The Wrongologist – Page 23 – Geopolitics, Power and Political Economy

Russia Is Building Huge Amounts Of Unspendable Rupees

The Daily Escape:

Sunset, Rio Grande Bridge, Taos, NM – June 2023 photo by Auggimage

Over the year that Russia has been at war in Ukraine, the west triggered sanctions to isolate Russia from getting access to hard currency. One result is that the sanctions have forced Russian to sell crude at discounted rates. At the cheap prices, India emerged as a major buyer of Russian oil. The discounts have led to India importing more oil from Russia than ever before. Here’s a chart:

According to data from Vortexa, the increase amounts to about 500k barrels/day since November, 2022. Russia now supplies India more crude than Iraq and Saudi Arabia combined. Prior to the Ukraine war, the chart shows that India bought very little oil from Russia. But as the sanctions cut off major Russian banks from much of the West’s payment systems, finding other markets that would trade for oil in currencies other than the dollar became a challenge.

India’s buying Russian crude made sense because India is a major buyer of Russian weapons. Since 2017, Russia has accounted for $8.5 billion of the $18.3 billion New Delhi has spent on weapons imports. Business Insider reports that India has been buying Russian oil using rupees since Moscow has been shut out of the USD-denominated global payments system.

Snapping up discounted Russian crude has also widened India’s substantial trade deficit with Russia. This has left Russian oil companies and banks with billions of rupees in their Indian bank accounts.

Russia is now amassing $1 billion worth of Indian rupees each month and it’s struggling either to use in India or to convert into rubles to repatriate the currency. Bloomberg estimates that the total of Russian assets in built up in India since 2022 equals $147 billion. And it’s not like Russia can send the rupees back home, because India has restrictions on capital outflows by foreigners. So, Russia is looking at $2 to $3 billion more rupees stuck in India every quarter.

Bloomberg quoted Russia’s Foreign Minister Sergei Lavrov during a Shanghai Cooperation Organization meeting in India in May:

“We need to use this money. But…these rupees must be transferred in another currency, and this is being discussed now…”

Nandan Unnikrishnan, a Russia expert at the Observer Research Foundation (ORF) in New Delhi, told DW:

“Russia wants a currency that it can use to buy goods that it requires for its economy… the question is identifying that currency…Russians would be happy to use the yuan,”

That’s because the Russia-China bilateral trade is worth hundreds of billions of dollars. OTOH, New Delhi would not be comfortable allowing trade settlement in the yuan, given the tense relations between India and China due to their border disputes. Reuters news reported that the Indian government had asked banks and businesses to avoid using the yuan to pay for Russian imports.

So Russia has a big problem. They would like to use the proceeds of oil exports to finance the Ukraine war. Putting how big the stranded rupees are in context, Russia spent $68 billion, on defense in 2022, according to Reuters. As Alexander Isakov, Russia economist at Bloomberg Economics says:

“There are no alternative oil importers of India’s caliber on the horizon for Russia, so exporters and banks will gradually accept settlement in rupees…”

Western pundits and economists have talked endlessly about how the sanctions weren’t doing much to close off Russia from the rest of the world. But the sanctions that cut off major Russian banks from most of the West’s payment systems, have created a real challenge to Russia finding ways to get paid for their crude so that they can finance their war in Ukraine.

Thoughts About Blowing Up The Ukrainian Dam

The Daily Escape:

Ray Wells Dune Shack, Provincetown, MA – June 2023 photo by Sarah E. Devlin. The shack is one of the largest of the historic dune shacks on the Outer Cape. It is made available for two weeks at a time through a combination of juried artist awards and a lottery system for members of the Peaked Hill Trust, a nonprofit group.

Have you been following the destruction of the Nova Kakhovka dam and power plant in the Russian-held part of Ukraine? Wrongo is still a little numb about the magnitude of what’s happened.

The dam is about 100 feet high and two miles across, and it holds back more than four cubic miles of water at its peak capacity. The reservoir is nearly 120 miles long. It had the only remaining roadway across the Dnipro River. The dam was also a source of hydroelectric power for the region. The dam was close to peak capacity when it gave way. In May, the water in the reservoir rose so high that it over topped the dam, apparently because the sluice gates couldn’t be opened by the Russians.

After weathering months of Russian air attacks on its energy infrastructure with missiles, bombs, and drones, blowing the dam has caused a permanent loss of electrical generation capacity of 357 Megawatts, or 1.4 Terawatt-hours per year. And Ukraine isn’t in a position to be giving up any sources of electricity. The cost of rebuilding it will be enormous and take years.

Both the Ukrainians and the Russians are blaming each other for the dam’s destruction. But as Yale’s Timothy Snyder says:

“Avoid the temptation to begin the story of this manmade humanitarian and ecological catastrophe by bothsidesing it. That’s not journalism.”

Snyder also says this:

“…is a humanitarian disaster that, had it not taken place within a war zone, would already have drawn enormous international assistance. Thousands of houses are flooded and tens of thousands of people are in flight or waiting for rescue. Another consequence is ecological mayhem, among other things the loss of wetland and other habitats. A third is the destruction of Ukrainian farmland and other elements of the Ukrainian economy.”

“Whatever the immediate cause of the dam break, it would not have happened without Russia’s invasion, without Russia’s earlier explosion at the dam, without Russia’s mismanagement of the water flow.”

So the speculation about who did it isn’t nearly as important as looking at the economic and military effects of losing the dam and the subsequent flooding:

“The sudden release of 18 cubic kilometers of water, about the volume of the Great Salt Lake in the US, will sweep the Dnipro River’s banks and tributaries downstream, threatening 80 settlements with flooding, including part of the city of Kherson and much of the eastern bank of the Dnipro, which is occupied by Russia.”

Still, armies that are attacking don’t blow dams if it would block their path of advance. Armies that are retreating do blow dams to slow the advance of the other side. At the moment of the explosions at the dam, Ukraine was advancing, and Russia was retreating.

And the timing is more beneficial to Russia than it is to Ukraine because it closes off the possibility of attack from the west for a significant period of time.

Last year, many feared the Russians would blow the dam as they withdrew from Kherson, although that would have prevented water in the reservoir behind the dam from reaching Crimea. Crimea is chronically water-short, although its local reservoirs are currently at capacity. There is a canal that brings water directly from the dam to Crimea.

The dam’s destruction now forces the Ukrainian government to use resources to mitigate the damage instead of using them in their counteroffensive. Secondly, it eliminates a key vehicle crossing point over the river.

Militarily, blowing the dam protects Russia’s flank from possible incursions across the river at least until the resulting mud flats dry out. The breadth of the waterlogged areas will mean that Ukrainian forces will have to wait at least a few weeks during which Russian forces can regroup and/or redeploy to other locations.

It may be that Russia has made a purely military decision, sacrificing the long-term future of Crimea in exchange for a short-term gain vs. the Ukraine counteroffensive.

Have the Russians now fully entered a “scorched earth” phase of the war? The Crimean reservoirs are full, so there is no immediate danger to the drinking water supply, but the long term prospects for water in Crimea are now dim. Regardless of who wins this war, the dam and canal will take years to rebuild.

It’s really difficult to see a plausible story where Ukraine had both the means or motive to cause this disaster. If Ukraine had done this, it would have taken precision missile strikes. But local reports about the explosions said that they were underwater and possibly from inside the dam.

Some will argue that Ukraine could have infiltrated special forces to blow up the dam. But that’s something out of a movie plot, not real life.

People should remember that for the past 15 months Russia has been killing Ukrainian civilians and destroying Ukrainian civilian infrastructure, whereas Ukraine has been trying to protect its people and the structures that keep them alive.

How To Think Differently About Housing

The Daily Escape:

Sunrise, Outer Banks, NC – June 2023 photo by Stephen P. Szymanski

Wrongo and Ms. Right have 12 grandchildren, only one of which is still in high school. The other 11 are out of school and pursuing their careers or are finishing their education. Only one of the 12 owns a home. Their experience with real estate is representative of what most younger Americans face in today’s real estate market. Ben Carlson uses data from Redfin to show us that mortgage payments are way up over prior years:

The median mortgage payment was up by more than $1,000 over four years. Carlson reminds us that this is just the monthly mortgage payment, it doesn’t include insurance, property taxes or upkeep. This is part of the reason that housing affordability is more excruciating — the pace of the increases has happened so quickly. We’ve simply never seen prices and rates rise this fast in such a short period of time. And asking prices are up as well:

Note that at the end of May 2023, the median asking price was $397k, up from $300k in May 2020, a 32% increase in four years.

But high mortgage rates and rising home prices aren’t deterring all buyers. John Burns Research shows buyers still outnumber sellers by a wide margin in today’s market. They report that as of April, even with 7% mortgage rates, 78% of all real estate agents say that buyers outnumber sellers in their markets.

And for rentals, the national median rent for a one-bedroom apartment has climbed to $1,504, according to research from Zumper. That’s significant: It’s only the second time in history that it has risen past $1,500. But the median doesn’t represent what you’ll pay in big cities:

In America, buying an investment property near work is more lucrative than actually working. The growth of asset values has outstripped returns on labor for four decades. Last year, one in four home sales was to someone who had no intention of living in it. Investors are incentivized to buy the type of homes most needed by first-time buyers: Inexpensive properties generate the highest rental-income cash flows.

Harvard’s Joint Center for Housing Studies found that in 2019, the median net worth of US renters was just 2.5% of the median net worth of homeowners: $6,270 versus $254,900. There’s no better example than the economic challenges to America’s young persons than trying to find (relatively) affordable housing near where they work.

A very interesting article in the May 23 NYT Magazine suggests a possible solution to housing inflation. Vienna, Austria began planning it’s now world-famous municipal housing in 1919. Prior to that, Vienna had some of the worst housing conditions in Europe. Vienna’s housing program is known as “social housing” (Gemeindebauten), a phrase that captures how the city’s public housing and other limited-profit housing are a widely-shared social benefit:

“The Gemeindebauten welcomes the middle class, not just the poor. In Vienna, a whopping 80% of residents qualify for public housing, and once you have a contract, it never expires, even if you get richer.”

Vienna isn’t a small town. Its population is just under 2 million, and if it were in the US it would be our fifth largest city, between Houston and Phoenix.

The availability of Vienna’s social housing also helps to keep costs down even for private housing:

“In 2021, Viennese living in private housing spent 26% of their after-tax income on rent and energy costs on average, which is…slightly more than the figure for social-housing residents overall (22%).”

One of the reasons Vienna’s social housing works is that it is not means-tested; it is open to middle class people. And as a result, the residents care more about whether their grounds stay clean and beautiful. In the US we restrict public housing to the poorest of the poor, making public housing something to escape from, not to enjoy.

Meanwhile, 49% of American renters are paying landlords more than 30% of their pretax income, In New York City, the median renter household spends 36% of its pretax income on rent.

The key difference is that Vienna prioritizes subsidizing construction, while the US prioritizes subsidizing people, like with housing vouchers. One model focuses on supply, the other on demand. Vienna’s choice illustrates a fundamental economic reality, which is that a large-enough supply of social housing offers a market alternative that improves housing for all.

Calls for a federal social-housing plan in America might sound far-fetched but the US government is already deeply involved in the housing market. There’s generous support for homeowners and deliberately insufficient support for the lowest-income households. In 2017, the US gave $155 billion on tax breaks to homeowners and to investors in rental housing and mortgage-revenue bonds, more than three times the $50 billion spent on affordable housing.

For many, housing expense can be an economic burden. And it’s hard to even contemplate what it would mean to have it not be a problem. What’s mind-boggling is how social housing gives the economic lives of Viennese an entirely different shape.

Imagine where the rest of America’s young adults’ income might go if they were able to spend much less of it on housing. Vienna’s program is a look into a world in which homeownership isn’t the only way to secure a financial future.

Monday Wake Up Call – June 5, 2023

The Daily Escape:

Blue Ridge mountains, NC – June 2023 photo by Michele Schwartz

It’s getting to be long enough into our economic recovery that we’ve started to ignore the monthly jobs report by the Bureau of Labor Statistics (BLS). Luckily, Simon Rosenberg doesn’t let us forget: (brackets by Wrongo)

“The…BLS jobs report is out and it’s another good one – 339,000 net new jobs, [plus] 432,000…upward revisions from previous months. With this new data my monthly jobs tracker clocks in at:

-33.8m jobs – 16 years of Clinton, Obama

-13.1m jobs – 28 months of Biden

-1.9m jobs – 16 years of Bush, Bush and Trump

Biden’s 13.1m jobs is almost 7 times as many jobs as were created in the 16 years of the last 3 Republican Presidencies, combined.”

Since the end of the Cold War, the US has seen 49 million new jobs created. Remarkably, 47 million of those 49 million jobs were created under Democratic Presidents.

On the Democratic Party’s watch we’ve seen strong economic growth. OTOH, during the same time, Republican presidents have overseen three consecutive recessions. It’s not a stretch to say that the GOP’s economic track record over the past 30 years has been among the worst in US history.

Consider Biden’s record of economic growth:

GDP growth under Biden is 3+%, or 3 times what it was under Trump.
Almost 7 times as many Biden jobs as last 3 GOP Presidents combined.
Best post Covid economic recovery among the G7 countries.
Lowest unemployment rate in a peacetime economy since WWII.
Lowest poverty/uninsured rates ever.
Real corporate earnings up in 2022.

Despite what the GOP is saying to the press about their being deficit hawks, the federal deficit went up every year under Trump, and has come down every year under Biden. Rosenberg adds this helpful chart of GDP growth by president:

So why is it that Americans aren’t convinced that the economy has improved since the pandemic? In a new poll from the AP-NORC, asking if the nation’s economic conditions are in good shape, the percentage who agree is down from 30% last month to 24%. Only a third of Americans in the new survey approve of how Biden’s handling the economy, while two-thirds disapprove.

In the survey, Democrats were more likely than Republicans to view economic conditions favorably, but just 41% of them say the economy’s good and only 7% of Republicans agree. And both numbers are down from the previous month for both Parties.

Now this may be at least partially due to the Republicans scare tactics about the Debt Ceiling. The Hill reports that this AP-NORC poll is in line with other recent surveys that suggest most Americans think the country’s economy is in poor shape, Other polls also indicate low confidence in the economic leadership team.

Axios suggests a different way to view the economic issue. They looked at Federal Reserve survey data from 2017-2022, which shows that people think they’re personal economy is doing just fine, while they think the national economy is in terrible shape:

This is most likely because of the media’s awfulizing about our economy. Obviously, consumer prices are high, but inflation is coming down. But even if inflation went to zero, today’s prices will still be much higher than Americans were accustomed to pre-pandemic, so people will be complaining.

And we can’t discount the negative impact of Congressional dysfunction about the Debt Ceiling, or all the news bunnies crying about our unsustainable national debt.

Still, our economy continues to do better than even the economists think. The May employment report marked the 14th straight month that more jobs were created than economists expected. Our GDP continues to grow (it’s up more than 5% from its pre-pandemic peak), even after accounting for inflation.

The average US employee now makes $33.44 per hour, 17.5% more than before the pandemic. The stock market is up 10% so far this year, but still, Americans aren’t buying it. Axios’ Felix Salmon reports that while Americans say that they’re broadly happy with their personal finances (above chart), in other polls, a majority consistently think (erroneously) that we’re currently in a recession.

Time to wake up America! Things are rolling along reasonably well, even if they’re not fantastic. We have the best job market in 50 years, and there’s no recession on the horizon. As the Rolling Stones said: “You can’t always get what you want…”. Maybe it’s time to look at the glass as half full.

To help you wake up, watch and listen to Alan Jackson cover Eddie Cochran’s 1958 “Summertime Blues” in 1994. The Blue Cheer had the radio hit with it in 1968. Wrongo loves three versions of this song: Blue Cheer, the Who, and this Allen Jackson cover:

Sunday Cartoon Blogging – June 4, 2023

Diversity, equity and inclusion initiatives or DEI, are intended to address inequities against historically marginalized groups and individuals who are working within an organization. DEI are three closely linked values that work together to be supportive of different groups of individuals, including people of different races, ethnicities, religions, abilities, genders, and sexual orientations.

DEI has recently come under fire. It’s at the center of some political battles being waged by Republican governors Greg Abbott and Ron DeSantis. Several Red states are considering or have passed legislation targeting DEI in public institutions. Texas passed a bill with a rider banning the use of state funds for DEI programs in universities and colleges. A similar bill to ban spending on DEI in public universities has been advanced in Iowa.

But Chick-fil-A? The same Chick-fil-A that’s given millions of dollars to anti-LGBTQ hate groups? The Chick-fil-A that conservatives circled the wagons around a few years ago after liberals criticized the owners for being haters?

They’re taking MAGA fire for creating a DEI policy and hiring someone to oversee the program. MAGA suddenly realized that Chick-fil-A had gone woke! But their program has been around since 2020. On to cartoons.

Nobody is safe:

Signs are everywhere:

MAGA says ya can’t help trans kids:

Our PolyCrisis government:

It’s a very old game, but Trump’s surrounded:

The Sacklers win:

Victory lap for Biden:

Saturday Soother – June 3, 2023

The Daily Escape:

Shenandoah NP, VA – May 2023 photo by Lori May

You’re becoming dimly aware that the Republican Party is assembling a large field of candidates to be its nominee for the presidency in 2024. By Wrongo’s count, there are 14 individuals who have either formally announced a run or are signaling that they will soon announce.

In 2016, Trump won the Party’s nomination against a 17-candidate field. The commonly accepted logic was that the large field refused to take him seriously and failed to rally around a single alternative. This time around, the commonly accepted logic is again that the only way to stop Trump is for the anti-Trump Republicans to coalesce around a single alternative.

Sure, but it hasn’t happened. Why? Because there really aren’t many anti-Trump Republicans. If you look at the list of 14, most of them want to take over Trump’s cult rather than dismantle it.

These people all know what happened last time, and they aren’t dummies. They also know that since leaving office, Trump has gotten 10 more states to award their Republican delegates through winner-take-all primaries, even if the winner receives less than a majority of the votes. The number of winner-take-all Republican primary states has grown from seven to 17.

If the Republican candidate field remains crowded, and Trump gets the most votes (even if it’s only 30%), he’ll win those states.

So what are these other presidential candidates thinking? Some are auditioning for the VP slot. Others may be having a self-absorbed moment. Wrongo thinks there’s also something else going on: These otherwise savvy politicians, who can raise boatloads of campaign money, are betting that Trump will be indicted and most likely convicted by the Department of Justice.

The idea is that Trump will be either so weakened by the criminal indictments and/or convictions that his current base of loyal voters will shrink to the point that he either withdraws or loses the primary fight.

OTOH, the recent blockbuster news from CNN that federal prosecutors have an audio recording of a summer 2021 meeting in which Trump acknowledges he held onto a classified Pentagon document about a potential attack on Iran is very dangerous to him, if true. From CNN:

“The recording indicates Trump understood he retained classified material after leaving the White House, according to multiple sources familiar with the investigation. On the recording, Trump’s comments suggest he would like to share the information but he’s aware of limitations on his ability post-presidency to declassify records…”

The July 2021 meeting was held at Trump’s golf club in Bedminster, New Jersey. Trump met with two people working on the autobiography of his former chief of staff Mark Meadows, as well as aides he formerly employed. CNN offers this vaguely neutral comment:

“The revelation that the former president and commander-in-chief has been captured on tape discussing a classified document could raise his legal exposure as he continues his third bid for the White House.”

A conviction by DOJ would mean that Trump is barred from holding a national office.

Wrongo thinks that at least some of the Republicans in the presidential race are now starting to follow the Breadcrumbs to Indictmentville. With the Former Guy blabbing about war plans in his possession, this seems like a death blow to Trump’s viability as a presidential candidate.

Assuming that the tape is authentic, and that there’s a proper foundation for admissibility in court, Trump may be done for, as a national candidate. It’s hard to imagine that potential plans for a military attack on Iran (if that document exists), wouldn’t qualify as a stolen secret.

And that may be partially what’s driving DeSantis and the other serious Republican presidential candidates.

We’ve reached the weekend without the country defaulting on its debts! Default seemed all too real only a week or two ago. But now, we won’t have to worry about that for a couple of years.

It’s time for our Saturday Soother, where we take a break and consider how we are continually jerked around by the GOP. It will be summer-like in northwestern Connecticut this weekend, and we have a houseful of family.

So, grab a chair outside in the shade. Now, watch and listen to something Wrongo had left over from Memorial Day: There’s a cemetery outside the Dutch city of Maastricht that holds 8,301 American soldiers who died in “Operation Market Garden” in the winter of 1944–45. Every soldier has been adopted by a Dutch family who tends their grave. Annually on “Liberation Day”, memorial services are held for the men who died to liberate the Netherlands. The day concludes with a concert, and “Il Silenzio” is always the concluding piece. It was written in 1965 by trumpet player Nini Rosso and is an extension of the Italian Cavalry bugle call also used by Tchaikovsky to open his Capriccio Italien. (It contains a part of the US military bugle call “Taps“).

This 2008 performance of “Il Silenzio” features a 13-year-old Dutch girl, Melissa Venema on trumpet with André Rieu and the Royal Orchestra of the Netherlands:

You won’t be disappointed by the video. It’s ironic and sad that people in other countries remember our war dead better than most Americans do.

The Two-Edged Sword Of Federalism

The Daily Escape:

Mount Evans Road, 14,100′, Idaho Springs, CO – May 26, 2023 photo by Reid Neureiter

Here at the Wrongologist, we often talk about Constitutional rights, but we rarely talk about Federalism. So today, let’s lean into federal vs. states’ rights. We’ll start with the recent Supreme Court decision in Sackett vs. EPA, which concerned the power of the EPA to regulate wetlands. Last week, the Supreme Court concluded that the Clean Water Act only applies to wetlands with “a continuous surface connection” to bodies of water.

This defined what waterbodies are considered waters of the United States (WOTUS), an issue that has been in the courts for years. The ruling narrowed the scope of the Clean Water Act, and severely limits the federal government’s ability to regulate wetlands.

Justice Samuel Alito’s opinion affirmed the principle that bureaucrats cannot broadly define statutory language. Alito’s opinion struck a blow for federalism. Federalism is a system of government in which the same territory is controlled by two levels of government. The US Constitution originally divided the exercise of political power between one national and many state governments. The national government is given control over matters affecting the whole nation. All other issues were reserved to the states.

Article VI of the Constitution contains the Supremacy Clause, which says that when the laws of the federal government are in conflict with the laws of a state’s government, the federal law supersedes the state law.
Article I, Section 8 of the Constitution describes specific powers which belong to the federal government. These powers are referred to as enumerated powers.
The Tenth Amendment reserves to the states those powers that are not delegated to the federal government.

The Sackett vs. EPA decision is another step in the Right-wing program to move as much federal government rule-making authority as possible to the states. This is the continuation of Nixon’s efforts to shrink the federal government’s power by devolving decisions to state and local governments. The best recent example of this is the Supreme Court’s Dobbs decision on abortion that wiped out the precedent set in Roe v. Wade that guaranteed a national right to abortion and passed that responsibility back to the states.

At the same time, the Right is moving to nationalize policy on social issues, from what books to allow on library shelves to limits on transgender rights, a rollback of state environmental actions, and an attack on anything that can be labeled as “woke.”

So we’ve got Red states pushing to centralize decisions about social and cultural issues in Washington, while the Right-wing Supreme Court pushes devolution of voting rights, abortion rights, and indeed national agency rule-making (EPA) to the states.

This 2023 brand of two-way Republican federalism is upending the delicate balance of power between the federal government and state governments. It raises questions about the allocation of authority, cooperation, and the ability of the national government even to define what is a pressing national issue.

Today’s Washington gridlock makes policymaking nearly impossible. That has shifted much of today’s policymaking to the states, where the Parties often have comfortable majorities. Many states (39) have government trifectas, with one Party controlling the governorship while holding majorities in the legislature, making policymaking simpler than in a divided and polarized US Congress.

Interest group activists have followed this trend and focused their efforts on these 39 states. Much of a state’s policies – abortion, voting rights, gun control, immigration, LGBT rights, healthcare, or taxation – are on widely divergent paths. For example:

In Democratic states it is easy to vote; in Republican states there are many barriers to voting.
In Democratic states fewer people are medically uninsured; in Republican states there are more uninsured people.
In Democratic states access to abortion is easier; in Republican states it is harder, if not criminalized.

Although federalism (for now) seems to protect the country from presidents amassing power in dictatorial ways, anti-democratic figures (think DeSantis and Abbott) are able, because of the resurgence of state-level policymaking, to transform Republican states into laboratories against democracy.

The Covid pandemic also put federalism to the test. The response to the pandemic highlighted the tension between national coordination and state autonomy. While the federal government provided guidance and resources, the implementation of measures like lockdowns, mask mandates, and vaccination campaigns, was largely left to individual states. This decentralized approach led to significant variations in pandemic response across the country, creating challenges in coordinating efforts and potentially exacerbating the spread of the virus.

Federalism properly implemented, brings government closer to the people and holds it accountable. But when badly implemented, you get the USA in 2023: A country trending toward autocracy.

Thoughts On The Debt Deal

The Daily Escape:

Rosa rugosa, Cape Cod, MA – May 2023 photo by Don Wilding

The holiday is over, and it brought an apparent deal between Biden and McCarthy. But was negotiating with the axe of a default on the national debt hanging over the country worth it? Sure, since it pulled the country back from the fiscal cliff.

But mostly, having to do it at all was stupid, and dangerous. And now, neither Party is completely happy, because both sides had to compromise. Wrongo recommends Noah Smith’s take:

“The recent fight over the debt ceiling, however, seems…like a return to the pointless obstructionism and grandstanding that characterized politics in the 2010s. There was absolutely zero reason for the House GOP leadership to use the debt ceiling — they could have just forced a deal through the normal appropriations process. Few people actually believed that the country’s leaders would let the US default on its sovereign debt due to a random minor budget fight…”

He’s correct, the House is controlled by Republicans. And the Senate also has enough Republicans to control the country’s fiscal budgeting process. They can ensure that what’s included and what’s cut would almost certainly be what Republicans wanted in the final package.

The Atlantic’s Ron Brownstein tweeted:

“It’s really something House GOP was willing to risk tanking global economy for such a tangential set of policy goals. Their plan threatened spending on young & low-income but by excluding revenue & entitlements had small impact on overall deficits. Means wildly excessive for ends.”

Despite all of the grandstanding by both Biden and the Republicans, the compromise deal looks like this:

A freeze on non-defense discretionary spending in 2024 and a 1% increase in 2025.
A 3% increase in defense spending.
Expanding work requirements by four years for SNAP (food stamps) and some smaller welfare programs.
Resumption of student debt payments (this isn’t a change to Biden’s student debt plan).
Reducing IRS funding by $20 billion.
Clawing back some unused Covid relief money.
Minor changes on permitting to streamline the process of environmental review.

House Republicans had initially demanded huge cuts in spending, which would have been pretty destabilizing to essential programs. These demands may have been simply an initial negotiating tactic. But not getting them in the final agreement might also speak to Biden’s negotiating ability.

Remember that the GOP’s threat to trigger sovereign default was because they think that the level of our national debt is an existential threat. But they wanted to include tax cuts in their original proposal. That would have been nuts since the purpose of their bill was to limit the growth in federal debt.

Remember too that only about 27% of our federal spending is classified as “discretionary”. About 65% is “mandatory” spending, which means that it doesn’t go through the appropriations process. (The remainder is interest on the debt.)

The spending restraint in this deal will affect only the “discretionary” portion, leaving the “mandatory” majority untouched. The “mandatory” portion includes Medicare, Medicaid, Social Security, EITC and SNAP.

Cartoons + Memorial Day Weekend

(There won’t be a Monday Wake Up column this week. Wrongo will return on Wednesday, May 31.)

Memorial Day, Arlington National Cemetery – 2013 photo by William Coyle

Monday will be Memorial Day, when we honor the sacrifice of those who died fighting in America’s wars. We mourn those we knew, and we pause briefly to remember those we never knew. The American public’s job is to say, “thank you for your service”. Saying it has become a reflex, like “bless you” when someone sneezes. Our default position is to thank, but not to think. For most of us, America’s foreign wars are a kind of elevator music. Always present, but we barely notice it.

Maybe we watch our town’s parade, or shop at the mall. There’s likely to be a cookout. It isn’t about love of country. It’s about sad Facebook emojis, Memorial Day mattress sales, and burgers on Monday. On to cartoons.

The old man remembers the soldier:

RIP Tina Turner:

Requiring a clean Debt Ceiling dies as Biden negotiates with Freedom Caucus:

A handy reminder:

Saturday Soother – May 27, 2023

The Daily Escape:

Milky Way, Monument Valley Navajo Tribal Park – May 2023 photo by Hasanur Khan

The WaPo’s Paul Farhi writes about “The looming existential crisis for cable news”:

“As recently as 2016, when Trump was narrowly elected president, just over 70% of all households with a TV had cable or satellite TV subscriptions. Today the figure is just under 40%, according to S&P Global Market Intelligence, a research firm.”

And it’s dropping fast:

“During the first quarter of 2023, another 2.3 million customers (or 7% of the total) cut the cord to traditional cable…the number of homes receiving TV via cable is now about the same as it was in 1992, when the industry was still on the rise.”

So, what does this mean for the Cable TV industry? Last year, the licensing fees collected by the six biggest cable news networks (Fox, CNN, MSNBC, CNBC, Fox Business and HLN) amounted to just over $4 billion. Advertisers added another $2.6 billion.

Farhi quotes Alan Wolk, a veteran advertising executive and media consultant:

“Cable news is dying….Not because it’s become irrelevant, but because the medium it lives on, cable TV, is dying.”

He predicts that cable could:

“…for all intents and purposes, disappear within a decade”.

The popular cable networks are profitable, largely because of how pricing works in the cable industry. The financial foundation of cable news isn’t advertising but the license fees that cable-system operators pay for the right to carry them. Regardless of whether a cable subscriber watches Fox, CNN or MSNBC, their monthly cable payments fund those companies.

The day could soon come when the exodus of cable subscribers leaves cable operators unable to pay the hefty license fees that those cable companies now command.

The cable industry sees what’s coming. They have all tried to distribute programming via streaming apps, YouTube channels, podcasts, and social media platforms in an effort to meet the cord-cutters where they are.

Yet so far, no news app comes close to matching cable in popularity and profitability.

Alan Wolk thinks cable news will have a particular problem in crossing the bridge to streaming: The median cable-news viewer is in their 60s and is resistant to new technologies.

The trouble signs are there. Viewers of the cable lineup other than news has sagged over the past decade as younger viewers have deserted cable. USA Network, once the most popular cable channel, has lost 75% of its nightly audience over the past 10 years. FX is down 68%, while the History Channel is off by 65%.

So what does this mean for US politics? Kyle Tharp posts weekly political advertising statistics on new media:

“…political advertisers spent just over $6.6 million on Facebook and Instagram ads last week…. For the fourth week in a row, the Biden campaign was the top-spending political advertiser nationwide on Facebook and Instagram. Their team continues to lean heavily on the platforms for growing their network of grassroots donors…..Political advertisers in the US have spent around $800,000 on Snapchat advertising in 2023.”

Tharp reports that DeSantis’ campaign launch video was heavily watched across all social media:

“On Twitter, the video received 23.8 million impressions…. compared to 2.9 million impressions for Tim Scott’s…launch video, and 9.1 million impressions on Nikki Haley’s…launch video…..Joe Biden’s launch video received 44.8 million impressions. The [DeSantis] video also received 125,000 views on Facebook, 1.9 million views on Instagram, and 236,000 views on Rumble. It’s a strong showing by any measure.”

(An “impression” is how many times it was displayed or had potential “eyeballs” on it.)

When you learn that Trump’s CNN town hall attracted an audience of just 3.3 million viewers, It’s clear that social media is already a major competitor to cable for the political class.

OTOH, if cable news goes away, how will Wrongo get his daily diet of pharmaceutical commercials?

That’s enough for this week. It’s time to forget about the “groundhog day” feeling that you get with the news bunnies constantly talking about the Debt Ceiling. It’s time for our Saturday Soother.

Here on the fields of Wrong, the baby bluebirds have fledged, and you can see them flying from tree to tree. We seem to be in for about 10 days of warmth and sun, with no rain in sight. People around here will soon need to choose between watering their plants and having a full well.

So grab a chair outside in the shade and put on your sunglasses. Now watch and listen to Dvořák’s “Piano Trio No. 4 in E minor, Op. 90 (the “Dumky”)”. Dvořák completed the trio in February 1891, and it is among the composer’s best-known works. The term Dumky is Ukrainian. It refers to epic ballads.

Here the Dumky is performed in the Herbst Theater, San Francisco in 2008 by the Beaux Arts Trio, with Daniel Hope on violin, Antonio Meneses on cello and Menahem Pressler on piano: