Ukraine War Reveals Our Broken Military Supply Chain

The Daily Escape:

Archangel Falls, Zion NP, UT – August 2023 photo by Torsten Hartmann Photography

The most important thing we’ve learned from the Ukraine War is that the US isn’t ready for a protracted war. One of the big reasons why, as The Insider says, America no longer builds weapons the way it used to. And we need to start building weapons again at tempo.

The Center for Strategic and International Studies (CSIS) has drawn a similar conclusion about US weapons manufacturing: There is no surge capacity and it will take years to revive it. According to their study, replacing the inventory of the critical items used in Ukraine, like 155 millimeter artillery shells, will take 4-7 years; Javelin missiles will take 8 years to replace; Stinger missiles 18 years. Before the Ukraine War broke out, the US was producing only about 14,000 155mm shells per year, enough for two days of fighting in Ukraine at current usage rates.

This scramble for ammunition reflects how ill-prepared the US and its allies are to sustain an intense and/or protracted land war.

Think back to America’s weapons building capabilities during World War II. We became an industrial powerhouse, cranking out warships and aircraft at a breakneck pace. One example: The Navy built ships in just weeks — its fleet grew from just 700 to over 6,000 over the course of the war.

The US maintained this capacity for decades but, as The Insider reports:

“Nowadays, it might take years to build a US Navy ship. The reasons for this are complex — shifted priorities, increased technology on board…labor costs — but the effect is clear: In a high-intensity conflict, the US would face challenges in not only producing vessels but also repairing any ships damaged in battle.”

These aren’t the only weapons that are in short supply. The Pentagon issued a study in April on the contraction of our Defense Contracting industry, which went from 52 primary contractors in the 1990s down to just six today. (full disclosure: Wrongo owns what is for him, a substantial number of shares in one of the six companies.)

During Clinton’s presidency, following the fall of the Soviet Union, Defense Secretary Bill Perry convened defense industry CEOs (known in the industry as the “last supper”) and told them that they should not assume production contracts would be maintained at Cold War levels, and they needed to diversify to survive. Many of the companies got out of defense production, and those that remained merged to secure market share of what became dwindling orders from the Pentagon.

This insured that US weapons suppliers wouldn’t be ready for a future that included China’s defense spending surge, the Russia-China strategic partnership, or today’s war in Ukraine.

Now, the Pentagon is revisiting whether industry consolidation has gone too far.

The WSJ reports that today, the industrial base of defense vendors is about 55,000 companies, down from 69,000 in 2016, and many of them are small firms. This smaller base has become a choke point as shortages of labor, chips, rocket motors and other components are stymieing efforts to boost arms production. The WSJ quotes Halimah Najieb-Locke, the Pentagon’s deputy assistant secretary of defense in charge of industrial-base issues, that the Pentagon:

“…is increasingly reliant on a smaller number of contractors for these critical capabilities….That impacts everybody’s ability to ramp production.”

These supply chain issues also dog the global arms manufacturing industry. US companies hold the first five spots in the top 10 ranking of arms sales, with China taking another four. The consolidated sales of the top five have fallen since the start of the Ukraine War.

Having this paradoxical slowdown in sales amid an increase in demand speaks to the larger challenges of a defense contractor base that is geared to peacetime production. The Defense Department has a role in this failure, since they rarely award contracts for multiyear procurements beyond current requirements. Air Force Chief of Staff Gen. CQ Brown said that the military hasn’t focused enough on keeping a steady flow of munitions production and procurement:

“In some cases, because you don’t have a threat on your doorstep, munitions aren’t…high on our priority list…”

Making the age-old point that sometimes, “just in time” isn’t. More from the WSJ: (emphasis by Wrongo)

“Lockheed and second-ranked Raytheon Technologies Corp. jointly produce…Javelin antitank missiles, but they expect it will take two years to double output that is now at around 400 a month.”

More:

“Greg Hayes, chief executive at Raytheon, said that Ukraine has burned through five years of Javelin production since February and 13 years’ worth of Stinger antiaircraft missiles.”

Aerojet Rocketdyne is an example of a small but crucial cog in the defense industry. It builds the rocket motors used in the Javelin and Stinger missiles deployed in Ukraine. Labor and supplier issues have delayed its deliveries of rocket motors. Raytheon, who makes the Javelin along with Lockheed, said it will be 2024 before Aerojet catches up with engine orders.

The US is also facing a nearly $19 billion backlog in arms sales to Taiwan. Control of the Pacific would be a crucial part of any war with China, and Beijing has the world’s largest navy. According to a 2022 Pentagon report, the country has about 340 ships and submarines. The US, meanwhile, has fewer than 300 warships. Despite that, the US is committed to growing its fleet. Its number of ships is expected to increase to 350 by the 2040s.

To keep up with China, the US will need to build more ships and submarines more quickly. But it has a smaller number of shipyards and a skilled-labor shortage.

All of this will take money, billions of it. But we’re already first in the world’s defense spending. The worst military equipment is equipment that isn’t unavailable when it’s needed. That is not to say that the Defense Contractors should be given a blank check, but we are in dangerous times.

The US spends more on national defense than the next ten countries combined. Defense spending accounts for 12% of all federal spending and nearly half of US discretionary spending. The Defense Contractors are floating on a sea of profits from their captured Pentagon customer.

But is it better to spend extra dollars to have weapons inventory on hand than pay the much higher political cost of a military failure? Can those dollars be found within the existing defense budget rather than by adding to it? From a strategic viewpoint, shouldn’t we build capacity in peacetime when we don’t yet need it (while hoping never to), so that if the US does need it, the capital assets are in place?

The real issue is the stop/start government procurement process. We saw this in N95 mask sourcing, where domestic suppliers downsized over the years to a point where they couldn’t meet the surge in demand when Covid hit. After they ramped up, the government walked away from them when mask mandates ended.

This is also true in defense. Over the last 25 years, Congress has passed more than 120 Continuing Resolutions to fund the Pentagon instead of annual appropriations bills. With Continuing Resolutions comes chronic uncertainty for companies about when they’ll get paid, or when they can proceed to a new phase of weapons development or production.

Nothing is forcing the DOD to only do business with a small group of contractors (other than no one else bids on the contracts because the DOD won’t award to them). The issue is a shrinking domestic manufacturing base, and a lack of sustained business in the defense sector to support a larger field of competitors.

Market forces require efficiency. Sadly, efficiency comes at the cost of resiliency. National security priorities should deal with the stop/start issues that face our defense industry. In 2020, the National Defense Industrial Association’s report on the readiness of the Defense Industrial Base said 27% of critical defense supplier industries would likely experience shortages in the event of a surge in demand for combat-essential products.

And two years later, it happened in Ukraine.

Over the longer term, the US should develop an industrial reserve policy that pays companies to maintain excess capacity, such as warehousing critical, long lead-time parts. Much of today’s production challenges could be easily resolved by giving selected weapons or weapons systems a “protected” status, making them outside of the usual DOD acquisition and contracting rules that limit the flexibility and commitment needed to ensure a continuous production line.

This strategy would be expensive. But Russia’s war in Ukraine has reinforced the necessity of maintaining a deep inventory of weapons which we no longer have today. And it’s no longer a question of whether the US industrial base is prepared to rapidly surge production. It’s clear that we are not, because the necessary investments have not been made.

(hat tip to Brendan K. for his useful insights for this article)

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Bidenomics For The Win

The Daily Escape:

Daicey Pond, Baxter State Park, ME – July 2023 photo by Lily Hurd

And we’re back! Apparently we didn’t miss much, just that July was the hottest month in the Earth’s history, and there was a new Trump indictment to go along with the others. And the Eagles announced that they will be starting their farewell tour. Another farewell tour?

While listening to the BBC, Wrongo heard a pundit say that “indictments are Trump’s big political problem while Biden’s is the economy”.

Really? Lots of Americans still think the economy is doing poorly, and are upset about it. People have already forgotten just how much economic dislocation happened during the pandemic. We’re still in the midst of rebuilding the economy and getting back to normal. The pandemic was a stark reminder of just how fragile America’s supply chains are and why they needed shoring up.

But looking at objective measures, it’s impossible to think the economy is bad. Because from the actual numbers, this economy is doing really well.  Noah Smith asks: What do we want from the economy?

  1. We want employment to be high, meaning that as many people as possible who want jobs can get them.
  2. We want inflation to be low, so that people have certainty about how far their paycheck and their savings will go in the future.
  3. We want real incomes to rise, meaning that we’re able to consume more than we could in the past, or save more if we want to.

And all three of these are happening right now, so maybe we’ve been in a “vibesession”, rather than in a recession. Maybe decades of no-to-low inflation left people psychologically unprepared for what a modestly sharp but short inflationary period would feel like.

Also, our political polarization has led to many people wishing for the worst possible economic outcomes. That, more than anything else, is probably driving the narrative. Think of it like this: The average American’s reaction to rapidly rising prices and wages:

1) Wages go up: I did that

2) Prices go up: The economy did this to me

Conclusion? I’m good, but the economy is bad.

Despite that thinking, things really look fine! GDP growth is moderate. Inflation is cooling. The labor market is humming along. From the NYT’s Peter Baker:

“Inflation at long last is down. So are gas prices and Covid deaths and violent crime and illegal immigration. Unemployment remains near record lows. The economy, meanwhile, is growing, wages are climbing, consumer confidence is rising and the stock market is surging.”

Everything is headed in the right direction except for Biden’s approval rating.

Democrats had a major breakthrough in 2020 and 2021 when under Biden, the federal government finally spent at the levels we thought were required to pull the country out of an economic nosedive. The results were terrific. We’ve had positive effects on incomes, poverty, unemployment, and economic growth. However, when inflation really hit, Republicans and the economic establishment launched their counter-offensive: They blamed inflation on Biden’s programs. And that’s partially true.

Two things: Democrats haven’t unified around a program for fighting inflation that could be seen by Americans as an alternative to austerity. And Dems need an elevator pitch for voters that says, “we’re on top of the economy’s problems”.

According to the WaPo, a slide show circulating in June in DC showed that in polling, the Party was losing badly to the GOP on the most important issue of voters: the economy. The recommendation was that Dems shift messaging to “growing the middle class.” It was then that Biden started talking about “Bidenomics”. From Vox:

“Bidenomics is a…way to package some very real things. Legislatively, it entails items such as the American Rescue Plan, the Inflation Reduction Act, the bipartisan infrastructure bill, and the CHIPS Act. On the regulatory front, it tries to boost competition in ways big, such as antitrust enforcement, and small, like eliminating junk fees.”

In contrast to both supply-side economics and neoliberalism, Biden is focused on altering the structure of the economy. Over the past year, manufacturing construction in hi-tech electronics, which the administration has subsidized through the Chips and the Inflation Reduction Act, has quadrupled. Tens of $ billions in infrastructure spending has funneled to the states for roads, water systems and internet upgrades. More clean-energy manufacturing facilities have been announced in the last year than in the previous seven years combined.

Even though polling shows that voters trust Republicans over Democrats on the economy, historically the economy has generally done better under Democrats. There’s no single reason that’s the case, but it’s true that Republicans have a straightforward message on the economy — spend less, slash taxes, weaken government oversight — that’s easy to understand.

Bidenomics is a way to try to change that. The goal of Bidenomics is two-pronged: To get Americans to see all of the good that there is in the economy right now, and to tie it back to Biden.

If Bidenomics continues to alter the structure of the economy in ways that help the vast majority, voters will give Biden another term and possibly reward Democrats with both Houses of Congress.

And if Bidenomics is successful, it will make the American economy stronger and fairer in the future.

Let’s close today by remembering SinĂ©ad O’Connor, who died in July:

This wall art was painted by emmaleneblake in Dublin near The George, a gay bar. Sinéad was right about the Church. Let the memory of her anger be fuel for other battles!

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Blogcation

The Daily Escape:

Artists Drive, Death Valley, CA – July 2023 photo by George B. Davis

Wrongo is taking a brief time away from the Wrongologist. Regular columns will return starting on Tuesday August 8. If SHTF during this break, Wrongo will probably return to say something obvious that you already know about whatever the issue is/was.

In the meantime, if turbulence occurs, keep your tray tables in their upright and locked position and if you’re Trump, keep your tiny hands off my blog.

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Monday Wake Up Call – July 24, 2023

The Daily Escape:

Sunrise, Avon, NC – July 2023 photo by Donna Cartwright Hayden

We’ve reached a point in our politics where the silly season never ends. The truth is slowly beginning to seep into the public’s consciousness that lifelong scofflaw Donald J. Trump is in deep shit. Wrongo is referring to the slate of trials the Former Guy is facing between now and the 2024 presidential election.

Florida US District Judge Cannon has just set a trial date for Trump’s classified documents case, so we can tally his busy legal schedule. As of now, the first item on the docket happens in October 2023. It is a civil lawsuit alleging he, his adult sons, and the Trump Organization were engaged in a $250 million fraud for inflating the values of his golf courses, hotels, and properties to obtain loans and insurance.

Next in line is the second bite of the apple for E. Jean Carroll. On January 15, 2024, (the same day as the Republican Party’s Iowa caucuses), Trump is again facing off against Carroll who won her last case against him. This time, she is seeking $10 million in damages for repeated attempts by Trump to defame her. The judge recently allowed Carroll to amend her lawsuit over Trump’s 2019 comments to include similar comments he made recently on CNN.

After that, the big trial fireworks begin with a March 25 case, where Trump will face a jury for the first time in a NY criminal case charging him with falsifying business records. The Manhattan district attorney’s office says Trump falsified records to cover up a reimbursement to his former fixer Michael Cohen, who advanced a hush-money payment to adult film actress Stormy Daniels. The judge has warned Trump that he is required to attend every day of the trial, potentially keeping him off the campaign trail for a couple of weeks.

Then it’s on to the May 20th classified documents case in Florida. Judge Cannon has set the classified documents case to begin in a two-week period beginning May 20, 2023. By that time, only a few states will not have voted in caucuses or primaries. By then, it’s likely that Trump will have a commanding lead in the race for the Republican nomination.

We still don’t know if Trump will be indicted on federal charges for attempting to stage a coup to remain in power despite losing the 2020 presidential election. The signs are that he will face more federal charges from Special Prosecutor Jack Smith within a few days or weeks.

Also, state charges in Georgia could come sometime in August. The Fulton County DA is considering bringing racketeering and conspiracy charges in connection with Trump’s efforts to overturn the 2020 election in Georgia.

These two trials could both be scheduled before the Florida documents case. And unlike the Florida documents case, they aren’t reliant on classified information which presents almost certain opportunities for delay by Trump’s lawyers.

The Jan 6 federal case will be tried in Washington DC. It would presumably take precedence over the Georgia case. It is likely that the presiding judge will schedule the trial for as soon as is practicable, irrespective of preexisting trial schedules in other cases. Otherwise, it’s hard to see a trial happening before a year from now.

If all of these cases move to a trial, it seems likely that Trump will be in court pretty much continuously from October 2023 (at a minimum) through the end of June 2024. The Republican National Convention is scheduled for mid-July in Milwaukee, Wisconsin. But, there’s a real possibility that at least some of these cases will not be resolved by then.

For all of these legal problems, anti-Trump people can do nothing to bring about his conviction in one or more of these cases. This is in now the hands of judges and juries over which we have zero control. It will be more than frustrating to stand helplessly on the sidelines as the trials unfold over the coming year.

And it’s possible that Trump could win some cases, even though on the merits, he doesn’t seem to have a viable defense in any of them. The friendliest jury pool he’s going to face is in the Florida documents case, but the evidence against him is overwhelming and incontrovertible. His best chance is that the judge who previously was absurdly friendly to Trump regarding these same documents, will exclude some evidence or otherwise steer the jurors toward a reasonable doubt. Short of that, he can hope that at least one juror will be MAGA enough to refuse to convict, leading to a hung jury.

The other trials in New York and DC, will have more problematic jury pools for Trump. There’s probably as good a chance that he will lose all of these cases as that he’ll get a hung jury and mistrial in any one of them. Outright acquittals seem impossible because the cases are just too strong.

Time to wake up America! On the legal front all we can do now is hope for victory. To help you wake up watch and listen to Todd Rundgren and Utopia perform “Just One Victory” on their 2018 Reunion Tour. Wrongo never was a fan, although this anthemic song hits the right notes for Trump’s legal battles, and he’s kept his voice even after all these years:

“Give us just one victory, it will be all right”

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Sunday Cartoon Blogging – July 23, 2023

NY Magazine has an article about Biden’s weirdest White House habits. What struck Wrongo was this:

“While you might think the addition of a cat would make the White House feel more like a home, it seems that hasn’t solved the problem. In January 2023 the president revealed that his new cat Willow is adding to his discomfort.

“Willow may walk in here any time now. She has no limits” Biden said. “You think I’m kidding, I’m not. Especially in the middle of the night when she climbs up and lays on top of my head.”

No wonder Biden seems to have less hair. In Wrongo’s experience, dogs will cuddle but would never sleep on your head…although maybe nose to nose. NY Mag must be starved for real content. On to cartoons.

Florida redefines slavery’s harm:

White guy’s thickest whitewash now available in Florida:

RFK jr isn’t on the same planet that his father walked:

GOP helps RFK jr in tearing down Camelot and building SCAMALOT:

This Fall’s new TV hit:

GOP persists in its Trumpy love:

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Saturday Soother – July 22, 2023

The Daily Escape:

Sunset, Yarmouth Port, Cape Cod, MA – July 2023 photo by Cynthia Maciaga

Wrongo continues to find demographic differences between the voters of 2020 and today. Most of those differences favor the Democrats. A WaPo op-ed by Celinda Lake and Mac Heller talks about some of them:

“Every year, about 4 million Americans turn 18 and gain the right to vote. In the eight years between the 2016 and 2024 elections, that’s 32 million new eligible voters. Also every year, 2½ million older Americans die. So in the same eight years, that’s as many as 20 million fewer older voters.”

This means that between 2016 and 2024, the cohort of eligible voters will have changed by a net 52 million. That difference is largely driven by new young people entering the pool and older people exiting. Those 32 million new voters are mostly “Gen Z”, who now constitute 20% of today’s American electorate.

In other words, it is highly unlikely, despite what national polls are showing, that the 2024 election will be a repeat of either 2016 or 2020.

Lake and Heller address the nuances of the demographic changes that are reshaping the electorate. The data show that today’s electorate is younger, more educated, and more issues-focused than in 2016 when Trump won. These factors tend to favor Democrats but do not guarantee success. Their takeaway is that Democrats are better positioned than Republicans to take advantage of these demographic changes. Lake and Heller stress that how Democrats reach them must be different from previous elections:

“Meet young voters where they are: on social media, not cable news. Make your messages short, funny and somehow sarcastic yet authentic and earnest at the same time. Your focus should be issues first, issues second, candidates third and party identity never.”

More from Lake and Heller:

“About 48% of Gen Z voters identify as a person of color, while the boomers they’re replacing in the electorate are 72% White. Gen Z voters are on track to be the most educated group in our history, and the majority of college graduates are now female.”

They also say that since voting participation correlates positively with education, we should expect women to have a larger voice in our coming elections.

Gen Z voters say their motivation for voting is not necessarily to support a party or candidate. Instead, it’s passion about one or more issues: They have a much more policy-driven approach than the more partisan voting motivations of their elders.

That policy-first approach, combined with the issues they care most about, have led young people in recent years to vote more frequently for Democrats and progressive policies than prior generations did when of similar age — as recent 2022 elections in Kansas, Michigan and Wisconsin have shown.

There’s a looming problem for both Parties: The possibility that young voters may embrace third-party candidates:

“Past elections show that Gen Z voters shop for candidates longer and respond favorably to new faces and issue-oriented candidates. They like combining their activism with their voting and don’t feel bound by party loyalty.”

With the “No Labels” movement and the efforts by the wacko Robert F. Kennedy Jr. to both field insurgencies, there’s potential danger from young people who are both committed and apolitical. Look for Gen Z to tire of waiting for Washington to solve problems. They may simply grab the national microphone from their elders and decide the 2024 presidential race.

Wrongo for one, is glad that they’ve arrived, and he believes they will fully understand the reasons why Trump must lose in 2024.

The weekend is here, and at least in our corner of the northeast, it is expected to be dry and warm. That means we can try to give more discipline to our disobedient plants. But before slapping on bug spray and sunblock, let’s take a few moments for our Saturday Soother, when we try to forget whatever Florida is doing to the teaching of the history of slavery, and center ourselves for another news-filled week to come.

Start by grabbing a tall glass of lemonade and find a chair outside in the shade. Now, let’s spend a few minutes remembering the life of Tony Bennett, who died on Friday. You know Bennett the singer, but you probably don’t know that he was a role model in other ways. As a soldier in World War II he helped liberate Jewish prisoners from a concentration camp, and he later marched in Selma with Dr. Martin Luther King, Jr. He refused to perform in South Africa when it was under apartheid.

Let’s watch and listen to Bennett perform “Body and Soul” in a duet with Amy Winehouse from Bennett’s 2011 album “Duets II: The Great Performances”. Bennett and Winehouse won the 2012 Grammy for best pop duo for this.

Tony may have been the best ever, but here, Amy is great, sounding a little like Billie Holiday:

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Economic Illiteracy

The Daily Escape:

The confluence of the Green River (L) and the Grand River (R) form the Colorado River, Canyonlands NP, UT – July 2023 photo by Michael L Mauldin. In 1921, the Grand River was renamed the Colorado.

Wrongo doesn’t think that political polls have much value if they have a national focus, but still, he presents an  Economist / YouGov Poll taken between July 8th and 11th of a nationwide sample of 1,500 adults (including 1,296 registered voters). The margin of error for adults is 2.8%, and for registered voters is 2.9%. They asked whether the country is in a recession:

Responses show that about 47% of adults and 48% of registered voters believe the US economy is currently in a recession. But, it’s not true.

We’re still seeing inflation: The BLS reported the Consumer Price Index was up 3% year over year in June. Inflation in June 2022 was 9% and it’s been falling ever since. It is now back near what the Fed says is its target for inflation, 2%.

But having inflation, even severe inflation, doesn’t mean we’re also in a recession. In fact, employment has continued to grow, even as economic growth has slowed. Growth has slowed from about 7% in 2021 to about 2% in the first quarter of 2023. But the economy isn’t shrinking. And the jobless rate in June was 3.6%, still at very low levels not seen consistently since the late 1960s. That would be 50+ years ago.

CNN quotes Justin Wolfers, an economics professor at the University of Michigan:

“We’re running out of time for a 2023 recession….We’ve never had a recession when the labor market was running this hot. In fact, it would be absurd to use r-word at a time when we’re creating jobs at this rate.”

Americans need to be taught economics. And also to read. It shouldn’t be so difficult to understand that the US economy is still humming along. Sadly though, most high schools don’t teach economics, and many college degrees don’t require it. This has resulted in economically ignorant adults (including voters) who just believe what lying politicians and an ambivalent media tell them.

The media’s endless ranting about inflation and recession has been a problem for Democrats. There’s plenty of economic unease and a lot of it is generated by so-called media “experts”.

People seem to want more concrete indications that we’ve turned a corner. But we’ve gone from  ̶800,000 jobs a month to full employment. Isn’t that turning a corner? We’ve had real wage gains after 44 years of declining real wages: Isn’t that turning a corner?

If you’re not someone who pays much attention to politics and/or if most of your information is coming from mainstream media, this is what you remember hearing about the Biden presidency:

  • The economy sucks because nobody wants to work.
  • INFLATION!!
  • Home prices are rising, which is why YOU can’t afford one!
  • Home prices are falling, which is why YOU can’t retire!
  • GAS PRICES!!! OMG!
  • There’s going to be a MASSIVE recession any day now!

Every night since Biden took office, the media has blanketed us with some flavor of all of those narratives. Every night, every newscast.

But some of us say that it’s a complete mystery why Biden’s poll numbers won’t budge.

OTOH, the cost of housing is increasing year over year. Insurance premiums are increasing by double digits year over year. The plumber or HVAC guy costs way more. But since the headline rate of inflation is down, let’s all go out for steak and lobster tonight.

From a political perspective, shouldn’t the Democrats fulfill the wishes of the voters who think we’re in a recession by having one now rather than waiting until 2024? A recession next year would make the Biden reelection effort (along with the efforts to take control of the House and keep control of the Senate) less viable.

We’re a nation of economic illiterates who can’t figure out when the economy actually is good. Right now, they are telling pollsters that they’re doing okay, but the economy is terrible.

And since they vote, Democrats will do substantially better in 2024 with a soft landing rather than a mild recession, regardless of whether polls are still showing voters believe that the country’s in a recession.

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Monday Wake Up Call – July 17, 2023

The Daily Escape:

Comb Ridge, UT & AZ – July 2023 photo by RC Bullough Photography

Wrongo and Ms. Right were urban pioneers in NYC in the early 1980s. We rented a loft on Maiden Lane in the financial district. Back then, we had to go uptown or to Hoboken, NJ for groceries because there were so few people living amongst the downtown forest of office towers.

But by the 2020 census, lower Manhattan was the fourth fastest-growing residential neighborhood in NYC. Since the pandemic, downtowns have looked more like the ghost towns of the 1980s with so many workers adapting to remote work. And they seem to be staying away.

Things are going to get interesting. We may be at the beginning of a massive structural change, not just a temporary blip impacting office towers: It seems that companies have figured out they won’t ever need this vast amount of vacant office space. Brookings says that office utilization averages less than 50% across major US downtowns. While The Gothamist reports that national office vacancies are at a high of 19.2% (compared to 12.6% in early 2020). They also report that McKinsey predicts that remote work will erase $800 billion from urban office real estate values.

This has many cities thinking about conversion of office space into residential space. In NYC, 25 Water Street, which was once home to the Daily News and JPMorgan Chase, has a plan to gut the offices, carve out courtyards and add 10 floors to the 22-story structure. GFP Real Estate and Metro Loft bought the building, formerly known as 4 New York Plaza, in December for about $250 million.

One loophole is that the Financial District doesn’t require that the conversions include any affordable housing. So this project will not have any apartments with capped rents for low-income units. That isn’t true in other parts of the City, like Midtown, Queens or the Bronx.

Boston is testing an incentive program for developers to convert empty downtown offices into housing. Mayor Michelle Wu announced that the owners of repurposed buildings could get up to 75% off on their property taxes. Boston’s office market vacancy rate climbed to 14.2% in the second quarter, the highest level in 20 years, according to data from CBRE Group Inc. And median monthly rent for a one-bedroom apartment has jumped 8% in the past year to $2,800.

Boston’s downtown has about half of the city’s office space. An October 2022 report commissioned by the city found that economic activity downtown remained 20% to 40% below pre-pandemic levels for industries like retail.

Back in NYC, Mayor Eric Adams is also proposing incentives to designate 136 million square feet of office space for conversion to residential development. It’s worked before: A 1995 tax break for conversions helped create 13,000 new apartment units in Lower Manhattan.

Brookings raises the question of what the taxpayers’ interest should be in these conversions:

“To what extent are current high office vacancies a market problem whose burden falls on the private sector (property owners and investors) and to what extent do they represent a market failure and policy problem to which government must respond with financial support from the public?”

The advocates of tax breaks and other financial incentives say it will:

  • Help drive foot traffic to downtown businesses struggling from a lack of commuters.
  • Bolster municipal coffers, as cities often rely on property taxes from office buildings.
  • Supply much-needed housing amid a shortage that has many paying exorbitant rents.

It seems that office-to-home conversions are no more a comprehensive remedy for housing than e-bikes are for transit issues. Few office buildings are truly suited for conversion. It’s often more straightforward for developers to knock down the existing structure and build condos from scratch.

Moreover, the best thing that cities can do to encourage more housing is to loosen zoning restrictions, allowing multi-use and apartment buildings to be developed rather than just supply tax breaks.

The battle lines are drawn. The 25 Water St. developer said state and city lawmakers will have to pay up if they actually want to turn vacant offices into homes:

“The politicians, if they want to create housing in New York City out of these buildings, they will need to provide significant incentives….And if they want to provide affordable housing, those incentives would have to be even higher.”

Time to wake up America! We can’t let our mayors give away more tax revenues to developers! We’re unsure if the current rate of office utilization will improve or not, so cities need to be smart about what they do next. To help you wake up, we dust off an oldie. Here are the Rolling Stones with “Salt of the Earth” from their album “Beggars Banquet”. Performed live at the Rolling Stones Rock and Roll Circus in 1968. This was the first tune where Keith Richards had the lead vocal:

Sample Lyric:

Raise your glass to the hard-working people
Let’s drink to the uncounted heads
Let’s think of the wavering millions
who need leaders but get gamblers instead

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Sunday Cartoon Blogging – July 16, 2023

The WaPo has an excellent briefing on Biden’s new border policy. If you’ve wondered why there’s no longer mass chaos at the southern border since Title 42 was lifted, it’s because the Biden administration has completely transformed how migrants, asylum-seekers, and those who enter illegally are treated.

You have to apply to enter the US legally by making an appointment using an app. It can take up to six weeks to get the appointment, but once you do, you are interviewed, photographed, and released to a social service agency that helps migrants, or a relative or sponsor who has registered with the feds. (Plus the app uses GPS to track your movements.) You then wait for your application for asylum to be processed and your claim adjudicated.

If you enter illegally, you are sent to a massive tent city to be fed and given necessities. You get your health checked out. And then you are sent back over the border with instructions on how to apply legally via the app.

The two processes illustrate the extent to which the Biden administration has transformed the way asylum seekers and migrants are processed along the southern border. As a result, illegal crossings have dropped by close to 70% since early May. Yes, 43,000 asylum-seekers get into the US every month. But until Congressional Republicans agree to a sensible immigration policy, controlling the influx in this manner seems to be the best alternative. On to cartoons.

What the GOP cares about:

We won’t fight climate change, so you’ll have to:

The GOP’s latest tangent:

The GOP decides the FBI is liberal:

It’s ironic that the GOP wants to defund the FBI which has always been a Republican bastion. And if the Elephant wants help with his minor surgery, Wrongo’s happy to assist. It’s doubtful that the FBI is about to start prosecuting illegal corporate activities with the same eagerness they showed when chasing after BLM and Occupy Wall Street.

Trump’s latest delay tactic:

Hollywood’s on strike:

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Saturday Soother – July 15, 2023

The Daily Escape:

Dawes Glacier, Endicott Arm Fjord, AK – July 2023 iPhone photo by Wrongo. The face of the glacier is 600’ high. While we were in front of it, the glacier calved 5 times, although never when a camera was pointed at it.

Word came that Anchor Brewing, America’s oldest craft brewer, is shutting down after 127 years in business. From CNN:

“The San Francisco-based company announced Wednesday it’s ceasing operations and liquidating the beloved business “following a combination of challenging economic factors and declining sales since 2016,” a press release said. Craft brewers, in particular, have been struggling for a variety of reasons including changing consumer habits, rising costs and lingering supply-chain challenges.”

Wrongo is old enough to remember when Anchor Steam was a cult beer in the eastern US. It was difficult to find, and it was more expensive than the big local beers. It was really an upmarket lager. There’s nothing wrong with being an upmarket lager, but today, plenty of craft brewers also do that, so America’s first craft brewery and the maker of the Steam Beer will be sold for parts. The surprising fact was that it employed just 61 staff.

It’s been a few years since the Wrong family had any Anchor products in the house. The last one was the Anchor Christmas Ale, which was for a time, an annual tradition at the holidays. But with the rise of local craft beers, tastes changed.

Today, family parties often include a craft beer made near where one of the kids live. The beers are admired because they are hard to get, and often have amusing names. The taste tests are conducted with much seriousness, although they’re similar in form to decades ago when someone would bring Coors Beer back from the west for all to taste.

Back in the day, we bought Anchor and Sierra Nevada when there were very few other craft beer offerings in the NY area. Now there are hundreds of craft beer choices throughout the country. And there’s so much good beer around, it seems logical that Anchor would fail. It’s surprising that Sierra Nevada actually seems to hold up.

But the industry’s facing headwinds:

“During the first three months of 2022, at least 53 craft breweries shut their doors, up from 42 closures in the first quarter of last year. That still leaves some 9,100 breweries in operation, but more closures are expected.”

That’s 9,100 breweries and 36,000 IPAs!

The pandemic and its ongoing effects, and the war in Ukraine continue to drag down smaller brewers, who are battling climbing costs, rising rents, and supply chain challenges.

2022 was supposed to be the “make or break” year for craft breweries, but problems remain in 2023. The biggest issue is increased competition in what has become a shrinking market for beer. Since most craft breweries cater exclusively (or mostly) to local markets, why wouldn’t Anchor still be viable in CA or a few western states? Apparently they were mis-owned.

Sapporo is a Japanese beer company that bought the brand in 2017. VinePair, a digital magazine that covers beer, wine and food reported last month that employees complained about Sapporo’s alleged mismanagement and lack of understanding of craft beer in the US. Sapporo also owns Stone Brewing, another craft beer with a national following. Let’s hope that Sapporo doesn’t do to Stone what it’s done to Anchor.

But there’s still 9,000+ breweries nationwide, so it’s easier than ever for consumers to find great beers within a few neighboring zip codes. For the brewers, they need to find a niche and make an extremely good product line. The brewer in our town has become quite successful with one location, and a rotating group of about 10 beers. They have gotten distribution in local supermarkets and liquor stores and seem willing to be a big fish in a small pond.

It’s Saturday, and in the northeast, we’re experiencing continued rounds of thundershowers that make it difficult to do much outside. In the past week, we’ve picked up around 5.5” of rain, so we won’t have to water the vegetable garden for a week or so.

And since it’s Saturday, its time for our Saturday Soother, where we step back from another week of news you can’t use and find a few moments to live as simply as possible in the present.

So grab a mug of coffee and take a seat near a large south-facing window and listen to “Jupiter” from Gustav Holst’s “Planet Suite” played here by The Royal Liverpool Philharmonic Orchestra conducted by Sir Charles Mackerras. The Planet Suite took nearly three years (between 1914 and 1917) to compose:

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