Mish's Global Economic Trend Analysis

If It Ain't Broken, Don't Fix It: Religious Freedom Act Take II
Downside Data Surprises in Canada; Bad Weather Up North? How About Recession?
Economists Fail to Predict Weather Once Again: Chicago PMI Disappoints

If It Ain't Broken, Don't Fix It: Religious Freedom Act Take II

Posted: 31 Mar 2015 06:01 PM PDT

Religious Freedom Act Take II

I received a number of emails in response to Indiana Legalizes Discrimination on Grounds of "Religious Freedom".

The bill, signed by Indiana Governor Mike Pence openly encourages discrimination based on sexual preference although Pence incredulously denies that claim. Pence now recognizes the need to "clarify" the legislation.

One of the better email responses came from reader Mark who wrote ...

The Constitution plainly states "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof."

The Constitutional guarantee of religious freedom is sacrosanct. The only restrictions placed on religious freedom are those religious practices that harm others.

And I would say "Yes" if you wanted to post a "No Catholics" or "No Jews" sign on the front door of your business. I would also warn, in the same breath, that you may find your business surrounded by protestors and boycotted the very next day. That is the market forces at work. Even though I am neither a Catholic nor a Jew, I would not do business with someone that had that sign on their front door. That is my choice, too.

Mark

If It Ain't Broken, Don't Fix It

I replied ...

"Why was there a need then to pass any bill? Pence now says the bill needs to be 'clarified'. If the bill needs 'clarification' then something in it is wrong. At best, the law was political stupidity. At worst, the legislation provides explicit and open encouragement of discrimination."

By the way, the problem with allowing a sign "Blacks Not Welcome" or "Jews Not Welcome" would be the massive protests that would undoubtedly disrupt neighboring establishments, all of which whose business would suffer while the sign was up.

In fact, it is likely the entire neighborhood of an establishment posting such as sign would be torched, with considerable and perhaps permanent damage to the property owner.

For similar reasons, freedom of speech does not allow someone to yell "fire" in a movie theater.

Otherwise, Mark is totally on target with the constitutional idea.

Acting Man Chimes In

I bounced my response off Pater Tenebrarum, a confirmed Libertarian, to see what he thought. Pater replied ...

In principle, the libertarian stance would be that I can decide on my private property, and if my body, time, equipment, etc. are concerned, who I want to let on my premises, and whom I wish to serve in some commercial capacity, or talk to, or otherwise interact with.

So if the law means something like "if you (for whatever reason) dislike gays or any other group of people, you cannot be forced by law to e.g. act as a photographer at their wedding", then it would be consonant with libertarian views - since obviously government coercion would otherwise be involved (saying "no" to someone is not tantamount to coercion, but not being allowed to say so is).

I personally think religious zealots of this sort are detestable, but as you can see, most businesses are voicing their opposition to discriminating conduct and social pressure (boycotts etc.) is already exerted as well (which again is perfectly legitimate).

Thus, there should be no need for the state to intervene at all. Anyway, it seems rather selective if it is introduced solely on "religious grounds". Any other reason than religious conviction should be just as admissible. For instance, it should suffice if one is merely a racist or homophobic jerk. I really don't get why it requires a law.

Real Purpose of the Bill

Pater is precisely correct. There is no need for the state to act.

It follows that the only conceivable purpose of the law is to make it clear that discrimination against gays on "religious" grounds is perfectly acceptable.

Actually there was one other purpose: Pence kowtowed to the extreme right wing for political purposes. Fortunately it blew up in Pence's face.

Text of the Bill

Inquiring minds may wish to dive into the complete Text of Indiana's 'Religious Freedom' Law.

Differences Between Indiana and Federal Legislation

Many people emailed the bill is exactly the same as the federal Religious Freedom Restoration Act, passed in 1993 under Clinton.

They are wrong as explained in What Makes Indiana's Religious-Freedom Law Different?

The Indiana statute has two features the federal RFRA and most state RFRAs do not. First, the Indiana law explicitly allows any for-profit business to assert a right to "the free exercise of religion."

The federal RFRA doesn't contain such language, and neither does any of the state RFRAs except South Carolina's; in fact, Louisiana and Pennsylvania, explicitly exclude for-profit businesses from the protection of their RFRAs.

The new Indiana statute also contains this odd language: "A person whose exercise of religion has been substantially burdened, or is likely to be substantially burdened, by a violation of this chapter may assert the violation or impending violation as a claim or defense in a judicial or administrative proceeding, regardless of whether the state or any other governmental entity is a party to the proceeding." Neither the federal RFRA, nor 18 of the 19 state statutes cited by the Post, says anything like this; only the Texas RFRA, passed in 1999, contains similar language.

Second, the Indiana statute explicitly makes a business's "free exercise" right a defense against a private lawsuit by another person, rather than simply against actions brought by government. Why does this matter? Well, there's a lot of evidence that the new wave of "religious freedom" legislation was impelled, at least in part, by a panic over a New Mexico state-court decision, Elane Photography v. Willock. In that case, a same-sex couple sued a professional photography studio that refused to photograph the couple's wedding. New Mexico law bars discrimination in "public accommodations" on the basis of sexual orientation. The studio said that New Mexico's RFRA nonetheless barred the suit; but the state's Supreme Court held that the RFRA did not apply "because the government is not a party."

If It Ain't Broken, Don't Fix It Part II

Curiously, one has to wonder if the absurd ruling in New Mexico happened precisely because New Mexico had an RFRA law in the first place.

So how is Indiana supposed to fix the law?

Then again, If Indiana's Religious-Freedom Law Isn't Discriminatory, Why Change It?

Mike Pence Responds

In a Wall Street Journal Op-Ed called Ensuring Religious Freedom in Indiana, Governor Pence says "Our new law has been grossly misconstrued as a 'license to discriminate.' That isn't true, and here's why."

Last week I signed the Religious Freedom Restoration Act, known as RFRA, which ensures that Indiana law will respect religious freedom and apply the highest level of scrutiny to any state or local governmental action that infringes on people's religious liberty. Unfortunately, the law has stirred a controversy and in recent days has been grossly misconstrued as a "license to discriminate."

I want to make clear to Hoosiers and every American that despite what critics and many in the national media have asserted, the law is not a "license to discriminate," either in Indiana or elsewhere.

Some express concern that Indiana's RFRA law would lead to discrimination, but RFRA only provides a mechanism to address claims, not a license for private parties to deny services. Even a claim involving private individuals under RFRA must show that one's religious beliefs were "substantially burdened" and not in service to a broader government interest—which preventing discrimination certainly is. The government has the explicit power under the law to step in and defend such interests.

Pence's Pack of Lies

Pence's defense reads like a pack of lies.

Here is the amusing part "Even a claim involving private individuals under RFRA must show that one's religious beliefs were 'substantially burdened' and not in service to a broader government interest—which preventing discrimination certainly is. The government has the explicit power under the law to step in and defend such interests," states Pence.

Good Grief!

According to Pence, the government has an "explicit power" to defend gays against private individuals, requiring the individuals to prove they were "substantially burdened, and not in service to a broader government interest," in service denials.

Wow.

If that is really the intent of the law (of course it isn't), no Libertarian in his right mind could ever support such nonsense.

What the Legislation is Really About

Several readers emailed that I should read the comments to my first post on this subject.

I did, and I also read every email response as well. I have to say, the volume against me was probably 8-1. One reader got the message.

Reader Daniel replied ....

Hi Mish,

First I'd like to commend you for stating your fair and reasonable opinions about this matter!

Unfortunately it is not a big surprise that wherever there is a large concentration of conservative republicans you still get a whole lot of of bigots as clearly evident by the comments to your article. Hopefully the future of the republican party will be different than what these guys represent.

I want to make a few points that I believe you share as well. If you do not, I would still like to read your response.

The problem with Mike Pence is not that he signed a bad law. The problem is that he signed a law that will be used selectively against a specific group of people while other people will enjoy protections already enforced by the Federal government.

The religionists behind this law do not believe in freedom. They use libertarianism selectively when it's convenient to achieve their own version of theocracy which is the polar opposite of freedom.

By signing this law and having the Republican party associated with it, many fair minded individuals who would normally support republican and libertarian policies will no doubt decide to disassociate themselves from such a party.

Anyway, thank you for providing great articles which I read almost daily.

Daniel

Bingo!

Reader Daniel, like Pater Tenebrarum gets it. There was no reason for this law other that what I stated above.

To make it clear that discrimination against gays on "religious" grounds is perfectly acceptable.
To kowtow to the extreme right wing for political purposes

Reader Mark slightly missed the mark but nicely raised an important constitutional question. Many emails were hateful.

Right to Be an Ass

I fully support the right of everyone to be a compete ass. Take for example this Email from Damon who wrote ...

"I have read your blog for years but no longer will. I also will not recommend it to others. I support Indiana over the sodomites that are destroying this country. I support Indiana over people like you."

To that I responded "good riddance".

I have no tolerance for bigots, hate-mongers, fake patriots who wrap themselves in the flag, and anyone who pretends their religion is better than all the rest, even if that stance hurts my blog traffic.

That is a stand I make by choice. I do not say things for "political expediency" or to win "popularity points" for this blog.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Downside Data Surprises in Canada; Bad Weather Up North? How About Recession?

Posted: 31 Mar 2015 12:07 PM PDT

The string of bad data reports not only applies to the US, economists up North appear to be no better at predicting the weather than US economists.

Variant Perception reports Downside Data Surprises Continue in Canada.

For the past 6 months, we have been alerting clients to the persistent decline in our Canada leading indicator. This is now showing up in numerous Canadian coincident data releases, with retail sales being the latest to miss expectations last Friday. The economic surprise index is now declining sharply and there is little sign of immediate improvement ahead.

PMIs continue to fall whilst building permits and housing starts (some of the best leading indicators to watch), remain negative yoy (top chart). However one of our main themes this year has been that of cognitive dissonance, whereby growth disappoints, but higher excess liquidity supports asset prices.

Canada December Retail Sales

On February 20, the Huffington Post reported Canadian Retail Sales Post Biggest Drop Since April, 2010.

Retail sales in Canada in December posted their largest one-month drop since April 2010, as the cost to fill your gas tank plunged and holiday shoppers spent less.

Statistics Canada said Friday retail sales fell 2.0 per cent compared with November to $42.1 billion in December. That compared with a drop of 0.4 per cent that economists had expected, according to Thomson Reuters.

The drop in sales came as sales at gasoline stations fell 7.4 per cent in December due to lower gas prices, while sales at motor vehicle and parts dealers fell one per cent. Excluding motor vehicle and parts dealers, sales were down 2.3 per cent.

Despite the larger than-expected drop in sales, Bank of Montreal senior economist Benjamin Reitzes cautioned not to jump to conclusions based on the retail sales report. Reitzes noted the rise in popularity of Black Friday sales in Canada has pulled some holiday shopping into November.

Sales were down in nine of 11 subsectors, representing 71 per cent of retail trade.

Canada January Retail Sales

On March 20, the Statistics Canada Retail Trade, January 2015 report showed sales down for a second month.

Retail sales decreased for the second consecutive month in January, declining 1.7% to $41.4 billion. Sales were lower in 7 of 11 subsectors, representing 83% of retail trade.

Lower sales at gasoline stations represented the majority of the decline. Excluding sales at gasoline stations, retail sales were down 0.8%.

Retail Sales in Volume Terms Decreased 1.2%.

Gasoline Station Sales Down Seven Months in a Row

Sales at gasoline stations fell 8.8% in January, reflecting lower prices at the pump. This was the seventh straight monthly decrease and the largest monthly decline since November 2008.

Receipts at motor vehicle and parts dealers (-1.4%) decreased for the fourth consecutive month. The overall subsector decline was a result of weaker sales at new car dealers (-1.8%). Used car dealers (-0.9%) and other motor vehicle dealers (-0.5%) also registered declines. Sales at automotive parts, accessories and tire stores (+2.2%) advanced for the fourth time in five months.

Sales Down in Nine Provinces

Retail sales were down in nine provinces in January. Lower sales in Quebec, Ontario and Alberta accounted for most of the decrease.

Quebec (-2.4%) reported the largest decrease in dollar terms, with widespread declines across most store types.

The decline in Ontario (-1.4%) was mainly attributable to lower sales at gasoline stations.

Retail sales in Alberta (-2.8%) declined for the fourth consecutive month in January, reaching their lowest level since December 2013. The decline was largely a result of lower sales at gasoline stations and new car dealers.

Receipts in Nova Scotia fell to their lowest level since March 2013, decreasing for the sixth consecutive month.

Prince Edward Island (+0.5%) was the only province to register an increase in January.

Seasonally Adjusted Numbers

Economist's Theories on Gasoline

Hey wait a second. Didn't economists tell us consumers would take savings on gasoline and spend it elsewhere?

Yes they did. So there is only one possible explanation: Just as in the US, Canadian weather was much worse than economists initially thought.

GDP Decline in January

Please consider Canada's GDP Probably Down In January, CIBC Says After Disappointing Retail Data.

Canada's economy likely shrank in January, CIBC said Friday following an unexpectedly negative reading on retail sales from Statistics Canada.

Retail sales fell 1.7 per cent in January, StatsCan reported, the second consecutive monthly decline. Analysts had been expecting a slowdown due to lower gas prices, but they weren't expecting the broad-based declines that were actually seen: Seven of 11 retail sectors shrank in January, including autos, furniture and food and beverages.

Canada's GDP for January "now looks set for a modest drop," CIBC economist Andrew Grantham wrote in a client note.

Economists had been expecting that lower gas prices would mean Canadians would spend more on other things, but that doesn't seem to be happening.

"The latest figures suggest that households are becoming more cautious in their spending habits," Grantham wrote, adding he doesn't think Canada will meet the modest 1.5-per-cent growth rate that the Bank of Canada is predicting for the first quarter of the year.

Consumers are showing signs of exhaustion, with household debt levels reaching yet another record high in the last months of 2014, up to 163.3 per cent of disposable income.

Canada in Recession

Flashback, January 31, 2015: Canada in Recession, US Will Follow in 2015

On January 21 when the Canadian Central Bank unexpected slashed interest rates, I wrote Canadian Recession Coming Up.

Following the rate cut, the yield curve in Canada inverted out to three years. Inversion means near-term interest rates are higher than long-term rates.

I saw no other person mention the inversion at the time. An inverted yield curve generally portends recession.

Nine days later, the Canadian yield curve is still inverted. Let's compare what I posted about the curve on January 21 vs. January 30.

Canadian Yield Curve January 21

30-year: 2.044% (Today's Low 1.998%)
10-Year: 1.426% (Today's Low 1.366%)
05-Year: 0.791% (Down 19 basis points, an 18% decline)
03-Year: 0.590% (Down 27 basis points, a 31% decline)
02-Year: 0.560% (Down 29 basis points, a 34% decline)
01-Year: 0.580% (Down 34 basis points, a 37% decline)
01-Month: 0.640% (Down 22 basis points, a 26% decline)

Canadian Yield Curve January 30

30-year: 1.834% (Down 21.0 basis points)
10-Year: 1.250% (Down 17.6 basis points)
05-Year: 0.603% (Down 18.8 basis points)
03-Year: 0.386% (Down 20.4 basis points)
02-Year: 0.392% (Down 16.8 basis points)
01-Year: 0.490% (Down 9.0 basis points)
01-Month: 0.580% (Down 6.0 basis points)

Not only did yields plunge across the board since then, the yield curve is still inverted all the way out to three years.

Recession Has Arrived

There is no point in waiting for further data. The Canadian recession has already arrived.

Canadian Yield Curve March 31

30-year: 1.99%
10-Year: 1.37%
05-Year: 0.78%
03-Year: 0.51%
02-Year: 0.51%
01-Year: 0.58%
03-Month: 0.56%
01-Month: 0.53%

The Canadian yield curve is still inverted albeit very slightly. Instead of attempting to predict the weather, something that is very difficult for economists to do (even in arrears!), perhaps they should watch the yield curve.

Isn't that what they should be doing?

Weather Predicting US Style

For more on weather predicting in the US, please see Economists Fail to Predict Weather Once Again: Chicago PMI Disappoints.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Economists Fail to Predict Weather Once Again: Chicago PMI Disappoints

Posted: 31 Mar 2015 10:33 AM PDT

Chicago PMI Disappoints

Economists expected a rebound in the Chicago PMI index this month following its collapse last month. Alas, once again the weather was much worse in Chicago than economists thought.

The Bloomberg Consensus was for a rebound from last month's dismal print of 45.8 back into positive territory of 50.2

"Companies sampled in the Chicago PMI report continue to report a lull in activity, at a sub-50 March index of 46.3 following 45.8 in February. On a quarterly basis, the index averaged only 50.5 in the first quarter, down steeply from 61.3 in the fourth quarter for the weakest reading since the third quarter of 2009. Respondents are citing bad weather and fallout from the West Coast port slowdown as temporary negatives, and they see orders picking up during the second quarter."

Failure to Predict Weather

That the Chicago PMI index remained in contraction for the second month at 46.3 while economists expected a rebound into positive territory proves once again how difficult it is for economists to predict the weather in Chicago for February, even though it's now March.

Don't worry, economists tell us this unfortunate string of bad weather is "temporary" and will improve in the second quarter.

On the dark side, I fail to see how economists can predict the weather in advance when they cannot do so in arrears.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Economy News

31.3.15

Mish's Global Economic Trend Analysis

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