In the face of heavy opposition from environmental groups, Gov. Gavin Newsom and his administration are pushing forward with a controversial plan to build a 45-mile water tunnel beneath the Sacramento-San Joaquin River Delta — a project the governor says is vital to modernizing the state’s aging water system.
State officials released their final environmental analysis of the proposed delta tunnel project on Friday, signaling the start of a process of seeking permits to build the tunnel that would use massive pumps to transfer water from the Sacramento River to cities and farmlands to the south.
Newsom and state water managers say the tunnel would help California adapt to worsening cycles of drought fueled by climate change and capture more water during wet periods. They say it would also help address the risks to infrastructure posed by earthquakes and flooding.
“Climate change is threatening our access to clean drinking water, diminishing future supplies for millions of Californians,” Newsom said in a written statement. “Doing nothing is not an option. After the three driest years on record, we didn’t have the infrastructure to fully take advantage of an exceptionally wet year, which will become more and more critical as our weather whiplashes between extremes.”
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Environmental groups have condemned the plan, saying the tunnel would seriously harm the delta’s deteriorating ecosystem and threaten fish species that are already on the brink. Opponents argue that the funds needed to build the tunnel would be better spent on groundwater recharge efforts, water recycling, and stormwater capture, among other projects.
Debate over the project has been simmering for decades. Former Gov. Jerry Brown sought a two-tunnel proposal, calling the project WaterFix. Newsom has supported a redesigned project with a single tunnel, called the Delta Conveyance Project.
The plan calls for a concrete tunnel 36 feet wide and running 140 to 170 feet underground, connecting to a new pumping plant that would send water into the California Aqueduct.
Construction costs have previously been estimated at $16 billion, but the state plans to update those cost estimates next year.
California officials say the tunnel’s two proposed intakes on the Sacramento River would allow the system to capture and transport more water during wet periods. State water managers say the current infrastructure makes for missed opportunities when large quantities of stormwater are allowed to flow trough the delta and into the Pacific Ocean during rainy periods, such as last winter.
Tunnel supporters say the project would improve California’s ability to withstand worsening droughts and intense swings between wet and dry periods.
“We really don’t have time to waste in terms of getting all projects moving forward that can secure California in this new hydrologic scenario,” said Karla Nemeth, director of the state Department of Water Resources.
Nemeth said the increase in water availability from the delta would be “pegged to those times when we do have those high flows,” rather than during dry times.
“Ultimately, it really is triggered by intense pulse conditions,” she said.
Officials estimated that if the tunnel had been in place during the torrential storms in January, the state could have captured and moved an additional 228,000 acre-feet of water, enough to supply about 2.3 million people for a year.
“We need to preserve the backbone of our water system,” said Wade Crowfoot, the state’s natural resources secretary.
Crowfoot said without this update, the existing water system is vulnerable to the effects of climate change as well as potential damage from a large earthquake, which could disrupt water deliveries for 27 million Californians. He said a quake could render the system unusable for months or more than a year, which he said would be “the largest catastrophe in any water system in America.”
“To ensure that our conveyance is both climate-resilient and earthquake-resilient, we need to modernize this infrastructure,” he said.
Environmentalists and other critics argue that the state is failing to see the big picture and has based the project on outdated climate science.
“Like its predecessor, the WaterFix Project, the Delta Conveyance Project fails to consider or address the risks from accelerating climate change impacts to Sacramento and San Joaquin River watersheds and the delta,” said Deirdre Des Jardins, an independent water researcher.
Des Jardins and a coalition of environmental and fishing advocates said in recent written comments that the project faces major uncertainties, “including worsening climate change impacts on water supply and sea level rise, coupled with the need to reduce exports in order to increase freshwater flows through the delta.” They also said the state has failed to consider non-tunnel alternatives.
Newsom’s tunnel proposal, as outlined in the state’s final environmental impact report, is “another failure of state water officials to imagine alternative approaches in a climate-impacted California,” said Barbara Barrigan-Parilla, executive director of the group Restore the Delta.
“The big pipe engineering solutions of the last century are no longer the way forward in California water’s climate-changed reality,” Barrigan-Parilla said. The latest delta tunnel plan, she said, is “out of date for climate change science” and will quickly be obsolete if it’s built.
She suggested the state invest in projects that “reduce reliance on water exports from the delta,” such as underground water storage in farming areas, more stormwater collection and wastewater recycling in cities.
Other environmentalists said the tunnel’s water diversions would deny critical flows to the delta and San Francisco Bay. They warned that would exacerbate recent declines in native fish such as Chinook salmon, longfin smelt, white sturgeon and endangered delta smelt.
“The science clearly demonstrates that fish need increased river flows to survive, but state agencies are ignoring it,” said Jon Rosenfield, science director for San Francisco Baykeeper. “California diverts more than half of the water flowing through Central Valley rivers to serve industrial agriculture and big cities. Because of excessive water diversions, the list of fish native to San Francisco Bay and its watershed that are verging on extinction continues to grow, and our fisheries are increasingly shut down.”
This year, commercial salmon fishing was shut down along the coast because fish populations declined dramatically.
Scott Artis, executive director of the Golden State Salmon Assn., charged that Newsom and his administration “mismanaged our rivers during the drought,” harming the fishing industry, and that the tunnel project “looks like an extinction plan for salmon.”
“Southern California residents will be on the hook to pay for nearly all of this $20-billion boondoggle,” Artis said. “The tunnel could cause Southern California water rates to skyrocket — without delivering much benefit. The core problem is that we’re pumping too much water from the Bay-Delta. We need to divert less.”
John Buse, senior counsel for the Center for Biological Diversity, said the state’s final environmental report “maintains the same skewed analysis by failing to come to terms with the massive harm this tunnel will bring to the delta and its fish.”
Although many environmental groups oppose the tunnel, Newsom’s proposal has found support among some water districts, organized labor and business groups.
Jennifer Pierre, general manager of the 27-member State Water Contractors, said California can no longer afford to delay the project.
“Our climate reality requires that we build and adapt,” Pierre said. “The Delta Conveyance Project represents a golden opportunity to increase the [State Water Project’s] ability to move and store water when it’s wet for use when it’s dry and will allow us to be more flexible in response to the state’s changing hydrological conditions.”
Jennifer Barrera of the California Chamber of Commerce said that improving the state’s “water system and its infrastructure through the Delta Conveyance Project is urgently needed.”
Within 10 days, the state is expected to certify the environmental documents, culminating the review and enabling the Newsom administration to turn to environmental permits. State officials said they expect to complete all permits by 2026, allowing for construction to begin around 2030.
The completion of the environmental review will also lead to discussions among managers of water agencies about whether to contribute financially to the project. The Metropolitan Water District of Southern California will review the environmental documents as well as an upcoming analysis of costs and benefits as the district’s board considers “how best to invest our resources in response to the changing climate,” said Adel Hagekhalil, the district’s general manager.
State officials said the project is part of a broader water strategy to respond to a projected 10% loss in average water supplies by 2040 due to hotter conditions.
The state is continuing to invest in other types of projects, including wastewater recycling, stormwater capture and groundwater recharge, as well as improved efficiency and conservation efforts, Crowfoot said.
“But at the same time, we can’t stick our head in the sand about the fact that our backbone water infrastructure remains essential,” Crowfoot said. “We can’t simply shift investments into all those localized sources and expect to maintain water reliability for 40 million people in the fifth-largest economy in the world. We have to do both.”
Times staff writer Hayley Smith contributed to this report.
As California grapples with worsening cycles of drought, a proposal to create a new water district in Butte County has sparked fears of a profit-driven water grab by large-scale farmers and outside interests.
In the walnut and almond orchards along State Route 99 near Chico, agricultural landowners have led a years-long campaign to form the Tuscan Water District — an entity they say is vital for the future of farming in this part of Northern California. They say having the district will enable them to bring in water and build infrastructure to recharge the groundwater aquifer.
Yet some residents argue the district would open the door to water profiteering, claiming the plan would connect local supplies to California water markets, and allow the state to demand transfers during drought emergencies.
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The proposal, which will be decided Tuesday via mail-in balloting, has generated debate about the use of partially depleted aquifers to store imported water. Although major water suppliers in other parts of the state, such as the Metropolitan Water District of Southern California, have invested in efforts to bank water underground for times of drought, the concept has met with deep suspicion in Butte County.
“You put in the infrastructure, you start taking over the groundwater basin for private profit, and it changes everything,” said Barbara Vlamis, executive director of AquAlliance, an organization focused on protecting water resources in the Sacramento Valley. “It becomes this economic engine for these people that want to take over ownership.”
Supporters deny the charges of seeking to sell or export water. They say the district is necessary to address the local groundwater deficit and achieve sustainability in the coming years, as required under California’s Sustainable Groundwater Management Act, or SGMA.
“This is the most important development in local agriculture in a hundred years,” said Richard McGowan, a farmer who is one of the campaign’s leaders.
Local nut and fruit orchards depend entirely on groundwater, which because of overuse is projected to require reductions in pumping to meet state-mandated sustainability goals.
McGowan said the district, once formed, could plan projects to transport water to the area and use that water instead of pumping from wells, or use it to recharge the groundwater basin. Another benefit of forming the agency, he said, would be the ability to apply for government grants to fund infrastructure projects.
“We’re going to have to become sustainable,” McGowan said. “This gives us a great opportunity to work together to preserve this water resource we have. And now water has become such a hot topic, and the state has now become involved with it, that it almost dictates that we do something like this.”
Those who are fighting the district say it’s unnecessary. Vlamis argued the area’s current overuse of groundwater, which is not as severe as other parts of the Central Valley, could easily be addressed through conservation, estimating that if growers would save about 5%, that would be enough.
She and others argue that if infrastructure is built to bring in water for groundwater recharge, the imported water that’s stored in the aquifer would become a privately owned asset, effectively creating a water bank. They say the groundwater basin could then be drawn down and filled with banked water, which could be sold and shipped elsewhere for profit.
Such water banks have been established by various entities elsewhere in the state, such as the southern San Joaquin Valley.
Vlamis said banking water would require a drawdown of the aquifer to create storage space, which would diminish the flow of streams, threaten groundwater-dependent trees and put shallow domestic wells at risk of running dry.
“I think it is a damaging effort that could potentially destroy this region as we know it,” Vlamis said.
A pump draws groundwater to irrigate a nut orchard near Nord in Butte County.
(Jeffrey Obser)
Opponents formed a political action committee called Groundwater for Butte, which has warned that establishing the district is a “water grab by Big Ag and the state.”
“When they begin to pump water into the ground, from surface water that is already owned by private parties, those companies or those interests will own the water in the ground under my house,” said Jeffrey Obser, executive director of Groundwater for Butte. “That public status of the water will slowly be erased.”
Supporters of the Tuscan Water District called such claims unfounded, saying they do not intend to transfer any water out of the area — and that measures are in place to prevent that from happening.
They pointed out that the resolution outlining the district’s authority specifically states that it will not “have the powers to export, transfer, or move water” outside the local Vina and Butte subbasins, and that the district will not transfer any imported water outside its boundaries.
“That’s an important restriction,” said Tovey Giezentanner, a consultant and spokesperson for the Tuscan Water District. “It was formed without the power to export water out of the county.”
Another of the conditions adopted by the Local Agency Formation Commission says the district must submit proposed projects, such as those focusing on aquifer recharge, to the local groundwater agency to ensure consistency with the area’s state-required groundwater sustainability plan.
Those conditions “will ensure that the water stays local,” Giezentanner said.
Supporters note that Butte County also has since the 1990s had an ordinance that requires a county review process for any transfers of local groundwater outside the county, or for so-called groundwater substitution transfers, in which a property owner would sell surface water that would otherwise be used locally and, as a substitute, would pump groundwater.
McGowan touted those measures, saying the effort to create the agency “is not about shipping water out of the county.”
But Vlamis said the district’s bylaws could easily be changed to allow for water to be moved out of the area, and the county ordinance simply outlines a procedure that would have to be followed.
“Even if that’s not their intention, to transfer water out of here, all it takes is an emergency proclamation by the governor, and all local ordinances and everything are thrown out,” Vlamis said. “You may have honorable intentions, but once the state wants more water, and you’ve put in the infrastructure to facilitate this, all bets are off.”
The water district’s proposed 102,000-acre territory covers a portion of the Tuscan Aquifer around Chico. It would overlap with part of the local Vina Groundwater Sustainability Agency’s territory.
State regulators have endorsed the area’s groundwater management plans, but Vlamis’ group AquAlliance is suing to challenge the Vina plan, as well as two other local plans. The group cites various failures in the plans, saying they would allow for substantial declines in groundwater levels, threatening wells and streams.
Vlamis said she’s convinced there is a longstanding interest among state and federal water officials to “integrate” the county’s groundwater into the state’s supplies, allowing for water to be transferred out of the area.
The state Department of Water Resources denied that.
Landowners have been casting ballots in the mail-election election. The balloting is weighted based on assessed land value, so the largest landowners, some of which farm thousands of acres, will have the biggest influence in the result. Critics have objected to this type of vote, saying they believe a one-vote-per-person system would be fairer.
Richard Harriman, a lawyer in Chico, called the effort to form the district a “Trojan Horse,” saying out-of-county landowners are seeking control of the area’s water “for purposes that are not for the public interest in Butte County.”
“It is absolute folly to think that the water is going to stay in Butte County, in that water bank, once the price of water is higher than the economic value of that water to agriculture. It will be gone. The water will follow the money,” Harriman said.
Farmer Ernie Washington said in a letter to the Chico Enterprise-Record that he initially was concerned about the potential to export water from the county.
“Conspiracy theories abound in the water world and I’m not naive enough to think that there aren’t plenty of outside interests with designs on our groundwater,” Washington wrote.
But he added that he’s satisfied measures are in place to address that “as well as it can be,” and believes the intent of those seeking to form the district is to “preserve our groundwater resource,” as well as farmers’ livelihood and way of life.
President Joe Biden sharply criticized Rep. Lauren Boebertin her Colorado congressional district on Wednesday afternoon, attacking the Republican directly for several minutes during his 23-minute long speech. It came as she hurled sharp criticism at him throughout the day on social media.
Rep. Lauren Boebert leaves a House Republican caucus meeting on Oct. 11 in Washington. / Credit: Joe Raedle / Getty Images
The president spoke at CS Wind in the afternoon after touring the wind turbine company’s plant in Pueblo, which is in Colorado’s 3rd Congressional District. He praised CS’s plan to hire hundreds of new workers and was quick to point out that funding from the infrastructure law that his administration pushed through helped to make it possible.
“(Boebert), along with every single Republican colleague, voted against the infrastructure law that made these investments in jobs possible and that’s not hyperbole, that’s a fact,” he said.
President Joe Biden speaks in Pueblo, Colorado, on Wednesday. / Credit: CBS
Biden paused for a moment when he first mentioned Boebert’s name. He then made the sign of the cross and smiled at the laughs that elicited. He said Boebert voted, first against the infrastructure law, and then to repeal key parts of the law. Boebert has repeatedly defended her voting record on the bill and called the law an example of “Green New Deal extremism.”
The attacks come a little less than a year before the 2024 general election. In 2022, Boebert was re-elected after narrowly defeating Democratic challenger Adam Frisch. Frisch is actively campaigning in the district in hopes of winning the seat next time around, but he didn’t appear onstage with Biden.
Frisch’s absence on Wednesday came under criticism from Boebert, who referred to her 2022 challenger as “Aspen Adam.” Frisch’s previous political experience includes serving on the Aspen City Council.
“(Frisch) is so scared of Biden’s sinking poll #’s that he declined to join him on the campaign trail in Pueblo today,” she tweeted. “If Aspen Adam won’t show up for his President and Pueblo, how can Third District voters trust he’ll show up for them?”
Biden referred to Boebert in his speech as “one of the leaders of (the) extreme MAGA movement.”
“She called (the infrastructure) law a massive failure,” said Biden, who then addressed employees of CS Wind, asking, “you all know you’re part of a massive failure?”
“Tell that to the 850 Coloradans that are getting new jobs in Pueblo and CS Wind thanks to this law,” he said. “Tell that to the local economy that’s going to benefit from these investments.”
Boebert was active on social media on Wednesday with a series of political jabs directed at Biden and Frisch. On X, formerly known as Twitter, she wrote that Biden came to Colorado after taking a break from “his lavish vacations” — a reference to his visit to Nantucket for Thanksgiving last week. She tweeted that Biden should be coming to Colorado to “apologize for his all out war on on fossil fuels and his Green New Deal agenda which have cost the great people of Colorado’s 3rd District dearly.”
BERLIN — Germans gave the world schadenfreude for a reason. And southern Europe couldn’t be more pleased.
For countries that spent years on the receiving end of Europe’s German-inspired fiscal Inquisition, there’s no sweeter sight than to see Germany splayed on the high altar of Teutonic parsimony.
The irony is that Germany put itself there on purpose and has no clue how it will find redemption.
A jaw-dropping constitutional court ruling earlier this month effectively rendered the core of the German government’s legislative agenda null and void left the country in a collective shock. In order to circumvent Germany’s self-imposed deficit strictures, which give governments little room to spend more than they collect in taxes, Chancellor Olaf Scholz’s coalition relied on a network of “special funds” outside the main budget. Scholz was convinced the government could tap the money without violating the so-called debt brake.
The court, in no uncertain terms, disagreed. The ruling raises questions about the government’s ability to access a total of €869 billion parked outside the federal budget in 29 “special funds.” The court’s move forced the government to both freeze new spending and put approval of next year’s budget on hold.
Nearly two weeks after the decision, both the magnitude of the ruling and the reality that there’s no easy way out have become increasingly clear. Though Scholz has promised to come up with a new plan “very quickly,” few see a resolution without imposing austerity.
The expectation in the Bundestag is that Scholz will find enough cuts to deal with the immediate €20 billion hole the decision created in next year’s budget, but not much more.
In the meantime, his government is on edge. While Economy Minister Robert Habeck, a Green, has been telling any microphone he can find that Germany’s economic future is hanging in the balance, Finance Minister Christian Lindner has triggered panic and confusion by announcing a series of ill-defined spending freezes.
On Thursday, the government was forced to deny a report that a special fund created to bolster Germany’s armed forces after Russia’s full-scale invasion of Ukraine would be affected by the cuts.
At a press conference with Italian Prime Minister Giorgia Meloni late Wednesday, Scholz endured the humiliation of a reporter asking his guest whether she considered Germany to be a reliable partner given its budget crisis. A magnanimous Meloni, whose country knows a thing or two about creative accounting, gave Scholz a shot in the arm, responding that in her experience he was “very reliable.”
Greek accounting
Between the lines, the justices of Germany’s constitutional court suggested the use of the shadow funds by Scholz’s coalition amounted to a bookkeeping sleight of hand — the same sort of accounting alchemy Berlin upbraided Greece for more than a decade ago. Perhaps unwittingly, the court ruling echoed then-Chancellor Angela Merkel’s unsolicited advice to Athens during Greece’s debt crisis: “Now is the time to do the homework!”
For eurozone countries with a recent history of debt trouble — a group that alongside Greece includes the likes of Spain, Portugal and Italy — Germany’s financial pickle must feel like déjà vu all over again. From 2010 onwards, they found themselves in the unenviable position of trying to explain to Wolfgang Schäuble, Merkel’s taskmaster finance minister, how they planned to return to the path of fiscal rectitude. At Schäuble’s urging, Greece nearly ditched the euro altogether.
The expectation in the Bundestag is that Scholz will find enough cuts to deal with the immediate €20 billion hole the decision created in next year’s budget, but not much more | Odd Andersen/AFP via Getty Images
In recent months, Germany has once again assumed the role of the fiscal scold in Brussels, where officials have been negotiating a new framework for the eurozone’s rulebook on government spending, known as the Stability and Growth Pact. The pact, which dates to 1997, has been suspended since the pandemic hit, but it is set to take effect again next year. Many countries want to loosen the rules given the huge budget pressures that have followed multiple crises in recent years. Berlin is open to reform but skeptical of granting its fellow euro countries too much leeway on spending.
The latest budget mess certainly won’t help the Germans make their case.
Simple hubris
The allure of the strategy the court has now deemed illegal was that the government thought it could spend money it salted away in the special funds without violating Germany’s constitutional debt brake, which restricts the federal deficit to 0.35 percent of GDP, except in times of emergency.
Put simply, Scholz’s coalition wanted to have its cake and eat it too, creating a veneer of fiscal discipline while spending freely to finance an ambitious agenda.
Despite ample warning from legal experts that the government’s plan to repurpose a huge chunk of emergency pandemic-related funds might not withstand a court challenge, Scholz and his partners went ahead anyway. What’s more, they staked their entire political agenda on the assumption that the strategy would go off without a hitch.
Last week’s court decision is the national equivalent of a rich kid being cut off from his trust fund: Daddy’s money is still there, but junior can’t touch it and has to exchange his Porsche for an Opel.
What many in Berlin cite as the main reason for what they are calling derSchlamassel (fiasco), however, is simple hubris.
Scholz’s mild-mannered public persona belies a know-it-all approach to governing. A lawyer by training who has served for decades in the top ranks of German government, Scholz, at least in his own mind, is generally the smartest person in the room.
During coalition negotiations in 2021, Scholz sold the budget trick idea to his future partners — the conservative liberal Free Democrats (FDP) and the Greens — as a way to square the circle between the welfare agenda of his own Social Democrats (SPD), the Greens’ expensive climate agenda, and the FDP’s demands for fiscal rigor (or at least the appearance thereof).
Indeed, it’s doubtful the coalition would have ever been formed in the first place without the plan. The Greens and FDP happily went along; after all Scholz, Germany’s finance minister from 2018-2021, knew what he was doing. Or so they thought.
Finance minister or ‘fuck-up’?
Scholz’s role notwithstanding, his successor as finance minister, FDP leader Christian Lindner, shares a lot of the responsibility for the snafu, for the simple reason that it was his ministry that oversaw the strategy.
During the coalition talks in 2021, Lindner was torn between a desire to govern and the fiscal strictures long championed by his party. Scholz offered him what appeared to be an elegant way to do both.
Scholz’s role notwithstanding, his successor as finance minister, FDP leader Christian Lindner, shares a lot of the responsibility for the snafu | Sean Gallup/Getty Images
When Lindner, who had never served in an executive government role before, was poised to secure the finance ministry, some critics questioned his qualifications to lead the financial affairs of Europe’s largest economy.
Many Germans have no doubt made their determinations in recent weeks.
Green machine
In contrast to the FDP, the Greens, had no qualms about endorsing Scholz’s bookkeeping tricks.
When it comes to realizing the Greens’ environmental goals, the ends have long justified the means.
In the early 2000s, for example, party leaders sold Germans on the idea of switching off the country’s nuclear plants and transitioning to renewables. They won the argument by promising that the subsidies consumers would be forced to finance to pay for the rollout of solar and wind power wouldn’t cost more every month than a “scoop of ice cream.”
In the end, the collective annual bill for German households was €25 billion, enough to have cornered the global ice cream market many times over.
The Greens’ ice cream strategy — secure difficult-to-reverse legislative commitments and worry about the financial details later — also informed their approach to what they call the “social, ecological transformation,” a plan to make Germany’s economy carbon neutral.
That’s why the shock of the court decision has hit the Greens hardest. After more than 15 years in opposition, the Greens saw the alliance with Scholz and Lindner as the culmination of their effort to convince Germans to embrace their ecological vision for the future. Just as the hoped-for revolution was within reach, it has slipped from their grasp.
Habeck, the face of the Green transformation, has looked like a man at his wits’ end in recent days, making dire predictions about the coming economic Armageddon.
“This marks a turning point for both the German economy and the job market,” Habeck told German public television this week, predicting that it would become much more difficult for the country to maintain the level of prosperity it has enjoyed for decades.
Road to perdition
For all his candor, Habeck failed to address the elephant in the room: It’s a fake debt crisis.
There is no objective reason for Germany to be in this dilemma. A best-of-class credit rating means Berlin can borrow money on better terms than almost any country on the planet. With a budget deficit of 2.6 percent of GDP last year and a total debt load amounting to 66 percent of GDP, Germany is also well above average compared to its eurozone peers in terms of fiscal discipline — even counting the debt raised for the special funds.
The only reason Germany can’t spend the money in the special funds is not because it can’t afford to, but rather because it remains beholden to an almost religious fiscal orthodoxy that views deficit debt as the road to perdition.
That conviction prompted Germany to anchor the so-called debt brake in its constitution in 2009, thereby allowing the government to run only a minor deficit, barring a natural disaster or other emergency, such as a war.
For eurozone countries with a recent history of debt trouble — a group that alongside Greece includes the likes of Spain, Portugal and Italy — Germany’s financial pickle must feel like déjà vu all over again | Aris Messinis/AFP via Getty Images
The constitutional amendment passed by a comfortable margin with broad support from both the Christian Democrats (CDU) and the SPD, which shared power in a grand coalition led by Merkel. At the time, Germany was still recovering from the shock triggered by the 2008 collapse of investment bank Lehman Brothers and had to commit billions to shore up its banking sector.
The country’s federal government and states had begun planning a reform of fiscal rules even before the crisis. The emergency gave them additional impetus to pursue a debt brake enshrined in the constitution as a way to restore public trust.
In that respect, it worked as planned. As countries such as Greece and Spain struggled with their public finances in the years that followed, Germany’s debt brake looked prescient.
Even as southern Europe struggled, the German economy went into high gear powered by strong demand for its wares from Asia and North America, allowing the government to not just balance its budget but to run a string of surpluses, peaking in 2018 with a €58 billion windfall.
Goodbye to all that
The good times ended with the pandemic. Germany, along with the rest of the world, was forced to dig deep. It had the fiscal capacity to do so, however, as the pandemic justified lifting the debt brake in both 2020 and 2021.
The fallout from Russia’s attack on Ukraine forced the government to do so again in 2022.
By drawing from special funds, Scholz and Lindner believed they could avoid a repeat in 2023. But the court’s ruling dashed that plan.
Long before the current crisis, it had become clear to most in government — both conservative and left-leaning — that the debt brake was a hampering investment in public infrastructure (Merkel’s coalition emphasized paying down debt instead of investing the surpluses) and, by extension, Germany’s economic competitiveness. Hence the liberal use of the now-closed special fund loophole.
Trouble is, even as many politicians have woken up to the perils of the debt brake, the public remains strongly in favor of it. Nearly two-thirds of Germans continue to support the measure, according to a poll published this week by Der Spiegel.
Repealing or even reforming the brake would require Germany’s political class not just to convince them otherwise, but also to muster a super majority in parliament, which at the moment is unlikely.
Late Thursday, the finance minister signaled that the debt brake would have to fall for 2023 as well. That means the government will have to retroactively declare an emergency — likely in connection with the war in Ukraine — and then hope that the constitutional court buys it.
NEW YORK, November 22, 2023 (Newswire.com)
– On Nov. 16, 2023, the Conference of Minority Transportation Officials (COMTO) New York Chapter hosted their 2nd Annual Legislative Breakfast at Club 101 located in midtown Manhattan.
COMTO stands as a prominent national champion for fostering diversity in employment, promoting inclusion, and expanding contracting opportunities. The primary objective of COMTO-NY is to prioritize equity in every conversation concerning transportation across the New York Region. The breakfast centered around the theme “Advancing Infrastructure in Transportation: Accessibility, Technology, Sustainability, and Resiliency.” Notably, the event garnered participation from over 100 attendees, representing both private and public sectors.
The selected speakers shared a high regard for equity in the transportation industry from concept to design, contracting to end user engagement, and included:
Nivardo Lopez, NYS Deputy Secretary of Transportation, Executive Chamber
Matthew C. Fraser, Chief Technology Officer for the City of New York
Jose B. Febrillet, Chief DEI Officer, Port Authority of NY & NJ
Anthony Tepedino, CEO & President, Allstate Sales Group, Inc. (ASG)
Kevin Collins, SVP and New York Office Leader, HNTB Corporation
Various sponsorship opportunities included their coveted Diamond Sponsor, ASG and Platinum Sponsor, HNTB. Additional levels in their sponsorship package included Gold, Silver and their Minority/Women-Owned Business Enterprise (MWBE), Service-Disabled Veteran-Owned Businesses (SDVOB) and Disadvantaged Business Enterprise (DBE).
As equity champions in transportation, COMTO-NY delivers a variety of forums and platforms for small and historically underutilized businesses leading to opportunities to participate in one of the strongest industries in our nation. Learning about these opportunities begins with having access to the right information leading up to these projects, especially those geared towards MWBEs/SDVOBs/DBEs.
The power breakfast served impactful dialogue, as the intent is to continue to build industry partnerships that will enable collaboration that foster pathways to enhance transportation for the New York region.
“It is through these connections with collective expertise that we are able to leverage and drive impactful change in our region,” COMTO-NY Chapter President Richard Watson stated.
“COMTO-NY’s Legislative Breakfast serves as a platform for insightful discussions, collaborations and the exchange of innovative ideas,” Legislative Breakfast Committee Chair Terence Banks added.
Past supporters of COMTO-NY’s Legislative Breakfast include NYC Mayor Adams, MTA CEO Janno Lieber, NYC Council Speaker Adrienne Adams, NYS Senator Leroy Comrie and NYC DOT Commissioner Ydanis Rodriguez.
COMTO-NY’s networking experience served as a catalyst to harness the power of this gathering to propel access to opportunities and pave the way for a brighter transportation future in the NY region and set the stage for a transformative journey towards a resilient and inclusive transportation system.
About COMTO-NY
COMTO was founded in 1971 on the campus of Howard University and currently has 38 chapters across the United States and Canada. Its mission is to ensure opportunities and maximum participation in the transportation industry for minority individuals, businesses, and communities of color through advocacy, information sharing, training, education, and professional development. The organization’s membership includes individuals, transportation agencies, private sector corporations, non-profit organizations, and Historically Underutilized Businesses (HUBs). COMTO-NY has almost 200 members in New York and New Jersey, including many prominent transportation leaders from both the public and private sectors.
This article is part of the Road to COP special report, presented by SQM.
Last week’s surprise deal between China and the United States may provide a boost to the climate talks in Dubai — but the two powers remain at odds on tough questions such as how quickly to shut down coal and who should provide climate aid to developing nations.
The world’s top two drivers of climate change are also divided by a thicket of disagreements on trade, security, human rights and economic competition.
The good news is that Washington and Beijing are talking to each other again and restarting some of their technical cooperation on climate issues, after a yearlong freeze. That may still not be enough to get nearly 200 nations to commit to far greater climate action at the talks that begin Nov. 30.
The two superpowers’ latest detente creates the right “mood music” for the summit, said Alden Meyer, a senior associate at climate think tank E3G. “But it still is not saying that the world’s two largest economies and two largest emitters are fully committed to the scale and pace of reductions that are needed.”
The deal, announced after a meeting this month between U.S. climate envoy John Kerry and his Chinese counterpart Xie Zhenhua, produced an agreement to commit to a series of actions to limit climate pollution. Those include accelerating the shift to renewable energy and widening the variety of heat-trapping gases they will address in their next round of climate targets.
U.S. President Joe Biden and Chinese leader Xi Jinping endorsed that type of cooperation after a meeting in California on Wednesday, saying they “welcomed” positive discussions on actions to reduce greenhouse gas emissions during this decade, as well as “common approaches” toward a successful climate summit. Biden said he would work with China to address climate finance in developing countries, a major source of friction for the U.S.
“Planet Earth is big enough for the two countries to succeed,” said Xi ahead of his bilateral with Biden.
But the deal leaves some big issues unaddressed, including specific measures for ending their reliance on fossil fuels, the main contributor to global warming. Andthe two countries are a long way from the days when a surprise U.S.-Chinese agreement to cooperate on climate change had the power to land a landmark global pact.
That puts the nations in a dramatically different place than in 2014, when Xi and then-President Barack Obama made a historic pledge to jointly cut their planet-warming pollution, paving the way for the landmark Paris Agreement to land in 2015.
Even a surprise joint deal between the two nations in 2021 failed to ease friction, with China emerging at the last minute to oppose language calling for a phase-out of coal power. The summit ended with a less ambitious “phase-down.”
House Speaker Nancy Pelosi speaks after receiving the Order of Propitious Clouds with Special Grand Cordon, Taiwan’s highest civilian honour | Handout/Getty Image
The two countries’ struggles to find comity have come at the worst possible moment — at a time when rapid action is crucial to preventing climate catastrophe. A growing number of factors has threatened to widen the U.S.-Chinese wedge further, including their competition for supremacy in the market for clean energy.
Two nations at odds
While the U.S. has contributed more greenhouse gases to the atmosphere than any other nation during the past 150 years, China is now the world’s largest climate polluter — though not on a per capita basis — and it will need to stop building new coal-fired power for the world to stand a chance of limiting rising temperatures.
The recent agreement hints at that possibility by stating that more renewables would enable reductions in the generation of oil, gas and coal, helping China peak its emissions ahead of its current targets.
The challenge will be bridging the countries’ diverging approaches to climate issues.
The Biden administration is urging a rapid end to coal-fired power, which is waning in the U.S., even as it permits more oil drilling and ramps up exports of natural gas — much of it destined for Asia.
At the same time, it wants the United States to claim a larger role in the clean energy manufacturing industry that China now dominates, and is seeking to loosen China’s stranglehold on supply chains for products such as solar panels, electric cars and the minerals that go into them. It’s also pressuring Beijing to contribute to U.N. climate funds, saying China’s historic status as a developing country no longer shields it from its responsibility to pay.
China sees the U.S. position as a direct challenge to its economic growth and energy security.
Beijing wants to protect the use of coal and defend developing countries’ access to fossil fuels. It has also backed emerging economies’ demands that rich countries pay more to help them deploy clean energy and adapt to the effects of a warmer world. China says it already helps developing countries through South-South cooperation and points to a clause in the 2015 Paris Agreement that says developed countries should lead on climate finance.
Hanging over the talks is also the prospect of a change of administration in the U.S., and continued efforts by Republicans to vilify Beijing and accuse the Biden administration of supporting Chinese companies through its climate policies and investments. And as China’s response to Pelosi’s trip underscored, climate cooperation remains hostage to other tensions in the two countries’ relationship, a dynamic likely to heighten in the coming year as both Taiwan and the U.S. hold presidential elections.
One challenge is that China doesn’t seem to see much to gain from offering more ambitious climate actions amid worsening relations with other countries, said Kevin Tu, a non-resident fellow at the Center on Global Energy Policy at Columbia University and an adjunct professor at the School of Environment at Beijing Normal University.
“In the past several years, China has voluntarily upgraded its climate ambitions a few times amid rising geopolitical tensions,” Tu said, pointing to its 2020 pledge to peak and then zero out its emissions. “So China does not necessarily have very strong incentive to further upgrade its climate ambition.”
The divide between the two nations has created a dilemma for some small island nations that often walk a fine line between negotiating alongside China at climate talks while pushing for more action to scale back fossil fuels.
The U.S. and China remain at odds on how quickly to shut down coal and who should provide climate aid to developing nations | Brendan Smialowski/AFP via Getty Images
“The U.S. is trying to drag everyone to talk about an immediate coal phase-out,” Ralph Regenvanu, climate minister for the Pacific island nation of Vanuatu, said during a recent call with reporters, calling the effort a “U.S.-versus-China thing.”
“But we also need to talk about no more oil or gas as well,” he added.
Operating on its own terms
The dynamic between China and the U.S. will either drag down or bolster the ambitions of countries updating their national climate pledges, a process that begins at the close of COP28. Nations are already woefully behind cuts needed to hit the goals they laid out in Paris.
China’s new 10-year targets will be crucial for meeting those marks, given that China accounts for close to 30 percent of global greenhouse gas emissions and that it plans to build dozens of coal-fired power plants in the coming years. The U.S., and many other countries, will be looking for greater commitments from China — whether that’s modifying what it means by phasing down coal or setting more stringent targets.
China has pledged to peak its carbon emissions before 2030 and zero them out before 2060,a decadelater than the United States has promised to reach net-zero. Beijing is unlikely to accelerate that timeline, in part because — analysts say — its philosophy is fundamentally different from that of the U.S.: underpromise and overdeliver.
Even without committing to more action, China’s massive investments in low-carbon energy installations — twice that of the United States — may inadvertently help the country achieve its peaking target early, some analysts say.
A complicated picture
If the Trump years drove China further from America, the global pandemic and resulting economic slowdown that started during his final year didn’t bring it closer. And the energy crunch stemming from Russia’s war with Ukraine cemented China’s drive for reliable energy to meet the rising needs of its 1.4 billion people. That created a coal boom.
Meanwhile, China heavily subsidized the expansion of wind, solar and electric vehicle production. Its clean energy supply chain dominance has lowered the global costs for those technologies but drawn scorn from the U.S. as it tries to rebuild its own domestic manufacturing base.
China has turned more combative in response. Rather than work with the U.S. to make joint announcements on climate action, Xi has made clear that China’s climate policy won’t be dictated by others. At G20 meetings, China has aligned with Saudi Arabia and Russia in opposing language aimed at phasing out fossil fuels.
“At the end of the day, it’s harder to make a claim that China needs the U.S. and it’s harder to make the claim that the U.S. can rely on China,” said Cory Combs, a senior analyst at policy consulting firm Trivium China.
Wealthy countries’ inability to deliver promised climate aid to vulnerable countries hasn’t helped. While China remains among the bloc of developing nations in calling for more action on climate finance, it also points to the investments it’s making in the Global South through its Belt and Road infrastructure initiative and bilateral aid.
A foreign diplomat who asked for anonymity to speak openly said China has resisted pressure to contribute money to a climate fund that would help developing countries rebuild after climate disasters and would likely push back against a focus on its continued build out of coal-fired power plants.
US climate envoy John Kerry sits next to China’s special climate envoy Xie Zhenhua | Fabrice Coffrini/AFP via Getty Images
“Anything that would signal that they would need to do more is something that gets blocked,” the person said.
China did release a plan earlier this month to cut emissions of the potent greenhouse methane, delivering on a promise it had made in a joint declaration with the U.S. at climate talks in 2021. But it has still not signed onto a global methane pledge led by the U.S. and the European Union.
All that amounts to a complicated picture for the U.S.-Chinese relationship and its broader impact on global climate outcomes.
“The U.S.-China talks will help stabilize the politics when countries meet in the UAE, but critical issues such as a fossil fuel phase-out still require much [further] political efforts,” said Li Shuo, incoming director of the China climate hub at the Asia Society Policy Institute.
“It’s very much about setting a floor,” and the talks in Dubai still need to build out from there, Shuo added.
He argues in a recent paper that China will subscribe to targets it sees as achievable and will continue toside with developing countries on climate finance. Chinese government officials are cautious about what they’re willing to commit to internationally, which sometimes serves as a disincentive for them to be more ambitious, he said.
The calculation is likely to be different for Biden’s team, who “want a headline that the world agrees to push China,” said David Waskow, who leads the World Resources Institute’s international climate initiative.
Not impossible
The power of engagement can’t be completely written off, and in the past it has proven to have a positive effect on the U.S.-China relationship.
“[Climate] sort of was a positive pillar in the relationship,” said Todd Stern, Obama’s former chief climate negotiator. “And it came to be a thing where when the two sides have come to get together, it was like, ‘What can we get done on climate?’”
Engagement with Chinaat the state and local level and among academics and research institutes has potential — in large part because it’s less political, said Joanna Lewis, a professor at Georgetown University who closely tracks China’s climate change approach.
There could also be opportunities to separate climate from broader bilateral tensions.
“I do feel like there’s that willingness to say, ‘We recognize our roles, we recognize our ability to have that catalytic effect on the international community’s actions,’” said Nate Hultman, director of the University of Maryland’s Center for Global Sustainability and a former senior adviser to Kerry. “It doesn’t solve all the world’s issues going into the COP, but it gives a really strong boost to international discussions around what we know we need to do.”
Sara Schonhardt and Zack Colman reported, and Phelim Kine contributed reporting, from Washington, D.C.
This article is part of the Road to COP special report, presented by SQM.The article is produced with full editorial independence by POLITICO reporters and editors. Learn more about editorial content presented by outside advertisers.
In summer 2023, American progressivism was spending big and riding high. Despite razor-thin majorities in Congress, Democrats had spent the last two years enacting hundreds of billions of dollars in new subsidies—for green energy, public transportation, domestic manufacturing, scientific research, and more. This progressive pork was now in the hands of Democratic President Joe Biden to distribute as his administration saw fit.
Yet when California Gov. Gavin Newsom looked upon the piles of fresh federal cash, all he could do was despair.
“We’re going to lose billions and billions of dollars in the status quo,” he complained to New York Times columnist Ezra Klein in June. “The beneficiaries of a lot of these dollars are red states that don’t give a damn about these issues, and they’re getting the projects.”
Newsom was right about the distribution of the funds: More than 80 percent of the new federal funding for clean energy and semiconductors was headed for GOP districts, according to the Financial Times. His outburst spoke to the anxiety of much of liberal America.
Despite a string of progressive policy victories at the federal level, a Democratic Party under the grip of progressives, and ironclad Democratic control over some of the country’s largest and wealthiest cities and states, blue America just wasn’t delivering what its boosters said the country needed.
“We need to build more homes, trains, clean energy, research centers, disease surveillance. And we need to do it faster and cheaper,” Klein himself had written a few weeks before his Newsom interview was published. Yet “in New York or California or Oregon…it is too slow and too costly to build even where Republicans are weak—perhaps especially where they are weak.”
The blue strongholds’ failure to build had added countervailing losses to all their wins.
These states aren’t just losing federal grants. They’re losing residents to states where housing construction is easier. They’re losing companies to places where the regulatory burden is lighter. They’re losing voters, tax dollars, congressional seats, and more to places that build the things people want. If the trend keeps up, the progressive vision for America may be lost as well.
This threat has provoked some surprising self-reflection from liberal wonks, writers, and officials.
America, and particularly blue America, has consciously wrapped itself in red tape, regulations, and special-interest carve-outs, to the point that it has become nearly impossible to convert either government subsidies or private capital into needed physical things.
As Newsom said to Klein, “We’re not getting the money because our rules are getting in the way.”
A hodgepodge coalition of legacy publication columnists, traditional think-tankers, upstart Substack writers, and obsessive Twitter posters have rallied around the straightforward idea that what the country needs is more stuff, and it isn’t going to get it with that thicket of rules standing in the way. Their call to action is what Atlantic writer Derek Thompson calls the “abundance agenda.”
According to Thompson, America has produced a lot of technology that allows people to complain about problems, but not much in the physical world to actually solve those problems.
Our “age of bits-enabled protest has coincided with a slowdown in atoms-related progress,” he wrote last year. “Altogether, America has too much venting and not enough inventing.” Thompson’s complaint echoes entrepreneur and venture capitalist Peter Thiel’s famous 2013 quip that “we wanted flying cars, instead we got 140 characters.” What we need instead, argues Thompson, are policies that will kick-start material growth and technological development here in reality.
For libertarians and free marketers, this new abundance agenda has a lot to offer. Many of its intellectual forefathers and policy foot soldiers are themselves libertarian-leaning. Even when they’re not, the abundance agenda remains a directionally deregulatory affair. Once seemingly fringe libertarian hobbyhorses such as abolishing zoning, occupational licensing, and immigration restrictions are now being aired prominently in mainstream center-left and progressive spaces.
At the same time, most of those who favor the abundance agenda are either agnostic about big government or actively supportive of it. In its most statist iterations, the deregulatory elements of the abundance agenda are mostly about clearing away the bureaucratic and constitutional obstacles to government-provided services and government-sponsored megaprojects.
For some abundance-agenda adherents, it’s a partisan project as well: The goal is to make blue America more efficient, more effective, and more appealing in the service of making America more Democratic.
And yet: The fundamental policy goal of abundance agenda liberalism is to clear away bureaucratic and political obstacles to useful projects, especially in the housing market. Is this a devil’s bargain that libertarians should be willing to make?
Getting the Public Out of Public Policy
Discussions about the abundance agenda quickly get bogged down in wonky specifics. But its pursuit of limitless individual potential powered by limitless growth and energy is nothing short of utopian.
In a 2022 essay for Works in Progress, Benjamin Reinhardt described this futuristic end point through the eyes of someone living in a world of abundant energy “too cheap to meter.”
You would wake up on your artificial island off the coast of South America, commute to work via a flying car and Singaporean space elevator, put in a few hours working on new longevity drugs in zero-gravity, and then jet off to Tokyo for a quick dinner with friends before commuting home.
As you return home, Reinhardt writes, you hope that one day you have “the resources to pull yourself out of the bottom 25 percent, so that your kids can lead an even brighter life than you do. Things are good, you think, but they could be better.”
In order to achieve this sci-fi world of abundance, we have to unshackle ourselves from growth-phobic institutions riddled with “veto points” stopping new housing, energy, and more.
The American government of today is a highly participatory one. Individual people have substantial opportunity to have their say in public hearings and courtrooms on everything from new housing projects to new power plants.
It wasn’t always this way.
As recounted in Yale historian Paul Sabin’s book Public Citizens, this level of citizen input was the product of laws passed in the 1970s inspired by slow-growth activists such as Rachel Carson, Jane Jacobs, and Ralph Nader.
This group of writers, lawyers, and activists argued that the midcentury liberal era’s love of growth and bigness had left corporations free to pollute the environment and flood the market with dangerous products. Meanwhile, unchecked, opaque government bureaucracies built or approved harmful megaprojects that bulldozed private property, often without the owners’ consent, and devastated nature in the name of “progress.”
To hold fundamentally untrustworthy bureaucracies accountable, citizens were empowered to sue bureaucrats when they didn’t follow new environmental regulations or disclose enough information about the projects they approved.
The thinking at the time, writes Sabin, was that “aggressive litigation might make the government work better.”
These anti-growth, anti-bigness policies also drifted down to the state and local level. Throughout the 1970s, state legislatures passed their own, often much more expansive environmental reporting laws that allowed citizens to sue to stop private projects such as new housing and businesses, as well as major infrastructure projects.
Local governments, meanwhile, tightened existing zoning codes to drastically reduce the amount of housing that could be built. They also gave local residents (via public hearings, referendums, and discretionary approval processes) more say over the approval of housing that was still technically allowed.
Empowered to sue over projects they didn’t like, local “not in my backyard” (NIMBY) activists grew increasingly successful in stopping everything that smacked of progress in their neighborhoods.
Free marketers have been critical of these laws from day one.
The California Environmental Quality Act (CEQA), which has enabled citizens to challenge the approval of both large infrastructure projects and single-family homes, was enacted in 1970.
By 1979, Reason was accusing the law of having “done more damage to home building in that state than anything since the last ice age and the San Andreas Fault.” It took several decades for mainstream Democrats like Newsom to start making similar complaints.
Indeed, these laws initially sparked little pushback from liberals. But as their costs have continued to mount in terms of housing units not built and energy not generated, a growing chorus of progressive voices has started demanding reform.
One example is the rise of California’s rabidly pro-development “yes in my backyard” (YIMBY) coalition in the mid-2010s. Irritated by ever-rising housing costs, the new YIMBYs started to demand that restrictive zoning laws and procedures that gave neighbors the ability to say “no” to new housing be abolished.
These largely left-wing YIMBYs were fighting for property rights and freer markets in building. Yet their rhetoric is more likely to stress left-wing notions of equality and inclusion: The privileged few shouldn’t get to say “no” to housing for the hard-pressed many.
Zoning reform has since become a core of the abundance agenda. Its critique of citizen veto points over housing has quickly spread to other areas of the regulatory state.
When it comes to the approval of infrastructure projects, community input is “fundamentally flawed,” wrote Jerusalem Demsas for The Atlantic last year. “It’s biased toward the status quo and privileges a small group of residents who for reasons that range from the sympathetic to the selfish don’t want to allow projects that are broadly useful.”
Riddling the system with these “veto points” has also given rise to a related criticism of modern American governance: what the Times‘ Klein calls “everything bagel liberalism.” (That’s a reference to the all-consuming “everything bagel” from the 2022 film Everything Everywhere All at Once that sucks up so much of the universe that no individual thing ends up mattering.)
The policy implications of the metaphor are clear. If everyone can say “no” to your project, then everyone is going to demand something before they say “yes” to it. That in turn weighs down projects, public or private, with prohibitively costly carve-outs and payoffs.
The abundance agenda’s criticisms of excessive veto points and the special-interest carve-outs they breed has made its supporters more friendly to the libertarian view that market incumbents often convert regulation into a protection racket.
In addition to NIMBY housing regulations, abundance agenda supporters criticize occupational licensing laws for propping up the earnings of incumbent day care workers and hair stylists at the expense of consumers and excluded workers. They criticize immigration restrictions that keep out high-skilled foreigners to protect the wages of native-born Americans. They attack “Buy American” laws that force businesses to purchase domestically sourced materials.
“I think a lot of people don’t know how much the government does to restrict access to a lot of kinds of goods that we don’t have serious disagreements about whether people should have access to them,” says liberal pundit Matt Yglesias. “There’s a lot of pretty pure rent seeking in the system.”
On the flip side, the growing popularity of the abundance agenda has seen free marketers use that framing to pitch their longstanding deregulatory beliefs to a wider left-of-center audience that might otherwise tune them out.
Discourse, a publication of the pro-market Mercatus Center at George Mason University, has published a series of essays on the abundance agenda, most of which argue that a long list of free market policies are necessary for true abundance.
Both libertarian and progressive abundance-agenda supporters have reached back in history to find forgotten strands of liberalism that prioritized growth and progress.
An Abundance of Takes
In Neal Stephenson’s sci-fi novel Anathem, there exists an order of rationalist monks whose whole purpose is to explain that every supposedly new idea was actually discussed to death centuries ago. If these monks existed in our universe, they’d likely say that, actually, there’s nothing all that novel about a progressivism that extols the virtues of growing the private sector and government.
As recently as the mid-2000s, there was a boom in this kind of thinking. Writers like Brink Lindsey (then a vice president of the Cato Institute) and Gene Sperling (one of President Bill Clinton’s economic advisers) made their respective cases for a “liberaltarian” or “pro-growth progressive” coalition.
The liberal-libertarian fusionists saw dynamic markets as necessary for the good jobs and tax revenue progressives wanted. They also recognized redistribution as a just and politically necessary means of shoring up popular support for the economic dynamism the libertarians prized.
As a bonus, a growing economy would convert everyday people to socially liberal values, or at least make them less willing to go in for reactionary politics. “It is easier to have a melting pot if it is a growing pot,” Sperling wrote in his 2005 book The Pro-Growth Progressive.
Nevertheless, there’s a lot that distinguishes today’s abundance agenda from the pro-growth progressives of old. The most obvious one is the contemporary group’s means of communication and organization. Notwithstanding Thompson’s admonition about too much venting and not enough inventing, the abundance agenda is definitely “too online.”
Today’s abundance-agenda liberals own a lot of real estate at legacy media outlets: Klein writes a column at The New York Times, while Thompson and Demsas write for The Atlantic. More often than not, the prestige publications’ version of the abundance agenda is a filtered, polished rendition of broad ideas and specific policies first circulated on social media and in digital newsletters.
Where else but #EconTwitter would thousands of professional wonks and interested laypeople gather to chew the fat about the latest National Bureau of Economic Research working paper explaining low growth rates, or dunk on clips of anti-housing activists saying a new apartment building will ruin their neighborhood?
Where else but in subscriber-supported Substack newsletters could writers find it possible (and profitable) to pen thousands of words on the particulars of energy-permitting regulations or international variation in public transportation project costs?
Out of this wonky internet churn, individual failures to build get synthesized into a coherent group identity around an abundance agenda and its larger call to action.
A representative episode was the uproar over La Sombrita.
La Sombrita was Los Angeles’ “radical” new design for shading its bus stops that, on closer inspection, turned out to be a mostly useless piece of metal that cast almost no shade.
Its primary virtue was that it was so small and ineffective that city workers could just go out and hang them from bus stop signs. More substantial shade structures would need multiple sign-offs and approvals from L.A.’s sprawling city bureaucracy.
A quarter-century ago, this small-scale boondoggle might have attracted little notice. Instead, it quickly went viral in the abundance-agenda corners of Twitter, which then produced thinkier Substack pieces about how La Sombrita explained America’s material stagnation, which were then followed by coverage in major traditional news outlets.
No “failure to build,” no matter how small, would escape the movement’s all-seeing eye.
Yglesias, who writes the Slow Boring newsletter on Substack, argues that the online nature of abundance-agenda liberalism has helped rehabilitate market-friendly centrist “New Democratic” thinking from its low ebb in the late 2000s and early 2010s.
That kind of proto–abundance agenda “had a lot of purchase and a lot of institutional backing 20 years ago and then came to be discredited because the particular institutions associated with New Democrats came to be associated with the invasion of Iraq” and the Great Recession, he says.
Thanks to new voices and institutions online, he adds, “there’s been a rebuilding and rediscovery of what was correct in that political tendency.”
As a sign of its success, the online movement has started to spawn traditional brick-and-mortar institutions in the real world.
One can see this in the rise of an abundance-agenda-adjacent think tank, the Center for New Liberalism (CNL)—previously known as the Neoliberal Project, and before that r/neoliberal. (In its earliest forms in the mid-2010s, CNL was just a humble subreddit, or online forum.)
“It was making really wonky memes about the federal funds rate,” says CNL co-founder Colin Mortimer. “It very quickly turned into a community and refuge for non-Bernie [as in socialist Sen. Bernie Sanders] Democrats who wanted a place to talk about still wonky but general politics.”
That subreddit community followed the upward ape-to-man trajectory of any successful internet-spawned political movement, growing into a successful Twitter account, a podcast, a website, local in-person meetups, and eventually acquisition by a decadesold center-left think tank, the Progressive Policy Institute, in 2020.
The CNL has since spun off into its own independent organization, where a large part of its mission continues to be convincing center-left policy makers that “we just don’t have enough stuff” and “we should make it easier to replace that stuff or build new stuff.”
That’s not the only abundance-agenda institution to grow beyond the confines of simple posting.
For a time, billionaire Stripe co-founder Patrick Collison was content to write about the causes of and obstacles to economic growth on his personal blog. His company has since plowed significant resources into more traditional publishing endeavors to expand on those ideas.
It has launched Stripe Press, which publishes and reprints a number of books helping to lay an intellectual groundwork for growth-obsessed abundance agenda-ers. That includes J. Storrs Hall’s Where Is My Flying Car?, which pins our stagnation on regulations that crushed energy production, and Stubborn Attachments, by George Mason University economist Tyler Cowen, which argues we have a moral duty to future human beings to increase economic growth by as much as possible.
The abundance agenda and libertarianism have a significant natural overlap. Nevertheless, the former’s goals are higher growth and “more stuff” generally, not a smaller state.
That goal has created an odd-bedfellows coalition of big-government liberals and small-government libertarians and conservatives, all interested in some pruning of the regulatory state. But the progressive members of this coalition want that pruning to unleash the best big government has to offer.
If free markets or small government institutions are seen as an impediment to higher growth and empowered, competent government, then they too have to go.
Klein’s “everything bagel liberalism” is a useful framing for discussing the problems of excessive process and special interest carve-outs. He first deployed it in the context of all the cost-increasing regulations attached to affordable housing development in San Francisco. The development he profiled managed to escape a lot of these regulations by relying exclusively on private money.
Nevertheless, Klein’s column made it clear he wanted the government to play a significant role in solving the state’s affordable housing problems, and indeed, its problems generally.
“Government needs to be able to solve big problems. But the inability or the unwillingness to choose among competing priorities—to pile too much on the bagel—is itself a choice, and it’s one that California keeps making,” he wrote. That’s a far cry from the libertarian view that government will inherently get bogged down with needless process and/or get captured by special interests.
Even where liberal adherents of the abundance agenda support getting rid of government regulation on market actors, it’s often part of a larger political project of making progressive policies work and progressive-dominated regions more powerful.
The abundance agenda in many ways started as an effort to liberalize zoning regulations on new housing construction in expensive coastal metro areas. A large part of that was early YIMBY activists and writers correctly understanding that restrictions on market supply are driving up market prices.
At the same time, this focus on zoning speaks to a progressive anxiety that blue America is losing people, power, and influence to places where housing costs are cheaper.
“The population center of gravity keeps shifting to places where they let houses get built is something everyone understands. The political economy consequences of that are dire,” says Yglesias. “Do you want to concede that the overall model in Texas is just better or do you want to zero in on how much of that excess growth is caused by housing elements and then do something about it?”
The libertarian political project is to shrink the state generally, not just reduce permitting times for federally approved infrastructure projects.
Many activists and policy wonks who support the abundance agenda argue it’s often undesirable and certainly a waste of time for anyone to pursue those larger changes to the nation’s political economy.
That’s the view taken by Alec Stapp, co-founder of the Institute for Progress. Stapp got his start working on the big questions of tech policy, such as antitrust and privacy regulations.
“It’s trench warfare,” he says. “Both sides are really well-funded. They’ve been having these arguments for decades. Has legislation been passed? Have rules and regulations changed? Not really.”
Stapp launched his institute with the goal of sidestepping those bigger policy fights in favor of focusing on the “inputs to innovations,” such as high-skilled immigration and federal science funding.
“Lots of people talking about should we give [the National Institutes of Health and the National Science Foundation] more billions of dollars or take away their funding,” says Stapp. Instead, his group asks: “For any given budget, whether it’s a little smaller or a little bigger, how are they spending it?”
That could well be the best way to be an effective policy entrepreneur. But it requires one to make peace with a state far larger and more intrusive than any libertarian could be comfortable with.
Even some abundance-agenda adherents who share the goal of freer markets and a less intrusive state have nevertheless embraced the idea that the modern world requires us to have a better functioning government before we can have a smaller government.
“Our governments cannot address climate change, much [less] improve K-12 education, fix traffic congestion, or improve the quality of their discretionary spending. Much of our physical infrastructure is stagnant or declining in quality,” wrote Cowen in a 2020 blog post advocating “state-capacity libertarianism.”
“Those problems require state capacity—albeit to boost markets—in a way that classical libertarianism is poorly suited to deal with,” he continued. “Even if you favor education privatization, in the shorter run we still need to make the current system much better. That would even make privatization easier, if that is your goal.”
Old-school libertarians have criticized this notion. David R. Henderson of the Hoover Institution perceptively replied to Cowen that “the latent power that a large-capacity state would have could more easily be drawn on than the power that a small-capacity state would have.”
“Even if large-capacity libertarians wouldn’t want the state to throw people in prison for producing, distributing, or using drugs,” Henderson warns, “they might not get their wish.”
The Liberaltarian Moment?
The liberaltarian movement never quite panned out. Will the abundance agenda be a similar flop? It’s always tough to read the tea leaves, but there’s reason to think a “liberalism that builds” might be a stickier concept.
The pandemic era’s trifecta of huge spending, high inflation, and empty shelves has reinforced the notion that you can’t just spend your way out of material deprivation. Center-left policy wonks and lay policy enthusiasts are increasingly hungry for ideas about how to grow the pie, not just subsidize and redistribute it.
Pandemic-era migration from blue to red America has made clear the role liberal states’ homebuilding regulations are playing in pricing people out. That has helped keep liberalizing zoning reforms on the top of the agenda at the state and local level.
Lastly, the success of congressional Democrats and the Biden administration at squeezing through big spending bills has, ironically, removed one source of friction between the big- and small-government sides of the abundance agenda. Like it or not, those billions in subsidies have already been approved. That’s one less point to argue about.
Provided it does stick around, where will an abundance agenda lead us?
One optimistic view is that an abundance agenda will succeed in smashing the veto point–riddled institutions of the 1970s. The inherent inefficiencies of government will mean that its schemes will still flounder, while private capital is at last unshackled to build our housing- and energy-rich future.
Or perhaps Henderson’s pessimism is on point. Abundance-agenda liberals (and a few useful-idiot libertarians) will succeed in making a more effective state only to see it slide its interfering tentacles into more and more areas of the economy and individuals’ lives.
Maybe the abundance agenda will be truly transcendent, as in Reinhardt’s energy-rich utopia. With the problems of material scarcity basically solved, questions about government control versus private initiative will become hopelessly archaic. Taxation will still be theft, of course. But when energy is too cheap to meter, who’ll even notice the state pirating a few electrons?
Most likely, we’ll end up somewhere in the middle, with the abundance agenda adding another pro-growth, deregulatory spice to the “everything bagel” of Democratic governance. Regulations will become less burdensome, but they won’t disappear. Progressive politicians will have to be more mindful of the costs of permitting procedures and “Buy American” rules, but they won’t get rid of them entirely.
That seems to be the direction where Newsom’s California is headed. After complaining bitterly about CEQA, the governor unveiled some incredibly mild tweaks to the law. They weren’t earth-shattering stuff by any means, and they won’t fix the state’s failures to build.
But directionally, they’re deregulatory. Perhaps real abundance starts on the margins.
While it may seem at times that America is hopelessly divided, there are some issues on which lawmakers seem to agree. For example, both Republicans and Democrats support protectionist policies that drive up prices for consumers.
From the first days of his administration, President Joe Biden has pledged that by 2030, electric vehicles (E.V.s) should make up at least half of all vehicles sold in the United States. The 2021 Infrastructure Investment and Jobs Act apportioned tens of billions of dollars to expand E.V. adoption, including $7.5 billion “to build out the first-ever national network of EV chargers.” The administration hoped to build 500,000 chargers by 2030.
To be eligible for funds, E.V. chargers must be built in the United States, and the cost of the American-made components used in their construction must be “greater than 55 percent of the total cost of all components of the manufactured product.”
But in February, the Federal Highway Administration (FHWA) waived the “Buy American” requirements for chargers “manufactured by July 1, 2024, whose final assembly occurs in the United States, and whose installation has begun by October 1, 2024.” It noted that a temporary postponement “enables EV charger acquisition and installation to immediately proceed.”
In July, Sen. Marco Rubio (R–Fla.) introduced Senate Joint Resolution 38, stating “that Congress disapproves” the waiver “and such rule shall have no force or effect.” On Wednesday, the resolution passed in the Senate, 50–48; Sens. Sherrod Brown (D–Ohio), Joe Manchin (D–W. Va.), Jon Tester (D–Mont.), and Kyrsten Sinema (I–Ariz.) crossed the aisle to support the measure.
“Waiving the Buy America requirements on EV chargers won’t help American taxpayers or workers,” Rubio said in July. “It hurts American companies and empowers foreign adversaries, like China, to control our energy infrastructure. We should never use American dollars to subsidize Chinese-made products.”
Interestingly, Democrats counter that Rubio is in fact the one responsible if the U.S. “subsidize[s] Chinese-made products.” After it passed, Sen. Bob Casey (D–Pa.) called the resolution a “cynical political ploy” that “would do irreparable damage to American workers and manufacturing…by forever hindering our Nation’s ability to become less reliant on Chinese manufacturing of EV chargers.”
In a statement on Wednesday, the White House claimed that the resolution “would weaken Buy America requirements by reverting to FHWA’s general waiver for manufactured products, allowing federal dollars…to be spent on chargers made in competitor nations like the People’s Republic of China.”
“If the President were presented with S.J. Res. 38,” the statement concluded, “he would veto it.”
The FHWA general waiver, established in 1983, “exempt[ed] manufactured products other than steel and cement” from provisions of the Buy American Act of 1933. But the 2021 infrastructure law mandated that “all iron, steel, and manufactured goods” used in federally funded projects be “produced in the United States.”
“Currently, all manufactured products are covered by this ‘waiver’ of Buy America requirements, which until recently included EV chargers,” the administration noted on Wednesday. “Last year, to ensure that the national network of EV chargers is Made in America, the Biden Administration issued a new policy that restores Buy America protections for EV chargers.”
In other words, the Biden administration instituted Buy American provisions on E.V. chargers only to then suspend those requirements when it became clear they would disadvantage production. Senate Republicans then criticized the administration for waiving its own rules and reverting to a policy put in place 40 years ago.
Unfortunately, in neither case did lawmakers admit that Buy American policies are a form of economic protectionism that harms consumers by making their desired products more expensive. The Biden administration implicitly acknowledged this fact when it waived Buy American rules on E.V. chargers so that domestic manufacturers could catch up.
“Global demand for EV chargers is putting strain on the supply chain that makes it difficult, if not impossible, to meet the made-in-America standards and expedite construction of new chargers, states and companies warned in comments to the Department of Transportation,” a Reuters report noted in February after the release of the FHWA rule.
Florida Gov. Ron DeSantis’ first TV ad begins with a single premise: “While Biden fails, DeSantis leads.” In 30 seconds, it highlights the governor’s actions related to Israel, hurricane recovery and the southern U.S. border.
A clip shows a reporter speaking to a camera. “The DeSantis administration has launched an evacuation,” she says before the scene flashes to footage of an explosion followed by a “breaking news” clip of a EuroAtlantic plane taxiing on a runway and people deboarding the plane.
“Safely evacuated hundreds of stranded Americans out of Israel,” the ad’s narrator says. “After a catastrophic hurricane, they said it would take over six months. But DeSantis got people back in their homes and rebuilt bridges in just days. And DeSantis deployed troops to the southern border to stop the invasion.”
We found that although DeSantis responded in each of these scenarios, the ad omits context about the federal government’s actions and responsibilities during these events.
DeSantis arranged for flights out of Israel, but so did the State Department
Florida Gov. Ron DeSantis, candidate for the 2024 presidential nomination, Oct. 28, 2023, at an annual leadership meeting of the Republican Jewish Coalition in Las Vegas. (AP)
The Florida Division of Emergency Management told PolitiFact that the flights are expected to cost taxpayers approximately $32 million. The flights were free for passengers.
The ad could create the impression that the Biden administration failed to evacuate Americans, but that’s not so.
The Biden administration offered 6,900 seats to Americans in Israel seeking to depart by air, land or sea. About 1,500 U.S. citizens and their family members departed using federal government transport through Oct. 31, a State Department spokesperson told PolitiFact.
Per longstanding federal law and policy, the government seeks reimbursement from citizens for the cost of transportation. We couldn’t ascertain how much the flight will cost those people.
Deputy National Security Adviser Jon Finer told CBS’ “Face the Nation” on Nov. 5 that over several days, the U.S. got more than 300 Americans from Gaza after the Rafah crossing opened into Egypt.
Florida troops went to border, but impact on illegal immigration is unclear
DeSantis twice sent Florida National Guard service members to the southern border during Biden’s presidency. But it’s unclear how those deployments have affected illegal immigration mitigation.
In May, the most recent deployment, DeSantis said he was sending 1,100 people to Texas — a mix of Florida National Guard soldiers and law enforcement officers. This came at Texas Republican Gov. Greg Abbott’s request, following the expiration of a public health policy that allowed border patrol agents to quickly deport migrants who crossed the southern border.
The Texas Military Department said Florida’s National Guard soldiers would work with its Texas counterparts. But the National Guard troops and state law enforcement officers’ roles are limited. States cannot enforce immigration law, only the federal government can.
The Tampa Bay Times reported in July that DeSantis had spent more than $3 million to send personnel to Texas. A Florida National Guard spokesperson told PolitiFact the Florida National Guard members are no longer in Texas.
Biden has also deployed thousands of National Guard soldiers to help immigration officials at the border with administrative tasks. At least 2,500 National Guard members are at the border now.
According to DeSantis’ May announcement, Florida National Guard troops patrolled the border and provided engineering support.
Local law enforcement can arrest people and charge them for trespassing, theft, drug trafficking or vandalism, the Center for Immigration Studies, a think tank that favors low immigration levels, wrote. They cannot deport people.
The ad says DeSantis “deployed troops to the southern border to stop the invasion.” But experts told us the word “invasion” doesn’t accurately describe what’s happening at the border where many immigrants turn themselves into Border Patrol agents to seek asylum.
That is not behavior that you would typically attribute to an invader. Usually, the term invasion suggests people are forcibly entering another country to take it over.
Bridge repairs have been funded by state and federal government
A damaged causeway to Sanibel Island is seen Sept. 29, 2022, in the aftermath of Hurricane Ian near Sanibel Island, Fla. (AP)
Hurricane Ian made landfall as a Category 4 hurricane in southwest Florida in September 2022. It caused over 150 deaths and over $112 billion in damage, the costliest hurricane in Florida’s history, according to the National Hurricane Center.
Pine Island and Sanibel Island were cut off from the mainland because their points of access were impassable, a Florida Department of Transportation spokesperson told PolitiFact. Although Lee County owns both bridges, DeSantis directed the state to provide support.
Temporary emergency repairs were made in three days to provide access to Pine Island. Temporary repairs to the Sanibel causeway took 15 days. The state set up a basecamp on site and some employees lived on site as work continued around the clock. A video by the state shows the extensive damage and repairs.
In March, DeSantis said the Sanibel causeway would be permanently repaired this year and cost $350 million. Permanent repairs to the Pine Island bridge will cost $25 million.
The state initiated the emergency repairs with state funds and in 2023, the Florida Legislature allocated almost $52 million for Lee County for road and bridge work that the state said would not be covered by the federal government.
A U.S. Department of Transportation spokesperson told PolitiFact the department made $111.5 million available to the state for road and bridge repair related to Hurricane Ian, including $50 million it announced weeks after the hurricane.
PolitiFact Staff Writer Samantha Putterman contributed to this article.
Despite recent funding from the federal Infrastructure Investment and Jobs Act (IIJA), a report from transportation trade groups cites insufficient investment in the area’s roadways.
According to the report released Thursday by the Long Island Contractors’ Association (LICA) and the American Road and Transportation Builders Association (ARTBA), though the IIJA will deliver at least $4.5 billion in highway-related funding for the state over five years, the New York State Department of Transportation Capital Plan is scheduled to grow by less than half that amount.
The report shows that NYSDOT Region 10, which includes Nassau and Suffolk counties, will see less than a 1 percent increase in average annual programming, comparing Fiscal Years 2023-2027 funding to Fiscal Year 2022 levels, resulting in declining average real programming levels for Long Island, after an adjustment for inflation.
Meanwhile, the report says the condition of New York roadways has been declining for some time. Between 2002 and 2021, the share of NYSDOT-maintained lane miles rated in “fair to poor” condition increased from 32 percent to 43 percent. On Long Island, 14 percent of NYSDOT-maintained lane miles were rated “fair to poor” in 2002, jumping to 41 percent in 2021.
“This report is a wake-up call for citizens of Long Island. Our roadways are falling apart, damaging people’s vehicles and causing commuting delays,” LICA Executive Director Marc Herbst said in a written statement. “New York cannot continue to fall behind our peer states when it comes to investing in our vital infrastructure. Through this report, we have identified a path to make changes and move Long Island forward.”
The report shows that long-term trends in New York disbursements for highway facilities reflect little growth, and awards for highway construction projects indicate “chronic underinvestment relative to peer states,” according to the LICA statement. Between 2000 and 2021, the average annual value of state and local government contract awards for highway construction in New York was 1.15 times the median level from 1997-1999 versus 1.60 times for northeastern peer states.
The report also cites published recommendations for changes to the Dedicated Highway and Bridge Trust Fund (DHBTF). Between 1994 and 2021, the share of DHBTF receipts allocated to capital projects declined from 61 percent to 17 percent, according to the report. The state comptroller has recommended that the DHBTF reduce expenditures for state operations and debt service, increase the ratio of pay-as-you-go funding to ongoing debt issuance, and limit reliance on general fund transfers.
“The Infrastructure Investment and Jobs Act is a once in a generation opportunity that must not be missed, and an ongoing dialogue about the best possible solutions to realize its full potential are key to a healthy future for Long Island,” Ryan Stanton, executive director of the Long Island Federation of Labor, AFL-CIO, said in the statement. “We look forward to partnering with LICA to elevate Long Island’s infrastructure needs, and deliver sound investments that create good union jobs, a key ingredient to a prosperous economy.”
Some policy experts who, over the last few decades, saw little need for serious fiscal austerity because the government could borrow at low interest rates are now changing their tune. Their argument is that with rates now rising and the government’s interest payments set to become extremely expensive, it’s time to adjust. While I suppose that’s progress, they fail to see that the past calls for austerity were attempts to avoid precisely what’s happening today.
Indeed, the need for fiscal responsibility was never based on an inability to afford extra debt back then. It was because the moment was destined to arrive when adjustments became necessary, and rising indebtedness ensured that these changes would become more painful.
Let me explain. Consider two well-respected economists and former high-ranking government officials, Lawrence Summers and Jason Furman, who previously suggested that in the aftermath of the Great Recession, concerns expressed by “deficit fundamentalists” (like me) were excessive, and that some of the efforts we championed to reduce the debt were unnecessary.
Despite the growing national debt, interest rates remained historically low, meaning the cost of servicing it was not particularly burdensome. This, they argued, made calls to control the debt out of touch. Better yet, those low rates were said to present an opportunity to “invest” in productive projects like infrastructure and education. This spending, in turn, would fuel productivity and raise economic growth, helping offset the future cost of the debt.
Now, unlike some who subscribe to similar ideas, Summers and Furman aren’t extremists. They acknowledged that debt cannot accumulate indefinitely. But they mocked calls for austerity measures back in the 2010s as premature, while encouraging government investments paid for with debt accumulation.
Undoubtedly, interest rates were low. As Summers and Furman highlighted in a 2019 paper, “in 2000, the Congressional Budget Office (CBO) forecast that by 2010, the U.S. debt-to-GDP ratio would be six percent. The same ten-year forecast in 2018 put the figure for 2028 at 105 percent. Real interest rates on ten-year government bonds, meanwhile, fell from 4.3 percent in 2000 to an average of 0.8 percent last year.”
This thinking has problems. First, it assumes government officials have the right incentives and knowledge—in addition to a comparative advantage over the profit-driven private sector—to “invest” productively. Not all government spending qualifies as productive investment, especially when most comes in the form of transferring wealth from one group to another and the rest is driven largely by interest group politics rather than by sound cost benefit analysis.
Second, 10-year projections are really unreliable. Later, in 2008, CBO projected that in 2018, public debt would be 22.6 percent of GDP. It turned out to be 78 percent. Then, in 2018, CBO projected that in 2028, debt would be 96 percent of GDP. It’s now projected to be 108 percent. Meanwhile, CBO projections for interest rates since the Great Recession have been higher than what they wound up being. Starting last year, that flipped, and actual rates are much higher than the projection. That gap between projected rates and actual rates is likely to continue. It could expand.
Overestimating interest rates means the federal government pays less than projected. Yay. An underestimation, however, means higher interest payments, more borrowing, and more debt than expected. Add to this misfortune an underestimation of debt levels and you quickly see a lot of red ink.
That’s why betting on low interest rates to argue that we should not worry about a growing debt burden is risky. Interest rates are influenced by a variety of factors and can rise fast. In fact, back in 2021, many continued to wrongfully argue that rates would not go up. Is it crazy, then, to believe we would be in a better position to face the rate hikes today if the government had better controlled its debt over the last 10 or 20 years?
Finally, anyone looking at CBO budget forecasts could always see that the disconnect between government spending and revenue was growing. Even assuming no significant rises in interest rates, as well as no emergencies requiring more borrowing and no new congressional or presidential spending programs—all things that have come to pass—official debt projections never looked good. Why add more debt to that?
In the end, the risks associated with high levels of debt were never about what we could afford while rates were low. It was always about understanding that when change inevitably comes, we can better address the challenge if we are not in over our heads.
Russian President Vladimir Putin will meet Chinese counterpart Xi Jinping in Beijing this week — a rare international visit by the Russian leader.
During the October 17-18 visit to Beijing, Putin will attend a forum marking 10 years of the Belt and Road Initiative, China’s global infrastructure program that has helped boost its influence worldwide.
Washington and Brussels have been eyeing with alarm the relationship between China and Russia, with Beijing refusing to condemn Moscow’s full-scale invasion of Ukraine, even as it has voiced support for the principle of territorial integrity.
Russia has increased its energy exports to China as it grapples with Western sanctions imposed as a response to the invasion of Ukraine.
EU foreign policy chief Josep Borrell urged China during a three-day trip to the country that wrapped up this weekend to use its influence with Russia, particularly on the U.N. Security Council, to stop the war in the country. He also warned Beijing that “any direct military support to Russia … would be a serious concern for us.”
The European Union is expected to have a summit with China before the end of the year.
This week’s Belt and Road Initiative Forum takes place against the background of a darkening economic picture for China, which has seen an economic slowdown, propelled in part by a property downturn. Representatives from more than 100 countries are expected to attend the forum in Beijing, including Hungarian Prime Minister Viktor Orbán.
At the same time, Defense Minister Li Shangfu has not been seen in public for more than six weeks, raising questions about his whereabouts and safety.
The visit to Beijing would mark Putin’s second international trip since the International Criminal Court (ICC) issued a warrant for the Russian leader’s arrest in March over the forced transport of children to Russia from Ukraine. Putin last week attended a summit of ex-Soviet nations in Kyrgyzstan. Neither Kyrgyzstan nor China is a party to the ICC.
CORRECTION: This story has been updated to indicated that the China trip would be Putin’s second international trip since the ICC issued its arrest warrant in March.
Fierce firefights and heavy shelling echo once again around the mountains of Nagorno-Karabakh, an isolated region at the very edge of Europe that has seen several major wars since the fall of the Soviet Union.
On Tuesday, the South Caucasus nation of Azerbaijan announced its armed forces launched “local anti-terrorist activities” in Nagorno-Karabakh, which is inside Azerbaijan’s borders but is controlled as a breakaway state by its ethnic Armenian population.
Now, with fighting raging and allegations of an impending “genocide” reaching fever pitch, all eyes are on the decades-old conflict that threatens to draw in some of the world’s leading military powers.
What is happening?
For weeks, Armenia and international observers have warned that Azerbaijan was massing its armed forces along the heavily fortified line of contact in Nagorno-Karabakh, preparing to stage an offensive against local ethnic Armenian troops. Clips shared online showed Azerbaijani vehicles daubed with an upside-down ‘A’-symbol, reminiscent of the ‘Z’ sign painted onto Russian vehicles ahead of the invasion of Ukraine last year.
In the early hours of Tuesday, Karabakh Armenian officials reported a major offensive by Azerbaijan was underway, with air raid sirens sounding in Stepankert, the de facto capital. The region’s estimated 100,000 residents have been told by Azerbaijan to “evacuate” via “humanitarian corridors” leading to Armenia. However, Azerbaijani forces control all of the entry and exit points and many locals fear they will not be allowed to pass safely.
Azerbaijani President Ilham Aliyev’s top foreign policy advisor, Hikmet Hajiyev, insisted to POLITICO the “goal is to neutralize military infrastructure” and denied civilians were being targeted. However, unverified photographs posted online appear to show damaged apartment buildings, and the Karabakh Armenian human rights ombudsman, Gegham Stepanyan, reported several children have been injured in the attacks.
Concern is growing over the fate of the civilians effectively trapped in the crossfire, as well as the risk of yet another full-blown war in the former Soviet Union.
How did we get here?
During the Soviet era, Nagorno-Karabakh was an autonomous region inside the Azerbaijani Soviet Socialist Republic, home to both ethnic Armenians and Azerbaijanis, but the absence of internal borders made its status largely unimportant. That all changed when Moscow lost control of its peripheral republics, and Nagorno-Karabakh was formally left inside Azerbaijan’s internationally recognized territory.
Amid the collapse of the USSR from 1988 to 1994, Armenian and Azerbaijani forces fought a grueling series of battles over the region, with the Armenians taking control of swathes of land and forcing the mass exodus of hundreds of thousands of ethnic Azerbaijanis, razing several cities to the ground. Since then, citing a 1991 referendum — boycotted by Azerbaijanis — the Karabakh-Armenians have unilaterally declared independence and maintained a de facto independent state.
For nearly three decades that situation remained stable, with the two sides locked in a stalemate that was maintained by a line of bunkers, landmines and anti-tank defenses, frequently given as an example of one of the world’s few “frozen conflicts.”
However, that all changed in 2020, when Azerbaijan launched a 44-day war to regain territory, conquering hundreds of square kilometers around all sides of Nagorno-Karabakh. That left the ethnic Armenian exclave connected to Armenia proper by a single road, the Lachin Corridor — supposedly under the protection of Russian peacekeepers as part of a Moscow-brokered ceasefire agreement.
What is the blockade?
With Russia’s ability to maintain the status quo rapidly dwindling in the face of its increasingly catastrophic war in Ukraine, Azerbaijan has moved to take control of all access to the region. In December, as part of a dispute supposedly over illegal gold mining, self-declared “eco-activists” — operating with the support of the country’s authoritarian government — staged a sit-in on the road, stopping civilian traffic and forcing the local population to rely on Russian peacekeepers and the Red Cross for supplies.
That situation has worsened in the past two months, with an Azerbaijani checkpoint newly erected on the Lachin Corridor refusing to allow the passage of any humanitarian aid, save for the occasional one-off delivery. In August, amid warnings of empty shelves, malnourishment and a worsening humanitarian crisis, Luis Moreno Ocampo, the former chief prosecutor of the International Criminal Court, published a report calling the situation “an ongoing genocide.”
Azerbaijan denies it is blockading Nagorno-Karabakh, with Hajiyev telling POLITICO the country was prepared to reopen the Lachin Corridor if the Karabakh-Armenians accepted transport routes from inside Azerbaijani-held territory. Aliyev has repeatedly called on Armenian forces in Nagorno-Karabakh to stand down, local politicians to resign and those living there to accept being ruled as part of Azerbaijan.
Why have things escalated now?
Over the past few months, the U.S., EU and Russia have urged Azerbaijan to keep faith during diplomatic talks designed to end the conflict once and for all, rather than seeking a military solution to assert control over the entire region.
As part of the talks in Washington, Brussels and Moscow, Armenian Prime Minister Nikol Pashinyan made a series of unprecedented concessions, going as far as recognizing Nagorno-Karabakh as Azerbaijani territory. However, his government maintains it cannot sign a peace deal that does not include internationally guaranteed rights and securities for the Karabakh-Armenians.
The situation has worsened in the past two months, with an Azerbaijani checkpoint newly erected on the Lachin Corridor refusing to allow the passage of any humanitarian aid | Tofik babayev/AFP via Getty Images
Aliyev has rejected any such arrangement outright, insisting there should be no foreign presence on Azerbaijan’s sovereign territory. He insists that as citizens of Azerbaijan, those living there will have the same rights as any other citizen — but has continued fierce anti-Armenian rhetoric including describing the separatists as “dogs,” while the government issued a postage stamp following the 2020 war featuring a worker in a hazmat suit “decontaminating” Nagorno-Karabakh.
Unwilling to accept the compromise, Azerbaijan has accused Armenia of stalling the peace process. According to former Azerbaijani Foreign Minister Elmar Mammadyarov, a military escalation is needed to force an agreement. “It can be a short-term clash, or it can be a war,” he added.
Facing growing domestic pressure amid dwindling supplies, former Karabakh-Armenian President Arayik Harutyunyan stood down and called elections, lambasted as a provocation by Azerbaijan and condemned by the EU, Ukraine and others.
Azerbaijan also alleged Armenian saboteurs were behind landmine blasts it says killed six military personnel in the region, while presenting no evidence to support the claim.
What’s Russia doing?
Armenia is formally an ally of Russia, and a member of the Collective Security Treaty Organization (CSTO) military bloc. However, Russian peacekeepers deployed to Nagorno-Karabakh have proven entirely unwilling or unable to keep Azerbaijani advances in check, while Moscow declined to offer Pashinyan the support he demanded after strategic high ground inside Armenia’s borders were captured in an Azerbaijani offensive last September.
Belarusian dictator Alexander Lukashenko previously said Azerbaijan has better relations with the CSTO than Armenia, despite not being a member, and described Aliyev as “our guy.”
Since then, Armenia — the most democratic country in the region — has sought to distance itself from the Kremlin, inviting in an EU civilian observer mission to the border. That strategy has picked up pace in recent days, with Pashinyan telling POLITICO in an interview that the country can no longer rely on Russia for its security. Instead, the South Caucasus nation has dispatched humanitarian aid to Ukraine and Pashinyan’s wife visited Kyiv to show her support, while hosting U.S. troops for exercises.
Moscow, which has a close economic and political relationship with Azerbaijan, reacted furiously, summoning the Armenian ambassador.
In a message posted on Telegram on Tuesday, Dmitry Medvedev, former president of Russia and secretary of its security council, said Pashinyan “decided to blame Russia for his botched defeat. He gave up part of his country’s territory. He decided to flirt with NATO, and his wife took biscuits to our enemies. Guess what fate awaits him…”
Who supports whom?
The South Caucasus is a tangled web of shifting alliances.
Russia aside, Armenia has built close relations with neighboring Iran, which has vowed to protect it, as well as India and France. French President Emmanuel Macron has previously joined negotiations in support of Pashinyan and the country is home to a large and historic Armenian diaspora.
Azerbaijan, meanwhile, operates on a “one nation, two states” basis with Turkey, with which it has deep cultural, linguistic and historical ties. It also receives large shipments of weaponry and military hardware from Israel, while providing the Middle Eastern nation with gas.
The EU has turned to Azerbaijan to help replace Russia as a provider of energy. European Commission President Ursula von der Leyen made an official visit to the capital, Baku, last summer in a bid to secure increased exports of natural gas, describing the country as a “reliable, trustworthy partner.”
Elon Musk secretly ordered his engineers to disable Starlink satellite communications near the coast of Russian-occupied Crimea last year to sabotage a planned Ukrainian drone strike.
Musk was worried the drone submarine attack, which was targeting the Russian naval fleet in Sevastopol, would escalate tensions and potentially lead to a nuclear war, according to an extract from historian Walter Isaacson’s upcoming biography “Elon Musk.”
Musk on Thursday evening painted a slightly different picture to the one described by Isaacson. He said satellites in those regions were never turned on in the first place and he simply chose not to activate them.
The extract, published by the Washington Post on Thursday, shows Musk’s journey from eager supporter to reluctant ally of Ukraine.
Isaacson writes that Musk reportedly panicked when he heard about the planned Ukrainian attack, which was using Starlink satellites to guide six drones packed with explosives towards the Crimea coast.
After speaking to the Russian ambassador to the United States — who reportedly told him an attack on Crimea would trigger a nuclear response — Musk took matters into his own hands and ordered his engineers to turn off Starlink coverage “within 100 kilometers of the Crimean coast.”
This caused the drones to lose connectivity and wash “ashore harmlessly,” effectively sabotaging the offensive mission.
Ukraine’s reaction was immediate: Officials frantically called Musk and asked him to turn the service back on, telling him that the “drone subs were crucial to their fight for freedom.”
But Musk was unwavering. He argued that Ukraine was “going too far and inviting strategic defeat” and that he did not want his satellites used for offensive purposes.
This was the beginning of a well-documented cooling of relationships between Ukrainian forces and the billionaire entrepreneur, who had been helping keep Ukraine online since the beginning of the Kremlin’s full-scale invasion through his Starlink satellites, as Ukrainian infrastructure was severely damaged by Russian attacks.
But as Ukraine moved on the offensive, Musk started restricting the Ukrainian military’s use of Starlink in Russian-controlled regions and for drone control, while also warning he would stop financially supporting of the service. His argument was the same: He wanted to prevent the conflict from escalating into a world war.
“There was an emergency request from government authorities to activate Starlink all the way to Sevastopol,” Musk said on X (formerly Twitter). “The obvious intent being to sink most of the Russian fleet at anchor. If I had agreed to their request, then SpaceX would be explicitly complicit in a major act of war and conflict escalation.”
Russia’s former President Dmitry Medvedev on Thursday praised Musk’s choice to shut down Starlink during Ukraine’s strike attempt.
“If what Isaacson has written in his book is true, then it looks like Musk is the last adequate mind in North America,” Medvedev wrote on Musk’s X. “Or, at the very least, in gender-neutral America, he is the one with the balls.”
“Elon Musk,” a biography by historian, professor and former Time magazine editor Isaacson, is set to be released on September 12.
This story has been updated with comments from Elon Musk.
NEW DELHI — A last-minute agreement on the Ukraine portion of the G20’s summit statement kept the entire document from the trash heap — but it took dropping a reference to Russia’s aggression against Ukraine to do it.
All the members of the group of top world economies spent weeks in fierce negotiations over every element of the 35-page communiqué. The greatest sticking point was what to say about the war raging in Eastern Europe, not least because Russia, a member of the bloc, would oppose condemnations of Moscow and shows of support for Kyiv.
What ultimately led to an agreement in the dark, early hours of Saturday morning was new language drafted by officials from India, the host nation, and delegates from Brazil and South Africa.
Russia, which spent weeks offering alternatives that wouldn’t leave it isolated in the G20 club, relented after key developing countries presented the formulation: All countries should “refrain from action against the territorial integrity and sovereignty or political independence of any state.” That phrasing was not included in the G20’s Bali declaration nearly a year ago.
But the final text was also acceptable to the Kremlin because it didn’t “deplore” or condemn “the aggression by the Russian Federation against Ukraine” as the Bali statement did. Language about there being a “war in Ukraine,” without specifically blaming Moscow for the conflict, is in both the Bali and the New Delhi declarations. “There were different views and assessments of the situation,” the new communiqué reads.
In effect, the G20 dropped its accusations against Russia in order to maintain unity on broader concepts of war and peace —concepts that were not so explicitly endorsed last November in Bali.
“The fact that we have consensus around the document was far from clear until the very last moment,” explained a senior EU official who, like four others from the Biden administration and European governments, was granted anonymity to discuss sensitive diplomatic dealings.
The G20, as a grouping, is geared toward issues of global economics and finance, not international conflict. But Western leaders, and U.S. President Joe Biden in particular, have leveraged multilateral gatherings since Russia invaded Ukraine 18 months ago to show they stand united with Kyiv.
Text on monetary policy was finalized well before presidents, princes and prime ministers descended on the Indian capital for this weekend’s summit. But the Ukraine section was being worked on well into Saturday morning, mere hours before official proceedings began.
Russia, represented in New Delhi by its foreign minister, not President Vladimir Putin, repeatedly demurred when iteration after iteration of the text sided more firmly with Ukraine. Moscow proposed competing language, the senior EU official said, including an entire section railing against Western-imposed sanctions that have complicated the Kremlin’s procurement of military materials.
India, as the host, shuttled Russian objections to officials from other G20 members, and sent their responses back to Moscow’s delegation.
In the end, so-called “sherpas” from the BRICS consortium’s three democratic countries settled on an idea: The communiqué should borrow language and principles from the United Nations Charter, which states that no country can seize territory from another using force. Russia, as a permanent member of the U.N. Security Council, should have no objection to it, they reasoned.
British Prime Minister Rishi Sunak publicly called the final language on Ukraine a “good and strong outcome” | Dan Kitwood/Getty Images
Sergey Lavrov, the Russian foreign minister who was deeply involved in the final negotiations, said the Kremlin could live with that language. Western nations were satisfied because the language genuinely reflected the overwhelming sentiment within the G20.
A senior U.S. official insisted that the New Delhi version is far superior to the Bali statement because of that reflection, noting that Russia would never sign anything that directly accused it of illegally capturing land.
Jon Finer, Biden’s deputy national security adviser, noted that the G20 leaders endorsed the Bali language last year and have supported U.N. resolutions.
“The joint statement issued yesterday builds on that to send an unprecedented and unified statement,” Finer told reporters. Biden is working to rally nations around the world against Russian aggression, he said. “This statement is a major step forward in this effort.”
U.K. officials, meanwhile, argued that in referring to the U.N.’s resolution against the invasion of Ukraine, the Bali communiqué didn’t directly condemn Russia’s aggression but instead indirectly referenced the fact that some countries had “deplored” it. “By achieving consensus in New Delhi, the G20 has forced Putin to commit to cessation of attacks on infrastructure, to withdrawal of troops, and to the return of territory,” a U.K. official said.
British Prime Minister Rishi Sunak publicly called the final language on Ukraine a “good and strong outcome.”
But others expressed their reservations. “Of course, if it was a document written by the EU alone, then this would probably look different, but then this would not be a consensus document,” the senior EU official said.
Kyiv had a much harsher reaction. “Ukraine is grateful to its partners who tried to include strong wording in the text,” Ukraine’s Foreign Ministry spokesperson Oleg Nikolenko wrote on social media. “At the same time, the G20 has nothing to be proud of in the part about Russia’s aggression against Ukraine.”
Officials from the G20, from India to Western nations, professed satisfaction with the joint declaration. They insisted that they achieved what they could in New Delhi in terms of being more pointed in their view of the war, even if the document had to drop the “aggression” reference about Russia.
According to a second U.S. official: “The focus was different for this one.”
President Joe Biden slammed former President Donald Trump for not building “a damn thing” during his presidency.
Biden’s handling of the economy is one concern many voters have as they consider whom to pick on the ballot next year. In a Labor Day speech on Monday to Sheet Metal Workers’ Local 19 in his native state of Pennsylvania, Biden sought to address that concern as he compared his presidency to Trump’s, referring to him multiple times as the “last guy.”
“Guess what? The great real estate builder, the last guy, he didn’t build a damn thing. Under my predecessor, infrastructure week became a punchline. On my watch, infrastructure has been a decade, and it’s a headline.”
(In November 2021, Biden signed a $1 trillion bipartisan infrastructure deal into law that funds projects for years to come.)
“How many times have we heard, ‘This is Infrastructure Week,’ over the last four years?” Biden said in April 2021. “About every second week is ‘Infrastructure Week,’ but no infrastructure was built.”
President Joe Biden delivers remarks celebrating Labor Day and honoring America’s workers and unions at the annual Tri-State Labor Day Parade in Philadelphia.
Kyle Mazza/Anadolu Agency via Getty Images
In his speech Monday, Biden continued to take aim at Trump.
“The guy who held this job before me was just one of two presidents in history … who left office with fewer jobs in America than when he got elected to office,” Biden said. “By the way, you know who the other one was? Herbert Hoover. Isn’t that kind of coincidental?”
Biden went on to say that the country’s economy is “stronger” than other countries’.
“All I hear from my friends on the other side is what they say is wrong with America,” Biden said. “They keep telling us America’s failing. They’re wrong. I’ve got news for them: America has the strongest economy in the world right now, today.”
Moscow launched a barrage of drone attacks early Sunday at a port in Ukraine’s Odesa region used by Kyiv to export grain, a day ahead of talks between Russia and Turkey where reviving a U.N.-backed grain deal will be high on the agenda.
Kyiv’s air defenses shot down 22 out of the 25 Iranian-made drones destined for the Danube River port infrastructure, Ukraine’s air force said on Telegram on Sunday. At least two people were reported injured.
The Danube River has become Ukraine’s main route for shipping grain after a deal brokered by Turkey and the U.N. allowing Kyiv to use the Black Sea for exports collapsed in July. Moscow has stepped up its attacks of Danube port infrastructure in recent weeks.
Russian President Vladimir Putin is set to meet Turkish President Recep Tayyip Erdoğan in Russia on Monday, where Turkey is expected to push for the restoration of the Black Sea grain deal.
“Russian terrorists continue to attack port infrastructure in the hope of provoking a food crisis and famine in the world,” said Andriy Yermak, the Ukrainian president’s chief of staff, on Telegram following the Russian attack.
Ukrainian officials also said Russian shelling had injured four people in the country’s southeastern Dnipropetrovsk region Sunday morning, while one person had died after attacks on Saturday in the country’s northeastern Sumy region. POLITICO couldn’t independently verify the reports.
That also comes after a top Ukrainian general leading the country’s counteroffensive said on Saturday that Kyiv’s troops had breached Russia’s first defensive line near Zaporizhzhia in southeastern Ukraine after weeks of mine clearance.
In a sign that Russia is also increasingly looking at all possible options to shore up its forces, Moscow has been appealing for fresh recruits through advertizing in the Caucasus and Central Asia, the U.K.’s Defense Ministry said on Sunday. Online adverts offering up to €4,756 in initial salaries have been spotted Armenia and Kazakshtan, as well as schemes offering fast-track Russian citizenship for those who sign up.
Around 280,000 people have signed up for military service in Russia so far this year, the country’s former President Dmitry Medvedev said Sunday. Last year, Russia announced a plan of increasing its troops by 30 percent to 1.5 million.
Italy intends to leave the Chinese Belt and Road Initiative (BRI) “without doing damage” to its relationship with Beijing, Italian Defense Minister Guido Crosetto said.
“The issue today is: how to walk back [from the BRI] without damaging relations” with Beijing, Crosetto said in an interview with Corriere della Sera. “Because it is true that China is a competitor, but it is also a partner.”
In May, Italian Prime Minister Giorgia Meloni said the country could enjoy good relations with China even without being part of Beijing’s controversial infrastructure initiative. Crosetto’s comments are the first confirmation of Italy’s intention to leave the Chinese program.
“The choice to join the Silk Road was an improvised and wicked act, made by the government of Giuseppe Conte, which led to a double negative result. We exported a load of oranges to China, they tripled exports to Italy in three years,” said Crosetto in the interview.
In 2019, Italy became the first G7 country to join China’s global infrastructure program to the surprise of allies in the West.
Critics noted that Rome’s decision to enter the Beijing initiative did not improve its trade deficit with China. Chinese exports to Italy increased 51 percent from 2019 to 2022, while China’s imports from the EU country rose by 26 percent during the same years, according to Italy’s Trade Agency.
French Finance Minister Bruno Le Maire, meanwhile, said France wants better access to the Chinese market and a more “balanced” trade relationship, not a “decoupling.”
“We don’t want to face some legislative hurdles or some other barriers to get access to the Chinese markets,” Le Maire told a press conference in Beijing a day after what he called “constructive” trade talks with Chinese Vice Premier He Lifeng.
The pictures posted on the Chinese company’s website show a tall, Caucasian man with a crew cut and flattened nose inspecting body armor at its factory.
“This spring, one of our customers came to our company to confirm the style and quantity of bulletproof vests, and carefully tested the quality of our vests,” Shanghai H Win, a manufacturer of military-grade protective gear, proudly reported on its website in March. The customer “immediately directly confirmed the order quantity of bulletproof vests and subsequent purchase intention.”
The identity of the smiling customer isn’t clear, but there’s a fair chance he was Russian: According to customs records obtained by POLITICO, Russian buyers have declared orders for hundreds of thousands of bulletproof vests and helmets made by Shanghai H Win — the items listed in the documents match those in the company’s online catalog.
Evidence of this kind shows that China, despite Beijing’s calls for peace, is pushing right up to a red line in delivering enough nonlethal, but militarily useful, equipment to Russia to have a material impact on President Vladimir Putin’s 17-month-old war on Ukraine. The protective gear would be sufficient to equip many of the men mobilized by Russia since the invasion. Then there are drones that can be used to direct artillery fire or drop grenades, and thermal optical sights to target the enemy at night.
These shipments point to a China-sized loophole in the West’s attempts to hobble Putin’s war machine. The sale of so-called dual-use technology that can have both civilian and military uses leaves just enough deniability for Western authorities looking for reasons not to confront a huge economic power like Beijing.
The wartime strength of China’s exports of dual-use products to Russia is confirmed by customs data. And, while Ukraine is a customer of China too, its imports of most of the equipment covered in this story have fallen sharply, the figures show.
Russia has imported more than $100 million-worth of drones from China so far this year — 30 times more than Ukraine. And Chinese exports of ceramics, a component used in body armor, increased by 69 percent to Russia to more than $225 million, while dropping by 61 percent to Ukraine to a mere $5 million, Chinese and Ukrainian customs data show.
“What is very clear is that China, for all its claims that it is a neutral actor, is in fact supporting Russia’s positions in this war,” said Helena Legarda, a lead analyst specializing in Chinese defense and foreign policy at the Mercator Institute for China Studies, a Berlin think tank.
Were China to cross the red line and sell weapons or military equipment to Russia, Legarda said she would expect the EU to enforce secondary sanctions targeting enablers of Putin’s war of aggression.
But, she added, equipment like body armor, thermal imaging, and even commercial drones that can be used in offensive frontline operations are unlikely to trigger a response.
“Then there’s this situation that we’re in at the moment — all these dual-use components or equipment and how you handle those,” Legarda explained. “I would not expect the EU to be able to agree to sanctions on that.”
Disappearing customer
Shanghai H Win, like other Chinese companies producing dual-use equipment, has enjoyed a surge in business since Russia’s full-scale invasion of Ukraine.
According to customs records obtained by POLITICO, Russia has ordered hundreds of thousands of bulletproof vests and helmets made by Shanghai H Win | Genya Savilov/AFP via Getty Images
“Because of the war, a lot of trading companies are looking for us and ask: ‘Are you making this kind of vest?’ We received a lot of inquiries,” a sales representative told POLITICO over the phone.
At first, the representative said Shanghai H Win wasn’t allowed to export directly to Russia unless the Chinese military issues a certificate and it can provide documentary proof of its final customer.
Yet when asked who the man in the pictures was, and where he was from, the representative denied that he was even a customer — even though the website said so.
“He is our customer’s customer. We cannot ask him directly, ‘Where are you from?’ But I guess maybe he is from Europe — maybe Ukraine, maybe Poland, even maybe from Russia. I’m not sure.”
Shortly after the call, Shanghai H Win took down the post featuring the mystery shopper from its website.
Who are the buyers?
So, who exactly are those customers? Evidence of deals — importers, suppliers, and product descriptions — can be found in a registry of declarations of conformity by anyone with access to the Russian internet who is familiar with international customs classifications.
In an earlier story, POLITICO searched these filings and found evidence that sniper bullets made in the United States were reaching Russia, where they were freely available on the black market.
The declarations enable the final buyer to certify that the products are genuine and, in effect, make it possible to import goods without the express consent of the maker. If goods are traded through an intermediary, the maker may not even be aware that its goods are going to Russia. The registry is, however, searchable so it’s still easy to find the ultimate buyers of the Chinese kit.
One is Silva, a company headquartered in the remote Eastern Siberian region of Buryatia. It filed declarations in January of this year detailing orders for 100,000 bulletproof vests and 100,000 helmets. The manufacturer? Shanghai H Win.
Such importers often bear the hallmarks of “one-day” firms, as shell companies are known in Russia, set up by actors who want to conceal their dealings. They tend to be new, listed at obscure residential addresses, and have few staff or assets. Their financial statements often don’t report the levels of turnover that the filings would imply.
According to public records, Silva was registered only last September. It reported zero revenues for 2022. A Google Street View search of its address in Ulan-Ude, the capital of Buryatia, takes visitors to a dilapidated apartment block.
POLITICO tried to contact Silva but the phone number given on its filings rang off the hook and a message sent to its email address bounced.
The sale of so-called dual-use technology that can have both civilian and military uses leaves enough deniability for Western authorities looking for reasons not to confront China | STR/AFP via Getty Images
Another Russian company called Rika declared a smaller shipment of body armor from Shanghai H Win in March. Before that, in January, Rika declared a consignment of helmets from a company called Deekon Shanghai, which shares an address with Shanghai H Win. The two companies are affiliated, another Shanghai H Win representative said.
A woman who answered the phone at Rika said: “We buy in Russia, not in China.” The company didn’t reply to a follow-up email from POLITICO.
The denial is hardly plausible: In addition to the protective gear, a search of declarations by Rika threw up hits for deals for thermal optical equipment from China. That was corroborated by customs data accessed by POLITICO, which revealed more than 220 shipments, worth $11 million, for thermal optics and protective equipment since the outbreak of the war. Rika advertises Chinese-made night sights right at the top of its website.
Another Russian company called Legittelekom, whose homepage reveals it to be a Moscow freight forwarding company, also appears as a buyer of 100,000 items of headgear and 100,000 suits of outerwear from Deekon Shanghai, according to filings dated last November 24.
A man who answered a call to Legittelekom declined to comment on POLITICO’s findings and would not say whether the company supplied the Russian military.
“This is a commercial activity and we do not disclose our commercial activities,” the man said in response to both questions.
Bigger deal
Then there’s Pozitron, a company based in Rostov-on-Don, the southern city briefly captured by warlord Yevgeny Prigozhin’s Wagner mercenaries in their failed uprising last month. It imported more than $60 million-worth of “airsoft helmets,” “miscellaneous ceramics,” and other items from Chinese firm Beijing KRNatural in November and December 2022, according to customs data shared by ImportGenius.
These flows check out with Pozitron’s own declarations of conformity between late October and December 2022, for a total of 100,000 helmets. The declarations also reveal that Pozitron acquired a range of drones from Chinese multinational SZ DJI Technology Co., Ltd last December.
Although the quantity is unclear, the models specified include ones known to have been used in the Ukrainian theater of war, like DJI’s Mavic 2 Enterprise Advanced quadcopter or the Mini 2 lightweight drone.
At first sight, the product descriptions in the declarations and customs records appear harmless enough — the “airsoft helmets,” for example, are said to be for use in paintball games and “not for military use, not for dual use.”
Sanctions and defense experts say, however, that it’s common practice to mislabel dual-use goods as being for civilian purposes when they’re in fact destined for the battlefield.
At any rate, Pozitron, which was only founded in March 2021, is having a very good war: Its revenues exploded from 31 million rubles — around $400,000 — in 2021 to 20 billion rubles — almost $300 million — in 2022, according to its financial statement.
Reached by email, Pozitron’s general director, Andrey Vitkovsky, said that his company has “never imported drones and similar products” from the People’s Republic of China.
“The main activity of Pozitron LLC is the purchase and sale of consumer goods, sporting goods, and fabrics, both produced in the Russian Federation and imported from China,” Vitkovsky added, saying that his company’s activities were “exclusively peaceful in nature, in compliance with all rules and restrictions.”
The denial is typical — Russian companies have good reason to fear Western sanctions if they are implicated in trade that supports the Kremlin’s war effort. After POLITICO reported in March that a company called Tekhkrim was importing Chinese assault weapons, and declaring them as “hunting rifles,” the firm was sanctioned by the United States.
Pozitron is on the West’s radar, said one sanctions expert, who was granted anonymity as they are not authorized to speak publicly.
As for Beijing KRNatural, POLITICO was able to trace a company with a similar name at the address given in the Pozitron filings. The company, Beijing Natural Hanhua International Trade Co., Ltd, is listed as a “small and micro enterprise.” It was founded in April 2022, a few months before the Pozitron deals. Nobody answered when POLITICO called.
Heavenly mechanics
In contrast to the bulk consignments of protective gear that appear intended to equip a large fighting force, the orders for drones found by POLITICO are more dispersed among different buyers — both companies and individuals.
In addition to Pozitron, buyers of drones from DJI and its subsidiaries include firms called Gigantshina and Vozdukh — neither of which responded to emailed requests for comment. Another is Nebesnaya Mekhanika (“Heavenly Mechanics”), which before the war was the Chinese company’s official distributor in Russia.
A DJI spokesperson said that the company and its subsidiaries had voluntarily stopped all shipments to, and operations in, Russia and Ukraine on April 26, 2022 — two months after the war broke out.
“We stand alone as the only drone company to clearly denounce and actively discourage use of products in combat,” the spokesperson said in comments emailed to POLITICO.
DJI said it had also broken off its relationship with Nebesnaya Mekhanika, although the Russian company filed further declarations for shipments of the Chinese company’s drones last September 15 and on March 27 of this year.
The spokesperson said that DJI was not in any way involved in the drafting of the declarations of conformity found by POLITICO: “These documents would have been filled out by Russian parties, and they do not indicate in any shape or form who ex- or imported the products that are being declared conform.”
“We have seen media reports and other documents that appear to show how our products are being transported to Russia and Ukraine from other countries where they can be bought off-the-shelf,” the spokesperson added. “However, it is not in our power to influence how our products are being used once they leave our control.”
Still, a search of ImportGenius shows that a Chinese company called Iflight has continued to ship DJI drones to Nebesnaya Mechnika via Hong Kong, care of a local company called Lotos. The most recent consignment was delivered last October 10. In an apparent anomaly, Russia is stated as the country of origin for the shipments.
Nebesnaya Mekhanika, which still advertises DJI drones on its website, did not respond to a request for comment.
Political will
The trafficking of low-tech body armor to high-tech drones and thermal optics highlights a vulnerability in the Western sanctions regime. The ambiguity surrounding the dual-use status of this equipment, coupled with the fact that a significant portion of it is manufactured in China, seems, at least for now, to have placed the possibility of the West taking meaningful action beyond reach.
Then there is the flow of technology through China that may include components made in the West that could be of direct military use.
Russia is fully aware of the China loophole and is using it to buy Western technology to fight its war against Ukraine, according to a recent analysis by the KSE Institute, a think tank affiliated to the Kyiv School of Economics. More than 60 percent of imported critical components in Russian weapons found on the battlefield came from U.S. companies, the researchers found.
It’s an issue that U.S. Secretary of State Antony Blinken brought up on a visit to Beijing last month — the first by Washington’s top diplomat in five years. He told reporters that China had given assurances that “it is not and will not provide lethal assistance to Russia for use in Ukraine.” Blinken, however, expressed “ongoing concerns” that Chinese firms may be providing technology that Russia can use to advance its aggression in Ukraine. “And we have asked the Chinese government to be very vigilant about that.”
U.S. Secretary of State Antony Blinken told reporters that China had given assurances that “it is not and will not provide lethal assistance to Russia for use in Ukraine” during a visit to Beijing last month | Pool photo by Leah Millis/AFP via Getty Images
France is also concerned that China is delivering dual-use equipment to Russia. “There are indications that they are doing things we would prefer them not to do,” Emmanuel Bonne, President Emmanuel Macron’s top diplomatic adviser, told the recent Aspen Security Forum. Pressed on whether China was supplying weapons, Bonne said: “Well, kind of military equipment … as far as we know they are not delivering massively military capacities to Russia but (we need there to be) no delivery.”
Yet there’s little the West can do to twist Beijing’s arm into halting flows of dual-use products into Russia. Only the United States would have the real power to impose an outright ban on dollar-denominated transactions — as Washington did when it sanctioned Iran over its secret nuclear program.
The EU, however, lacks such a strong sanctions weapon because the euro is far less ubiquitous on global markets. It’s also been hesitant to act. In its latest package of Russia sanctions last month, the EU compiled a list of seven Chinese companies that shouldn’t be allowed to trade with the bloc. But, after lobbying by Beijing, Brussels dropped four companies from the blacklist.
Elina Ribakova, one of the authors of the KSE Institute report, said indirect shipments via China pose challenges in terms of both the scope and enforcement of Western sanctions. Secondary sanctions may not be sufficient, she said. She called for manufacturers to be forced to take responsibility for where their products end up — just as banks were required by regulators to step up customer oversight and anti-money laundering operations in the wake of the 2008 financial crisis.
“What we can do differently is to create the same infrastructure for the corporates,” explained Ribakova, who is director of the international program at the Kyiv School of Economics. “We have to threaten them with serious fines.”
Maxim Mironov, a sanctions expert and assistant professor of finance at the IE Business School in Madrid, reckons that the West, despite expanding sanctions to punish Putin’s helpers, lacks the political conviction to enforce them against Beijing.
“Do politicians have enough will to put sanctions on China? Basically, the answer is no,” said Mironov.
“China signals: You can try, but I don’t care what you are trying to do,” Mironov added. “And the European Union is like: If you don’t like it, we are not going to do it. And if the Chinese see that, they are just going to continue doing what they think is in their best interest.”
The European Commission, the U.S. National Security Council and the Chinese Mission to the EU did not respond to requests for comment.
Stuart Lau contributed reporting.
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Sarah Anne Aarup, Sergey Panov and Douglas Busvine
