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Restaurant Sales, Traffic Tumble: “The Industry Hasn’t Reported A Positive Month Since February 2016”

 There appeared to be a glimmer of hope for the restaurant industry last month, when despite ongoing negative restaurant sales and traffic performance in April, BlackBox Intelligence Executive Director, Victor Fernandez said that “there are some reasons to be cautiously optimistic about the second quarter, at least in terms of improvement over what we’ve seen in the recent past” adding that “the move of the Easter holiday meant that April’s results were likely softer than they would have been without this shift, meaning spending in restaurants was probably a little stronger than the numbers show.”

Alas, any trace of optimism was doused with the latest BlackBox snapshot report (based on weekly sales data from over 27,000 restaurant units, and 155 brands representing $67 billion dollars in annual revenue) which found that May was another disappointing month for chain restaurants by virtually all measures.

Same-store sales were down -1.1%, which represents a 0.1% decline from April. At the same time, same-store traffic “growth” also dropped by -3.0% in May, down 3.2% on a rolling 3 month basis. Although traffic results improved from prior month, the growth in check average was lower than it has been in recent months, causing the fall in sales growth vs. March and April.

More concerning is that the restaurant industry has not reported a month of positive sales since February of 2016, according to BlackBox.

The latest report from the National Restaurant Association found much of the same: as a result of softer sales and customer traffic levels and dampened optimism among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a sizable decline in April. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 100.3 in April, down 1.5 percent from a level of 101.8 in March.

  • The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 99.1 in April – down 2.3% from a level of 101.4 in March. April represented the sixth time in the last seven months with a reading below 100, which signifies contraction in the current situation indicators.
  • The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 101.5 in April – down 0.7 percent from March. Although the Expectations Index remained above 100 – signaling the anticipation of generally positive business conditions in the months ahead – it declined to its lowest level in six months.

April’s sharp decline in the RPI was the result of broadbased drops in both the current situation and expectations indicators. And, as BlackBox found, the Natl Restaurant Association confirmed that restaurant operators reported a net decline in same-store sales and customer traffic, which followed modestly stronger results in March. In addition, restaurant operators’ six-month outlook for both sales growth and the economy retrenched from more positive readings in recent months.

Restaurant operators reported a net decline in same-store sales for the sixth time in the last seven months. Only 34% of restaurant operators reported same-store sales increase between April 2016 and April 2017, down sharply from 57% of operators who reported higher same-store sales in March. 47% of operators said their sales declined in April, up from 30 percent who reported similarly in March.

Restaurant operators also reported softer customer traffic levels in April. Only 26% of restaurant operators reported an increase in customer traffic between April 2016 and April 2017, down from 41 percent of operators who reported higher traffic in March. Fifty-two percent of operators reported a decline in customer traffic in April, up from 38% in March.

* * *

Discussing the latest results, Fernandez said that “at this point, we believe the most likely scenario for the current quarter will be an improvement over recent quarters, while still suffering negative sales given the current consumer spending trends.” Or, as we would put it, no actual improvement.

Looking at the macro picture,  where there has recently been an upturn in retail spending on most goods and services, adds to the confusion as it stands in stark contrast to the continued decline in sales growth at restaurants. Consumers appear to be maintaining their spending at restaurants – at a declining pace – but increasing it for other goods and services. This change in consumer spending patterns was identified about a year ago and how much longer it will continue is unclear.

Additionally, the restaurant operators’ outlook for the economy is not as bullish as it was in recent months. 22% of restaurant operators said they expect economic conditions to improve in six months, down 15% points from the reading in December 2016. 12% of operators expect economic conditions to worsen in six months, while about two-thirds think conditions in six months will be about the same as they are now.

The details:

  • May sales were weak across all segments. Only the fine dining segment was able to achieve very small positive same-store sales growth during the month. The second best performing segment during May was quick service. That soft performance notwithstanding, the best performing segments continue to be those with the lowest and highest average guest checks. “Dining experience on one end and value and convenience on the other seem to continue to be key components of restaurant sales performance based on current consumer spending trends,” said Fernandez.
  • The weakest performing segment in May was casual dining. This was a bit unexpected since the segment showed improved performance during the first four months of 2017 after lagging the industry for several years. Casual dining has added a modest number of new units, but same-store sales declines have contributed to its overall loss in market share.
  • Despite weak sales results year-to-date, fast casual continues to win the market share battle. It gained the most share in the first quarter of 2017 compared with the same quarter a year ago. Aggressive expansion has driven total sales growth, but increased competition and market build-out have undoubtedly impacted same-store sales for the segment. The only other segment that gained market share year-over-year was quick service.

There is a silver lining: while overall sales continue to decline for most of the industry, there are pockets of opportunity that some brands have capitalized on to boost performance. Dine-in sales have been negative year-to-date, but to-go is up 2.9 percent, perhaps facilitated by recent introductions of smartphone-based ordering. Sales are also up in catering, delivery, and drive-thru. From a day part perspective, breakfast and mid-afternoon sales offer continued opportunities for growth, while lunch and, especially, dinner sales continue to stumble.

Ironically, in addition to challenges from falling guest counts and consumer spending, strong challenges continue to confront restaurants in both staffing and retaining enough qualified workers. We say ironically because as we showed after the latest jobs report, restaurant/fast food/waiter/bartender hiring remains the only strong spot in the US labor market. As the chart below shows, starting in March of 2010 and continuing through April of 2017, there have been 87 consecutive months of payroll gains for America’s waiters and bartenders, an unprecedented feat and an all-time record for any job category.Putting this number in context, total job gains for the sector over the past 7 years have amounted to 2.378 million or just under 15% of the total 16.4 million in new jobs created by the US over the past 87 months

And yet, according to BlackBox, restaurant operators are pessimistic regarding the difficulty of recruiting in the upcoming quarters. Part of the problem is that hiring for new restaurant positions has started to pick up again. The number of employees in the chain restaurant sector increased by 1.9 percent during April compared with a year ago, up from 1.5 percent growth recorded in March. The other issue affecting staffing is rising turnover. Turnover rates for both hourly employees and management staff increased again during April. “The turnover numbers that we are reporting are stunning”, said Joni Thomas Doolin, CEO of TDn2K. “Many of the brands that we track are already facing unsustainable levels of staffing vacancies. Most alarming is the fact that over 70% of employees are leaving voluntarily as opportunities for better work increase”.

Meanwhile, the overall labor market nearing full employment doesn’t hint at relief for operators anytime soon. The consequences of turnover are well documented by TDn2K. Not only does it impact service levels and guest satisfaction, which correlate to traffic and sales, but it is also a huge source of additional costs hurting the bottom line. According to a recent study by People Report, it costs on average about $2,200 to replace a single restaurant hourly employee, while the cost of turnover for all levels of restaurant management is on average about $15,000 per manager.

“The companies who are leading in the marketplace are starting by winning in the workplace. Being a great employer has never been more important,” stressed Doolin.

The summaryafter 14 months of continuous declines for the restaurant industry, the end of the tunnel is nowhere in sight.

State Corporate Tax Receipts Just Crashed The Most Since The Recession

After flatlining for the past year, US income tax receipts – both at the federal government and on a state and local level – have been disappointing, and have posted a sharp drop since the start of the year, which is “sounding an alarm about the health of the US economy” in BofA’s words (in addition to the countless other alarms about the health of the economy, which however are ignored due to the record stock market).

As Bank of America highlights something we warned about last September, according to the Rockefeller Institute and CBO, US federal income tax receipts have come in about 3% below expectations this year.

Digging deeper, the disappointment was largely in personal current tax receipts, with withheld tax receipts showing little growth over the prior two-quarters. The story is a bit different for state and local governments where personal tax receipts were fairly stable, but there was a significant decline in tax receipts for corporate income.

In fact, corporate income tax receipts fell a sharp $7bn in 1Q, the biggest drop since the recession. Since corporate income tax receipts only make up about 14% of the total, there was still a modest gain in overall state and local tax receipts. While there has been a particular weakness of late, the trend through last year was weak; according to the Rockefeller Institute, total state tax collections grew only 1.2% in FY16 (declined in real terms), the weakest performance since 2010.

In an attempt to explain away this otherwise troubling development, the CBO has proposed that the weakness in tax receipts may reflect the shift of taxpayer income into later years on the anticipation of legislation to reduce tax rates, which however is looking increasingly unlikely. Presumably, this would have the biggest effect on high income and high net-worth individuals. And this will matter for the aggregate figures as the top 1% of earners account for almost 40% of federal personal income tax receipts.

If indeed, it is the case that high-net-worth individuals and smaller corporations are delaying payments, there would be pent-up tax receipts. As such, tax receipts should jump if and when tax reform is passed or it becomes clear it will fail. Either way, behavior should shift, leading to an increase in declarations of income. The question is over timing

A more likely explanation is that state tax collections continue to be strain from the energy sector, which pays taxes based not on non-GAAP imaginare “wishful earnings”, but on hard cash, which for most companies, is still a trickle. This is confirmed by a map of tax receipts on a geographical basis which isolates the energy-patch states. There is a clear pattern of weakness in energy states like Wyoming, West Virginia, Texas, Oklahoma, and North Dakota. Alaska is also heavily oil-dependent and while growth in tax receipts increased sharply, it is coming from a subdued base.

While a modest recovery in oil prices earlier in the year may have helped, the recent decline will undoubtedly add to further pressure on state corporate tax receipts.

Why does this sharp drop in tax revenues matter? Simple: tax receipts are tracked for varioous reasons, most directly they influence the forecast for government spending. As BofA notes, “a slowdown in tax receipts could lead state and local governments to reduce spending or increase taxes to make ends meet.”

According to the Rockefeller Institute, uncertainty surrounding federal tax reforms “leaves the states in the dark as they are finalizing state budgets for the fiscal year 2018.” It would seem the combination of potential policy changes on the horizon and the weakening in tax collections results in weak state and local spending. And the data already show hesitance on the part of state and local governments, with state and local government expenditure slicing an average of 0.06ppt from GDP growth over the past four quarters (Chart 3).

 

On a federal level, it will impact the amount the government has to borrow to fund its deficit, therefore determining when the government will hit the debt ceiling. This is quite relevant today since the debt ceiling was officially reached on 17 March and has been extended using extraordinary measures. However, the weakness in tax receipts could create challenges, pulling forward the date that the debt ceiling is hit. This was likely a motivating factor for Treasury Secretary Mnuchin to ask Congress to raise the debt ceiling before the Congressional summer recess begins on 28 July. In our view it is possible this becomes another point of conflict in Washington in coming weeks.

But most importantly, economists care about tax receipts because it is one of the few unvarnished, unadjusted, and realistic data points regarding the health of the overall economy. Tax receipts are a function of income creation in the economy: a slowdown in tax receipts indicates a slowing in income creation and therefore overall economic performance. Growth in federal tax receipts trends with the growth in aggregate payrolls (aggregate hours worked x earnings), which is why the recent deterioration in federal tax receipted is especially troubling.

Full doc: April 26, 2017 FISA court order against the NSA for five years of illegal spying on US citizens

https://www.scribd.com/document/349261099/2016-Cert-FISC-Memo-Opin-Order-Apr-2017-4

Millennials and the Labor Force: A Look at the Trends

Millennials make up the largest percentage of our population today, yet have seen some of the lowest labor force participation growth and highest unemployment out of all age groups since the turn of the century. This has larger implications when coupled with slow wage growth, high home prices, and mounting student debt.

The general consensus is that Millennials consist of individuals born between the early 1980s to the early 2000s. Here we will focus on the Bureau of Labor Statistics data for those born between 1981 and 2000. Based on this definition, Millennials currently make up about 32 percent of the Civilian NonInstitutional Population, which is the lowest fraction of the population for this cohort since the BLS began its five-year breakdown of employment data. The range for the 16-34 age group over time has been about 32-44% of the total civilian population, with the largest percentage in the late 1970s through the early 1980s. Here is a comparison of the five cohorts since the turn of the century.

Looking at the Labor Force Participation Rate (LFPR) for the 16-34 age range since 1948 you will see that it has declined rapidly since 2000. See Trends in the Teenage Workforce for an in-depth look at the teenage workforce.

For reference, here are a pair of charts. The first is a close-up look at Millennial LFPR growth since 2000, in which we break down further the Millennials into five-year cohorts. The teen year drop off since the turn of the century is clear here and the 25-34 cohort has declined only slightly, in line with other age groups (except those 55 and over). The second is a growth comparison chart for the overall range cohorts since 2000.

Millennials dealt with the highest unemployment rates during the Great Recession their age group has seen since the 1980s, and while this number has been declining in recent years, it has had a lasting effect. Coupled with the highest average loan debt per student, Millennials feel like they are struggling to make ends meet as a result. Here is the unemployment rate for the five-year cohorts since 1981.

The next chart presents nine year cohorts since 2000 as a comparison. It is clear that the Millennial cohort has had the highest unemployment of all cohorts since the turn of the century. The average unemployment rate since 2000 for this group is 13.1%, compared to a combined average of 5.0% for other age groups.

We will continue to watch trends among Millennials. Be on the lookout for more in-depth articles on Millennials on topics such as student loan debt and housing.

Elizabeth Warren ‘Silenced’ Again After Video Surfaces Of MLK’s Wife Thanking Senator Sessions

 After being silenced last night on the Senate floor during her desperate racial stunt to read disparaging remarks about now-confirmed Attorney-General Jeff Sessions, we suspect Senator Elizabeth Warren is lost for words as video surfaces of Coretta Scott King thanking Senator Sessions at the launching of the Rosa Parks Library and Museum.

The racially-divisive stunt that Senator Warren tried to pull last night – by  quoting a letter from the late Coretta Scott King, civil rights activist and wife of Martin Luther King Jr., who wrote in 1986, during Sessions’ failed confirmation hearing for a federal judgeship, that he “had used the awesome power of his office to chill the free exercise of the vote by black citizens” as a U.S. attorney in Alabama – ended with her being silenced by Senate vote.

Tonight, we suspect she will choose to silence herself as more recent video of Coretta Scott King surfaces destroying her warrant-less claim was that King’s wife’s words framed Sessions as a bigot, as she thanks Senator Sessions for his help in the construction of the Rosa Parks Library and Museum…

As far as Senator Warren is concerned, even MLK’s niece lambasted her for playing the race card…

Still what would one expect, when all you have is an ‘identity politics’ hammer, every ‘problem’ is a nail.

The One Chart That America’s Corporate Elite Don’t Want You To See

The message from America’s ruling elite is, as always – “do as I say, not as I do” – and nowhere is that more evident in the following chart. Simply put, follow the money!

As we detailed last week, as US financial stocks have soared in the post-election Trumphoria, so bankers have been dumping over $100 million in personal stock holdings…

 

But, as Barron’s details, it’s not just the bankers that are bailing out of US stocks (just as the corporate elite and their mainstream media lackeys cajole you and your hard-earned retirement funds back into the most-expensive market ever), it’s everyone!!

 

The massive spike in insider-selling (relative to buying) is broad-based…

 

Still – listen to CNBC, buy some more NFLX or TSLA or the latest Biotech stock, we have reached a new permanantly high plateau…

Ex-WSJ Reporter Finds George Soros Has Ties To More Than 50 “Partners” Of The Women’s March

Former WSJ reporter Asra Nomani asks in the NYT’s “Women In the World” section what is the link between one of Hillary Clinton’s largest donors and the Women’s March? Her answer: “as it turns out, it’s quite significant.

Here is what else she discovered.

Billionaire George Soros has ties to more than 50 ‘partners’ of the Women’s March on Washington

In the pre-dawn darkness of today’s presidential inauguration day, I faced a choice, as a lifelong liberal feminist who voted for Donald Trump for president: lace up my pink Nike sneakers to step forward and take the DC Metro into the nation’s capital for the inauguration of America’s new president, or wait and go tomorrow to the after-party, dubbed the “Women’s March on Washington”?

 The Guardian has touted the “Women’s March on Washington” as a “spontaneous” action for women’s rights. Another liberal media outlet, Vox, talks about the “huge, spontaneous groundswell” behind the march. On its website, organizers of the march are promoting their work as “a grassroots effort” with “independent” organizers. Even my local yoga studio, Beloved Yoga, is renting a bus and offering seats for $35. The march’s manifesto says magnificently, “The Rise of the Woman = The Rise of the Nation.”

It’s an idea that I, a liberal feminist, would embrace. But I know — and most of America knows — that the organizers of the march haven’t put into their manifesto: the march really isn’t a “women’s march.” It’s a march for women who are anti-Trump. 

As someone who voted for Trump, I don’t feel welcome, nor do many other women who reject the liberal identity-politics that is the core underpinnings of the march, so far, making white women feel unwelcomenixing women who oppose abortion and hijacking the agenda

To understand the march better, I stayed up through the nights this week, studying the funding, politics and talking points of the some 403 groups that are “partners” of the march. Is this a non-partisan “Women’s March”?

Roy Speckhardt, executive director of the American Humanist Association, a march “partner,” told me his organization was “nonpartisan” but has “many concerns about the incoming Trump administration that include what we see as a misogynist approach to women.” Nick Fish, national program director of the American Atheists, another march partner, told me, “This is not a ‘partisan’ event.” Dennis Wiley, pastor of Covenant Baptist United Church of Christ, another march “partner,” returned my call and said, “This is not a partisan march.”

Really? UnitedWomen.org, another partner, features videos with the hashtags #ImWithHer, #DemsInPhily and #ThanksObama. Following the money, I poured through documents of billionaire George Soros and his Open Society philanthropy, because I wondered: What is the link between one of Hillary Clinton’s largest donors and the “Women’s March”?

I found out: plenty.

By my draft research, which I’m opening up for crowd-sourcing on GoogleDocs, Soros has funded, or has close relationships with, at least 56 of the march’s “partners,” including “key partners” Planned Parenthood, which opposes Trump’s anti-abortion policy, and the National Resource Defense Council, which opposes Trump’s environmental policies. The other Soros ties with “Women’s March” organizations include the partisan MoveOn.org (which was fiercely pro-Clinton), the National Action Network (which has a former executive director lauded by Obama senior advisor Valerie Jarrett as “a leader of tomorrow” as a march co-chair and another official as “the head of logistics”). Other Soros grantees who are “partners” in the march are the American Civil Liberties Union, Center for Constitutional Rights, Amnesty International and Human Rights Watch. March organizers and the organizations identified here haven’t yet returned queries for comment.  

On the issues I care about as a Muslim, the “Women’s March,” unfortunately, has taken a stand on the side of partisan politics that has obfuscated the issues of Islamic extremism over the eight years of the Obama administration. “Women’s March” partners include the Council on American-Islamic Relations, which has not only deflected on issues of Islamic extremism post-9/11, but opposes Muslim reforms that would allow women to be prayer leaders and pray in the front of mosques, without wearing headscarves as symbols of chastity. Partners also include the Southern Poverty Law Center (SPLC), which wrongly designated Maajid Nawaz, a Muslim reformer, an “anti-Muslim extremist” in a biased report released before the election. The SPLC confirmed to me that Soros funded its “anti-Muslim extremists” report targeting Nawaz. (Ironically, CAIR also opposes abortions, but its leader still has a key speaking role.)

Another Soros grantee and march “partner” is the Arab-American Association of New York, whose executive director, Linda Sarsour, is a march co-chair. When I co-wrote a piece, arguing that Muslim women don’t have to wear headscarves as a symbol of “modesty,” she attacked the coauthor and me as “fringe.” 

Earlier, at least 33 of the 100 “women of color,” who initially protested the Trump election in street protests, worked at organizations that receive Soros funding, in part for “black-brown” activism. Of course, Soros is an “ideological philanthropist,” whose interests align with many of these groups, but he is also a significant political donor. In Davos, he told reporters that Trump is a “would-be dictator.”

A spokeswoman for Soros’s Open Society Foundations, said in a statement, “There have been many false reports about George Soros and the Open Society Foundations funding protests in the wake of the U.S. presidential elections. There is no truth to these reports.” She added, “We support a wide range of organizations — including those that support women and minorities who have historically been denied equal rights. Many of whom are concerned about what policy changes may lie ahead. We are proud of their work. We of course support the right of all Americans to peaceably assemble and petition their government—a vital, and constitutionally safeguarded, pillar of a functioning democracy.”

Much like post-election protests, which included a sign, “Kill Trump,” were not  “spontaneous,” as reported by some media outlets, the “Women’s March” is an extension of strategic identity politics that has so fractured America today, from campuses to communities. On the left or the right, it’s wrong. But, with the inauguration, we know the politics. With the march, “women” have been appropriated for a clearly anti-Trump day. When I shared my thoughts with her, my yoga studio owner said it was “sad” the march’s organizers masked their politics. “I want love for everyone,” she said. 

The left’s fierce identity politics and its failure on Islamic extremism lost my vote this past election, and so, as the dawn’s first light breaks through the darkness of the morning as I write, I make my decision: I’ll lace up my pink Nikes and head to the inauguration, skipping the “Women’s March” that doesn’t have a place for women like me.

Asra Q. Nomani is a former Wall Street Journal reporter. She can be reached at asra@asranomani.com or on Twitter.

In Stunning Last Minute Power Grab, Obama Designates Election Systems As “Critical Infrastructure”

In a stunning last minute power grab by the Obama administration with just 14 days left in his Presidency, the Department of Homeland Security released a statement this evening officially declaring state election systems to be “critical infrastructure.”  The statement from DHS Secretary Jeh Johnson defines “election infrastructure” as “storage facilities, polling places, centralized vote tabulations locations, voter registration databases, voting machines” and all “other systems” to manage the election process…so pretty much everything.

I have determined that election infrastructure in this country should be designated as a subsector of the existing Government Facilities critical infrastructure sector. Given the vital role elections play in this country, it is clear that certain systems and assets of election infrastructure meet the definition of critical infrastructure, in fact and in law.

 

I have reached this determination so that election infrastructure will, on a more formal and enduring basis, be a priority for cybersecurity assistance and protections that the Department of Homeland Security provides to a range of private and public sector entities. By “election infrastructure,” we mean storage facilities, polling places, and centralized vote tabulations locations used to support the election process, and information and communications technology to include voter registration databases, voting machines, and other systems to manage the election process and report and display results on behalf of state and local governments.

Of course, it’s likely not a coincidence that the DHS made this announcement just hours after the “intelligence community” declassified their “Russian Hacking” propaganda which basically noted that RT has a very effective social media distribution platform while once again providing absolutely no actual evidence.

Johnson’s statement goes on to note that while many “state and local election officials are opposed to this designation” he went ahead with his decision anyway because that’s just what the Obama administration does.

Prior to reaching this determination, my staff and I consulted many state and local election officials; I am aware that many of them are opposed to this designation. It is important to stress what this designation does and does not mean. This designation does not mean a federal takeover, regulation, oversight or intrusion concerning elections in this country. This designation does nothing to change the role state and local governments have in administering and running elections.

 

The designation of election infrastructure as critical infrastructure subsector does mean that election infrastructure becomes a priority within the National Infrastructure Protection Plan. It also enables this Department to prioritize our cybersecurity assistance to state and local election officials, but only for those who request it. Further, the designation makes clear both domestically and internationally that election infrastructure enjoys all the benefits and protections of critical infrastructure that the U.S. government has to offer. Finally, a designation makes it easier for the federal government to have full and frank discussions with key stakeholders regarding sensitive vulnerability information.

 

Particularly in these times, this designation is simply the right and obvious thing to do.

Of course, one of the most vocal opponents of this move has been Georgia Secretary of State Brian Kemp who recently told Politico it is nothing more than an attempt to “subvert the Constitution to achieve the goal of federalizing elections under the guise of security.”

During an earlier interview with the site Nextgov, Kemp warned: “The question remains whether the federal government will subvert the Constitution to achieve the goal of federalizing elections under the guise of security.” Kemp told POLITICO he sees a “clear motivation from this White House” to expand federal control, citing Obama’s health care law, the Dodd-Frank financial-reform legislation and the increased role of the Education Department in local schools.

 

To some election officials, this sounds like the first stage of a more intrusive plan.

 

“I think it’s kind of the nose under the tent,” said Vermont Secretary of State Jim Condos, a Democrat. “What I think a lot of folks get concerned about [is] when the federal government says, ‘Well, look, we’re not really interested in doing that, but we just want to give you this,’ and then all of a sudden this leads to something else.”

Meanwhile, Kemp continued on by noting that “this administration only has 15 days left in its term” and to make such a critical decision during the 11th hour “smacks of partisan politics.”

But we’re sure it’s nothing, Obama doesn’t really strike us as the type to play the “partisan politics” game.

The New Normal ‘Safety Net’: Surging Disability Benefits Claims

If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from the Disability Insurance Trust Fund. As Bloomberg notes, in 1990 fewer than 2.5% of working-age Americans were “on the check;” by 2015 the number stood at 5.2%, with geographical “disability belts” appearing across America.

Something changed in 2000…

 

That growth has left the fund in periodic need of rescues by Congress – most recently in 2015, when the Bipartisan Budget Act shifted money from Social Security’s old-age survivors’ fund to extend the solvency of the disability fund to 2023.

“None of us should be surprised that the cost of the program was rising,” says Stephen Goss, Social Security’s chief actuary.

 

He says the program’s growth is mostly a consequence of demographic change. Older workers are more likely to get sick, and as women have entered the workforce, they too have become eligible for benefits.

In 1956, when the disability insurance fund was created, qualification was based on a list of accepted medical conditions. In 1984, Congress broadened the criteria, giving more weight to chronic pain and mental disorders. The qualification process also became more subjective. Now, rather than check diagnostic conditions against a list, the process determines whether applicants are able to perform work that’s available. “It’s not as if you go to the doctor, the doctor says, ‘I’m sorry, son, you’ve got disability,’ ” Autor says. “It’s a social construct, because it’s about whether you can work.”

Source: Bloomberg

The geographic distribution of people on disability tells a different story to the government’s “it’s a demographic/aging issue” argument: Workers who might have endured pain for a physical job apply for disability when jobs disappear.

This has created what some economists call “disability belts” – rural areas in Appalachia, the Deep South, and along the Arkansas-Missouri border.

Source: Bloomberg

In a 2013 paper, David Autor, an economist at MIT, and his co-authors wrote that Social Security disability insurance was the single biggest source of federal transfers into areas that had been directly affected by trade with China and Mexico. Dan Black, now at the University of Chicago, found in a 2004 paper that growth in disability claims in Appalachia dramatically outpaced those in the rest of the country. Although it’s not designed to, Autor says, Social Security disability benefits function as unemployment insurance.

In the coming Congress, Republican Representative French Hill, who represents Van Buren County, plans to reintroduce a disability insurance reform bill he wrote after hearing Autor, the MIT economist, present his analysis of the program—a talk that echoed things Hill had heard from folks back home. The bill would require more frequent reviews of disability recipients with nonpermanent conditions.

Georgia Confirms Homeland Security Attempted To Hack Election Database 10 Separate Times

Last week we noted a letter from Georgia Secretary of State, Brian Kemp, to the Department of Homeland Security questioning why someone with a DHS IP address (216.81.81.80) had attempted to hack into his state’s election database on November 15, 2016 at 8:43AM.  Now, according to WSB-TV in Atlanta, we learn that Georgia’s election systems were actually the target of hacking by DHS on 10 separate occasions.

The Georgia Secretary of State’s Office now confirms 10 separate cyberattacks on its network were all traced back to U.S. Department of Homeland Security addresses.

 

In an exclusive interview, a visibly frustrated Secretary of State Brian Kemp confirmed the attacks of different levels on his agency’s network over the last 10 months. He says they all traced back to DHS internet provider addresses.

 

“We’re being told something that they think they have it figured out, yet nobody’s really showed us how this happened,” Kemp said. “We need to know.”

 

Kemp told Channel 2’s Aaron Diamant his office’s cybersecurity vendor discovered the additional so-called vulnerability scans to his network’s firewall after a massive mid-November cyberattack triggered an internal investigation.

Meanwhile, Kemp pointed out that all of the attempted hackings occurred around critical registration and voting deadlines calling into question whether “somebody was trying to prove a point.”

The Secretary of State’s Office manages Georgia’s elections, and most concerning for Kemp about the newly discovered scans is the timing.

 

The first one happened on Feb. 2, the day after Georgia’s voter registration deadline. The next one took place just days before the SEC primary. Another occurred in May, the day before the general primary, and then two more took place in November, the day before and the day of the presidential election.

 

“It makes you wonder if somebody was trying to prove a point,” Kemp said.

Of course, the Obama administration, a pillar of “transparency” for sure, has confirmed the attacks originated at the DHS but has refused to provide a straight story on why the attempted hackings occurred.  Furious with the lack of answers, Kemp has now written a letter to the Trump administration asking for a formal review after his inauguration next month.

Last week, the DHS confirmed the large Nov. 15 attack traced back to a U.S. Customs and Border Protection internet gateway. But Kemp says the DHS’ story about its source keeps changing.

 

“First it was an employee in Corpus Christi, and now it’s a contractor in Georgia,” Kemp said.

 

Unsatisfied with the response he got from DHS Secretary Jeh Johnson this week, Kemp fired off a letter Wednesday to loop in President-elect Donald Trump.

 

“We just need to ask the new administration to take a look at this and make sure that we get the truth the people of Georgia are deserving to know that and really demanding it,” Kemp said.

 

Kemp says several of those scans came around the same time he testified before Congress about his opposition to a federal plan to classify election systems as “critical infrastructure,” like power plants and financial systems.

As we’ve said before, despite all the media attention on “Russian hackers,” this cyberattack, originated from within our own Department of Homeland Security, is the only actual confirmed case of hacking related to the 2016 election.

 

* * *

For those who missed it, here is what we wrote last week after the initial hacking was discovered.

Georgia Secretary of State Brian Kemp is anxiously wondering, as are we, why someone with a Department Of Homeland Security IP address would try to hack into his State’s voter registration database.  Even though DHS offered cyber security help to states prior to the election, the Wall Street Journal notes that Georgia was one of the states that specifically denied assistance.

The secretary of state of Georgia is asking the Department of Homeland Security to explain what appears to be an attempted breach of the state’s voter registration database by someone in the federal government.

 

In a letter to Department of Homeland Security Jeh Johnson dated Thursday, Georgia’s Secretary of State Brian Kemp said the state had discovered an unsuccessful attempt to breach the firewall of state computer systems. That attempt was linked to an IP address associated with DHS, he said.

 

“At no time has my office agreed to or permitted DHS to conduct penetration testing or security scans of our network,” wrote Mr. Kemp, a Republican. “Moreover, your department has not contacted my office since this unsuccessful incident to alert us of any security event that would require testing or scanning of our network.”

 

The alleged attempted intrusion by the federal government on a state computer system responsible for election security was detected by a third-party security firm working for the state of Georgia. The attempt was unsuccessful, according to the state. The computers also house information about company incorporations.

According to a letter written by Kemp to DHS Secretary Jeh Johnson, the attempted intrusion occurred 1 week after the election on November 15, 2016 at 8:43AM and came from an IP address associated with DHS (216.81.81.80).

GA

 

Of course, since the hacking a state’s election database it technically illegal, even for DHS, Kemp had some fairly pointed questions for Johnson on who authorized the scan and how many other states were scanned without authorization.

GA

 

Meanwhile, the potential hacking followed threats from Jeh Johnson leading up to election day to declare election systems “critical infrastructure” which would have given the federal government more authority over state databases.

The Department of Homeland Security made a major push in advance of November’s elections to help states secure election systems against possible hacking, as fears of foreign interference in the U.S. election process reached a fever pitch in the months leading up to Election Day.

 

The department also considered declaring election systems “critical infrastructure,” which would have given the federal government additional authority to protect the systems. DHS didn’t take that step, however, as many states expressed concern about additional federal authority over their election systems and said the constitution provided states the right to run their own elections.

 

As a result of some of the concerns, the department clarified that assistance on election-related security matters was voluntary and encouraged states to take advantage of DHS resources and expertise to help secure state election systems.

 

“DHS assistance is strictly voluntary and does not entail regulation, binding directives, and is not offered to supersede state and local control over the process,” Mr. Johnson, the DHS chief, said in September.

 

Georgia was one of the states that had declined the federal government’s assistance for election security, citing state sovereignty. “Right now, we’re just demanding answers,” said David Dove, a top aide to the Georgia secretary of state. “My boss, Secretary Kemp, has been a very vocal critic of the Department of Homeland Security declaring election systems critical infrastructure.”

After all the talk about Russian hackers, wouldn’t it be just perfect if it turns out that the Obama administration was the only group to actually attempt to illegally hack into a state election database?  That said, we won’t hold our breath waiting for Jill Stein and disaffected Hillary supporters to express their outrage over this incident.

 

Brian Kemp’s full letter can be viewed below: