FRIDAY NEWS ROUNDUP — OCTOBER 30, 2020
The Partisanship Facing Our Next President; The State of the Pandemic Economy; Intrigue in Russian Intel
Happy Friday from Washington, DC. On the Policy Team, we often talk about the Permanent Campaign — the way that political leaders push out messages and even govern with an eye towards November. The Permanent Campaign affects policymaking, since politicians seek to time the impact of their choices to benefit their party and their reelection, and its rise has been greatly abetted by the improved understanding of the electorate provided by better access to social science research. The Permanent Campaign and the 24-hour news cycle exist in a symbiotic relationship, and the growth of epistemic bubbles ensures that partisans receive exactly the campaign messaging they want to hear at all times.
After years of waiting, on Tuesday the American people get to answer back and express their preferences. As we look ahead to Election Day, we each have our own personal hopes for the outcome, but our collective and corporate hope is for patience. The combination of the pandemic and the distributed means by which our elections are run could make the process of tabulating results slower than the television age has trained us to expect. There are clearly efforts to game the system in terms of who gets to vote, but there is also regular, run-of-the-mill maladministration in a process that is managed by county-level officials with small budgets and limited staff.
Let the votes be counted and the chips fall where they may. The next day, prepare for the Permanent Campaign to reset. The reason that liberal democracy is the best form of government thus far designed is that it forces our leaders to compete in the open to serve the people under fair laws; when they lose our confidence they leave office, and we are a fickle bunch. Nothing is forever, and it is only 739 days until the 2022 midterms.
For those of you who have not already done so, make a plan and go vote.
This week, we hosted a webinar with Jocelyn Aqua, Kenneth Propp, and Lindsay Gorman to discuss digital trade, data regulation, and online privacy issues. CSPC Senior Advisor Andy Keiser authored a white paper on the threat that Beijing’s policies pose to the U.S. semiconductor industry. In The Hill, Ethan decried the increasing politicization of the military in this election cycle. In Diplomatic Courier, Joshua reviewed Fareed Zakaria’s latest analysis of the post-pandemic world.
In this week’s roundup, Dan addresses how neither candidate can expect a honeymoon, while Michael looks at the state of the pandemic economy. Joshua looks at a shakeup in Russian security services and the latest on the poisoning of Putin’s main opponent. As always we wrap with news you may have missed.
Winning and Repairing House Divided
Dan Mahaffee
Well, we’re almost there. While Election Day itself is around the corner, as of Thursday evening, more than 81 million Americans have already voted. In Texas, turnout is already 95% of that of 2016; in Georgia, 82%; and in North Carolina, 81%. WIth Republicans are on defense in those states, as well as Arizona, it’s a clear demonstration of how the electoral maps — and math — are shifting in the Sun Belt. That many political junkies keep refreshing to see the latest polls from Pennsylvania, Michigan, and Wisconsin reminds us just how unpredictable politics can be, even for those deluged in poll data.
Until ballots begin to be counted, we’ll see just how great the expansion in turnout has been, but it is clear that the electorate of 2020 will be far different than that of 2016. At this point, the partisans will be spinning polling and data to suit their narrative, but the verdict at this point is in the hands of the American people.
While we may not know the answer by Wednesday, or even Friday, of next week, there are some things that we can predict with near total certainty.
First and foremost, either candidate will be the oldest person elected president in the history of the United States. This will continue to reflect that the United States is an outlier among major democracies, where the age of elected leaders has trended younger. Upon the shoulders of either septuagenarian will fall one of the most challenging presidential inboxes of any elected president. While the pandemic, economic slowdown, and international crises would be more than enough for any president of any age or era, there is the fact that we now live in an era that provides no honeymoon for a newly elected or re-elected president. In fact, much of our politics, framed now by negative partisanship,will bring about immediate opposition.
While the polls favor former Vice President Biden, there is still a pathway to victory for President Trump. If he is re-elect, most data suggests that it will again be an electoral college victory and popular vote loss for President Trump. Combined with what is likely a Democratic House and a likely near 50–50 Senate. Even if this victory has not come due to a court decision, the institutions of American electoral politics and their constitutional structure will have suffered an irrevocable breach in democratic legitimacy — especially for America’s urban centers.
Should former Vice President Biden win, be it in a squeaker or “Blue Tsunami,” he will be immediately confronted by the well-honed media machine that has fueled conservative politics and thinking in America since Rush Limbaugh hit the airwaves in 1999 and Fox News hit the cable dial in 1996. After all, Fox News is already dusting off its playbook from the tea party era in case of a Biden presidency.
While the media echo chambers in politics are a known challenge, there is now an even darker element among the far right that fantasize about and prepare for political violence. The recently uncovered plot against Michigan Governor Gretchen Whitmer demonstrates these groups — and the affinity that, at least this group, enjoys from local elected law enforcement. And, finally, for a President Biden, there will be the unique factor of “former President Trump” — who’s post-presidency will likely be as unconventional as his presidency.
The clear difference will be in the tenor of politics. President Trump is one with the partisan id of our politics. He has embraced and ridden the whirlwind to great success, and there is little reason to think that a second term in office would change that. For former Vice President Biden, a long-time career in politics brings us back to memories of bipartisan bonhomie in Washington that are difficult to replicate today — while also serving, as memories often do, to gloss over the intractable partisan battles of that era.
What we can at least hope for is that there is a return to good faith in American politics, but that tone is more likely to come from the grassroots than it is from the incentive structures of our current politics. The business and sport of politics has made it far too lucrative for us to sharpen rhetorical swords instead of legislative plowshares. The healing will have to come in the hearts of the American people, first.
In a 2020 marked by disease, disasters, and disorder, the need for real solutions is clear. The verdict rendered at the ballot box next week will not immediately solve any of those problems — but it will set the tenor for how the American presidency balances the demands of governing with politics of division.
Economic Data Paints a Hazy Picture of Life in the Pandemic
Michael Stecher
You probably saw yesterday morning that the advanced estimate for U.S. Gross Domestic Product growth in the third quarter (July 1 — September 30) was 33.1% on an annualized basis. Because we are just a few days away from an election, this was instantly seized upon by committed partisans to tell the story that fits their narrative, but the data are both better and worse than you might have heard. It is undeniably true that this is the single largest quarter of growth in the recorded history of the country. It is also absolutely true that, despite this quarter’s impressive number, the economy is at a lower level of output than it was six months ago. The economic data that have been released in recent weeks tell a story of a country that has escaped a total collapse thus far, but is not out of the woods. The economy is generally springy and tends to revert back to a steady rate of growth determined by factors that are difficult to change in the short-run, but the longer the COVID-19 pandemic continues, the more collective choices by consumers and firms will produce long-term shifts in our lives.
One major area of improvement in the economy last quarter was a rebound in personal spending. Compared to last quarter, consumers spent more overall, more on goods, more on services, and more on homes. Imports of goods and services were also up sharply. Americans bought more cars and spent more on clothes and furniture. But personal consumption is still below where it was before the pandemic began. One of the biggest shifts from last quarter to this one is that disposable personal income fell sharply (down 16.3% on an annualized basis). This is because, in the last quarter, economic stimulus measures that Congress passed earlier in the year were still putting money into people’s pockets. Those packages are now exhausted.
There had been some hope that negotiations among House Democrats, Senate Republicans, and the Trump administration might extend the stimulus before the election, but inconsistent direction from the president and expected difficulty in bringing Senate Republicans along on any deal reached by Speaker Pelosi and Treasury Secretary Mnuchin doomed that plan. Negotiations might continue in the lame duck period between Election Day and the seating of the new Congress in January, but that probably depends on how the election goes. This means that it is likely that the engine that powers consumer spending will sputter in the fourth quarter, especially if the third wave of the virus prompts firms to further slow hiring or continue to lay off staff.
Spending by state and local governments shrank both last quarter and in the second quarter. The federal government does not have to balance its budget — it almost never does, and it might be bad if it ran a large surplus — but states and municipalities generally do. States rely on a mix of income and sales taxes to fund themselves, so if incomes are down and people spend less, states can face sharp revenue shortfalls. Balanced budget requirements force them to reduce outlays by cutting spending on things like welfare, education, and public safety.
This is exactly the opposite of what economic wisdom recommends in a recession, but it is baked into our system. When people lose their jobs, there is more need for programs like Medicaid and Temporary Assistance for Needy Families. If the states have less funding available for those programs, people will need to cut back even further, which further reduces economic activity. If the job market does not recover, people will run out of financial support, and states will lose the ability to help them. The current recovery will stall out and become a long-lasting recession; this should be a major concern for policymakers.
Back in March, there were some very scary days in the financial markets. There are not supposed to be days when pro-growth assets like crude oil and the stock market fall and “safe” assets like gold and treasury bonds fall. This was a worrying sign that the stress of the early days of the pandemic were threatening to unravel the financial system like what we saw in September 2008. That did not happen in large part because of quick, effective action from the Federal Reserve. The Fed also committed to reducing interest rates to try and stimulate the economy. At this point, however, there is not much more than the Fed can do. Treasury yields are pretty close to zero, mortgage rates are really low, as are the “risk-neutral” rates that banks charge each other. That is what has prompted Bill Dudley, former President of the Federal Reserve Bank of New York, to write that monetary policy is “running out of firepower” and that only fiscal policy in the form of stimulus is likely to help.
One major outstanding question about the pandemic is to what extent it will change our lives in the post-pandemic world. Most of us have not attended a live sporting event or gotten on an airplane in the last 7 months; many have not eaten in a restaurant, stayed in a hotel, or gone into the office. My assumption is that people generally liked the way they were living their lives in 2019 and would prefer to go back to that if they could. If they used to travel by plane and eat in restaurants regularly, they will generally go back to that. The only places where that will not be the case is where they make expensive investments that change some element of their pre-COVID lives.
That is why I am interested to see that spending on “recreational goods” is up: people are buying home exercise equipment, which might mean that they will not rejoin a gym. “Furnishings and durable household equipment” includes things like desktop computers, printers, and other home office equipment, and is also up sharply. If people have invested in the ability to seamlessly (or less frictively) work from home regularly, they may decide that they do not need to go to the office every day. If that is the trend, it also is no great surprise that investment in commercial real estate is declining. None of this means that life will not snap back when the pandemic ends, but the more people make decisions like this, the more of our post-2020 world will be altered for the long-term.
A FSB Dismissal and the Navalny Case
Joshua C. Huminski
In a move that may signal an attempt by Russian president, Vladimir Putin, to distance himself from the poisoning of opposition figure Alexei Navalny, one of the more powerful members of Russia’s siloviki — the apparatchiks of the security and intelligence services — was forced to retire.
While technically at the age of retirement, General Sergei Smirnov, first deputy director of the Federal Security Service (FSB), was not promoted to another post, shunted off to another advisory body within the Presidential Administration, or able to extend his term in office as some of his colleagues have been able to do. Rather, he was simply dismissed and is now a private citizen. Sergei Korolev, the head of the SEB, or Economic Security Service, over which Smirnov stood, is expected to replace him.
Having joined the KGB in 1975, Smirnov spent part of his early career in Leningrad, making him part of the Leningrad clique of siloviki, with which President Vladimir Putin typically surrounds himself. Smirnov was, however, not part of the inner circle of Putin’s cadre, which may have been part of the reason for his rather breezy dismissal. Putin typically likes to hold on to those who are close to him, refusing to allow them to retire, despite their near pleas to do so.
Smirnov steadily rose within the KGB and later FSB, becoming the head of the Internal Security Directorate (UVB), an internal FSB watchdog group in 1998. In 2000 he became the deputy director of the FSB, rising to first deputy director in 2003. As first deputy director he took on a number of powerful posts including Military Counterintelligence (UVKR), the Economic Security Service, and the Service for the Protection of the Constitutional Order (SZKSiBT).
As first deputy director, Smirnov oversaw the FSB’s Second Service, part of which according to the Guardian, is believed to have been behind the poisoning of Alexei Navalny, the opposition figure. The European Commission alleged that Navalny was under close surveillance by the FSB, concluding that “that the poisoning was only possible with the involvement of the Federal Security Service [FSB]”.
Shortly before the dismissal of Smirnov, Putin declared that he personally intervened to allow Navalny to leave Russia to receive treatment in Germany. Russia watchers noted that Putin’s statement, read from a piece of paper (which is unusual for Putin), may have been a sign that the president was attempting to distance himself from the Navalny case. Putin has been loath to utter Navalny’s name (almost like Voldemort in the Harry Potter universe), so it is unusual for him to take credit for intervening in the case.
Navalny, who is still recovering from the poisoning, alleged that only the FSB director Alexander Bortnikov or the head of foreign intelligence office, Sergei Naryshkin, could have authorized the use of Novichok — the chemical agent used against Navalny — without Putin’s sign off. Guardian sources believe that SZKSiBT, until recently headed by Smirnov, was responsible for the poisoning. SZKSiBT is tasked with tackling terrorism, extremism and internal political threats on behalf of the Kremlin. If indeed SZKSiBT was responsible with the poisoning and failed, Smirnov’s dismissal may not be that surprising. For Putin, perhaps the only thing worse than a dead opposition figure is a not-quite dead opposition figure.
For Smirnov, the failed poisoning could equally have been the final nail in his proverbial coffin. Smirnov reportedly suffered a stroke in 2019 and was spending more time outside of the FSB headquarters. Additionally, under his watch several high-ranking officers were arrested on charges of corruption including Colonel Kirill Cherkalin of the FSB’s Department K, which is responsible for the financial sector. He reportedly was found with $185 million stashed in bags and suitcases in his apartment in May 2019. Two others from Department K, Dmitry Frolov and Andrey Vasilyev, were also arrested in the Spring of last year, allegedly having taken bribes from Russian bankers. According to Mark Galeotti, a noted Russia researcher and author, Cherkalin was Smirnov’s enforcer and Smirnov was almost dismissed then as a result of the scandal.
Putin’s comments on Navalny and Smirnov’s dismissal occurred prior to the news that a joint investigation by Bellingcat (an open source research organization), Der Spiegel, RFE/RL and the Insider, had uncovered that despite claims to the contrary, Russia was developing technologies that could be used for poisoning dissidents and opposition figures. If true, this could mean that Russia is in violation of the Chemical Weapons Convention.
Undoubtedly there are a lot of moving parts. Smirnov’s dismissal is likely the result of internal FSB politicking and now provided a convenient time for his removal. The internal corruption that occurred under his watch, his health, and the failed poisoning all certainly contributed to his hasty exit. It certainly did not help that he was not one of Putin’s inner circle of trusted confidants, which likely eased his exit.
The rising pressure on Moscow as a result of Navalny is interesting to watch. Whoever was ultimately responsible for the poisoning likely did not expect the international pressure that followed. Navalny is a Russian citizen, not terribly well known in the West, and the poisoning took place on Russian soil, hardly a recipe for international condemnation. Sergei Skripal he is not and Tomsk is not London.
Putin’s hasty interjection of himself into the Navalny situation, taking credit for allowing the opposition figure to leave, and dismissing someone who may or may not be connected to the poisoning, may be the president’s attempt to create space between him and the incident. This could well be in anticipation of additional international pressure, not the least of which could be a Biden win next week in the presidential election.
News You May Have Missed
U.S. Approves $2.37B Weapons Sale to Taiwan
Oscar Bellsolell
The State Department notified Congress on Monday of a $2.37 billion sale of missile systems to Taiwan. The Pentagon has reported that the package includes up to 100 Boeing-made Harpoon Coastal Defense Systems and 400 Harpoon Block II Surface Launched Missiles. The notification came less than a week after the announcement of three other arms deals worth $1.8 billion. Beijing has already announced sanctions on American defense contractors at a moment when relations between the U.S. and China are at their lowest point in decades — Washington and Beijing have confronted each other recently over the COVID-19 pandemic, technology, trade, and the Chinese Navy’s recent aggressive maneuvers in the South China Sea.
Anti-Lockdown Protests Grip Italy
Eric Dai
Protests erupted in Italy this week after Prime Minister Giuseppe Conte announced a series of partial lockdown measures in response to a second wave of Covid-19 infections. Italy was one of the countries that was hardest-hit by the pandemic earlier this year. Under the new restrictions, which perhaps indicate the Italian government’s unwillingness to return to the complete lockdowns of last spring, movie theaters are to be shut down completely, while restaurants and bars will close after 6 PM. Protests against those measures took place in several Italian cities, with some demonstrations in Turin and Naples turning violent.
Ethiopia, Egypt, and Sudan Resume Talks over Ethiopia’s Grand Renaissance Dam
Eric Dai
Tripartite negotiations between Ethiopia, Egypt, and Sudan resumed on Tuesday over the construction of Ethiopia’s Grand Renaissance Dam, an issue that has been a major point of contention between the three nations. The $4.8 billion hydroelectric dam, which began to be filled in July, is situated on the Blue Nile, one of the Nile River’s main tributaries. Egypt and Sudan allege that the dam will adversely affect their water supply, as both nations rely on the Nile’s flow downstream for irrigation and drinking water. Egypt also argues that it has historical rights to the Nile’s waters based on two international agreements it had signed in 1929 and 1959. Ethiopia, however, does not recognize these claims and maintains that it has a right to construct the dam under international law.
Opposition Party Wins Seychelles’ Election for the First Time in 44 Years
Thomas Triedman
Wavel Ramkalawan, an Anglican Priest and leader of the Seychelles Democratic Alliance, won the Seychelles presidential election last Sunday, marking the first victory against the United Seychelles party since 1977 — the year the East African island nation gained independence from Britain. Ramkalawan’s party also won the legislative election that was taking place concurrently, winning 25 seats while the United Seychelles party won only ten. The State Department called the elections “orderly and free,” applauding the results as “evidence that Seychelles has become a truly democratic nation.” As president, Ramkalawan will aim to fight drug trafficking (heroin is a major problem in Seychelles), strengthen the rule of law, and boost Seychelles’s tourism-driven economy that has been squashed by Covid-19.
Jeremy Corbyn Suspended from UK Labour Party
Until April, Jeremy Corbyn was the leader of the UK’s Labour Party and the leader of the opposition in Parliament. Many left-of-center Brits noticed, however, that, under Corbyn’s leadership, Labour covered up acts of anti-Semitism by party leaders and harassed supporters who tried to raise awareness of the problem — even employing anti-Semitic tropes in doing so. A report released yesterday by the UK’s human rights watchdog agency detailed multiple violations of the Equality Act by Labour and Corbyn’s advisors. After the report was released, he said that the problem was “dramatically overstated” by his political opponents. Current Labour Party leader Sir Keir Starmer called on Corbyn to retract his comments, saying that Labour was committed to implementing the recommendations from the watchdog. When Corbyn doubled down on his comments, he was suspended from the Parliamentary Labour Party. This does not appear to be a premeditated move by Starmer to move an unpopular colleague out of the party to advance their standing in the next election, but it does have that effect.
The views of authors are their own and not that of CSPC.