Social media stocks slipped yesterday after President Trump signed an executive order granting the government broader authority to crack down on social media companies. Twitter fell 4.45%, Facebook dipped 1.61% and Google’s parent company Alphabet dropped 0.08%. Twitter took the biggest hit because Trump said if the company doesn’t operate honorably, he hinted he would consider shutting the company down.
Trump says social media companies have gained “unchecked power” and have taken on the roles of editors and publishers of the content on their websites. His executive order would remove their “liability shield” if they engage in censorship.
What is Section 230?
Section 230 allows tech companies to moderate user-generated content on their site without becoming legally liable for it as a publisher typically would.
The law allows companies to engage in “good Samaritan” moderation of “objectionable” material. This, then, comes without the companies receiving a publisher or speaker treatment. Section 230 allows platforms like Twitter, Facebook and Google’s YouTube to take down terrorist content. It also allows them to track and take down harassing messages while still enjoying other legal protections.
What the law doesn’t allow, and what Trump says the platforms are doing, pertains to selectively moderating what messages users see to silence conservative voices.
“They’re doing things incorrectly, they have points of view,” Trump said at the White House. “My executive order calls for new regulations under Section 230 of the Communications Decency Act to make it that social media companies that engage in censoring or any political conduct will not be able to keep their liability shield. That’s a big deal,” he also stated.
Trump said the order would also prevent taxpayer dollars from going to any company that engages in what Trump referred to as deceptiveness. This is in addition to limiting these protections for companies that acted with bias.
Trump’s executive order comes just days after Twitter added a fact-checking feature. The social media site added the new feature alongside two of the President’s tweets about mail-in ballots and fraud. After Twitter added the fact-checking features, Trump then accused the company of engaging in “political activism.”
He also tweeted, “So ridiculous to see Twitter trying to make the case that Mail-In Ballots are not subject to FRAUD. How stupid, there are examples, & cases, all over the place. Our election process will become badly tainted & a laughingstock all over the World. Tell that to your hater @yoyoel.”
“Big Tech is doing everything in their very considerable power to CENSOR in advance of the 2020 Election,” the president also said Wednesday night — on Twitter. “If that happens, we no longer have our freedom. I will never let it happen! They tried hard in 2016, and lost. Now they are going absolutely CRAZY. Stay Tuned!!!” he then added.
Facebook CEO Mark Zuckerberg said that his company is taking a different approach to moderating content on his social media platform.
“I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online. Private companies probably shouldn’t be, especially these platform companies, shouldn’t be in the position of doing that.”
The interest in updating Section 230 to remove the liability shield for publishers isn’t just a goal for Republicans. It actually has bipartisan support.
This past January, Democratic nominee Joe Biden proposed revoking Section 230 completely. “The idea that it’s a tech company is that Section 230 should be revoked, immediately should be revoked, number one. For Zuckerberg and other platforms. It should be revoked because it is not merely an internet company. It is propagating falsehoods they know to be false.” Biden also never responded to follow-up questions about this statement.
Even former Democratic candidate also Bernie Sanders supported the idea, adding, “Tech giants and online platforms should not be shielded from responsibility when they knowingly allow content on their platforms that promotes and facilitates violence.”
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Here’s When You Can Expect Social Security Cuts
Social Security is a retirement cornerstone for tens of millions of Americans. According to the Centers for Budget and Policy Priorities, every year it keeps 15 million retirees out of poverty.
Unfortunately, the program is facing massive financial hurdles. It has been collecting a net cash surplus for the last 38 years. However, starting next year, it is projected to run a $21.1 billion net cash outflow.
The program entered the decade with a reserve of $2.9 trillion in assets. Although, many expect the net outflows to increase each year and chip away at the reserve by $1.1 trillion. This leaves the program with only $1.8 trillion in reserves by 2029.
The program isn’t facing bankruptcy or insolvency. Instead, it is more and more likely that retirees will soon face reductions in their benefits to keep the program afloat.
Two trusts actually make up Social Security. The first one is the Old-Age and Survivors Insurance (OASI) trust. It provides payouts to retired workers and survivors of deceased workers. The other is the Disability Insurance (DI) trust. This one supplies payments to workers that are long-term disabled.
When reporting on the state of the program, the Social Security Board of Trustees generally lumps the two trusts together. However, each trust is independent and faces individual risks.
Of the two, the OASI is projected to be in financial distress the soonest. The latest Trustee report estimates that the OASI will deplete its asset reserves by 2034. Meanwhile, the DI trust could possibly depleat its reserves in 2065.
But because the OASI is much larger than the DI trust ($2.8 trillion of the combined $2.9 trillion in reserves), the combined trusts are projected to become insolvent in 2035.
So expect the first major cuts to come in 2035 in an effort to avoid insolvency. Those efforts will involve a potential bitter pill for retirees to swallow.
Unless Congress finds a way to raise additional revenue and/or reduce outlays, retired workers and survivors of deceased workers can expect a 24% reduction in monthly benefits starting in 2035. While that seems a long time from now, it’s only 15 years away and will be here sooner than you think.
In real numbers, a retiree who receives the average monthly Social Security benefit of $1,503 today would see their monthly benefit reduced to $1,142 per month, or $361 less to live on. A married couple receiving $2,531 in monthly benefits would see their check cut by $608 per month, down to $1,923.
While the monthly reduction stings, looking at it from a lifetime benefit approach magnifies the worries for retirees trying to live out their golden years. A hypothetical worker who retires this year and starts receiving benefits would typically expect to collect about $500,000 in Social Security benefits. A 25% reduction means they would see their benefits cut by $120,000, down to only $380,000 in retirement benefits.
A married couple would see their projected $1 million in benefits reduced by $240,000 down to $760,000. That’s not an easily-replaced amount of retirement income.
If there is a glimmer of hope, it’s that Congress can take action to avoid – or delay – the day of reckoning. Yes, they’ve known since 1985 that the program would one day run out of money. But if there is one thing that the government is good at, it’s waiting until the last minute to really dig in and find a solution.
Let’s hope they can set aside their differences and put America’s retirees first.
Corporate CEOs Sour On Economic Recovery, Varney Warns: No More Lockdowns
Corporate executives aren’t expecting a full economic recovery until the end of next year. This is according to the Q2 CEO Economic Outlook Survey conducted by Business Roundtable.
The bearish outlook coming from a generally optimistic group is concerning for those hoping that the economic recovery is slowly underway. The survey indicated that the executives are hesitant to increase capital spending, hiring plans or sales expectations for the rest of the year.
The index’s overall reading contracted to 34.3 in the second quarter. This is the lowest reading since the midst of The Great Recession in 2009.
As a group, expectations were for the country’s gross domestic product to shrink by 3.8% this year, and more than one-third of respondents expect it to take until 2022 for the economy to fully recover.
Joshua Bolten, president and CEO of Business Roundtable, said in a statement, “The outlook of Business Roundtable CEOs reflects the reality of current economic conditions. We appreciate the actions taken by the Administration and Congress so far to help American workers, small businesses and communities, but there is much more to do. We encourage policymakers to work together on additional measures that will help bring a rapid end to this public health crisis and encourage economic recovery efforts as business operations resume.”
No Round Two
If we are hoping for economic recovery anytime soon, we can’t shut down the economy a second time, says Fox Business host Stuart Varney.
“Quite simply, the economy couldn’t take it. Nor could all those people who have been locked in with abusive relationships. And all those people denied life-saving medical tests and elective surgery. We can’t go back to that,” said Varney.
Varney said efforts to minimize or lessen the effect of a second wave of outbreaks should be on a local, not national level.
“The president says no new national lockdown. Instead, put out the fires at the local level,” Varney said. “That’s what the bar and beach closings are all about. Wear masks, keep your distance, wash your hands. That’s the policy. Contain the outbreaks. Limit the spread.”
Numerous states, including California, Florida and Texas are either rolling back reopening plans or implementing new restrictions. These come as the number of coronavirus cases rises. Varney said we just need to live with the virus as part of our lives.
“We can argue all day long about whether it’s a spike in new cases or a surge, or a ‘serious’ increase’. But the fact is, the number of new cases is going up, especially in some of the states that started to reopen,” said Varney.
He added, “There will be some impact on the pace of the economic recovery. You can’t expand rapidly if there are still restrictions on economic activity. The virus will not go away completely any time soon. There are going to be local outbreaks. There will be local shutdowns. That’s the way it is. That’s what we have to live with.”
And he says absolutely no second shut down.
“Once was enough,” he said.
Fed Buying Bonds Of Apple, Visa Raises Questions About Programs
Do bonds issued by Visa or Apple really need help from the Fed?
It’s a question many investors and analysts are asking after the latest disclosures from the Federal Reserve show the central bank is buying bonds of companies that face no liquidity concerns or challenges in the secondary market.
To be fair, the Fed is buying bonds of companies that are struggling. These companies are at risk of seeing the demand for their bonds dry up.
But bonds issued by Visa, Microsoft and Home Depot aren’t what many had in mind when the Fed announced it would buy bonds in the secondary market to ensure the market didn’t freeze up amidst the first wave of coronavirus shutdowns.
And other well-funded and stable companies like Apple and Goldman Sachs, who have bonds held in a handful of bond ETFs, have indirectly benefited. This happened as the Fed has bought roughly $6.8 billion of bond ETFs since the programs started.
Kathy Jones, director of fixed income at Charles Schwab, shares her piece about the situation. She says “It does sort of make you wonder if it makes sense for them to be buying bonds of Apple. Spreads are so tight and stocks are doing so well. You wouldn’t think they would need support from the Fed. The reasoning I guess makes sense. But when you look at the outcome, you scratch your head and wonder whether this is where we need the money to go.”
The Fed disclosures show it has purchased $430 million in individual bonds and $6.8 billion in ETFs. This, admittedly, makes up a small fraction of the $210 trillion corporate bond market and $961 billion fixed-income ETF market.
The Fed’s purchases, so far, remain limited to the secondary market. However, plans are for the Fed to soon start buying bonds directly from the issuing companies.
Goldman Sachs have bonds purchased by the Fed through bond ETFs. The said company not only sees the potential for moral hazard but two more challenges. These include a misallocation of capital and a diminishing appearance of independence for the Fed.
The bank believes, however, that the worries about moral hazard and a perceived loss of independence will diminish as time passes. They believe this will happen as long as the Fed continues to steer the markets properly,
Charles Schwab’s Jones doesn’t let the Fed off quite so easy. “I do think it’s a moral hazard. I think it’s something they’re going to have to deal with when things settle down. There will be accusations that they committed money in ways that didn’t make sense and didn’t help the average Joe.”
Former New York Federal Reserve Bank President William Dudley agrees with Jones.
During a recent interview with Bloomberg Television, Dudley said the Fed not only encourages bad behavior, but they also rescue those that made bad decisions.
“People who have high-yield debt that’s outstanding, a lot of times that’s happened by choice. So for the Federal Reserve to intervene and support those asset prices, is basically creating a little bit of moral hazard in the sense you’re encouraging people to take on more debt.”
“We had a number of players in these last few months that have essentially been bailed out by the Fed: Hedge funds that were invested in cash Treasuries, and short Treasury futures,” Dudley added. By purchasing Treasurys, the Fed helped “those entities unwind what turned out to be a bad trade.”
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