Author: wrongologist

Monday Wake Up Call – February 27, 2023

The Daily Escape:

Sunset, Blue Ridge Mountains, near Asheville, NC – February 2023 photo by Andre Daugherty

Yesterday, Wrongo posted the Gallup Poll’s recent survey showing that 65% of Americans support continuing with the war in Ukraine, even if it’s a prolonged conflict. Staying the course in Ukraine requires us to think carefully about both the means of continuing to arm Ukraine, and also about the ends we hope to achieve once the fight is over.

The New Yorker’s David Remnick interviewed Russian historian Stephen Kotkin about how the war in Ukraine ends. Kotkin points out that the war is far from over, but we can look at how it might end:

“The Biden Administration has effectively defined victory from the American point of view as: Ukraine can’t lose this war. Russia can’t take all of Ukraine and occupy Ukraine, and disappear Ukraine as a state, as a nation.”

Kotkin thinks that from the Ukrainian viewpoint, victory has mostly to do with getting into the European Union:

“…that has to be the definition of victory: Ukraine gets into the European Union. If Ukraine regains all of its territory and doesn’t get into the EU, is that a victory? As opposed to: If Ukraine regains as much of its territory as it physically can on the battlefield, not all of it…but does get EU accession—would that be a definition of victory? Of course, it would be.”

Currently, we’re experiencing a war of attrition between Ukraine and Russia. In order to win this type of war, you have to out-produce your enemy’s weapons production.

But is that realistic? The US is the major supplier of arms to Ukraine, but we haven’t ramped up our production of the weapons we’re sending to Ukraine. Instead, we’re drawing down our supplies of armaments. More from Kotkin: (brackets by Wrongo)

“We haven’t ramped up industrial production at all. At peak, the Ukrainians were firing…upward of ninety thousand artillery shells a month. US monthly production of artillery shells is fifteen thousand. With all our allies thrown in, everybody in the mix who supports Ukraine, you get another fifteen thousand….So you can [produce] thirty thousand…artillery shells while expending ninety thousand a month. We haven’t ramped up…..We’re running out.”

So, can we actually provide the means to get to the ends Biden wants, or the ends that Ukraine wants? Not without doing something radically different than we’re doing now.

Politically, from here to the 2024 election we’ll see a debate about whether we should be in Ukraine at all. This debate will form a key element in who the Republicans select as their presidential nominee.

Mike Pence isn’t a first-level presidential candidate, but on Friday he rebuked fellow Republicans who have given less-than-robust support for America’s defense of Ukraine. On NBC, he lays out the classic Republican position clearly:

“…I would say anyone that thinks that Vladimir Putin will stop at Ukraine is wrong…”

NBC also quoted DeSantis: (brackets by Wrongo)

“An open-ended blank check [in Ukraine]…is…not acceptable…..Russia has been really, really wounded here and I don’t think that they are the same threat to our country, even though they’re hostile. I don’t think they’re on the same level as a China.”

The WSJ’s Kimberley Strassel writes that Trump intends to make limiting or ending the war in Ukraine a central element in his campaign. She quotes Trump:

“This thing has to stop, and it’s got to stop now…the US should negotiate peace between these two countries, and I don’t think they should be sending very much.”

Strassel thinks that Trump sees an opening to rally the part of his base that’s skeptical of military commitments abroad. So he, like Congressional Republicans are floating a false choice: A strong America globally or a strong America domestically:

“The GOP for more than 70 years has been the party of strong defense….Trump and a small group (at least for now) of congressional Republicans risk throwing all that hard-earned credibility away, neutralizing one of the party’s greatest strengths…”

Clearly there’s a developing split in the GOP over whether America should be backing the war or seeking immediate peace in Ukraine.

Regardless of Republican Party politics, don’t Ukrainians deserve the chance to try to win on the battlefield? Whether America is willing to ramp up its weapons production will partially answer that question. And whether we’re able to keep our eyes on the prize of a reunited NATO, a reunited EU, and a free Ukraine.

Time to wake up America! It seems possible that the Republican Party might shift to preferring a strong America domestically rather than a strong America globally.

That would be a political earthquake in our politics.

And how would the Democrats adjust? Their political brand is already pretty damaged among the White non-college educated in heartland America. Would the Dems become America’s military spending Party?

To help you wake up, listen to 1973’s “Live and Let Die” written by Paul and Linda McCartney, and performed live by McCartney:

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Sunday Cartoon Blogging – February 26, 2023

From Gallup: (brackets by Wrongo)

“Nearly one year into the war between Russia and Ukraine, Americans’ support for Ukraine holds steady. A stable 65% of US adults prefer that the United States support Ukraine in reclaiming its territory, even if that results in a prolonged conflict. Meanwhile, 31% continue to say they would rather see the US work to end the war quickly, even if this allows Russia to keep its [Ukraine’s] territory.”

Here’s Gallup’s chart:

Shortly after the poll was conducted, Biden announced that the US would send 31 Abrams tanks to Ukraine.

There are significant partisan differences in how the war is viewed. Democrats are far more supportive than Republicans and independents, even though majorities of all three Party groups favor Ukraine’s continuing to fight to reclaim its former territory:

The Bulwark’s Will Saletan writes about the current disarray in the GOP over Ukraine. He’s saying that war fatigue and unease in the Republican base are being channeled and fueled by FOX, whose primetime anchors are working to undermine America’s support for Ukraine. He also mentions a few GOP officials who are fighting back by supporting Ukraine when they go on the FOX network.

This isn’t shocking, since back in the 1990s the warmonger right were literally saying “give peace a chance” over NATOs involvement in the Balkans. Mostly because the commander in chief at the time was a Democrat. This is what they do.

Wrongo thinks that, just like in the 90s, there are enough Republicans tied to the military and national security to ensure that the US won’t abandon Ukraine.

But from here to the 2024 election we’ll see a large contingent of Republican hypocrites who will turn themselves inside out trying to be peaceniks, complaining that the money spent in Ukraine should be going to Real Americans. It’s just a game to them. And It has been for a very long time. On to cartoons.

The Tucker effect:

The DeSantis labels won’t stick:

The GOP’s Information Ministry at work:

Same ‘ol from Trump:

McCarthy’s strategy:

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Saturday Soother – February 25, 2023

The Daily Escape:

Death Valley sunset, Death Valley NP, CA and NV – February 2023 photo by Leila Shehab Photography

From the NYT:

“To Democrats, the train derailment and chemical leak in the hamlet of East Palestine, Ohio, is a story of logic, action, and consequences: Rail safety regulations put in place by the Obama administration were intended to prevent just such accidents. The Trump administration gutted them.

To Republicans, East Palestine is a symbol of something…more emotional: a forgotten town in a conservative state, like so many others in Middle America, struggling for survival against an uncaring mega-corporation and an unseeing government…”

If you follow FOX news you can be forgiven for thinking that the federal disaster relief teams just got around to dealing with the hazardous materials spill in East Palestine, Ohio.

Actually, those federal teams have been on the scene since it happened.

Republicans are trying to make a political meatloaf out of Biden’s visiting Ukraine rather than visiting Ohio. Or why it took Pete Buttigieg three weeks to visit the site. Even the East Palestine mayor Trent Conaway said Biden’s trip to Eastern Europe was “a slap in the face.” But if Biden had visited, you know the mayor would say he had better things to do than shepherd around a bigwig.

Their message is that Democrats are indifferent to working-class voters.

But maybe there’s something under the surface of these politics-as-usual arguments. The derailment presents issues that Republicans rarely like to grapple with: Corporate power and a clear need for government regulation.

What may be brewing is a new and different message by the GOP’s populist wing, one that breaks with Party orthodoxy and targets corporate America. And Norfolk Southern, owner of the derailed train and also behind a clear lobbying effort to keep the government from improving rail safety, is a big and very easy target.

Vox quotes Saurabh Sharma, the president of American Moment, a public policy organization that aims to influence young conservatives to become more populist:

“I think that this tragedy that happened in East Palestine is an opportunity for Republicans that have been looking for opportunities to distinguish themselves from the neoliberal set in the party to do so.”

The execrable JD Vance was in East Palestine with Trump, and told Axios afterwards that figures like Trump, Tucker Carlson and himself recognize that East Palestine residents and those like them were the GOP’s voters:

“The three of us, in our own ways, recognized instantly: This is fundamentally our voters, right? These are sort of our people. It’s a reasonably rural community. It’s been affected by industrialization,” Vance said. “These are the people who really lost when we lost our manufacturing base to China, And these are the people who are going to be forgotten by the media unless certain voices make sure that their interests are at the forefront.”

Wow, Yale grad Vance, trying to speak mid-western English says: “This is fundamentally our voters, right?”

The question is: Can Republicans build an economic populist base within their Party? It’s clear that Trump deserves criticism from the Democrats over the accident, since it’s easy to connect the derailment to Trump’s deregulation of ineffective train braking systems, the cause of the accident. That means Trump wouldn’t be exempt from political attacks by economic populist Republicans.

Conservatives like Jon Schweppe, the director at the American Principles Project, a conservative think tank, tried to link a few ideas together:

“There is a growing sense that all of these corporations are against us — not only are they trying to screw us over on the woke stuff, but generally, they just don’t care about ordinary people.”

The American Principles Project is virulently anti-woke, anti-trans and anti-voting rights. Can they also be anti-corporations? And how close are they to mainstream Republicans?

Can the East Palestine accident cause Republicans to embrace truly populist issues? Would the GOP tie corporate graft and greed to bureaucratic incompetence and Democratic indifference? They seem to fit easily within existing Tucker Carlson messaging.

BTW: All of it also fits very easily into Democratic messaging.

But let’s forget about who’s woke or, how will the second year of the Ukraine war go? It’s time for our Saturday Soother, when we disengage from the world as completely as possible and focus on finding a calm state to prepare us for the week to come.

Here in the Mansion of Wrong, we spent time upgrading our internet service to fiber optic. That wasn’t the promised slick changeover touted by the provider, but it’s finally working.

To get soothed, settle in a big chair by a south-facing window and watch Lang Lang play Debussy’s “Suite Bergamasque, or Clair de lune”. This performance was part of an album launched in Paris on Valentine’s Day, 2019. Listen as Lang Lang performs on a boat cruising along the Seine while you enjoy Paris at night:

 

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A Few Wealthy A—holes Want To Secede From America

The Daily Escape:

Poppy bloom, Picacho Peak SP, Picacho, AZ – February 2023 photo by Leila Shehab

Wrongologist blog commenter Terry McK had this to say responding to Wrongo’s post about Speaker McCarthy and his lieutenant Marjorie Taylor Green’s antics surrounding gifting Tucker Carlson with the J6 videos:

“We lie to ourselves about the nature of our government…..Nor have we a marketplace of ideas. We could have – but the marketplace is dominated by the intellectual equivalent of soda and snacks….Now most speeches are performance art delivered to an empty chamber. ”

He’s correct. Here are a few recent developments that track with Terry’s thinking. First, Joe Perticone in the Bulwark: (emphasis by Wrongo)

“A strange proposal is working its way through the Idaho state legislature that would have that state envelop more than a dozen of Oregon’s most conservative eastern counties—in effect, shifting the border between the states 200-plus miles to the west. While last Wednesday’s vote in the Idaho House approving this “Greater Idaho” idea is nonbinding, it does legitimize the movement that has long been promoting the plan.”

A Bluer Oregon and a Redder Idaho. This movement is by the far-Right members of Idaho’s government. And among the 15 Oregon counties targeted to become part of Idaho, 11 have so far formally expressed their support for the plan. So unlike Taylor Greene’s rantings about a national divorce, this idea has a lot of elected officials on board.

Second, Ars Technica reports that:

“Two Republican lawmakers in Idaho have introduced a bill that would make it a misdemeanor for anyone in the state to administer mRNA-based vaccines—namely…COVID-19 vaccines made by Pfizer-BioNTech and Moderna.”

This probably won’t go anywhere. And state-level politicians everywhere also have tons of bad ideas.

Finally, a sober look how some of the wealthy in the fancy towns across the western US are angling for succession or civil war comes from Vanity Fair’s James Pogue. Writing about Jackson Hole, Wyoming:

“…there was a constant traffic of small jets and private aircraft, humming into and out of a town that has become a modern refuge for people with remote jobs…many of them driven to the Northern Rockies by a worry…that the rest of America is on its way toward environmental, political, or economic breakdown.”

Pogue speaks with Catharine O’Neill, great-great-granddaughter of John D. Rockefeller. She’s a Conservative who worked in Trump’s State Department and after the 2020 election moved to Wyoming:

“She…views the corporate elite as enemies of America and believes that we’re on the cusp of a populist uprising against the brand of transnational capitalism championed by Republicans for most of the last half-century.”

She lives on a 580-acre “vertically integrated cattle operation” she started. Today she’s anti both Parties but would happily vote for Tucker Carlson if he’d step forward. These are the thoughts of the “dissident right”. A few of the wealthy have created secretive groups to help people “exit’ from society and from what they see as a failing American system.

From Pogue:

“Who even needs a civil war,” one…texted me recently, “when the institutions are doing such a good job of delegitimizing themselves?”

This cohort sees the Northern Rockies as one of a few places in America that will be livable once life in much of America is fighting heat waves, floods, storms, and fires. They’re focused on how to live through “managed decline,” the wind-down period after the age of cheap fossil-fuels and rapid economic and technological progress wane.

They’re certain that will also bring about the erosion of America’s “state capacity”, the government’s ability to do things. Then our “real economy” will hollow out, and our political divisions will worsen, even more than currently.

But this movement isn’t only supported by the wealthy. Average American workers are increasingly priced out of housing and better educational opportunities for their kids. Many of these workers have service jobs that support the wealthy from Los Angeles to Jackson Hole, and from Cape Cod to Miami Beach. A Moody’s Analytics report says that for the first time in 20 years, the average American is “rent-burdened”, meaning they put at least 30% of their income towards housing.

This makes many middle class Americans very susceptible to arguments by the dissident right about how corporate elites and modern capitalism are hurting their chances to realize the American Dream. This was the basic thrust of the “Occupy Wall Street” movement in 2011. Now, the right wing is trying to take up their cause.

Will there be a second civil war? It doesn’t need to be a war. People don’t understand how easy it would be to launch an insurgency in America. We should take a lesson from the way the Taliban defeated the American military using small arms, and there are plenty of small arms in America. Insurgencies are less a war than an extended political conflict, in which the insurgents try to get governments to overreact. And when they inevitably do, the insurgents build support. It doesn’t take all that much to create a plausible scenario for conflict.

This is Wrongo’s second wakeup call this week. We can’t do much about the wealthy who tell themselves that they’re better off without America.

But we can and must do a lot to persuade average Americans not to fall victim to their rhetoric.

Jimmy Carter’s 1976 stump speech included this:

“I’ll never lie to you”…and…”we need a government as good as its people…”

Would living his message today help us hold the country together?

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Speaker McCarthy Gives FOX’s Carlson The Jan 6 Videos

The Daily Escape:

Poppies beginning annual super bloom, Chino Hills, CA – February 2023 photo by Road to Something New

Mike Allen of Axios reported on Monday that House Speaker Kevin McCarthy (R-CA) had made all the Capitol security footage from January 6 available to FOX’s Tucker Carlson:

“House Speaker Kevin McCarthy has given Fox News’ Tucker Carlson exclusive access to 41,000 hours of Capitol surveillance footage from the Jan. 6 riot, McCarthy sources tell me. Carlson TV producers were on Capitol Hill last week to begin digging through the trove, which includes multiple camera angles from all over Capitol grounds. Excerpts will begin airing in the coming weeks.”

Yes, it’s the same Tucker Carlson who repeatedly questioned official accounts of Jan 6, downplaying the insurrection as “vandalism.” It’s also the same guy who, in Dominion Voter Systems’ lawsuit against FOX News, was shown to be lying to his viewers about the legitimacy of the 2020 presidential election.

Carlson’s producers are already going through the videos. They will be looking for footage of insurrectionists that will support the MAGA contention that the insurrectionists actually were tourists who simply had lost their way. It seems likely that Carlson’s team will selectively edit the footage to paint a picture that Jan 6 couldn’t have possibly been an insurrection. If you doubt this is his intent, Mike Allen also reports that:

 “Carlson last year called the attack an ‘outbreak of mob violence, a forgettably minor outbreak by recent standards.’”

Rep. Jamie Raskin (D-MD) a member of the Jan. 6 committee, said this:

McCarthy granted access to non-public materials about the insurrection to an amoral propagandist who constantly misrepresented the facts about both the 2020 election and the Jan. 6th insurrection.

Giving Carlson this access to the materials may be within McCarthy’s purview, but the videos actually belong to the American people. So why can McCarthy grant “exclusive access” to Carlson? If the idea is to achieve more transparency, then all news organizations (and the American public) should be able to view them, not merely a political hack like Carlson.

In one sense, McCarthy’s doing this shouldn’t be a surprise. The extremists who extracted concessions during McCarthy’s campaign for the Speakership have been calling for this almost from the start of the J6 Committee’s work.

And Rep. Marjorie Taylor Greene (R-GA), who spent time yesterday calling for the red states to secede:

She then spent the rest of her day taking credit for the video release to Fox:

Let’s repeat that: The person taking credit for pushing McCarthy to make this release, was calling for “a national divorce” (civil war to the rest of us) two hours earlier. It all sure sounds legit.

Here’s some background on how the Committee handled these videos when they were conducting investigations. Compare that to handing them over to FOX. From the WaPo:

“People familiar with the video footage say that the committee investigating the Jan. 6 insurrection had access to a special dedicated terminal installed in the committee office that had password- protected access to the volume of footage. The committee asked for permission from U.S. Capitol police before they used any of the footage in public hearings, these people said, as they did not want to publicly disclose the location of security cameras in the building.”

More:

“The committee cut and minimized use of the footage accordingly, these people added. ‘We used the material that we thought was most important in demonstrating findings, and we were extremely cautious in what we chose to use,’ said a former committee staffer who expressed concerns about the security risks posed by Carlson’s access to the entire trove of surveillance footage.”

So don’t say McCarthy didn’t have a choice. He undoubtedly felt pressure to release the raw footage to FOX, but he could have done that on a government server allowing all news services to comb through it, as well as the public.

He went to Carlson because he needs to satisfy his extremist Republican Congressional members.

We need to learn whether the DoJ already has copies of these tapes. We know that McCarthy’s release of Capitol Police surveillance video will have limited effect on the current J6 criminal cases because defense lawyers have already had access to the footage for months and have been using it in existing cases at trial.

Tucker is gonna tuck around.

Democrats and any other defenders of democracy had better get ahead of the FOX narrative. Like Biden just got ahead of Putin’s spring Ukraine offensive.

Because we know what’s coming.

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Monday Wake Up Call – February 20, 2023

The Daily Escape:

Oatman, AZ on Route 66 – February 2023 photo by Laurel Anne Lindsay

Some of you may have heard about a study called “The Hidden Tribes of America” by the group More in Common. It’s trying to understand the forces driving political polarization in America today. They classify the American electorate into seven distinct groups, they call “Tribes”.

But their key conclusion is that most people don’t belong on the far left or far right: (brackets by Wrongo)

“
the largest group that we uncovered in our research has so far been largely overlooked. It is a group of Americans we call the Exhausted Majority…representing a two-thirds majority of Americans, who aren’t part of the Wings….most members of the Exhausted Majority aren’t [simply] political centrists or moderates. On specific issues, their views range across the spectrum.”

More:

“But while they hold a variety of views, the members of the Exhausted Majority are also united in important ways: They are fed up with the polarization plaguing American government and society
.. [they] are so frustrated with the bitter polarization of our politics that many have checked out completely
.. they aren’t ideologues who dismiss as evil or ignorant the people who don’t share their exact political views. They want to talk and to find a path forward.

This chart from the study graphically illustrates the seven tribal groups of the American populace. As you can see, there is a left-wing group that is about 8% of the US population. And there are two right-wing groups that equal about 25% of Americans. That leaves four groups in what the authors call the “Exhausted Majority”. They are 67% of the American populace.

Here are some demographic characteristics of the seven groups:

  • Progressive Activists: younger, highly engaged, secular, cosmopolitan, angry.
  • Traditional Liberals: older, retired, open to compromise, rational, cautious.
  • Passive Liberals: unhappy, insecure, distrustful, disillusioned.
  • Politically Disengaged: young, low income, distrustful, detached, patriotic,
  • Moderates: engaged, civic-minded, middle-of-the-road, pessimistic, Protestant.
  • Traditional Conservatives: religious, middle class, patriotic, moralistic.
  • Devoted Conservatives: white, retired, highly engaged, uncompromising,

Wrongo identifies as one of the Traditional Liberals, their description rings true.

The authors say that in their research, this tribal membership predicted differences in Americans’ views on various political issues better than demographic, ideological, and partisan groupings. You can read or download the whole study here.

An “Exhausted Majority” may be a positive political development. Wrongo spends nearly every day thinking that there are just two opposing camps. And that they each view each other with fear and loathing, refusing to listen to anything that doesn’t fit their existing narrative. As we’re entering the next presidential campaign, it’s good to know that Wrongo’s view of our polarization might be well, wrong.

Is the “Exhausted Majority” merely a new response to our dysfunctional politics? Wrongo isn’t alone in thinking that what’s wrong with our country will take decades to overcome. Faced with that, people start to look for quick fixes, or a way to stop listening to the wrangling. And you don’t have to be unaligned with either Party to share this sense of exasperation.

The people described in the “Exhausted Majority” are similar. It’s also true that for most people, politics isn’t the be-all-end-all of their lives. They’d prefer that the business of government didn’t require their involvement. They’re trying to get their kids educated, and to keep them safe. They prefer to see political compromise happen without needing to be involved.

But if you can walk away from politics when it frustrates you, then you’re in the lucky minority:

  • There are large numbers of parents who have discovered that their child is addicted to opioids.
  • There are many people who had lost their health insurance when they were laid off.
  • Many sent their daughter to college in the South only to learn that she no longer has any reproductive rights.
  • Many are worried that books are being taken from public school libraries.
  • Some fear that they may lose the right to vote.

These people can’t simply throw up their hands and walk away. Only political action will help them. We all know that the political radicals are irredeemable. We also know they make the most noise, but they’re a minority.

The fed-up people on both sides and in the middle have to find a way to take the country back from the radicals, instead of allowing ourselves to be herded into existing opposing camps.

Time to wake up America! We can’t simply drop out. There’s too much at stake. Democrats need to find candidates and a message that can motivate an additional 5%-15% of the “Exhausted Majority” to vote with them. To help you wake up, watch, and listen to the RedMolly band play a very nice cover of Richard Thompson’s “Vincent Black Lightning 1952”. It’s a surprise how beautifully it adapts to a bluegrass idiom, and the dobro work makes it:

“Vincent Black Lightning” is one of the most perfect songs ever written. We saw Thompson perform it live at Tanglewood last summer.

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Sunday Cartoon Blogging – February 19, 2023

(Wrongo and Ms. Right are sending healing thoughts to friend and blog reader Gloria R.)

There was a small article in the NYT saying that European gas prices had dropped to pre-Ukraine war levels:

“On Friday, the European benchmark price of gas fell below 50 euros ($53) per megawatt-hour for the first time since late 2021. Prices spiked above €300 per megawatt-hour in mid-2022, as Russia curtailed gas exports to Europe after its invasion of Ukraine.”

This isn’t what economists forecasted as the mid-winter energy situation in Europe, which all of a sudden has too much natural gas. It seems Russian gas isn’t indispensable to Europe. Natural gas is, but not necessarily Russian gas. Of course, the mild European winter was a big factor. And regional natural-gas inventories, which are at about 65% capacity, on average, are at their highest levels in years, according to a Bloomberg analysis.

Russia and its gas company Gazprom spent decades building the European (and specifically) the German market. The cost was the building of massive infrastructure to move their gas to Europe. Then Russia pissed it all away last February.

At great cost, they’ll eventually build new infrastructure to move all that gas to Asia and elsewhere. On to cartoons.

America has been reduced to this:

Or is it this?

Nikki says we need younger politicians:

Why the balloon story doesn’t go away:

More about America’s sickness:

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Saturday Soother – February 17, 2023

The Daily Escape:

Where desert meets mountains, near CA/NV border –  February 2023 photo by Austin James Jackson

Liz Hoffman at Semafor has a short analysis of the value of credit card loyalty programs to airlines. Many of us have them and we use them to purchase our everyday goods in order to earn air miles or points that we later use to get a seat upgrade, or to fly for free.

Everyone knows about this “perk” from the airlines, but few of us know just how profitable these programs are to the carriers. It turns out that they are the most lucrative assets on airlines’ balance sheets. The uncertain profitability of the airline business makes them very important since the airlines often lose money.

The airlines used to be secretive about just how profitable their frequent-flier programs were. But, when they were in deep financial trouble during the pandemic, several US carriers pledged their loyalty programs as collateral for new loans when other financing failed.

That required the airlines to open the books on their loyalty programs. And now we’ve learned that their credit card businesses are more valuable to shareholders than their basic business of flying planes. From Hoffman:

“It turns out that United’s rewards card program with JPMorgan Chase is valued today at $22 billion. But United’s market capitalization is $16 billion, meaning investors are assigning negative value to the part of its business that flies airplanes. The same goes for American and Delta.”

From a market valuation perspective, the basic businesses of the big three US airlines are under water. Hoffman provides an eye-opening chart showing that the airlines’ huge investment in aircraft and ground operations doesn’t produce a dime of market value for their shareholders:

As you can see, none of the big three US carriers get any incremental market value from flying planes. So should they either sell off all of that hardware, or spin off their credit card businesses?

They can’t. They need the flights to create demand for the points/miles. The secret sauce behind the success of their loyalty programs is that the actual value of an air mile isn’t clear. Customers think they’re getting a $3,000 upgrade to first class for a few thousand points, while the airlines know that the upgraded seat is unlikely to sell at all, and if it does, it won’t be for anything like that amount.

Foreign carriers have less reliance on their rewards programs. Many operate with government subsidies, so their flights are more profitable. And they serve consumers who are less comfortable with plastic. So their market valuation is less dependent on loyalty programs:

We have to assume that the board members of the airlines have always known about the value of their loyalty programs. But now everyone is seeing the potential value, and the airlines might be thinking that they can wring even more value from them.

What’s distressing about this is that the airlines needed bailouts only two years ago during Covid. The US airlines received $54 billion in federal aid to pay workers during the Covid pandemic. That agreement prohibited them from share buybacks.

That’s because they had continuously bought back shares in the years prior to the bailout. The four biggest US carriers — Delta, United, American, and Southwest — spent about $40 billion buying back their companies’ stock between 2015 and 2020. That effort to improve their market valuation failed spectacularly, since their loyalty programs are now worth more than the companies themselves.

America added a 1% tax on buybacks excise tax for buybacks this year, passed as a part of the Inflation Reduction Act. This will help reduce the deficit and might dampen American corporations’ appetite for stock buybacks. The largest US airlines are making money again, and labor unions don’t want them to spend it on more stock buybacks. In a public petition, some of the largest airline labor unions — representing more than 170,000 pilots, flight attendants, customer service agents — are urging carriers to stabilize operations and invest in workers before spending on buying back more of their stock. We’ll see if that ever happens.

Enough high finance, it’s time for our Saturday Soother. Here on the Fields of Wrong, we’ve had a few warm days that led to the beginning of our spring cleanup. To settle into your soother, grab a mug of coffee and a seat by the window. Start by forgetting about Nikki Haley’s campaign or what to do now that football is over.

Now listen and watch RenĂ©e Fleming sing “Nacht und TrĂ€ume” (Night and Dreams) written in 1825 by Franz Schubert conducted by Claudio Abbado with The Lucerne Festival Orchestra in 2005:

 

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GOP Attacks ESG Investing Rule

The Daily Escape:

Lake Sammamish, Issaquah, WA – February 2023 photo by Everything Washington

Are you following the Republican war on ESG? ESG stands for Environmental, Social, and Governance, key criteria that may impact a company’s market valuation and its business behavior. ESG has become a red line for Conservatives, who argue that companies that follow it are failing to live up to their fiduciary duty to maximize profits for investors.

The jury is still out on whether ESG investing delivers the same, better, or worse returns. But, despite any definitive evidence, Republicans hate ESG investing. From Semafor’s Liz Hoffman:

“Last year, Republican-controlled legislatures began passing laws blacklisting state investment funds from doing business with money managers that pushed what they deemed to be liberal agendas, like boycotting gun manufacturers and mining companies. BlackRock, run by Larry Fink, an outspoken supporter of so-called ESG principles, has taken the brunt of the pressure, with at least 10 states pulling their money from his firm or threatening to.”

For the many Republican state governors, treasurers, and attorneys-general who joined in, it’s turned out that several hadn’t done their financial homework before joining the culture war. Some failed to calculate the financial cost of their ideological stance. Semafor cites a few examples:

  • Indiana’s budget office found that a bill forcing state pension funds to divest from “woke” money managers would cost $6.7 billion over the next decade in lower-than-market returns. That also would force retirees to increase their paycheck contributions.
  • Executives in one of Kentucky’s retirement funds argued with the state’s treasurer that a recent law requiring them to pull money from BlackRock and 10 other firms seen as hostile to the energy industry would violate their duty to get the highest returns for pensioners.
  • A 2021 Texas investment blacklist cost municipalities an additional $303 million to $532 million in bond interest, according to a study by University of Pennsylvania. JPMorgan, Citigroup, and other banks left the state after the law was passed, leaving less competition for bond underwriting. That raised interest rates about 40 basis points.
  • North Dakota voted down, 90-3, a Texas-style bill that would have required the state treasurer to prepare a blacklist of financial firms that have committed to reducing carbon emissions, but would have stopped short of banning state investment funds from doing business with them.

Hoffman concludes that:

“Owning the libs turns out to be expensive.”

There are always trade-offs between principles and profits. Whether Republican politicians decide the political value of the fight offsets the lost profits is another question. This will at some point become a question for voters, who are the taxpayers and pensioners effected by these decisions.

In one way the GOP has already won a battle in the culture war on ESG. BlackRock has changed its marketing to tout its investments in fossil fuels. It also deployed new technology that allows investors to cast their own ballots in corporate elections instead of outsourcing their votes to the firm. Black Rock hopes these moves may blunt criticism that they are pushing a progressive agenda.

But the GOP isn’t giving up on fighting ESG. Politico is reporting that Sen. Mike Braun (R-IN) has offered a joint resolution under the little-known Congressional Review Act  (CRA) to overturn the Department of Labor’s recent rulemaking on ESG investing. The new rule took effect on January 30.

The rule allows fiduciaries to take ESG factors into consideration when choosing retirement investments. It potentially impacts the retirement savings of 152 million American workers whose accounts are governed by the Employee Retirement Income Security Act, or ERISA. From Braun:

“You cannot direct funds…to ESG. You’ve gotta go for whatever is going to give you the best financial return….That doesn’t mean that someone couldn’t choose to tell their broker to invest in ESG.”

Braun has 60 days to gather a majority in the Senate to overturn the rule. His has all 49 Republican Senators and Democrat Sen. Joe Manchin. If Braun can get 51 votes in the Senate, and given that the House is controlled by Republicans, the new rule would go away.

OTOH, a study by Penn State found that 70% of registered Republicans surveyed opposed government interference in ESG investments, higher than Democrats with the same position (57%). From Forbes:

“This exposes an irony at the heart of the ESG culture war: right-wing critics are seeking to actively interfere in decisions made by investment professionals about how to safeguard their clients’ money. In any other context, they’d be up in arms about the very thing they’re doing here.”

How silly to expect consistency from the GOP. We’ll see if Braun can find another Democrat in the Senate to join the Republican culture war on ESG.

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Ohio’s Airborne Toxic Event

The Daily Escape:

Roan Mountain, NC – February 2023 photo by Spencer Carter. Roan Mountain has the largest naturally growing gardens of Catawba rhododendrons in the world.

Back on February 3, a Norfolk Southern (NS) train carrying hazardous materials derailed near the town of East Palestine, Ohio. Federal investigators say a mechanical issue with a rail car axle caused the derailment. After several days of underreporting, we now know what happened.

Here are some facts: The derailment included 50 cars, 20 of which carried toxic materials, 14 of those contained vinyl chloride. The subsequent fire burned for three days. Then there was a “controlled release” of poisonous gas. And finally, effects of the poison were felt on locals, their animals, and local waterways.

The axle problem is important since it is the cause of all the hardship in East Palestine. Trains use steel wheels on steel rails because they produce 85+ % less friction than rubber truck tires do on roads. The contact point of a wheel on the rail is about the size of a dime. Compared to trucks, trains are cheaper (4 cents vs 20 cents per ton-mile in the US), and more sustainable: One ton of freight can be moved over 470 miles on a single gallon of diesel fuel.

But sustaining that economic advantage requires the railroads to maintain all that steel in good working order. Otherwise if things go wrong with a train that’s 4.5 miles long, they can go very, very wrong. And reporting seems to indicate that NS didn’t maintain its steel wheels correctly.

Also, the derailed NS train was not classified as a “high-hazard flammable train,” despite its hazardous and flammable cargo. Such a classification would have lowered its speed and affected its route. From Lever News:

“Though the company’s 150-car train in Ohio reportedly burst into 100-foot flames upon derailing — and was transporting materials that triggered a fireball when they were released and incinerated — it was not being regulated as a “high-hazard flammable train,” federal officials told The Lever.”

Apparently when current transportation safety rules were first created, a federal agency sided with industry lobbyists and limited regulations governing the rail transport of hazardous compounds. That decision effectively exempted many trains hauling dangerous materials including the NS train in Ohio, from the “high-hazard” classification and its more stringent safety requirements.

Generally, workers want safety and the bosses want money. Safety requires additional time, more workers, and money. Deregulation contributes to the lack of safety. Using vinyl chloride in a chemistry lab requires safety equipment. Tank cars containing thousands of gallons of it should require more than the government apparently thinks is safe.

Wrongo always looks at the politics in these sorts of industrial disasters because they are usually caused by the economics created by politics.

Given how dangerous these chemicals are, and given how they are used and transported, we have to expect accidents like this to happen. But the government should be able to tell us whether the current accident rate is higher or lower than expected, and if higher, what should be done to correct the problem.

We trust the bureaucrats that make the rules to balance safe operations against the risk of an airborne toxic event like this. Wrongo’s brief look into this one incident doesn’t evidence that kind of trust. It appears that the bureaucrats who make the rules on railroad safety were influenced by the industry and wrote a rule that puts the economics for the railroad industry ahead of public safety.

These issues exist everywhere in the relationship between industry and government. There’s always pressure by the industry on the bureaucrats to deregulate. In a man-made disaster, that can place greater burdens on the communities, like just happened in East Palestine.

This is what the Michael Lewis’s book “The Fifth Risk” is about: People who go to school, get extensive training and then work in obscure corners of the government. Lewis talks about how important these people are, and how for decades they’ve been denigrated, vilified, and ignored, largely by Republicans.

This is another area in which the GOP is awful in a completely lopsided way to Democrats.

The existence of corporations who can impose risks on the rest of us is what happens when there is unequal political power. We need a state with a strong regulatory system to protect us. The state must build regulatory regimes for chemical spills that shift the risks back onto those who create them.

NS in this case, has said that they will be fully responsible for the damages caused in East Palestine.

That’s encouraging, but how does that little town with a population of less than 5,000, or even the state of Ohio hold NS to their word?

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