Security World: Obama. Gruber. Amnesty. Oh my!

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Nov. 19, 2014

No. 147

By Jonathan V. Last

COLD OPEN

Not much going on in the world of politics this week. Just a Supreme Court case that might disassemble Obamacare. And the architect of Obamacare dropping truth bombs about how the Democrats lied and dissembled to pass the law. And the president threatening to unilaterally amnesty 5 million illegal immigrants^_about 1.6 percent of the total U.S. population.

It's hard to know which is worst / best. Linda Greenhouse and Dahlia Lithwick immediately went into high gear trying to work the refs like an angry Pat Summitt. So maybe there's something to the case. (See Adam White's excellent piece on King v. Burwell here in the latest issue of the STANDARD.)

Jonathan Gruber, the MIT economist who did a lot of the heavy lifting for Obamacare was caught, post facto, saying a lot of unhelpful things about what the Democrats did to pass Obamacare over the objections of the "stupidity of the American voter." Which prompted the president to call Gruber, "some adviser who never worked on our staff."

Reader P.C. emailed me to note that this was eerily similar to how Obama once described former radical terrorist Bill Ayers, as just "a guy who lives in my neighborhood," and "not somebody who I exchange ideas with on a regular basis." Except that unlike Ayers, who's been happy to not embarrass his fellow traveler, Gruber may not be a team player: Here's a video of him describing a meeting with Obama where they talked specifically about the subject of deceiving voters.

Oh no. Boom goes the dynamite.

Which brings us to amnesty. On the one hand, it's easy to understand why President Obama would want to grant amnesty to 5 million illegal immigrants via executive order. It's a shrewd political move that works to buttress Democratic client groups. It puts congressional Republicans in a very difficult position, with no obvious counter-moves. And it makes undoing the amnesty a politically difficult task for 2016.

The only reasons not to push the button have to do with respect for the constitutional order, precedent, the legislative process, common sense, and the public will. And you can guess how seriously this president takes those things from the manner in which he has governed for the last six years.

Ross Douthat had a strong column over the weekend explaining, in very clear terms, the Rubicon that President Obama is about to cross. The question is not whether he can be stopped^_I suspect he cannot. But whether the body politic can find some way to inflict real political pain in reaction to the transgression. If not, then our politics will get much, much worse in the coming years.

LOOKING BACK

"Whenever I offer career advice to students, I tell them that journalism is a great profession because, given enough time to read up on the subject, we can write on almost anything we like. Of course in the midst of a recession, such advice may be deemed useless_after all, is anyone even hiring? A colleague tells me that until recently his advice to students was, 'Whatever you do, don't go to law school.' Now he says, 'Have you ever thought about law school?'"

^_Victorino Matus, "Keep Hope Alive" from our November 16, 2009, issue.

Remember you get full access to THE WEEKLY STANDARD archive when you subscribe.

Hartache

Dem hero worship.

Gehry's Ike

Not dead yet.

THE READING LIST

A conversation with Reihan Salam.
* * *
Cleaning up after Ebola^_the NYC way.
* * *
A snarky history of the New York Times "Styles" section.

INSTANT CLASSIC

"Bruce Charlton, Professor of Theoretical Medicine at the University of Buckingham in England, wrote that "that landing of men on the moon and bringing them back alive was the supreme achievement of human capability, the most difficult problem ever solved by humans." That's a good way to look at it: The political class presented the boffins with a highly difficult and specific problem and they solved it - in eight years. Charlton continued:

"'Forty years ago, we could do it ^_ repeatedly ^_ but since then we have not been to the moon, and I suggest the real reason we have not been to the moon since 1972 is that we cannot any longer do it. Humans have lost the capability...'

"If you think about it, isn't it kind of hard even to imagine America pulling off a moon mission now? The countdown, the takeoff, a camera transmitting real-time footage of a young American standing in a dusty crater beyond our planet blasting out from his iPod Lady Gaga and the Black-Eyed Peas or whatever the 21st century version of Sinatra and the Basie band is... It half-lingers in collective consciousness as a memory of faded grandeur, the way a 19th century date farmer in Nasiriyah might be dimly aware that the Great Ziggurat of Ur used to be around here someplace."

^_ Mark Steyn on the Apollo missions and Interstellar, November 15, 2014

THE LAST WORD

And now, a little break from politics:

Over the weekend I read a long Fortune article by Beth Kowitt about McDonald's. It's a fantastic piece of reporting and writing and a great reminder that if you get close enough to them, most industries are inherently interesting.

The thrust of Kowitt's article is that McDonald's is in a spot of trouble. Year-on-year same-store sales are likely to be negative in 2014 for the first time since 2002. But what has McDonald's worried is that this negative growth may just be a leading indicator of structural decline.

McDonald's is, in many ways, a marvel. It owns 7.3 percent of the U.S. restaurant market^_which is about as much as its next three rivals (Subway, Starbucks, and Wendy's) combined. It has a massive, worldwide operation, which juggles a balance between global homogenization and local flavor. For instance, in 2013, Kowitt reports, McDonald's leapt into the U.S. buffalo wings market with their Mighty Wings. The wings came to the U.S. via McDonald's restaurants in Hong Kong, where the product and its sauce had been developed and they were a staple on the menu. (The Mighty Wings flopped in America, and McDonald's was left with 10 million pounds of chicken^_20 percent of its total inventory for the dish^_unsold. Yikes.)

But while the Mighty Wings were a failure in practice, they're also a sign of the company's strength: They can beta test menu items with a great deal of statistical rigor; they have mastered a gargantuan supply chain; and they operate with enormous efficiency on a scale that very few other companies can manage. In a way, McDonald's is not totally dissimilar from Amazon, or Walmart, or UPS in their mastery of logistics.

Like most giant companies, McDonald's faces general challenges from the macro-environment: rising commodities prices put pressures on their margins and stagnant wage growth in America^_especially among low- to moderate-income families^_has put pressure on their customer base.

But McDonald's is also facing some challenges that are specific to the company^_and quite interesting. For instance, over the last 25 years, the company has suffered from menu creep. In 1990, McDonald's in the U.S. offered 33 menu items. Today, there are 121 items.

This creates all sorts of problems. More menu items means that each item is worth less to the company^_Kowitt notes that the Shake Shack chain has 44 menu items, which average, annually, $66,000 in sales per store. The McDonald's average is closer to $20,000. This means that you need more space and more workers spending more time per item to generate the same revenue. (It's not unlike the SKU difference between Costco and Walmart.)

The menu creep also dilutes the McDonald's identity with consumers. With 121 things on the menu, you start to wonder what McDonald's food is really all about. Is it a burger joint, a coffee shop, a breakfast café, or something else? I suspect McDonald's would argue that the company is all of these things^_and to a certain extent that's right. But when you try to be all things to all people, you risk being none of them.

Yet it's easy to understand where the menu creep came from. Over the past 20 years, McDonald's has faced the kind of novel competition that the store never anticipated. They went from three decades battling other fast-food burger chains to suddenly having to deal with Starbucks, which issued an entire different sort of challenge. Then Dunkin' Donuts joined the coffee-shop/fast-food party, too. Then, just as McDonald's was pivoting to deal with these new threats, another new sector arrived, known in the industry as fast-casual dining. (Think Panera, Chicken Out, or Boston Market.) Fast-casual aimed at a slightly more upscale customer, and thus tried to nibble off the top of McDonald's.

And then, just over the last ten years has emerged yet another sector, called "better burger." Better burger joints^_Five Guys, Shake Shack, Elevation, BGR^_are highly-focused operations that serve almost nothing but burgers. But they do a more upscale burger. And because they aren't anywhere near the size of McDonald's^_and because they do almost nothing else^_their burgers are better than anything McDonald's can hope to offer. And as such, they are a stake pointed straight at the heart of the McDonald's empire.

These three new categories^_coffee, casual dining, and better burger^_are what forced McDonald's hand in their menu expansion. And they now pose something like an existential threat to the company.

By all means, go give the Fortune piece a read. It's a great reminder that there are plenty of things in this world more interesting than politics.

Best,
JVL

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