Congress – Page 5 – The Wrongologist

Cartoon Of The Week

The Daily Escape:

Cascade River Valley, North Cascades, WA – September 2023 photo via WanderWashington

Given how often the Republicans in the House shoot themselves in the foot, Santa better bring them Kevlar shoes. This cartoon expresses the problem perfectly:

The room where it never happens:

Should Kamala Harris Stay As VP?

The Daily Escape:

Cosmic Ashtray, Harris Wash, Escalante, UT – September 2023 photo by Michelle Strong. The rock that looks like a bird in the center sits in sand, not water.

There’s the whispering campaign among Democrats saying that Biden is too old to run, and there’s the whispering campaign that says Kamala Harris should be replaced on the ticket to help out ol’ Joe. Like the Biden whispers, when Wrongo speaks with Democrats about Harris, the vast majority are wishing that someone else would be the VP candidate on the Democratic 2024 presidential ticket.

Those two thoughts can be viewed as one, or independently of each other. Wrongo addressed the issue of Biden’s age here:

“Biden has slowed down, that’s objectively true. But he is worlds better than Trump. And if those are the choices for president in 2024, be thankful that the old guy is on the right side of history.”

Barring a Biden health catastrophe before the summer of 2024, no Democrat will challenge Biden’s running for a second term. But the same can’t be said for Harris. Some think Biden could inject new enthusiasm into his campaign by picking a new running mate for 2024.

These two whispering campaigns are linked because many Americans think that it’s crucial to have a vice president who is seen as a capable successor to a president, in this case, Biden. After all, he will be 86 when his second term ends in 2029. Even for a relatively healthy 80 year-old about to be 81, the odds of something going wrong increases steadily between 81 and 86.

Poll numbers indicate that the public doesn’t support Harris to that extent. She’s less popular than a relatively unpopular Biden. That’s not a good situation. OTOH, as the Niskanen Center says, VPs generally have little to no impact on a presidential race and almost no direct effect on voter decision-making.

Where they can make a slight difference is in targeted demographics. A candidate can pick up (or retain) support among certain groups of voters. This is where dropping Harris from the ticket would cause more problems than it would solve:

“…it is hard to imagine a core Democratic constituency that Biden can less afford to deliberately alienate than Black women, who gave the president an 81-point margin in 2020…especially at a time when pollsters keep warning that turnout among voters of color is one of the president’s worst potential problems.”

“It is…impossible to deny that Harris has liabilities or deny that she has disappointed as both a presidential candidate and now as vice president. She’s been caught flat-footed too many times by what seemed like simple queries, and she has failed to stake out a clear policy space for herself inside the party. But Biden has done her no favors, either. He put her in charge of the southern border, an effectively impossible task given that Congress has shown zero interest in addressing the many problems there.”

Yet, according to Gallup, Harris had far better approval numbers at the time of her inauguration than Pence did when he became VP.

Booting Harris from the ticket would be a self-inflicted wound. Biden’s brand (and one of the keys to a 2024 victory) is that he’s a no-drama politician (in contrast to Trump). There’d be no better way to shatter that image than for Biden to dump his VP a year before the election.

Some Dems are worried that in a second Biden term, Harris will become the Party’s de facto 2028 nominee. It’s true that current or former VPs who seriously seek their Party’s nomination often get nominated. But Harris is at well under 50% in polls that asked who Democratic primary voters would support if Biden didn’t run again. One survey from Ipsos/Reuters had her at just 20%.

But, after eight years of seasoning as VP at the national level, it might be that Harris would be a much better candidate than she was in 2020. And there is no telling how governors like Gretchen Whitmer, Josh Shapiro or Gavin Newsome might handle the national spotlight. Think how Ron DeSantis withered once everyone got to know him.

So Harris isn’t going anywhere in 2024.

But there are other troubling issues for Dems who feel less than enthusiastic about the 2024 ticket. NBC says that political ad spending is projected to reach $10 billion by the end of this election cycle, making it the most expensive two years in political history. But Michelle Goldberg wrote that:

“…panic is setting in among some progressive groups because the donors who buoyed them throughout the Trump years are disengaging…..As both big and small donors pull back, there have been layoffs across the progressive ecosystem, from behemoths like the Sierra Club to insurgent outfits like Justice Democrats, the group that first recruited Alexandria Ocasio-Cortez…”

Dem funding is falling just when they need money more than ever:

“It was probably inevitable that left-leaning fund-raising would fall once the immediate crisis of Donald Trump’s presidency ended. Activism, like electoral politics, is often thermostatic: There’s more energy on the right when Democrats are in power, and more on the left during Republican administrations.”

Goldberg also mentions the Dems’ never-ending funds raising via email, something that frosts Wrongo:

“If you’re on any progressive mailing lists, you surely know what I’m talking about: the endless appeals, sometimes in bold all caps, warning of imminent Democratic implosion.”

The relentless drumbeat in Wrongo’s inbox has caused him to cut off the Democratic Party completely in the past two years. If every email is “critical” then none are critical. If this month’s deadline is “crucial” then next month’s can’t be.

Small donors are punished every day for their giving to Democrats. Their information is sold and repackaged back to them from all across the political ecosystem. Wrongo won’t begin donating again until January 2024.

Finally, it seems to be in the DNA of Democrats to want a deus ex machina to deliver them from Trump and Republicans. It may be that some of the 91 counts put Trump in jail, but don’t count on the 14^th Amendment malarkey to get him off the ballot, unless he’s convicted of “treasonous conspiracy” like some of the Jan. 6 defendants.

Consistent with that, Many Dems are hoping for a savior to ride up on a white horse and “save” the Party from Biden and Harris.

But Democrats came to the dance with Biden — and that’s who they’re leaving with.

Romney Exits

The Daily Escape:

Northern Lights, Malletts Bay, Lake Champlain, Colchester, VT – September 2023 photo by Adam Silverman Photography

By now, everyone’s heard that Mitt Romney (R-UT) isn’t going to run for a second term in the Senate. From the WaPo:

“Romney, 76, said his decision not to run again was heavily influenced by his belief that a second term, which would take him into his 80s, probably would be less productive and less satisfying than the current term has been.”

He used the opportunity to say that Biden and Trump were too old to be the presidential candidates of their Parties, and they, like him, should stand aside and let the next generation of politicians take center stage.

But the big news was generated from a few quotes Romney made to McKay Coppins, who’s book about Romney is coming out in October. Coppins has a teaser article in The Atlantic in which Romney lets loose his ire against Trump (who Romney carefully cultivated in 2016 and 2017, when he was angling to be Secretary of State):

“So many Republican Senators privately expressed their support for Romney’s public criticism of Trump that the Utahan began keeping count, telling staffers he’d had more than a dozen nearly identical exchanges. He recalled one senior lawmaker complaining to him: “[Trump] has none of the qualities you would want in a president, and all of the qualities you wouldn’t.”

Romney told Coppins:

“Almost without exception, they shared my view of the president.”

This has earned Romney accolades from the media and from a few Democrats. Karen Tumulty in the WaPo credits Romney with “paving the way for national health-care reform…” This ignores the fact that Romney ran for president in 2012 promising to repeal Obamacare.

Yet, after reading The Atlantic article, the media used terms like “noble,” “principled,” and “courageous.” But there is nothing courageous about saying the right thing only when you’re on your way out the door.

Wrongo has had issues with Romney since his run for the presidency in 2012. In May of 2012, Wrongo wrote:

“Over the past few days, Mitt Myth Romney has taken credit for GM being alive and Osama Bin Laden being dead.”

On the auto bailout Wrongo had previously reported what Romney actually said about the auto industry bailout: (emphasis by Wrongo)

“On February 12, 2012, Romney said: “Three years ago, in the midst of an economic crisis, a newly elected President Barack Obama stepped in with a bailout for the auto industry. The indisputable good news is that Chrysler and General Motors are still in business. The equally indisputable bad news is that all the defects in President Obama’s management of the American economy are evident in what he did.”

/snip/

“The president tells us that without his intervention things in Detroit would be worse. I believe that without his intervention things there would be better.”

Romney lied or changed his positions throughout his 2012 campaign against Obama. America is better off because he only received 206 votes in the Electoral College to Obama’s 332. He always was a plutocrat who’s political philosophy is basically trickle-down economics, low taxes and traditional religious cultural values.

There is room for those views in our politics, but Romney, who was the only Republican who twice voted to impeach Trump, could have done more to rally his fellow Senators to confront Mr. 91 counts. But, he’s gone from being the Republican nominee for president to being forced to leave politics just a decade later.

You may say “Thank God for Brave Men like Mitt Romney”, men with strong spines willing to stand up for what they believe and then march forward right out of the room!

Enough for this week, it’s time to let go of whatever is happening to Hunter Biden and his impeachable dad, and center ourselves for the government shutdown that’s coming at the end of the month. It’s time for our Saturday Soother!

Here in northwestern Connecticut, we’re seeing nights in the high 40° as summer draws to a close. Despite the threats from Hurricane Lee, let’s spend our Saturday Soother outside, sitting on the deck. To help you let go of the many insults of your week, listen to “Winter” (“Invierno”) from Astor Piazzolla’s “Four Seasons of Buenos Aires” (“Las Cuatro Estaciones Porteñas”). Piazzolla was an Argentine composer who is credited with developing the nuevo tango.

Wrongo and Ms. Right were fortunate to attend a concert last week which featured Vivaldi’s Four Seasons followed by Piazzolla’s Four Seasons of Buenos Aires. Piazzolla’s classical work often features tango like rhythms. Here is his “Winter” played by Royal Concertgebouw Orchestra in Amsterdam, NL in 2014. The soloist is the conductor Liviu Prunaru:

Is Biden Too Old?

The Daily Escape:

Sunset, Coquille River Lighthouse, Bandon, OR – September 2023 photo by Mitch Schrieber Photography

At lunch this week with three people all who are around 80 years old, one whispered that “Biden is too old”. The rest of us agreed. In a perfect world, Biden would be considering winding up his political life and shipping his boxes to Rehoboth Beach in Delaware.

But we don’t live in a perfect world. Biden will run for president again, and the polls show it’s likely to be a tight race against Trump. Many in the press see Biden as too frail to carry out even basic duties, leaving his aides to secretly run the country in his stead.

But as Semafor points out, in the first book that now documents the early years of his presidency, the picture is the reverse:

“The Last Politician,” the Biden-in-power book that Franklin Foer published last week….presents an aging president who’s nonetheless fully engaged in the job, stumbling more when he loses his temper…than when he loses his train of thought.”

Foer’s book portrays Biden as a leader who sounds shaky in public but is the dominant force in his White House. Foer tells Semafor that Biden: (Brackets by Wrongo)

“…buries himself in details…[and] takes technocratic charge of issues”.

Two Writers Who Speak To What America Needs

The Daily Escape:

Wukoki, Wupatli National Monument, AZ – September 2023 photo by David Erickson

September is underway, and we’re about to have a negotiation about government spending. But that doesn’t mean that the news this month will be any less stupid than last month’s. Also, as the Republican presidential candidates demonstrate every day, we don’t actually know whether the GOP is a dying Party or, the rising single Party of an authoritarian state.

Unless and until the traditional press presents these as the stakes, it is very unclear which it’ll end up being. With this as an introduction, Wrongo wants to introduce two writers who are attempting to break through our chain of bad policies and the bad ideology that threatens our democracy.

First, from Wesley Lowery in the Columbia Journalism Review:

“We find ourselves in a perilous moment. Democracy is under withering assault. Technological advances have empowered propagandists to profit through discontent and disinformation. A coordinated, fifty-year campaign waged by one of our major political parties to denigrate the media and call objective reality into question has reached its logical conclusion: we occupy a nation in which a sizable portion of the public cannot reliably tell fact from fiction. The rise of a powerful nativist movement has provided a test not only of American multiracial democracy, but also of the institutions sworn to protect it.”

Lowery is a Pulitzer Prize-winning reporter. He goes on to say:

“In 2020, I argued that the press had often failed this test by engaging in performative neutrality, paint-by-the-numbers balance, and thoughtless deference to government officials. Too many news organizations were as concerned with projecting impartiality as they were with actually achieving it, prioritizing the perception of their virtue in the minds of a hopelessly polarized audience…”

Lowery also says that news organizations often rely on euphemisms instead of clarity in clear cases of racism (“racially charged,” “racially tinged”) and acts of government violence (“officer-involved shooting”). He says that these editorial decisions are not only journalistic failings, but also moral ones:

“…when the weight of the evidence is clear, it is wrong to conceal the truth. Justified as “objectivity,” they are in fact its distortion.”

Lowery concludes by saying:

“It’s time to set aside silly word games and to rise to the urgent test presented by this moment.”

Second, Bob Lord is a tax attorney and associate fellow at the Institute for Policy Studies. He also serves a senior advisor on tax policy for Patriotic Millionaires. At Inequality.org, he proposes a graduated wealth tax on the rich:

“The United States is experiencing a level of wealth inequality not seen since the original Gilded Age. This yawning gap between rich and poor has unfolded right out in the open, in full public view and with the support of both political parties.

A malignant class of modern robber barons has amassed unthinkably large fortunes. These wealthy have catastrophically impacted our politics. They have weaponized their wealth to co-opt, corrupt, and choke off representative democracy. They have purchased members of Congress and justices of the Supreme Court. They have manipulated their newfound political power to amass ever-larger fortunes.”

Biden’s Plan To Cut Drug Prices

The Daily Escape:

Mars on left, Earth on right – image by alofeed

The Biden administration released its list of 10 prescription medicines that will be subject to the first-ever price negotiations by Medicare. This is a big deal because Medicare covers 66 million older Americans, people who routinely take very expensive drugs.

Until recently it was illegal for Medicare to negotiate prices with drug companies. But the Inflation Reduction Act (IRA), passed last August, gives Medicare that power. It also forces companies to pay a rebate to Medicare if their drug prices rise faster than inflation. The Congressional Budget Office estimates that price-capping measures will reduce Medicare expenses (and the federal deficit) by $96 billion by 2031.

The list includes drugs for diabetes, arthritis, and Crohn’s disease, and could sharply lower medical costs for patients. Reuters says that the US Centers for Medicare & Medicaid Services (CMS) spent $50.5 billion between June 1, 2022 and May 31, 2023 on these 10 drugs. That was about 20% of the total cost of drugs in the Medicare prescription drug program known as Part D.

The WaPo had an opinion piece by David Goldhill, CEO of SesameCare.com, a digital marketplace for discounted health services: (brackets and emphasis by Wrongo)

“The pharmaceutical industry earns almost 50% of its worldwide revenue here [the US], as do medical information-technology firms. [Medical] Device makers earn 40% of their money in the US. And this understates things, because US revenue is generated from higher prices, so margins are greater. If the US accounts for half of a company’s revenue, it probably contributes at least 75% of its profits.”

This has always been the business plan for Big Pharma: Make your money in the US and take whatever scraps of profit you can get in other markets.

That market subsidy is paid by American taxpayers generally (through the funding of Medicare) and by US pill-takers specifically when they pay higher co-pay prices for the drugs that help with their chronic conditions. The Economist points out that prescription medicines in America cost two to three times more on average than in other wealthy countries:

The blue dots are the price paid in the US for brand name drugs. The grey dots are prices paid in the various countries for all US drugs sold in those countries. The comparison of brand name to generics shows how much greater the cost is to an American. It also follows that US patients’ out-of-pocket expenses, (the slice of drug costs not covered by insurance), are among the highest in the world.

It’s understandable why Biden’s move to start negotiations on some of the most expensive drugs has been fiercely opposed by the pharmaceutical industry. Essentially, high US drugs costs underwrite what amounts to a subsidy for buyers of the same drug sold when it’s outside the US.

Many of the Big Pharma have jumped on the legal bandwagon, challenging price-setting provisions in the IRA. More from the Economist:

“Since the law’s passage over 50 companies have blamed the IRA in earnings calls for clouding their prospects.”

A quick primer on drugs. Most medicines are either small-molecule drugs or large-molecule drugs. The former are the kind of pills that line our medicine cabinets. Large-molecule drugs, (also called biologics), are more complex and must be injected. The IRA grants biologics 13 years of pricing freedom after a drug is approved, while small-molecule drugs get only nine years post-approval before they must face Medicare’s bean counters. The industry estimates that small-molecule brands could lose between 25% and 40% in overall revenue due to the earlier cap on prices.

PhRMA, the pharma Industry’s lobbyist argues (and Republicans back them) that high US prices reflect the high cost of drug development. The pharmaceutical manufacturers are, of course, suing to stop the price negotiations. They say that allowing the government to negotiate lower bulk prices for drugs will stifle innovation, and will cut funds for research.

One thing that Big Pharma wants to avoid showing us is that they rely on smaller, more agile biotech firms for ideas. Between 2015 and 2021, 65% of the 138 new drugs launched by Big Pharma originated mostly from smaller firms. So, while innovation isn’t totally gone from the big firms, what they’re mostly doing is marketing the intellectual property of small pharmaceutical firms.

It didn’t take long for Republicans to jump on the decision to allow Medicare to negotiate drug prices. From Politico:

“Piggybacking on the pharmaceutical industry’s strategy, Republicans are working to persuade Americans that the Biden plan will stifle innovation and lead to price controls.”

Politico quotes Joel White, a Republican health care strategist:

“The price control is a huge departure from where we have been as a country….It gets politicians and bureaucrats right into your medicine cabinet.”

Politico says that the GOP effort to reframe the drug price debate may hurt them, since they plan largely to run on inflation, while the Biden plan will lower drug prices. Also they quote a new poll from the Kaiser Family Foundation (KFF) that shows 58% of independent voters trust Democrats to lower drug costs compared with 39% of Republicans.

Our politicians and pundits have bleated at us for years about being an “exceptional nation” – but what we really are is exceptionally gullible. As long as the large healthcare and pharmaceutical companies insist on standing between American consumers and their health needs, maximizing their profit will always come first.

We also continue to elect leaders who lobby for keeping corporations unleashed so that they can make as much profit as possible, while saying that the “market” will decide where the public good is prioritized. This keeps us hopelessly mired in a grossly expensive, and often ineffective healthcare system.

We continue to let ourselves be convinced by corporations and our politicians that reforming healthcare is impossible. That the solutions and methodologies used by other developed nations are substandard, and/or somehow immoral.

The Hill reported that the 14 leading US drug companies paid out more in stock buybacks and dividends from 2016 to 2020 than they spent on research and development. Those firms spent $577 billion from 2016 to 2020 on stock buybacks and dividends, $56 billion more than the $521 billion they spent on R&D. So, it’s oblivious how Big Pharma could easily fund their R&D with lower drugs prices.

It is also useful to remember that America has more healthcare billionaires AND healthcare bankruptcies than any other country. Those two things are inextricably linked.

As long as the pharmaceutical companies can maximize profits by buying politicians rather than by charging higher prices in other countries – the American people are the ones who will continue to get screwed.

Reshoring The Semiconductor Industry: The Chips Act

The Daily Escape:

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

The semiconductor industry is big, complex, and important. Semiconductors are also an important test case for America’s ability to revive its domestic manufacturing base. There’s a lot riding on Biden’s Chips Act that became law one year ago. It is a $50 billion package of subsidies, tax credits and other sweeteners designed to bring advanced chipmaking back to America.

As a result, Taiwan Semiconductor Manufacturing Company (TSMC) is investing $40 billion in Arizona. Samsung is investing $17 billion in Texas. Intel, America’s biggest chipmaker, will spend $40 billion on four semiconductor fabrication plants, or “fabs” in semiconductor parlance, in Arizona and Ohio. Both Democrats and Republicans regard it as a bipartisan legislative triumph.

But, finding highly skilled labor is key to the Act’s success. While America still has world-class semiconductor researchers and designers, we no longer have the kind of skilled labor that turns silicon wafers into electronic circuits. Chief Investment Officer magazine quotes Joseph Quinlan of Bank of America (BOA):

“America’s manufacturing renaissance could either be delayed or derailed by mounting structural headwinds….The US will have graduated only 108,000 technicians (who operate, maintain and fix electronic gear) by 2030, but demand is for 130,000 by then….Similarly, the nation will have produced 42,000 engineers and 21,000 computer scientists at that point, yet will need 69,000 and 34,000, respectively.”

BOA says that the other shortfall is construction workers. Construction of US factories has climbed 80% from a year ago, yet the nation has 374,000 unfilled construction jobs. We’re already seeing the problem. From the Economist:

“…The first of TSMC‘s factories was due to start production next year. But in July it announced that the launch would be put back to 2025 because it could not find enough workers with the expertise to install equipment at such a high-tech facility.”

The problem is during the delicate final phase of installing the most high-end equipment. Mark Liu, TSMC’s chair, said in a July earnings call:

“…there is an insufficient amount of skilled workers with those specialized expertise required for equipment installation in a semiconductor-grade facility.”

As a result, TSMC is sending skilled workers from Taiwan to teach Americans how to do the job. The Commerce Department forecasts that about 100,000 workers may be needed for the construction of these new fabs in the US.

The chip market breaks down into “leading edge” chips, followed by “advanced” chips and “trailing edge” chips, sorted from the smallest chips to the largest. The Economist says that by 2025, American chip factories expect to be churning out 18% of the world’s leading-edge chips (see chart below):

This seems highly optimistic if we can’t get these new plants built or staff them. Leading-edge fabs that are built in America will take longer to build and will be smaller than those in Asia. In China and Taiwan, companies can build out a new fab in 650 days. In America, the average construction time is expected to be 900 days, or 40% longer. Construction costs, therefore, can be 40% more in America than in Asia.

Regarding size, in Arizona, TSMC plans to make 50,000 wafers a month—equivalent to two “mega-fabs”, as the company calls them. In Taiwan, TSMC operates four “giga-fabs”, each producing at least 100,000 wafers a month. Size matters: The more chips a fab makes, the lower the unit cost.

More from the Economist: (emphasis by Wrongo)

“America will produce enough cutting-edge chips to meet only about a third of domestic demand. Apple will keep sourcing high-end processors for its iPhones from Taiwan.”

Overcapacity is a possible threat. The Economist says that in 2019, China made one fifth of “trailing-edge” chips, which go into everything from washing machines to cars and aircraft. But by 2025 it will produce more than a third of them. It’s possible that excess supply from China will put downward pressure on prices. In the long run, this could hurt higher-cost American fabs.

So, while there has been substantial progress in just a year, the US isn’t going to undo 20+ years of offshoring chip manufacturing in the next 24 months. The Commerce Department says it wants companies to collaborate on building up a construction workforce, so that workers trained for one project can move on to other fabs that are being built. In this respect, TSMC’s plan to import Taiwanese trainers is less of a bug than a feature, part of the process of helping to build knowledge.

Once the fabs are built, they’ll need technicians to operate them. Such workers have historically required two years of training at a community college or a vocational school. But companies and educators are experimenting with much shorter courses. Columbus State Community College in Ohio, where Intel is building two fabs, is offering a one-year program. The aim is for students to be job ready for Intel as their fabs come online.

But, will these companies be willing to put candidates with one year’s training anywhere near the multi-million-dollar machinery inside their fabs?

The fabs also need engineers to run them. Universities near some of the fabs under construction, including Arizona State and Ohio State, have expanded their offerings of semiconductor courses as part of degrees in engineering and physical sciences. Leading the charge is Purdue University in Indiana: last year it launched a semiconductor degree program for both undergraduates and graduates.

And the flow of students seems encouraging. Intel expected 100 registrants for its quick-start courses, but 900 showed up. At Purdue enrollment has also been very strong. Handshake, a job platform for recent graduates, reported that applications for full-time jobs at semiconductor companies were up by 79% compared with last year, versus 19% in other sectors.

Returning to having a strong, vibrant high tech manufacturing industry in the US is good, both strategically and economically. But for the immediate future, it remains a gamble: We’re saying that the economic reasoning for moving manufacturing offshore in the past still exists. But it’s important enough strategically that we (and these profit-seeking corporations) will somehow underwrite the cost disadvantages.

Relearning basic skills such as cutting wafers into chips and packaging them in hard plastic casings will take time. The welcome news for these new fabs is that colleges and universities see an opportunity in helping train the new labor force.

But we will still be dependent on other countries. We do not have a secure domestic supply of lithium, nickel, graphite and other minerals needed to expand production of solar panels, wind turbines, semiconductors and electric vehicles. BOA points out that American imports of lithium-ion batteries from China more than doubled in 2022, to $9 billion.

So, while there’s lots going on that may someday be positive, China represents a potentially dangerous choke point given that US-Sino bilateral relations are at a decade’s low. We’re depending on them to continue providing much of the materials crucial to our new manufacturing capacity, while we’re in the middle of a serious rift with them.

Reshoring manufacturing, especially high value manufacturing is America’s dream. But it will take unprecedented cooperation between the government, multinational firms and our higher education system to make it happen.

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.”

“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)

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?

We want employment to be high, meaning that as many people as possible who want jobs can get them.
We want inflation to be low, so that people have certainty about how far their paycheck and their savings will go in the future.
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 Sinéad 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!

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:

The Wrongologist

Geopolitics, Power and Political Economy

Category: Congress

Cartoon Of The Week

Romney Exits

Two Writers Who Speak To What America Needs

Reshoring The Semiconductor Industry: The Chips Act

Ukraine War Reveals Our Broken Military Supply Chain

Bidenomics For The Win

Sunday Cartoon Blogging – July 16, 2023