Friday News Roundup — October 18, 2019
A Statement on the Passing of Rep. Cummings; Democratic Primary Update; “Unicorns” on Uncertain Footing; Plus News You May Have Missed
Greetings from Washington, DC. While earlier in the week we were celebrating the Nats finally reaching the World Series, we are now reflecting on the life and legacy of Representative Elijah Cummings. This week, our President & CEO Glenn Nye shares some brief thoughts on his life, legacy, and example.
This week, our Senior Fellow James Kitfield reports on worries about how our political scandals at home affect our intelligence partnerships with key foreign partners.
Additionally, next Monday evening, we are pleased to honor Gwynne Shotwell, the President & COO of SpaceX, and Heather Wilson, former Secretary of the Air Force and current President of the University of Texas at El Paso, with our Eisenhower Award for their leadership in national security and economic innovation. More details on the award are available here.
In the rest of this week’s round up, Chris provides an update on where we stand in the Democratic presidential primary. Dan looks at the warning signs about “unicorns” and the changing nature of the economy. As always, we wrap with news you may have missed.
Remembering Elijah Cummings
We at CSPC were saddened Thursday morning to hear of the passing of Congressman Elijah Cummings. Representative Cummings’ entire career was dedicated to the service of his country, from his time in the Maryland House of Delegates to his impressive career in the U.S. House of Representatives. Serving the Baltimore area for over twenty years, Rep. Cummings established a reputation as an honest broker and a decent man among his colleagues, garnering the kind of bipartisan praise not common in Washington. It was my pleasure to serve with him in the House of Representatives, and I can only hope that in my career I can emulate some of the qualities he exhibited. We hope that his legacy will inspire the sort of leadership that our country needs at this point in our history.
Democratic Primary Part V: The Left Strikes Back
After roughly two months without covering the slog faced by the 2020 Democratic candidates, it now seems appropriate to reassess the field. As we have done before, it is helpful to take stock of the changes taking place in the race since the field is always in flux. Multiple debates have taken place since our last edition of primary coverage, and the herd of over 20 candidates has now thinned to a “relatively streamlined” roster of 17 major candidates.
When considering the above chart which we have used for all of our primary analyses this cycle, multiple changes warrant further explanation. On every pundit’s radar is the rise of Elizabeth Warren to the front of the field, recently overtaking former Vice President Joe Biden in many polls. Even in historically conservative states such as Iowa, Senator Warren has racked up impressive polling performances. Although the former Vice President still holds a substantial lead in the South — as he holds a large swath of the African-American electorate’s support — Warren is being recognized as the race’s frontrunner as she capitalizes on her momentum. The Massachusetts Senator’s frontrunner status was largely confirmed on Tuesday night, as candidates faced off in another Democratic primary debate.
Earlier debates saw notable assaults on Joe Biden from Kamala Harris and Julian Castro, who used perceived weaknesses in the frontrunner to try to distinguish themselves in a crowded field. While the tactic worked to temporarily catapult Kamala Harris into the spotlight, it failed her over time and failed Secretary Castro from the very beginning. This week, attention was focused similarly on Senator Warren, including multiple attacks from the moderate side of the stage regarding the viability of her Medicare for All plan. While former Vice President Biden was caught completely off guard by attacks against him in the first debates, Senator Warren took them in stride, using her response time as an opportunity to elaborate on her plans — something she has adopted as a campaign hallmark.
Two shifts working in concert explain the lower half of the first tier. Mayor Pete Buttigieg has maintained a steady base of support over the course of the summer and early fall; his debate performance on Tuesday night was also well-received. Promoting his record of military service, the South Bend Mayor flexed his foreign policy muscle in criticizing President Trump’s withdrawal from Syria. Simultaneously, Senator Kamala Harris has seen a steep decline in popularity following a spike to second place in early July. She now hovers just below Mayor Buttigieg in the polls, and is struggling to maintain any momentum she once had. While both of their poll numbers are far too low to threaten the top contenders at this point, consistent performance at roughly 5% is enough to rake in fundraising dollars and stay on the debate stage, the necessary elements to keep a candidacy alive.
Shifts in the lower tiers are mostly too minor for analysis here, but all of the aforementioned thinning of the herd is worth mentioning. Since our last primary piece, four candidates have dropped out: NYC Mayor Bill DeBlasio, Washington Governor Jay Inslee, New York Senator Kirsten Gillibrand, and former Colorado Governor John Hickenlooper. Although all four may have been formidable candidates in previous cycles (senators and governors have traditionally dominated presidential politics) most of the oxygen in the room has been used by the historically large field. While a midwestern mayor like Pete Buttigieg has found relatively stable footing this cycle, many other major candidates have had no such luck. This includes most of the moderate candidates in the field, especially Sen. Michael Bennet, Rep. John Delaney, Gov. Steve Bullock, and Rep. Tim Ryan.
One less visible phenomenon that may also prove to have a large impact on the race for the Democratic nomination is fundraising. Specifically, former Vice President Joe Biden has struggled with filling his campaign coffers throughout the past three months. Over this period, Mr. Biden’s campaign has spent more than it has taken in by over $2 million. The Biden Campaign has less than a third of the cash on hand of Sen. Warren’s campaign, and is even being out-raised by Mayor Buttigieg. In the modern era, candidates have found an effective strategy in focusing on small-dollar donors rather than those large-dollar donors that former Vice President Biden courts. Senator Bernie Sanders is a case-in-point of this condition, as he is the most effective fundraiser in the field by far and receives the overwhelming majority of his contributions in small increments.
Whether or not former Vice President Joe Biden can rectify his financial struggles, it is clear that the inertia of his campaign is not enough to preserve his lead. As Senator Warren’s momentum builds and multiple moderate candidates wait to snatch up Mr. Biden’s base of support, the campaign will undoubtedly continue to be in flux.
A couple weeks ago, in our “news you may have missed,” we noted the tenuous position of WeWork. Once a high-flying “unicorn,” headed towards an IPO, the firm is now at an inflection point. Its expansion — making it the largest commercial lessor in Manhattan, London, and the District of Columbia — ultimately became a lodestone on the balance sheet, while highly unorthodox management structure and self-leasing financial arrangements would lead to the ouster of its founder, Adam Neumann. At one point, WeWork was valued at $47 billion, yet now, we’re speculating whether it will last through mid-November.
It hasn’t been the best of times for the unicorns, with the dismal post-IPO performance of Uber and Lyft providing a highly cautionary tale about what happens when these firms go public. Not all unicorns have been misses, however, though the successes are important to note. Beyond Meat has been one of the major success stories, as, for reasons that are myriad, people have chosen switch burgers for “burgers.”
Of course, there are the broader economic implications of these firms’ successes and failures. Employees who expected windfalls after their firms IPO-ed have been disappointed. The State of California hopes that it does not repeat the mistakes of the 1990s and early 2000s, where the state budget, buoyed by tax revenue from that era’s tech boom, quickly proved unsustainable as the market contracted. In the case of WeWork, there is the concern about what a possible collapse could do to commercial real estate markets. One also cannot forget that endowments and pensions have turned to private equity for improved investment yields, helping to push more and more cash into venture capital investments in these firms.
Over at The Atlantic, Derek Thompson describes this trend in generational terms, in a piece entitled “The Millennial Urban Lifestyle is About to Get More Expensive.” He analyzes how these firms have drawn in venture capital money, effectively serving to subsidize transportation, dining, workspace, exercise, health care, pet care, and so on for young urban professionals. As he describes:
If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you’ve interacted with seven companies that will collectively lose nearly $14 billion this year. If you use Lime scooters to bop around the city, download Wag to walk your dog, and sign up for Blue Apron to make a meal, that’s three more brands that have never recorded a dime in earnings, or have seen their valuations fall by more than 50 percent.
As he accurately points out in his piece, many of these firms face challenges in terms of basic unit economics. For the meal kit companies he describes, it costs more to attract new subscribers than the revenue received during the span of a customer’s subscription — as they often cancel their subscription not long after meal deliveries begin. On the other hand, there are Uber and Lyft, where the business plan only appears profitable when you remove human drivers from the equation and replace them with automated vehicles.
At a time where the economic picture is uncertain, the health of these companies could presage greater weakness in the economy — or simply the fact that these companies aren’t ready for the scrutiny of going public. Our political debate lags woefully behind the changing nature of the economy, the role of the worker, and the benefits and costs of innovation and disruption. Absent new thinking, we will simply try to shoehorn 20th century approaches into meeting 21st century challenges.
News You May Have Missed
The House of Representatives voted on Wednesday to officially rebuke the decision of President Trump to withdraw American military forces from Syria. Although the resolution is nonbinding, it garnered broad, bipartisan support; 354 lawmakers voted for the measure while 60 voted against. After Turkish forces moved to extinguish Kurdish forces that have allied with the United States in the fight against ISIL, a bipartisan chorus arose among political punditry and government circles to urge American intervention to prevent their slaughter. Vice President Pence has apparently brokered a deal with the Turkish government to halt offensive operations. Regardless, it is clear that there is bipartisan consensus in opposition to the president’s noninterventionist efforts.
The Tongass National Forest, in the Alaskan panhandle, is the largest national forest in the United States and the largest temperate rainforest in North America. Since the Clinton administration, Federal policy has banned roadbuilding and logging in the forest. Heeding the calls of Alaskan lawmakers and business leaders, the Trump administration has recommended that the entire forest be opened for development. Ecological experts have warned about the broader impact on this pristine ecosystem, as the effects of logging extend beyond the forest to important land, river, and sea habitats.
The government of China warned this week that they would take retaliatory action if President Trump were to sign a piece of legislation putting Hong Kong’s special trade status under review. Such an act could put Chinese officials at risk of being sanctioned, hurting Chinese business interests. Chinese Foreign Ministry spokesperson Geng Shuang went further in stating “”If the relevant act were to become law, it would not only harm China’s interests and China-U.S. relations, but would also seriously damage U.S. interests.” They added that “China will definitely take strong countermeasures, in response to the wrong decisions by the U.S. side, to defend its sovereignty, security and development interests.” Congressional lawmakers seem unfazed by the thinly veiled threat, and the Senate intends on sending the bill to the president’s desk in the near future.
As U.S. forces bomb their own bases in Syria to prevent them from falling in the hands of Turkish-backed militants or Russian mercenaries, Russian President Vladmir Putin has made state visits to Saudi Arabia and the United Arab Emirates. While the trip had been planned long in advance of President Trump’s sudden decision to withdraw U.S. forces from Syria, many commentators in the region have noted that Putin appears to be on a “victory lap” as regional leaders seek to hedge their concerns about the future of U.S. policy in the region.
In news that has the CSPC team as shocked as a Casablanca police prefect learning that there’s gambling in Rick’s Cafe, cybersecurity experts studying the Android version of the Chinese Communist Party’s “Study the Great Nation” app have found that it contains spying software designed to provide full access to a user’s phone and data. This app has been heavily promoted by the CCP to encourage citizens to study “Xi Jinping Thought” and while mandatory for civil servants and party officials, a growing number of companies have linked workers’ salaries to performance on the app’s quizzes on party dogma and the life of Xi Jinping.
Due to Typhoon Hagibis, the traditional ceremony in which the newly crowned Japanese Emperor is presented to the people in an open-top car had been postponed. Although the storm hit Japan last weekend, the government decided to move the date of the ceremony out of respect for the victims affected by it. At least 77 people were killed, and nine are still missing in the wake of the storm. When the ceremony does take place on Tuesday, it will take roughly 30 minutes, followed by an address from Emperor Naruhito. Multiple foreign dignitaries will be in attendance, including Prince Charles of the United Kingdom.
The views of authors are their own, and not that of CSPC.