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The Club PUBlication  03/28/2022

3/28/2022

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​Multiple shocks have caused havoc within the U.S. economy
Pandemic, inflation, labor shortage, invasion have altered the landscape.
By JEANNA SMIALEK New York Times

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The pandemic and now the war in Ukraine have altered how America's economy functions. While economists have spent months waiting for conditions to return to normal, they are beginning to wonder what "normal" will mean.

Some of the changes are noticeable in everyday life: Work from home is more popular, burrito bowls and road trips cost more, and buying a car or a couch made overseas is harder.

But those are all symptoms of broader changes sweeping the economy — ones that could be a big deal for consumers, businesses and policymakers alike if they linger.

Consumer demand has been hot for months now, workers are desperately wanted, wages are climbing at a rapid clip and prices are rising at the fastest pace in four decades as vigorous buying clashes with roiled supply chains. Interest rates are expected to rise higher than they ever did in the 2010s as the Federal Reserve tries to rein in inflation.

History is full of big moments that have changed America's economic trajectory; the Great Depression of the 1930s, the Great Inflation of the 1970s and the Great Recession of 2008 are examples. It is too early to know for sure, but the changes happening today could prove to be the next one.

Economists have spent the past two years expecting many of the pandemic-era trends to prove temporary, but that has not yet been the case. Now Russia's invasion of Ukraine threatens to roil the global geopolitical order, yet another shock disrupting trade and the economic system.

For Washington policymakers, Wall Street investors and academic economists, the surprises have added up to an economic mystery with potentially far-reaching consequences. The economy had spent decades churning out slow and steady growth clouded by weak demand, interest rates that were chronically flirting with rock bottom, and tepid inflation. Some are wondering if, after repeated shocks, that paradigm could change.

"For the last quarter-century, we've had a perfect storm of disinflationary forces," Jerome Powell, the Fed chair, said last week. "As we come out the other side of that, the question is, what will be the nature of that economy?"

The Fed began to raise interest rates this month in a bid to cool the economy down and temper high inflation, and Powell made clear last week that the central bank planned to keep lifting the rates — perhaps aggressively. After a year of unpleasant price surprises, he said the Fed will set policy based on what is happening, not on an expected return to the old reality.

The pre-pandemic normal was one of chronically weak demand. The economy today faces the opposite issue: Demand has been supercharged, and the question is whether and when it will moderate. Before, globalization had weighed down both pay and price increases because production could be moved overseas if it grew expensive.

Gaping inequality and an aging population both contributed to a buildup of savings stockpiles, and as money was held in safe assets , it seemed to depress growth, inflation and interest rates across many advanced economies.
Then came the coronavirus.

Governments around the world spent huge amounts of money to get workers and businesses through lockdowns; the United States spent about $5 trillion.
The era of deficient demand abruptly ended, at least temporarily.

The money, which is still chugging out into the U.S. economy from consumer savings accounts and state and local coffers, helped to fuel strong buying as families snapped up goods like lawn mowers and refrigerators.
Global supply chains could not keep up.

Companies were rehiring as the economy reopened from the pandemic and to meet the burst in consumption, so labor was in high demand. Workers began to win the raises they wanted or to leave for new jobs and higher pay.

The world of slow growth, moderate gains in wages and low prices evaporated — at least temporarily. The question now is whether things will settle back down to their pre-pandemic pattern.

The argument for a return to pre-pandemic norms is straightforward: Supply chains will eventually catch up. Shoppers have a lot of money in savings accounts, but those stockpiles will eventually run out, and higher Fed interest rates will further slow spending.

As demand moderates, the logic goes, forces like population aging and rampant inequality will plunge advanced economies back to pre-pandemic norms. Fed officials mostly think that reversion will happen. Their estimates suggest low inflation and slow growth will be back within a few years and that interest rates will not have to rise above 3% to achieve that moderation.
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The Club PUBlication  03/21/2022

3/21/2022

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​Shift from COVID to the ‘next normal’

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A Pharmacy manager shows off a package of Pfizer Paxlovid pills. The COVID-19 treatment has been effective but its continuing effectiveness are not guaranteed

A new report argues for a substantial investment in pathogen defenses, but Congress needs to act.

As its name suggests, a new, book-length report entitled "Getting to and Sustaining the Next Normal: A Roadmap for Living with COVID" offers a detailed guide for exiting the COVID-19 crisis.

But as valuable as the precise advice is from experts such as Minnesota's Mike Osterholm, one of the report's key contributions is spotlighting a broader principle that should galvanize our response to this viral threat.

That critical concept: "biosecurity." It's not a new idea, but it's one whose time has come. It simply means that protections and preparations against dangerous biological agents are essential ingredients for national defense.

Commitment and investment are critical after COVID revealed health and economic vulnerabilities.  The report's authors, including Osterholm and 22 other leading scientists from private and public sectors, offer benchmarks for gauging progress on COVID containment. They also argue compellingly, using the biosecurity framework, for substantial investment to guard against future disease threats. The estimated price tag: about $160 billion over three years, then $10 billion to $15 billion annually.

Among the objectives are improving domestic and global vaccine manufacturing capabilities, developing a "pancoronavirus" shot to guard against an evolving COVID virus, strengthening disease surveillance, improving indoor air quality in schools and public buildings, and "developing a multi-drug antiviral therapeutic."
That last goal especially warns against complacency. The rapid development of a Paxlovid, a highly effective treatment for those infected with COVID, has been a triumph. But, as the report notes, this wily virus could develop resistance to it and other medications. Thwarting that would yield dividends in developing treatments for other pathogens as well.

Both short- and long-term strategies are needed. Thus, the need for policymakers to shift from pandemic crisis response to the broader biosecurity framework. Unfortunately, a new snag in congressional COVID funding doesn’t inspire confidence.

Even as rising COVID cases in Europe and Asia signal another variant’s rise, congressional dallying is jeopardizing the $15.6 billion requested by the White House to continue the nation’s domestic and global COVID response. The dollars are needed to ensure plentiful U.S. supplies of tests, medical equipment and treatments. Hopefully, these won’t be necessary.  But preparation remains vital.

“The Biden administration needs the funding to purchase and stockpile the tools we need to keep ourselves and our families safe and healthy if and when the next COVID variant emerges,” Sen. Tina Smith, D-Minn., told an editorial writer. “This includes tests, masks, treatment pills, and PPE. We also need funds for additional booster doses, vaccines for children under 5, and the global vaccination effort to stop future variants in their tracks.”

At the heart of the funding snag: a dispute over to whether to pay for the $15.6 billion plan by redirecting stimulus dollars already pledged to states.  Republicans are the main advocates for redirecting state dollars, according to the Washington Post.

It’s worth noting that not all states will lose out on American Rescue Plan funds if this approach is taken. Twenty states already have received their full allotment. But 30 states, Minnesota among them, have not. Dollars repurposed for the federal COVID response would come from the funds pledged to these 30 states.

Clawing back these dollars from some states but not all raises fairness issues. Reneging is also unwise given the uncertainties of an ongoing pandemic. The nation’s health response shouldn’t require looting dollars set aside for states’ economic recovery.

The “Roadmap” report drives home how much work lies ahead. “In the United States, a country with 330 million people, the transition to the next normal can occur when the National Center of Health Statistics measures the direct mortality from major respiratory illnesses to average 165 deaths per day and 1,150 per week,” the authors write.

The death toll from COVID going into March 2022: “Over 10 times higher.”
The nation’s leaders need to shoulder their biosecurity responsibilities.
Swift passage of the $15.6 billion in funding is necessary but just the start.
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The Club PUBlication  03/14/2021

3/14/2022

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​Remembering how to prevent nuclear war
Clear commitments, constraint and predictability can save us from forcing our enemies to choose between doom-filled escalation and defeat.

By ROSS DOUTHAT • New York Times
THE NATURE OF WAR

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In September 1983, Stanislav Petrov was a lieutenant colonel in the Soviet military, assigned to the command center that monitored early warning satellites over the United States.

During one of his shifts, the alarms went off: The Americans had seemingly launched five Minuteman intercontinental ballistic missiles.

This was at a peak of Cold War tension, just a few weeks after the USSR shot down a Korean airliner that strayed into Soviet airspace. With only minutes until the missiles were predicted to hit their targets, Petrov had to decide whether to report the attack up the chain of command, potentially triggering a swift retaliatory strike.

Following both intuition and the assumption that a real first strike would feature more than five missiles, he decided to report the alert as a malfunction, a false alarm. Which it was: The satellite had misread sunlight reflecting off clouds as a missile launch.

Petrov passed to his reward in 2017 — a suitable one, hopefully, for a man who saved millions of lives — but there are two reasons to reflect on his choices now, as the West tries to respond to Russia's Ukrainian invasion with the Russian nuclear arsenal in the background.

The first is simply to be reminded how fortunate the world was to escape a nuclear exchange during the Cold War, when near-misses happened not just during moments of maximal brinkmanship like the Cuban missile crisis but also through randomness, coincidence and error. If there's a path to nuclear war in this century, it will probably feature a similar kind of contingency and accident, the devil taking a hand in ways that can't be predicted in advance.

But it's also worth considering exactly what made Petrov's position so excruciating: He had to decide whether to escalate toward Armageddon in a situation where not to escalate threatened his entire society with defeat. And then also to consider how he found a way out of his predicament: through the fact that five missiles was not actually a defeating blow, which was both evidence that the satellites were erring and also a sign that he didn't actually hold the final fate of his country in his hands.

His specific experience vindicates a general doctrine for confrontations between nuclear-armed powers: It's often better to constrain yourself than to limit your enemy's choices, pushing them toward a doom-laden decision between escalation and defeat.

Clear commitments — we will fight here, we won't fight there — are the coin of the nuclear realm, since the goal is to give the enemy the responsibility for escalation, to make it feel its apocalyptic weight, while also feeling that it can always choose another path. Whereas unpredictable escalations and maximalist objec-tives, often useful in conventional warfare, are the enemy of nuclear peace, insofar as they threaten the enemy with the nowin scenario that Petrov almost found himself in that day in 1983.

These insights have several implications for our strategy right now.

First, they suggest that even if you believe the U.S. should have extended security guarantees to Ukraine before the Russian invasion, now that war is begun we must stick by the lines we drew in advance. That means yes to defending any NATO ally, yes to supporting Ukraine with sanctions and weaponry and absolutely no to a no-fly zone or any measure that might obligate us to fire the first shot against the Russians.

Second, they mean that it's extremely dangerous for U.S. officials to talk about regime change in Moscow — in the style of the reckless Sen. Lindsey Graham, R-S.C., for instance, who has called on a "Brutus" or "Stauffenberg" to rid the world of Russian President Vladimir Putin. If you make your nuclear-armed enemy believe your strategy requires the end of their regime (or very life), you are pushing them, again, toward the no-choice zone that almost trapped Col. Petrov.

Third, they imply that the odds of nuclear war might be higher today than in the Soviet era, because Russia is much weaker. The Soviet Union simply had more ground to give up in a conventional war before defeat appeared existential than does Putin's smaller empire — which may be a reason why current Russian strategy increasingly prioritizes tactical nuclear weapons in the event of a conventional-war retreat.  But if that makes our situation more dangerous, it also should give us confidence that we don't need to take wild nuclear risks to defeat Putin in the long run. The voices arguing for escalating now because we'll have to fight him sooner or later need to recognize that containment, proxy wars and careful line-drawing defeated a Soviet adversary whose armies threatened to sweep across West Germany and France, whereas now we're facing a Russian army that's bogged down outside Kyiv, the Ukrainian capital.

We were extremely careful about direct escalation with the Soviets even when they invaded Hungary or Czechoslovakia or Afghanistan, and the result was a Cold War victory without a nuclear war. To escalate now against a weaker adversary, one less likely to ultimately defeat us and more likely to engage in atomic recklessness if cornered, would be a grave and existential folly.
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The goal is to give the enemy the responsibility for escalation, to make it feel its apocalyptic weight, while also feeling that it can always choose another path.
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The Club PUBlication  03/07/2022

3/7/2022

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​Global resolve is key as Russia advances

The initial military, diplomatic, economic and cultural pushback to Putin must not wane.
March 4, 2022

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After brutalizing his own citizens in Chechnya and violating international borders — and law — in Georgia, Crimea, and eastern Ukraine, Russian President Vladimir Putin was apparently counting on continued ineffectual international protest against his invasion of Ukraine and relatively little resistance from forces on the ground.

Putin majorly miscalculated militarily, diplomatically, economically and even culturally. Most significantly, he underestimated Ukrainians.

Led by intrepid President Volodymyr Zelenskyy, Ukrainian armed forces and everyday citizens have put up a ferocious fight against the Russian invasion.  They have shown a patriotism more profound than the jingoistic version often found in other countries, including sometimes our own. Outmanned and outgunned but not out motivated, Ukrainians have shown an inspiring spirit just as reports of Russian dispirit emerges from the front lines and the home front, which once again sees an iron curtain isolating Russian citizens from the world.

Diplomatically, after a halting start, democracies have rallied in rare unity.  The coordinated, consequential sanctions imposed by the U.S., European Union, the United Kingdom and Asian and Australian nations who share the universal values of democracy and sovereignty are real and deep. And finally, many are targeted at the kleptocratic oligarchs enabling, and enabled by, Putin. Unfortunately, everyday Russians will still mostly feel the brunt of a collapsing economy. But maybe that will inspire them to show courage commensurate to Ukrainians and take to the street to protest Putin's disastrous war against nonaggressive neighbors who were once fellow citizens.

The Western-led effort to condemn the Kremlin went international on Wednesday when the United Nations General Assembly voted 141-5 to condemn Russia's invasion of Ukraine. The "no" votes were the usual repressive suspects: the offender, Russia, and its supplicants Syria and Belarus, as well as global pariahs North Korea and Eritrea. There were 35 abstentions, including Moscow's allies in Beijing and, shamefully, India, the world's largest democracy that wouldn't stick up for the world's most beleaguered.

While quick to acknowledge that the nonbinding vote doesn't directly change anything, the lopsided result was "extraordinary," and "the result of intense diplomacy to build that support" from the U.S. and other key countries, Mary Curtin, diplomat-in-residence at the Humphrey School at the University of Minnesota, told an editorial writer. It's also reflective of world leaders witnessing "Ukraine's intent and determination to push back, which I think surprised Russia."

Moscow may also have been surprised by the breadth and depth of not just official government sanctions, but by corporations acting independently to isolate the aggressor. Major multinationals — including but not limited to Boeing, Volkswagen, Harley Davidson, Nike, Adidas and Apple — have admirably made unilateral decisions to suspend or curtail investments and/or operations in Russia, often at the cost of billions of dollars.

And while not nearly as militarily, geopolitically or economically as consequential, the cultural cutting-off of Russian teams and athletes from international competitions like the World Cup as well as other events in globally connected 21st-century cultural life are appropriate and may intensify the gut reaction of Russians (belying the lies from Russian state media) that Putin is taking their country off a cliff.

And yet despite the extraordinary pushback, Russian troops show no sign of pulling out of Ukraine. Rather, they're intensifying their invasion, indiscriminately shelling cities and reportedly taking at least one major one, Kherson, in southern Ukraine. Despite early setbacks, Russia's overwhelming military advantage will likely continue to conquer key cities, perhaps including Kyiv, the capital. The war "is going according to plan," Putin told French President Emmanuel Macron, according to a readout of their Thursday call. For the brutal Putin, that apparently includes what could be war crimes, which the world should not flinch from pursuing.

If Russia prevails in its initial invasion, it might lead to a grinding insurgency.  The same nations, multinational corporations, international organizations, institutions and individuals who have shown such zeal in backing a sovereign Ukraine and resisting a revanchist Russia must continue to apply pressure.

A presidential pledge to do so was one of the rare bipartisan moments during the State of the Union address on Tuesday, as President Joe Biden said that he and Congress are together in "an unwavering resolve that freedom will always triumph over tyranny." The first post-address move is Biden's request for $10 billion in "additional humanitarian, security and economic assistance for Ukraine and the neighboring region." With now more than 1 million war refugees in just a week, Ukraine, and countries generously opening their borders, will need this and more. Congress should act quickly.

A previous president, John F. Kennedy, similarly spoke of a "long twilight struggle" to win the Cold War. JFK, in his inaugural address, also pledged that "we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and success of liberty." So far the stakes haven't been commensurately raised. But Americans should put rising gas prices and other effects in context, and most importantly continue paying with their most important asset: their attention, which is needed to continue the global resistance to Putin's crimes.

                                       Star-Tribune
                                                          MICHAEL J KLINGENSMITH, Publisher and CEO
                                                               SCOTT GILLESPIE, Editor, Editorial Pages

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