those issued by fully private guarantors … The advantages of implicit federal support allowed Fannie Mae and Freddie Mac to grow rapidly and dominate the secondary market for the types of mortgages they were permitted to buy (known as conforming mortgages). In turn, the perception that the GSEs had become “too big to fail” reinforced the idea that they were federally protected.”

The federal government’s history of bailing out creditorsmade this expectation especially strong.

Now that the summer of 2008 is a decade in the rearview mirror, we should be mindful that bailouts– and expectations thereof–encourage risky behavior, inviting crisis and further bailouts. Notwithstanding Mr. Bush’s assertion, one cannot save free enterprise by abandoning free enterprise. And free enterprise runs on market signals. Just as firms need profit signals to encourage good decision making, they need loss signals to discourage mistakes.

Unfortunately, just as the bailouts of the ‘70s, ‘80s, and ‘90s begat the massive bailouts of the 2000s, the likelihood of further–and perhaps even larger–bailouts in the future remains disconcertingly high.