Good morning. Here’s your Daily Situational Awareness for Tuesday, 18 July 2023.
TODAY’S BRIEFING:
- READ TIME: 5 Minutes, 10 Seconds
- Inside the Beltway
- (1) Trump Benefits, DeSantis Tanks in Divided Donor Field
- (2) AI-Generated Political Ads Raise Questions Over Regulation
- (3) SCOTUS Reporters Shift Gears from Cases to Ethics
- (4) Chip CEOs Meeting with Biden Officials Over China Restrictions
- Domestic INTSUM
- (5) U.S. Economic Outlook Extremely Uncertain
- (6) Private Equity Grants VP Kamala Harris’ Electrification Wish
- (7) Teamsters Tell White House to Butt Out of UPS Negotiations
- Russia-NATO SITREP
- (8) Developing Countries’ Food Lifeline Cut
- China & Indo-Pacific SITREP
- (9) China Angry Over Taiwan Political Candidate Visit to U.S.
INSIDE THE BELTWAY
- (1) TRUMP BENEFITS, DESANTIS TANKS IN DIVIDED DONOR FIELD: Federal Election Commission (FEC) filings released over the weekend show former President Donald Trump well ahead of the pack on 2nd quarter fundraising efforts, raising over $30 million amid Florida Governor Ron DeSantis’ announcement that his campaign will cut back on staff.
- Trump spokesman Steven Cheung said DeSantis “clearly mismanaged” campaign donations after DeSantis’ announcement.
- Why It Matters: Republican super donors looking for alternatives to Trump are splitting their efforts among a crowded candidate field, setting up a repeat of the 2016 Republican primary. DeSantis’ campaign is draining its campaign coffers already and scaling back, an ominous sign as Trump continues to dominate in polling and fundraising efforts with individual small donors. However, the Never Back Down PAC is expected to announce $130 million in fundraising in a filing later this month, which will boost DeSantis’ campaign despite cutbacks. – R.C.
- (2) AI-GENERATED POLITICAL ADS RAISE QUESTIONS OVER REGULATION: Progressive non-profit Public Citizen is urging the Federal Election Commission (FEC) to reconsider regulations for AI-generated political ads after a 3-3 vote by the commission in June deadlocked regulation efforts.
- Public Citizen lobbyist Craig Holman said AI political attack ads will make it “difficult to discern reality,” and the FEC has the power to act because the ads constitute “fraudulent misrepresentation.”
- Why It Matters: The use of generative AI to create political attack ads will increase as we approach the 2024 election, and the FEC’s refusal to act will pressure Congress to legislate on AI before the 2024 election kicks into full gear. – R.C.
- (3) SCOTUS REPORTERS SHIFT GEARS FROM CASES TO ETHICS: Politico’s Senior Legal Affairs Reporter Josh Gerstein said there has been a “dramatic increase” in resources from media in reporting on possible ethical conflicts of Supreme Court Justices and a shift away from traditional reporting on cases and court opinions.
- Why it Matters: Democrats have increasingly supported court-packing since former President Trump nominated Amy Coney Barrett for the third vacancy of his term. The media campaign focused on alleged ethics violations of the SCOTUS Justices is conveniently focused on the Conservative Justices and is priming public opinion for a push by Democrats to pack the court or attempt impeachment proceedings to get at least one more vacancy before President Biden’s current term ends. – R.C.
- (4) CHIP CEOS MEETING WITH BIDEN OFFICIALS OVER CHINA RESTRICTIONS: The CEOs of Intel, Qualcomm, and Nvidia are in Washington D.C. to meet with National Economic Council Director Lael Brainard and National Security Adviser Jake Sullivan over restrictions on investments in China expected in the coming weeks.
- According to people familiar with the matter, the tech CEOs see a window of opportunity to convince the Biden administration that a trade escalation on chips will undermine the administration’s diplomatic efforts with China.
- Treasury Secretary Janet Yellen told her Chinese counterparts that the restrictions would be narrowly targeted at semiconductors, quantum computing, and AI.
- Why It Matters: The Biden administration is trying to walk a fine line by “derisking” the U.S. economy from the Chinese economy rather than decoupling, but Chinese officials see no difference between the two. The White House is expected to have a months-long comment period on the executive order targeting U.S. investments in China, which will push back the implementation and any effect the new restrictions could have to 2024. – R.C.
DOMESTIC INTSUM
- (5) U.S. ECONOMIC OUTLOOK EXTREMELY UNCERTAIN: Mixed economic data has business owners and investors confused.
- The Purchasing Managers’ Index (PMI) shows that services are expanding, but manufacturing activity is down to recession levels.
- Bond markets are predicting a recession, but stocks are still rising; the S&P 500 is up about 20% since the October 2022 low.
- Why It Matters: After a decade of near-zero interest rates, we’ve seen the fastest interest rate increase in recent history. This is why U.S. manufacturing – an interest rate-sensitive sector – is suffering. A recession will reset the economy, and we’ll be on a better path afterward. But until then, we expect pain for U.S. companies and citizens. – H.B.
- (6) PRIVATE EQUITY GRANTS VP KAMALA HARRIS’ ELECTRIFICATION WISH: First Student, the largest school bus operator in North America and owned by private equity firm EQT, will spend billions of dollars to electrify 30,000 buses by 2035.
- Electric school buses can cost up to $400,000 – over four times the price of a diesel school bus.
- The 2021 Bipartisan Infrastructure Law provides $5 billion through fiscal year 2026 for zero-emission electric buses and low-emission buses that run on propane or compressed natural gas (CNG).
- Why It Matters: Government subsidies skew the market and attract companies and investors that profit from taxpayers. Without significant pushback, the EV trend will accelerate. This will mean more government subsidies, waste of taxpayers’ dollars, and inflation for U.S. citizens. – H.B.
- (7) TEAMSTERS TELL WHITE HOUSE TO BUTT OUT OF UPS NEGOTIATIONS: 340,000 United Parcel Service (UPS) workers are set to strike starting 01 August if negotiations between UPS and the Teamsters Union are not back on track.
- Teamsters President Sean O’Brien said the union told the Biden administration on “numerous occasions” not to intervene, and acting Labor Secretary Julie Su said she does not see a need to step in yet.
- Why It Matters: UPS moves 19 million parcels per day in the U.S. and a work shutdown will have a major impact on the economy and supply chains to the tune of billions of dollars. Their competitors, FedEx and the U.S. Postal Service, do not have the capacity to step in and take up the slack. UPS also handles logistics for the medical industry, and a strike will impact the delivery of medical devices and surgical equipment to healthcare providers. – R.C.
GEOSTRATEGIC INTSUM
Russia-NATO SITREP
- (8) DEVELOPING COUNTRIES’ FOOD LIFELINE CUT: Russia suspended the Black Sea Grain Deal that allowed 33 million metric tons of Ukrainian food exports since August 2022, despite the ongoing conflict.
- The International Rescue Committee said the grain deal is a “lifeline for the 79 countries and 349 million people on the frontlines of food insecurity.”
- Why It Matters: Ukraine must now export grains by land or through the Danube River to Romania’s Black Sea ports, which means a lower global food supply. If major food producers cannot increase exports, developing countries will face higher prices that could spark food riots, political revolutions, and more migration to Europe and the United States. – H.B.
China & Indo-Pacific SITREP
- (9) CHINA ANGRY OVER TAIWAN POLITICAL CANDIDATE VISIT TO U.S.: Beijing reacted angrily over Taiwan presidential frontrunner Vice President William Lai’s planned visit to the U.S. next month.
- China considers Lai a separatist movement leader, although he is a duly elected Vice President and the leading presidential candidate for Taiwan’s Democratic Progressive Party.
- U.S. Secretary of State Antony Blinken told reporters Lai was making a standard transit of the U.S. that was “routine” and consistent with past practices.
- Why It Matters: Last month, Beijing announced that visits to the U.S. by Taiwanese politicians were unacceptable. China is tightening the screws on its coercive measures against Taiwan by claiming the right to control the political activities of Taipei officials. Expect Beijing to react to Lai’s visit with the usual flurry of military exercises around Taiwan, this time more aggressive and likely closer to direct confrontation. – M.M.
— END REPORT
M.S. indicates analyst commentary from Mike Shelby
M.M. indicates analyst commentary from Max Morton
J.V. indicates analyst commentary from Jared Vaughn
R.C. indicates analyst commentary from Robert Cook
H.B. indicates analyst commentary from Harrison Burge