National Intelligence Bulletin for 22 February 2019

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.


In this National Intelligence Bulletin

  • InFocus: Will third party politics be a 2020 spoiler?
  • A potential future in post-Trump America
  • SPLC’s “Year in Hate”
  • NC state officials order new election for 9th Congressional District
  • Reparations floated among Democratic candidates
  • Obama team meeting with Democratic candidates
  • Far Left Politics Roll-Up
  • Economic/Financial Watch commentary

 

InFocus:  Starbucks mogul Howard Schultz says he’s running for president in 2020 as a “centrist independent,” and it’s drawn considerable criticism from the Left. In previous reporting, we’ve covered an array of warnings from Democrats who say that his run would ensure a second term for President Trump. This week, Schultz tamped down on those concerns, writing, “I hear and respect this overriding concern, and have repeatedly promised that I will not be a spoiler. I am committed to ensuring that I will do nothing to re-elect Donald Trump. I mean it.” Schultz also warned that the Democratic Party may sabotage itself by nominating a Far Left candidate who loses to Trump. [source]

Schultz has criticized Sen. Elizabeth Warren over her policies, concluding that her presidency would mean socialism for America. This week, Schultz added that his path forward as a centrist independent speaks to the 45 percent of Americans who “don’t feel well-represented by either party.” It’s clear that he sees a potential path to the presidency through the middle. That path includes motivating the 100 million Americans who didn’t vote in the 2016 election to vote in 2020. I can’t say whether or not Schultz will make it to 2020, but he’s committed to running for now. He’s speaking to crowds across the nation, going on political talk shows (including Fox News), and drawing a line between himself and the ‘politics of extremism’ on both sides. There’s a small chance that his message gets widely adopted, but unless he can build a cult-like following of motivated voters, in the vein of Bernie Sanders or Donald J. Trump, he has a very unlikely path forward.

Meanwhile, Maryland Governor Larry Hogan is mulling over a primary challenge to President Trump. In an interview with Politico this week, Hogan criticized the GOP for protecting Trump. “Typically [the GOP] try to be fair arbiters of a process and I’ve never seen anything like it and I’ve been involved in the Republican Party for most of my life. It’s unprecedented. And in my opinion it’s not the way we should be going about our politics.” [source] The Republican National Committee passed a resolution earlier this year that confirmed their support for President Trump. But former Ohio governor John Kasich and former Massachusetts governor Bill Weld are also looking at a primary run against Trump.

Charlie Sykes, one of the men behind the new conservative anti-Trump journal Bulwark, ran an op-ed entitled, “We need Mitt Romney. And We Need Him Now” — to push back against Trump. Two more Never Trump conservatives are Bill Kristol and David Frum, who seem willing to back just about anybody as long as it’s not Donald Trump. Potential primary challengers collectively have about a zero percent chance of being the Republican nominee for 2020, but they’ll force the RNC to make a decision on just how far primary talk will go. Just like the DNC, the RNC is trying to avoid an ugly primary fight, too.

There really does appear to be four different major parties in our current political system. There are the old guard neo-conservatives; the right wing populists (evolution of the Tea Party); the democratic socialists; and the old guard neo-liberals. For the foreseeable future, the newer factions of both parties have staying power. The Democratic Socialists undoubtedly have a bright future in politics and, as I’ve written, represent a true threat to the future of the country. But I question what will happen to the Republican Party after Trump. How long will the Republican Party stay together if, after Trump, it becomes the party of right wing economic nationalism?

It’s entirely possible that 2020 is spoiled by a third party candidate, but I don’t see a viable third option coming from the Left. What I see is that there are neo-conservatives like Max Boot who have left the Republican Party. There are neo-conservatives like David Frum who are turning left and encouraging the GOP to adopt liberal values, like Obamacare and the carbon tax. [source] (Frum, who defended Obamacare, has gone so far to say that he will vote for the Democratic candidate if Trump is the Republican candidate.) And there are conservatives like Charlie Sykes and Bill Kristol who will never adopt nationalism or economic populism.

What I see is a potential challenger supported by old guard neo-conservatives; a Never Trump conservative (like Kasich) who can pick up enough votes as an independent to derail the re-election of President Trump and ‘save democracy’. (They actually believe that they’d be saving democracy if they defeated Trump.) In fact, if I were the Democrats, I’d be actively supporting an old guard third-party candidate to achieve the Ross Perot Effect. Perot, who took zero electoral college votes but 19 percent of the popular vote, is widely considered to be the man who denied then-President George H.W. Bush a second term.

I know it’s popular in Trump circles to look at the Green New Deal and the Democrats’ leftward lurch as evidence that Trump cruising to re-election. I say, “Not so fast.” Right now, Trump is not a shoo-in. There’s still over a year and a half until November 2020. That means there’s still time for a global crisis, a financial crisis, a recession, or third party candidate who could be used to sink Trump. None of these things are outside the realm of possibility, and a third-party challenger could absolutely spoil 2020. – S.C.


 

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?

Major Trends:

  • Ongoing political instability due to high stakes political warfare
  • Removal of political guardrails increases risk of reaction
  • Simmering social grievances based on race, class, and political ideology contributing to sporadic violence
  • Ongoing culture war features information operations and economic warfare

 

A potential future in post-Trump America

One of the simplest ways to describe one potential American future is simply to observe what’s happening in America now, and then consider what would continue happening after Trump is gone. Let’s take a first crack: American tribalism is likely to worsen, as its doing now.

In an interview with David Frum, Bulwark podcast host Charlie Sykes (both aforementioned) points out that America is “dividing in so many subcategories” and asks how we reverse this tribalism. Frum responds, in part, by saying:

“… we need a stronger sense of American nationhood. And as the country becomes more diverse, that becomes ever more important, because if we’re not a nation as compared to other nations then we’re tribes within a nation.”

Frum calls for two things to accomplish this re-nationhood: a restrictive immigration policy to rebuild a national identity, and a “stronger state that delivers material benefits to people, including healthcare.” Frum goes on to say that a national healthcare system is one way to rebuild a sense of national identity, because all citizens will receive the same healthcare, regardless of race or socioeconomic class.

Frum is an editor at the Atlantic and is no longer influential within the Republican Party. (Frum was a speech writer for President George. W. Bush and penned the term “axis of evil.”) But he does have a platform and he’s describing some real truths. One thing I wrote about last week was how “New Americans” are beginning to define what America is. After all, the cultural battle we’re fighting now is essentially over who defines American identity. Is America still the country of George Washington and Thomas Jefferson? Or is it the country of Barrack Obama and Ilhan Omar?

I hate to write this, but it’s increasingly the country of the last immigrant who got here. The current middle class gets to take a back seat to another generation of new citizens, who, we’re credibly told, are more important than existing ones. In terms of national identity, 1776 is setting sail. That trend is irreversible. Greater diversity means more tribalism and a new definition of national identity. If we want to see what a future America looks like in another five or ten years, we need to look no further than what’s happening now because it’s likely to continue.

SPLC’s “Year in Hate”

The Southern Poverty Law Center recently published their annual review of hate groups. According to their numbers, which I haven’t looked into, there are over a thousand such groups in America, which is up 30 percent in four years. Casting aside how loosely they define “hate,” this is the result of polarizing politics and the recognition that America’s demographics are changing. “Demographics is destiny” is a popular phrase in the Alt-Right, and it expresses a concern that’s likely to grow as the country grows more diverse and less White. It’s why I’ve focused on the idea of “low intensity conflict,” which has already started and will become more apparent as right wing and left wing groups ‘battle’ for the future of America.

NC state officials order new election for 9th Congressional District

State officials have ordered a new election to be held for the embattled 9th District of North Carolina. The state Board of Elections found evidence of voter fraud, which prevented the Republican victor from being seated in Congress. The seat will remain vacant until another election is held. No date has been set, but outside groups could make this an epic political fight.

Reparations floated among Democratic candidates

As more Democratic candidates are confirming their support for reparations, some numbers are being floated. One reparations policy researcher supports a $100 billion program. Others, like Dr. Dority of Duke University, believe the number should be higher. Both Elizabeth Warren and Kamala Harris are proposing reparations of some form, although no specifics have been released.

Here are some relevant quotes from this week:

“We have to be honest that people in this country do not start from the same place or have access to the same opportunities. I’m serious about taking an approach that would change policies and structures and make real investments in black communities.” – Sen. Kamala Harris (D-CA) confirming her support for reparations for descendants of slaves

“We must confront the dark history of slavery and government-sanctioned discrimination in this country that has had many consequences, including undermining the ability of black families to build wealth in America for generations. We need systemic, structural changes to address that.” – Sen. Elizabeth Warren (D-MA), a presidential candidate who also supports reparations

“[Mr. Booker] is running for president to reignite our sense of common purpose to build a more fair and just nation — that means enacting policies that atone for this nation’s history of intentionally discriminatory public policy toward African-Americans. You cannot address the systemic racism unique to this country without proposing race-conscious solutions.” – Spokesman for Sen. Cory Booker (D-NJ)

“There is a point in black Americans making a collective decision to treat a candidate’s attitude toward reparations as a litmus test for supporting them.” – Dr. Sandy Darity, Duke University professor

Obama team meeting with Democratic candidates

A group of former Obama staffers and advisors — and in some cases, Barrack Obama himself — have met with a dozen Democratic presidential candidates to offer campaign advice. According to the New York Times reporting, “Mr. Obama has indicated to candidates that he worries about the possibility of a damaging primary fight, and has urged them to avoid attacking each other in bitterly personal terms that could help Mr. Trump. He has also hinted that he sees a relatively open space for a more moderate Democrat, given the abundance of hard-charging liberals in the race.” [source]

Media: Mueller report to be published soon

CNN is reporting that special counsel Robert Mueller will soon report his findings to the Attorney General. This isn’t the first time that media outlets have reported the imminent delivery, however, more outlets are independently confirming it this time. Next week seems to be the general consensus, although no one yet knows for sure. Why does next week matter? President Trump will be in Vietnam to meet with North Korea’s Kim Jong-un. The report’s release would draw attention away from the summit and possibly give Kim leverage, especially if the report is negative for President Trump. Last year, Mueller released indictments against Russian officials just before President Trump was scheduled to attend a summit in Helsinki. Odd timing, to say the least.

Judging by the way Democrats are acting, collusion doesn’t seem to be the most likely finding. Obstruction of justice, over the firing of former FBI director James Comey, is still one possibility. But even if the Mueller report finds nothing of substance, President Trump’s legal woes aren’t over. First, Attorney General William Barr gets to decide which parts of the report, if any, get released to Congress or the public. Democrats in Congress will certainly pursue litigation if the full report isn’t released, and that could wind up in the Supreme Court. Beyond that, House Intelligence Committee chairman Rep. Adam Schiff (D-CA) is leading a trio of committees in their own investigation, which could drag on through election season. Plus, if the Mueller report mentions anything about President Trump’s income tax statements, Democrats are certain to renew their calls to subpoena the Trump tax returns. That could open a new can of worms.

 

Far Left Roll-Up

“We began the political revolution in the 2016 campaign, and now it’s time to move that revolution forward… It turns out that many of the ideas that I talked about – that health care is a right, not a privilege, and that we’ve got to move toward a Medicare-for-all, single-payer system: very, very popular. The idea that we have got to raise the minimum wage to $15 an hour. When I talked about making public colleges and universities tuition-free and lowering student debt, that was another issue that people said was too radical. Well, that’s also happening around the country.” – Sen. Bernie Sanders (I-VT), announcing his presidential candidacy

“We have to fight every election, every day, everywhere because they need to know that there are more of us than there are them and we love our nation and we will not let it fall.” – Stacey Abrams

“You can see evidence in plain sight on the issue of collusion, pretty compelling evidence,” Schiff said, adding, “There is a difference between seeing evidence of collusion and being able to prove a criminal conspiracy beyond a reasonable doubt.” – Rep. Adam Schiff (D-CA), Chairman of the House Intelligence Committee

“I see the value of markets and that they can produce a lot of good if they have rules. But let us all be clear: Markets without rules are theft and I am opposed to theft. There is a reason that the folks on Wall Street, the big CEOs, don’t want me to even be in the Senate.” – Sen. Elizabeth Warren
“We will pay for the Green New Deal the same way we paid for the original New Deal, World War II, the 2008 bank bailout, extended quantitative easing programs, all our current wars. The Federal Reserve can extend credit to power these projects.” – A blog post from Rep. Alexandria Ocasio-Cortez; more Modern Monetary Theory
“When people ridicule progressive proposals as silly and unaffordable, they’re basically revealing their own biases and ignorance. Investment can and should be debt-financed; benefit enhancements can be largely paid for with high-end taxes.” – Left wing economist Paul Krugman

 

PIR2: What are the new significant indicators of threats to economic or financial stability?

Major Trends:

  • Trade war with China poses risk to U.S. farmers and manufacturers, emerging markets
  • Slow in global economic growth poses risk to emerging and developed economies
  • Unsustainable national debt to increase due to trillion dollar budget deficits
  • Strong potential for an economic recession around 2020 that causes significant financial disruption

 

Economic/Financial Watch

There’s trouble from the Philly Fed’s manufacturing index, which just dipped into negative territory. After a survey of expectations came in at 14, the actual numbers posted were -4.1 — the lowest since the 2016 manufacturing recession. Manufacturing orders and shipments for the Philadelphia region also turned negative. Additionally, the Philly Fed manufacturing index is generally a good indicator for Gross Domestic Product growth, which means that we should expect GDP to dip significantly. The latest GDPNow data from the Atlanta Fed is pointing to 1.4 percent growth from Q4 2018. (AC: This is probably one of several reasons why the Federal Reserve is curbing its policy of two additional rate hikes this year.) [22 Feb]

This week, the Federal Reserve released their Federal Open Market Committee minutes from January, which show a decision to revise the previous month’s policy decision. Instead of planning on two rate hikes this year, the Fed is likely to delay further decisions. “We are now facing a somewhat contradictory picture of generally strong U.S. macroeconomic performance, alongside growing evidence of crosscurrents. At such times, common sense risk management suggests patiently awaiting greater clarity,” said Fed chair Jerome Powell. Additionally, the Fed expressed their desire to end quantitative tightening and leave their $4 trillion balance sheet as is, for now. (Analyst Comment: The Fed often get things wrong. Previously, I’ve included accusations that the Fed’s rate hiking has accidentally pushed the U.S. economy into recession. This policy decision, which essentially admits that the last rate hike went too far, is a good example of the Federal Reserves mistakes.) [21 Feb]

The $9 trillion corporate debt bubble is receiving a lot of attention recently as more analysts look at lower lending standards — the same problem experienced in the lead up to the 2007/8 housing market meltdown. That’s leading numerous analysts to warn about the risk of corporate bankruptcy during the next financial downturn. [21 Feb]

Speaking about possible interest rate increases and a recession, BlackRock’s chief multiasset strategist said, “It seems frankly optimistic to expect nothing from the Fed in the next 12 months. When you look at payroll data, this is not an economy that’s about to be in recession.” In other words, the economy is still moving and the Federal Reserve may look at another interest rate hike sometime this year. [20 Feb]

I continue to see growing adoption of Modern Monetary Theory, which says that the federal government can run deficits indefinitely without worrying about the growing national debt. At a speech at the American Economic Association last month, one former International Monetary Fund chief economist said, “The levels of debt we have in the U.S. are not catastrophic. We clearly can afford more debt if there is a good reason to do it. There’s no reason to panic.” [20 Feb]

“It would seem to me that all of the clues are pointing in the direction of [the next global recession] being of the severe type, maybe not as much as 2008 but certainly very much more severe than the average global recession that we’ve had in the post war period.” – Desmond Lachman of the American Enterprise Institute [20 Feb]

I’m increasingly paying a little less attention to the data and seeking out what investors, hedge fund managers, and other financial elites are saying about the markets and economy. Here’s a quick take on my findings over the weekend. [19 Feb]

“This rapid debt expansion can’t go on forever. At some point, there will be a price to pay in the form of slower economic growth or a recession… A lot of local municipalities will have trouble. Detroit was a recent one. There will be Puerto Ricos in the U.S… It’s not going to end well.” – Steve Romick of First Pacific Advisors warning about the coming municipal debt defaults [19 Feb]

“I still have my seatbelt fastened. We will most likely be in a recession in a few months, if we’re not already… People look at the wrong indicators… [The stock market] is telling me that the economy is rapidly slowing. There is historically a six-month lag from the market peak to the gross-domestic-product peak. The market peaked in late September.” – Pamela Rosenau of the Ronsenau Group (AC: I find this take the least credible. The economy may be slowing down, but we’re not in a recession yet.) [19 Feb]

“I think [a recession is] soon, probably 12 to 18 months. And, you know, the word recession always elicits a lot of emotion… It is not going to be an ’08- or ’01-type of affair. It’s going to be like a 1990 affair, which was very modest and shallow.” – Mike Wilson, Morgan Stanley market strategist [19 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

S.C.

Samuel Culper is a former Intelligence NCO and contractor. Iraq(x1)/Afghanistan(x2). He now studies intelligence and warfare.

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