Good morning. Here’s your Daily SITREP for Tuesday, 24 October 2023.
TODAY’S BRIEFING:
- READ TIME: 3 Minutes, 49 Seconds
- Inside the Beltway
- (1) U.S. “Ill-Prepared for Existential Threat” of Nuclear Peers
- (2) D.C. Mayor: Refund the Police
- Domestic INTSUM
- (3) Expanded UAW Strike Shows Labors’ Impact & Leverage
- (4) Car Loan Defaults Rising, Signaling Possible Financial Chaos
- Global SITREP
- (5) Transitional Energy Source Needs Trillions of Capital
- (6) White House Says Iran Behind Attacks on U.S. Forces
INSIDE THE BELTWAY
- (1) U.S. “ILL-PREPARED FOR EXISTENTIAL THREAT” OF NUCLEAR PEERS: According to a report published by the Congressional Commission on the Strategic Posture of the United States, the U.S. is “ill-prepared” for an “existential threat” of two peer nuclear adversaries and makes recommendations on how the U.S. should modern and expand strategic capabilities to simultaneously deter Russia and China.
- Commission Chair Madelyn Creedon said the U.S. is “on the cusp of a fundamentally different global setting for which we did not plan, and we are not well prepared,” and confronting two nuclear peer powers is unprecedented.
- Why It Matters: The U.S. is heading into a conflict no longer in the unipolar moment but in the context of great power competition. This report points out that nuclear modernization is insufficient to meet the threat of Russia and China, which is correct. The U.S. government should learn the most important lesson from the Ukraine War, that the capacity to turn economic power into military power, rather than focusing only on low-quantity, high-cost, high-tech weapons, is still the key to peer-to-peer and near-peer conflict. – R.C.
- (2) D.C. MAYOR: REFUND THE POLICE: Washington, D.C. Mayor Muriel Bowser introduced proposals to roll back progressive police reforms that Bowser said make it more difficult for police to ensure public safety.
- “We have to reverse the policy environment in the city that, quite frankly, went haywire in the last three years,” Bowser said.
- Why It Matters: Crime is visibly rising in blue metros, and it’s driving businesses away. That unavoidable consequence appears to be forcing liberal local governments to push back against progressive “defund the police” reform, and this move in Washington, D.C., could be only the first with other major blue metros to follow. – R.C.
DOMESTIC INTSUM
- (3) EXPANDED UAW STRIKE SHOWS LABORS’ IMPACT & LEVERAGE: The United Auto Workers (UAW) union expanded its strike to a Stellantis Michigan factory that makes Ram 1500 trucks – one of the manufacturers’ most important and profitable vehicles.
- UAW President Shawn Fain said that Stellantis “is trying to lowball and undercut us” with contract proposals that were significantly weaker than those offered by General Motors and Ford.
- The additional 6,800 striking UAW members bring the total strike count to about 40,000 between General Motors, Ford, and Stellantis employees.
- Why It Matters: The UAW is paying workers $17 million per week from its nearly $800 million strike fund, giving the union leverage and time to continue the strikes. To reach an agreement, the Big Three automakers will need to increase their initial pay raise offers, along with better bonuses and other improved benefits. These higher labor costs and reduced profit margins will force automakers to raise car prices. – H.B.
- (4) CAR LOAN DEFAULTS RISING, SIGNALING POSSIBLE FINANCIAL CHAOS: Americans are falling behind on their auto loans at the highest rate in nearly three decades due to higher car prices and borrowing costs, according to Fitch Ratings.
- The percentage of subprime auto borrowers at least 60 days past due on their loans increased to 6.1% in September – the highest rate since 1994.
- Why It Matters: The cycle of auto loan defaults usually starts with subprime borrowers and then spreads to wealthier, more creditworthy borrowers. Higher inflation and the return of student loan payments this month could spur the next wave of defaults. – H.B.
Global SITREP
- (5) TRANSITIONAL ENERGY SOURCE NEEDS TRILLIONS OF CAPITAL: Countries need to spend $7 trillion on new liquified natural gas (LNG) export plants, natural gas facility upgrades, and development of new natural gas fields by 2050, according to a report from the Japanese Institute of Energy Economics.
- “Announced projects in the world still won’t make up for the [natural gas] supply needed when considering the energy transition that will take several decades,” said the President of Japanese trading house Mitsui & Co.
- The Swiss-based International Gas Union (IGU) separately warned about a global natural gas supply shortage unless investments increase.
- Why It Matters: Governments are determined to quickly move away from fossil fuels to renewable energy, but there will be a transitional period. Policymakers could anoint natural gas as a “green” energy source that’s required for the energy transition, which would boost government funding, subsidies, and private capital investment. – H.B.
- (6) WHITE HOUSE SAYS IRAN BEHIND ATTACKS ON U.S. FORCES: The White House on Monday said Iran was “actively facilitating” rocket and drone attacks by Iranian-backed proxy groups on U.S. military bases in Iraq and Syria.
- White House spokesperson John Kirby said, “We know Iran’s goal is to maintain some level of deniability here, but we’re not going to allow them to do that.”
- The Pentagon announced on Monday that it was sending special operations advisors to Israel and speeding up the delivery of sophisticated air defense systems to the Middle East.
- Why It Matters: The Pentagon is beginning to realize that the war in the Middle East will likely embroil the U.S. – not by Washington’s choice but because long-time mortal enemies of the U.S. are now at war with both Israel and its ally, the U.S. It is likely that the brunt of Iranian proxy attacks on both Israeli and U.S. targets will begin once Israel commences its ground offensive in Gaza. Although the Biden admin has requested Israel delay its ground offensive, it appears that the Israeli Defense Forces are instead accelerating shaping operations for a massive invasion of Gaza in the very near future. – 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
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