The National Intelligence Bulletin is a weekly look at threats to social, political, economic, and financial stability in the United States, and provides early warnings and indications of America’s volatile future. This report is available each week for Intelligence subscribers.
ADMIN NOTE: Starting next week, this report will be broken up into a series of daily intelligence summary so we can be more timely with our analysis and perspective. In the most recent survey, 96 percent of respondents said that they’d read a daily intelligence summary. These daily reports would also allow me to expand on some things that appear in the Early Warning. Meanwhile, this report will become the “executive summary” of those daily reports.
In this National Intelligence Bulletin…
- InFocus: Do political cycles spell the end of an era?
- Division among House Democrats underscores broader political shift
- How Democrats plan to take and keep the Senate permanently
- Dozens of climate protestors arrested at Sen. McConnell’s office
- Bannon breaks down 2019 on “Face the Nation”
- Far Left Politics Roll-Up
- Economic/Financial Watch commentary
In Focus: Yale political science professor Stephen Showronek is a presidential historian, and he’s described something he calls “political time.” Showronek writes that these non-linear cycles occur as “old order” political powers lose their relevance and new generations re-establish a new political order under reconstructive presidents. Michelle Goldberg, a New York Times columnist and admittedly a Leftist, pointed out Showronek’s work when she recently wrote:
“Viewed through this schema, Donald Trump’s presidency looks more like the end of a cycle than the end of the Republic.” [source]
Goldberg goes on to suggest that we could be “on the cusp of a new political epoch” involving democratic socialism and the Green New Deal, which is the anchor of the new political order. If this is to be the case, then it tells of the political conquest of “New America” over “Old America.” This has trended for a long time, starting with the Immigration Act of 1965, but it gained significant traction from 2008-2016 when the Left homed in on questioning what it means to be American.
Describing the “new political epoch” on a podcast, Goldberg went on to say:
“And so I guess the question is whether these demographic changes [like mass immigration] can eventually overcome things like gerrymandering, overcome things like the small state bias in the Senate and the disproportionate power the small states have in the electoral college. It’s becoming increasingly difficult for Republicans to win the popular vote in the presidential election… Nevertheless, it’s not clear to me how much Republicans can hold back the generational tide.”
I’ll have more on this political shift in the analyst comments under PIR1.
Priority Intelligence Requirements
PIR1: What are the new significant indicators of disruptive political, social, or cultural conditions or events?
PIR2: What are the new significant indicators of threats to economic or financial stability?
PIR1: What are the new significant indicators of disruptive political, social, or cultural conditions or events?
Electoral college remains under attack
This week, and following reporting in previous weeks, former attorney general Eric Holder called for an end to the electoral college. “Time to make Electoral College a vestige of the past. It’s undemocratic, forces candidates to ignore majority of the voters and campaign in a small number of states. The presidency is our one national office and should be decided – directly – by the voters,” he wrote via Twitter. [source] (AC: Why now? Because, as I reported a few weeks ago, Eric Holder knows that demographics heavily favors Democrats. “Demography is trending our way,” he said.)
Division among House Democrats underscores broader political shift
This week, Speaker Pelosi excoriated some House Democrats during a closed door meeting. “This is not a day at the beach. This is the Congress of the United States,” Pelosi complained as some Democrats continue to vote with Republicans. Specifically, the row is over a process called “motion to recommit” which House Republicans have used to slip more conservative clauses into otherwise progressive bills. While some Democrats want to change House rules to restrict the minority party’s ability to hold a vote on a motion to recommit, Pelosi is not currently in favor. All she wants is for Democrats to reject all Republican proposals. “We are either a team or we’re not, and we have to make that decision,” Pelosi said, later adding that the motions give Republicans “leverage”. During the meeting, Rep. Ocasio-Cortez warned that she would be using “a text chain with 200 activists in her district” in order to dissuade other Democrats from voting alongside Republicans.
One recent example was a Republican motion that passed with some Democratic support, which would require gun sellers to notify ICE if an undocumented immigrant purchased a gun. That clause got put into the House Democrats’ universal background checks bill, passed just this week. Some moderate Democrats who voted with Republicans feared their districts would vote them out of office if they didn’t support that provision.
“I think [the motion to recommit] is an extension of Trump’s tactics into the House, and we cannot legitimatize it and we cannot allow for it and we cannot support it,” Ocasio-Cortez said.
(Analyst Comment: The Democratic Party will continue to have problems reconciling its new progressive agenda with its more moderate representatives who feel that they represent the interests of their districts over interests of their party.
Fundamentally, it’s the same problem the Populist Right had and will continue to have with the Establishment/Neo-Conservative Right. After Trump, neo-conservatives will likely battle to bring the base back under what was once the mainstream — under the guise of “rescuing the GOP” — but as long as the Left is moving farther Left, I don’t foresee the GOP becoming the party of Bush and McCain again. Ditto for the Left: the Right’s push towards economic nationalism inflames the Far Left, ensuring that faction doesn’t return to the mainstream, but instead drags the mainstream with it, as well.
I’ll just restate here one of my concerns for 2020: the Never Trump, neo-conservative faction of the Republican Party runs a “moderate” Republican to split the vote. I have more in that later in this report.
But the populist, economic nationalist Right is a symptom of another trend which shows younger generations moving father Left. This is an existential threat to what I’ve referred to as Old America — older, more traditional, capitalist, and patriotic nationalist; in other words, the Trump base — as the concept of “New America” — younger, more cosmopolitan, anti-capitalist and anti-nationalist — tries to re-define the American identity. I borrowed the “New America” term from Foreign Affairs, the publication from the Council on Foreign Relations, which recently used an entire issue of the magazine to push for things like “re-defining American nationalism” and “the New Americans” — in this case, the expanding immigrant class and younger Americans desiring democratic socialism.)
How Democrats plan to take and keep the Senate permanently
This week, Puerto Rico was briefly dead center in the Democratic presidential campaign. While Democratic candidates have so far not endorsed “statehood,” per se, candidates Julian Castro, Elizabeth Warren, and Bernie Sanders have gone on record that they’ll support what Puerto Ricans choose. There’s already a movement reaching out to Democratic candidates to garner support. Statehood would require a Senate vote, so it could well be on the table the next time Democrats hold the Senate. That would give the them two reliably Democratic seats in a chamber that Democrats desperately want to flip and keep.
(Analyst Comment: Elizabeth Warren last month favored statehood for the District of Columbia. There’s already a movement there to give residents representation. As much as Democrats have complained about the coming imbalance in the Senate — 30 percent of the population will have 70 percent of the Senate seats within 20 years — Puerto Rico and D.C statehood represent a near-term solution that will heavily favor Democrats.)
Dozens of climate protestors arrested at Sen. McConnell’s office
Over the weekend, a group called the Sunrise Movement protested against Senate Majority Leader Mitch McConnell, leading to “several dozen” arrests at McConnell’s office. “All we’re asking for is to have a goddamned chance at a livable future,” said a Sunrise Movement co-founder. (Analyst Comment: The Sunrise Movement is a climate change activist group that’s also been involved in protesting against Democrats who refuse to back the Green New Deal.)
Bannon breaks down 2019 on “Face the Nation”
On Sunday, former Trump strategist Steve Bannon appeared in an interview on CBS’s “Face the Nation”. Bannon says that, due the Mueller report, the ongoing Congressional investigations, and the Southern District of New York’s criminal probe, “I think the next 90 days to four months is going to be a real meat grinder [for President Trump]… I think that 2019 is going to be the most vitriolic year in American politics since before the Civil War.” Bannon predicts a tough road ahead for President Trump, but says that he’ll get past it, be stronger for it, and then can start positioning himself for the 2020 campaign.
AC: The general consensus right now, including among some Democrats, is that the Mueller report will disappoint those who were hoping for hard evidence of collusion. I’ve been consistent since last year that my belief is Mueller is more likely to go after an obstruction of justice case, rather than collusion. Once published, the report goes to Attorney General William Barr, who then decides what, if any, gets released to the public. Meanwhile, Congressional Democrats have already drafted a lawsuit against AG Barr if he fails to disclose the full report to Congress. As for the Southern District of New York, that’s a criminal probe and media outlets are likely to immediately begin emphasizing its importance if the Mueller report is a dud. Thanks to the five House committees now investigating the President and his associates, we can expect legal hand-wringing into 2020. But Bannon seems to think Trump will get through.
On a longer term, the question is just how badly will these investigations and their findings, criminal or otherwise, impact the capacity of the Trump administration to carry out its obligations? The administration has already been hamstrung by career bureaucrats — usually referred to as the “deep state” — who can create red tape, slow walk directives, and wait until a new secretary is appointed, then start that process over again. There exists the potential that the Southern District’s investigation turns into charges against President Trump or someone in his periphery, which may add legitimacy to calls for impeachment. If the Congressional investigations, the Mueller report, and the Southern District of New York’s probes turn up nothing major, President Trump will have a major advantage going into 2020, being able to campaign on being cleared of wrongdoing. That’s not an option for Democrats.
What I foresee happening beyond Trump is, now that the bureaucracy and the media — the “resistance” — have perfected how to hamstring presidents, future Republican administrations, if they exist, will find themselves in the same boat; always battling a new challenge, unable to push through the bureaucracy, and unable to replace career bureaucrats with competent officials. If President Trump is re-elected in 2020, his base will expect him to make haste on deconstructing the administrative state, which was Bannon’s goal from the outset. But Trump has to get through 2019 first.
#ADOS hashtag causing division among Black Leftists
Now that the issue of reparations is a prominent question among Democrats, a grassroots effort called American Descendants of Slaves, or #ADOS on social media, is getting a lot of attention. Founders and participants of the movement have been criticized recently as being Russian bots, or being “paid for by Russia,” according to one member of the Congressional Black Caucus. Some critics allege that the movement features white people who pretend to be blacks on social media to attack blacks who are not descendants of slaves, like presidential candidate Sen. Kamala Harris. Other critics accuse the group of fomenting dissent among the black community over who and who isn’t a descendant of slaves. [source] (AC: I first saw this hashtag on Twitter and had to look it up. This is a rehash of Obama ‘not being black like me,’ a charge leveled by civil rights leader Cornell West because Obama never experienced the Civil Rights movement, nor did he live in poverty, nor did his ancestors experience slavery or Jim Crow. Some on the Left are accusing the ADOS movement of attacking Kamala Harris for the same reasons. Harris is the daughter of Jamaican and Indian immigrants. As an aside, even Ben Carson attacked Obama over his “blackness”: “He’s an ‘African’ American. He was, you know, raised white. Many of his formative years were spent in Indonesia. So, for him to, you know, claim that, you know, he identifies with the experience of black Americans, I think, is a bit of a stretch.” As one opinion writer put it, there’s a “blacker-than-thou” mentality being practiced in America.)
Far Left Roll-Up
“Incredible to start an investigation and have six months’ worth of leads on the first day.” – MSNBC analyst Matt Miller, speaking on the fallout of the Cohen testimony
NYT: “Democrats on Thursday emphasized their intent to explore and broadcast Mr. Trump’s actions through existing investigations, believing that, lacking startling new evidence, a drawn-out gantlet of inquiries will do more damage to a president seeking re-election than a partisan impeachment that could only roil the country and energize Republicans — a thousand cuts over a swing of the ax.”- NYT reporters Fandos and Hulse
“Yes, we have unambiguous evidence that the president has committed a crime at this point, I think. Do we have unambiguous evidence he has done impeachable offenses? We’ve got a ways to go yet.” – Rep. Jerry Nadler (D-NY)
“There’s a real thirst to win [the Senate] in 2020, and I’m getting good vibes. There’s going to be a fervor I think for taking back the Senate this election the way there was taking back the House in the last one… [The chances are] better than last time. It’s not as good as two years from now. But it’s good.” – Sen. Chuck Schumer
“We’re working hard to make statehood a top-tier issue. Puerto Rico moving up the primary can only help highlight the issues that are important: the unequal treatment of citizens and the statehood issue.” – Manny Ortiz, advisor to Puerto Rico’s governor
“Respect for Puerto Rico means you have the right to determine your association with the United States, period. Puerto Rico deserves self-determination. And on this question, I will support the decision of the people of Puerto Rico.” – Sen. Elizabeth Warren
“[Imeachment is] a very disruptive process to put the country through, and it’s an opportunity cost in terms of time and resources. You don’t want to go down that path unless it is unavoidable.” – Speaker Nancy Pelosi
“I believe that impeachment is inevitable. It also is a terrifying notion. Pence is an ideologue, and the ideology he holds is more terrifying to me and my constituents… Nations struggle any time [they] overthrow a dictator, and Trump really has the markings of a dictator.” – Rep. Ilhan Omar (D-MN)
“We would like your support in recommending the ASDC [Association of State Democratic Committees] work towards developing a collaborative approach to battling disinformation, illicit campaign tactics, bots, trollfarms, fake accounts, altered text, audio, and video, any and all inauthentic speech in our Presidential Primary process.” – So reads a “non-aggression pact” that would prevent underhanded tactics from being employed among fellow Democratic presidential candidates
During a CNN townhall last night, Sen. Bernie Sanders is asked whether or not, if he were elected, America would become a socialist nation. Sanders refused to answer the question, instead saying that, “If I am elected president, we will have a nation in which all people have healthcare as a right, whether Trump likes it or not.” Sanders went on to express support for free college tuition and raising the minimum wage. In a question from the audience, Sanders is asked if he can make “a simple, persuasive case as to why socialism is preferable to capitalism.” He doesn’t answer the question.
“If the Republicans are going to try to block us on key pieces [of legislation] that we’re trying to move forward, then you better believe we’ve got to keep all the options on the table.” – Sen. Elizabeth Warren, speaking about removing the Senate filibuster
Eitan Hersh, a Tufts political science professor, warned via Twitter that the Democrats could be doomed in five steps:
“The two historical time periods that are comparable to where we are now in terms of polarization and division are the French Revolution before the revolution and the United States before the civil war… Now we’re about to do the same thing [automating] to millions of retail jobs, call center jobs, fast food jobs and, most destructively, trucking jobs in the coming years … When I talked to other mainstream political candidates, no one seemed to want to focus on the enormity of the reality that’s ahead for America.” – Andrew Yang, Democratic presidential candidate
“There’s scientific consensus that the lives of children are going to be very difficult. And it does lead young people to have a legitimate question: is it okay to still have children?” – Rep. Alexandria Ocasio-Cortez (D-NY)
PIR2: What are the new significant indicators of threats to economic or financial stability?
URGENT: (Update) The Debt Ceiling is a major issue coming up. The Treasury is scheduled to run out of money this September, but Congress doesn’t seen interested in having the debt ceiling debate right now. Senate Finance Committee Chairman Chuck Grassley (R-IA) said that they probably won’t begin discussing the debt ceiling until the fall. According to the Bipartisan Policy Center’s Director,”Our long-term debt path is reckless and potentially dangerous for the future of our economy, but the debt limit in its current form carries unacceptable costs and risks.” In 2011, Democrats and Republicans fought over the debt ceiling, which led Standard & Poor’s to downgrade the U.S. credit rating. Politics could again influence the upcoming debate. [01 Mar]
Ray Dalio, who warned at the beginning of 2018 that he saw a recession on the horizon in 2020, recently scaled back his concern. Instead of a 50 percent chance of recession before the 2020 elections, he now sees a 35 percent chance. He continued: “In summary while the Fed probably doesn’t have enough firepower to offset a deep recession, the big sag that we expect is probably manageable.” (Analyst Comment: The Fed’s recent decision to delay further interest rate hikes has a big impact. There’s no longer widespread fear that a hawkish Fed will hike us into a recession.) [28 Feb]
The Chinese economy continues to slow. The latest data shows China’s factories fell to teir lowest activity levels in three years and export orders slowed to the lowest level since 2011. [28 Feb]
BlackRock CEO Larry Fink warned that the U.S.-China trade war could have additional implications for fiscal and monetary health. “What worries me about the conversation between the U.S. and China — China has a $1.3 trillion pool of U.S. Treasurys, they’ve been accumulating U.S. Treasurys because of the trade deficit. Now as China reduces its trade deficit with the U.S., the likelihood of them reducing their need for U.S. Treasurys is large.” Fink also warned that “over the next few years — and this is something we are not talking about enough and we need to be talking about this — we should expect over the number of years ahead, less ownership of U.S. Treasurys as their deficits shrink. But that’s at the same time the U.S. deficit still seems to be growing at a trillion dollars. So it is long term a little more disturbing for me to see the implications of smaller Chinese purchases of debt with rising deficits. So the bigger question is: who’s going to be the substitute buyer to buy this?” (AC: All this will lead to larger fiscal and monetary uncertainty, which is likely to lead to increased social and political instability.) [27 Feb]
Goldman Sach’s Jan Hatzius recently wrote to investors that the global economy has probably bottomed out and to expect a pickup. “Some green shoots are emerging that suggest that sequential growth will pick up from here,” Hatzius wrote. While there’s still some downside risk, Goldman still sees 3.5 percent growth in global GDP. [27 Feb]
JPMorgan CEO Jamie Dimon recently gave his annual presentation to shareholders in which he said, “We are prepared for a recession. We’re not predicting a recession. We’re simply pointing out that we are very conscious about the risks we bear.” Still, Dimon seemed bullish over the long term, saying that JPMorgan would take the opportunity during a downturn to expand and hire more bankers. “Financial results are going to get a little bit worse, but it’s also an opportunity to shine.”
(Analyst Comment: There seems to be a consensus opinion right now that the next recession won’t be as bad as some fear. Numerous financial elites have commented over the past several months that they see the next downturn as an opportunity to expand on the cheap and make firesale purchases of equities.) [27 Feb]
Fed chair Jerome Powell appeared before the Senate Committee on Banking, Housing, and Urban Affairs yesterday. “While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals.” A slowdown in China and weakness in Europe are particular concerns for the Federal Reserve. Powell also said that he’s “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.” In other words, the Federal Reserve is entirely open to modifying or changing course if U.S. economic conditions worsen. [27 Feb]
Also in yesterday’s Powell testimony: MMT. I’ve written about how progressive politicians are adopting Modern Monetary Theory, or MMT, which argues that governments who issue their own currency can borrow indefinitely to fund deficit spending. Yesterday, Powell said, “The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong.” [27 Feb]
According to the latest data from the St. Louis Federal Reserve, the wholesaler inventories-to-sales ratio continues to climb, showing that existing sales are slowing down compared to inventory ordering. That’s a classic sign of a slowdown. Despite that, the latest Bloomberg Consensus for Q1 2019 economic growth is hovering around two percent. [26 Feb]
Add another recession survey to the list: according to a National Association for Business Economics survey, 10 percent of respondents see a recession starting this year, 75 percent see a recession starting in 2020, and 11 percent see no recession through 2021. [26 Feb]
China’s Shanghai Index was up this morning (along with U.S. futures and pre-open trading) on news that President Trump is postponing the 01 March tariff increases. Last week, China reported they’d be increasing purchases of U.S. soybeans and other agricultural products. U.S. and Chinese negotiators have made “substantial progress” in trade talks, and President Trump likely still wants China’s help in solving the North Korea issue. There’s no deadline on a trade deal, but President Trump is inviting President Xi to Mar-a-Lago sometime in March, presumably to sign a trade deal. Now economists are asking if the deal will be big enough to stave off a global economic slowdown. Consensus so far: probably not. [25 Feb]
Over the weekend, Warren Buffet published his annual letter to Berkshire Hathaway shareholders. Buffet is somewhere around the world’s fifth richest man, and because his investment prowess is legendary, people listen when he speaks (and writes). Here’s one part of his letter that stood out to me: “A few of our trees [companies] are diseased and unlikely to be around a decade from now.” Given that we’re on the tail end of the current economic cycle, this statement would portend a turbulent period for some companies, especially those with large amounts of debt. Buffet essentially describes these high-debt companies as playing Russian roulette: “usually win, occasionally die”. That aligns with what a lot of other conventional financial elites are saying, specifically that corporate debt will likely lead to the death of numerous companies during the next downturn.
Towards the end of the letter, Buffet discusses the current national debt. He writes, “Those who regularly preach doom because of the government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400-fold during the last of my 77-year periods.” Buffet goes on and seems to write off concerns of fiscal calamity. There’s no arguing against a fiscal reckoning eventually, but Warren does reinforce his investing strategy, which is generational. What I take from this is that Buffet is an optimist over the long term, despite what happens over the next decade. [25 Feb]
Lastly, President Trump described the world economy as “fragile” in a tweet about oil prices this morning. “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” [source] [25 Feb]
These economic/financial briefs appear each morning in the Early Warning intelligence report. You can sign up for this email on your My Account page.
// END REPORT