The big idea
Biden has a Christmas problem. And it's not Anthony Fauci
President Biden has a Christmas problem. And it has nothing to do with Anthony S. Fauci saying on Sunday that he doesn’t know yet whether it’ll be safe in 80 days for families to get together to celebrate, then backtracking a day later.
Biden’s problem is this: Severely disrupted global supply chains sending prices skyward (and not in Santa’s sleigh), playing havoc with inventory, and potentially making it harder for Americans to be certain they’ll have the desired presents come the holidays.
Or, as my colleague David Lynch recently put it: “The commercial pipeline that each year brings $1 trillion worth of toys, clothing, electronics and furniture from Asia to the United States is clogged and no one knows how to unclog it.”
Biden’s core promise to voters in 2020 was that he would be a steady hand, singularly focused on smothering the pandemic and reviving the economy. The soaring death toll from the Delta coronavirus variant, and the ensuing economic sputters, have tested that vow, and holiday strains could fray it further. And the president’s economic agenda faces an uncertain fate in Congress, where Democrats are puzzling out how to avoid a default on debt payments in the face of a lockstep GOP refusal to help.
And the cost of renting those containers has soared, David noted. “This month, the median cost of shipping a standard rectangular metal container from China to the West Coast of the United States hit a record $20,586, almost twice what it cost in July, which was twice what it cost in January, according to the Freightos index.”
Shortage of truck drivers
The price of hauling goods from the ports has also climbed because of a shortage of truck drivers — a phenomenon that was partly responsible for soaring U.S. gas prices earlier this year and gets much of the blame for painful petrol shortages in the U.K.
At Yahoo! Finance, Brian Cheung reported in August on trucking companies giving double-digit wage increases and still not making up the workers lost during the pandemic.
The American demand for toys surged in the pandemic and doesn’t show signs of slowing down.
Here’s more from David: “Fallout from the once-in-a-century health crisis is the chief culprit behind soaring freight bills and delivery delays. Americans trapped at home slashed spending at restaurants, movie theaters and sporting events and splurged on goods such as laptops and bicycles, triggering an import avalanche that has overwhelmed freight channels.
But the pandemic also exposed weaknesses in the nation’s transport plumbing: investment shortfalls at key ports, controversial railroad industry labor cuts, and a chronic failure by key players to collaborate, according to interviews with more than 50 individuals representing every link in the nation’s supply chain.” (Here’s your second chance to click on David’s excellent interactive piece.)
Not so merry holidays
Those forces are driving up the prices of consumer goods right as retailers brace for the holiday season and creating major headaches for everyone involved in the process that culminates with children tearing open carefully wrapped packages over the winter holidays.
At Reuters, Richa Naidu and Lisa Baertlein sounded the alarm last month.
“Hitches in logistics could result in empty-handed consumers and lost sales for retailers like Walmart (WMT.N) and Target (TGT.N) - where Reuters and analysts this year have seen some gaps in shelves among seasonal items, from school supplies and backpacks to Halloween decor and costumes.
Reuters spoke with six leading toy makers — including MGA, Kids2 and Funko Inc (FNKO.O) — that said they are using pricey cargo planes, routing shipments to new seaports, and asking retailers like Target to do their own shipping.”
At Bloomberg News, Matthew Townsend, Jordyn Holman and Eliza Ronalds-Hannon reported Monday “It’s the beginning of October, just the start of what the retail world simply calls ‘peak.’ But the industry is already in various forms of panic that usually don’t take hold until the weeks before Christmas.”
“Across Europe, retailers such as apparel chain H&M can’t meet demand because of delivery delays. In the U.S., Nike cut its sales forecast after Covid-19 triggered factory closures in Vietnam that wiped out months of production. And Bed Bath & Beyond’s stock plunged amid shipping woes, with Chief Executive Officer Mark Tritton warning that disruptions would last well into next year. ‘There is pressure across the board, and you will hear about that from others.’”
The Bloomberg reporters noted “[o]ne of the better scenarios for the fourth quarter is that big retailers drastically increase spending on logistics — including resorting to using costlier air freight or chartering entire cargo ships — but still maintain their sales targets. That will likely mean they’ll see a hit to profit margins, but it could also lead to taking market share from smaller competitors who can’t match their deep pockets.”
But, they cautioned: “The bigger, more systemic risk — one that could hurt every retailer — is that American[s] spend less than expected because there isn’t enough inventory. The available goods may also not be all that enticing. The boom in shipping prices has forced manufacturers to make hard decisions about what to transport.”
The White House did not return an email seeking comment.
What's happening now
Jayapal pegs miniumum for reconciliation at $2.5 trillion in virtual meeting with Biden
Democrats are beginning to narrow their differences on the $3.5 trillion reconciliation bill. “Democrats in a flurry of private talks are beginning to narrow their differences over the size of [Biden’s] sweeping safety-net bill, as liberals signal sizable concessions on the size of what could be the most far-reaching social legislation in years,” Sean Sullivan, Seung Min Kim and Marianna Sotomayor report.
- “In a virtual meeting with about a dozen liberal Democrats on Monday, Biden suggested a range of $1.9 trillion to $2.2 trillion, according to people with knowledge of the private discussion — significantly lower than his initial $3.5 trillion plan.”
- “Rep. Pramila Jayapal (D-Wash.), leader of the influential Congressional Progressive Caucus, pushed back, according to three of the people... She countered with a minimum spending amount of $2.5 trillion, saying a range from that figure to $2.9 trillion could cover key programs.”
- “It is unclear whether Democratic centrists like Sens. Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona would agree to a figure in this range, but Biden has been in frequent contact with them in recent days and has suggested he knows what they would accept. Meanwhile, other influential progressives such as Sen. Bernie Sanders (I-Vt.) have continued to lobby for the $3.5 trillion figure.”
- “In a statement, Jayapal called Monday’s meeting ‘very productive’ and added, ‘Progressives fought to get the full Biden agenda back on track, and now we are beginning negotiations to deliver it to working people, families, and our communities.’”
Facebook whistleblower Frances Haugen warned lawmakers that Facebook operates without oversight and issued a call to action from Congress to make social media safer, Cat Zakrzewski, Elizabeth Dwoskin, Cristiano Lima and Will Oremus report.
- “An uncharacteristically large group of lawmakers piled in for the beginning of a hearing by the Senate Commerce Committee’s consumer protection panel,” Lima writes.
- “Haugen said that while working at Facebook, she saw that the company’s understaffing underscored a lack of investment in better detection,” Zakrzewski writes. “A pattern of behavior that I saw at Facebook was that often problems were so understaffed that there was kind of an implicit discouragement from having better detection systems,” Haugen said.
Lunchtime reads from The Post
Catholic clergy in France likely abused more than 200,000 minors, according to a major report released this morning. “The Vatican said in a statement that Pope Francis had been informed of the report during a recent visit by French bishops. ‘His thoughts turn first to the victims, with immense sorrow for their injuries and gratitude for their courage to speak out,’ the statement said, adding that Francis hopes the French church can follow a path of ‘redemption’ after becoming aware of this ‘appalling reality,’” Rick Noack and Chico Harlan report.
… and beyond
China is bringing business to heel. “Chinese tech companies are reeling from regulation. Nervous creditors are hoping for a bailout for China’s largest developer. Growing numbers of executives are going to jail. An entire industry is shutting down. For China’s leader, Xi Jinping, it’s all part of the plan,” the New York Times’s Paul Mozur reports.
- “Emboldened by swelling nationalism and his success with Covid-19, Mr. Xi is remaking China’s business world in his own image. Above all else, that means control. Where once executives had a green light to grow at any cost, officials now want to dictate which industries boom, which ones bust and how it happens.”
Climate change is a big problem for farmers in Hawaii. “When people talk about climate change in Hawaii, it’s often through the lens of what might lie ahead if global temperatures continue to rise. But climate change is already here, and the impacts of a warming planet are being felt by the state’s farmers and ranchers,” the Counter’s Jessica Terrell reports.
The Biden agenda
Yellen: Oct. 18 is the actual deadline and blowing past it will cause a recession
The U.S. faces a recession if Congress doesn’t address the debt limit within two weeks, Treasury Secretary Janet Yellen said
- “I do regard Oct. 18 as a deadline. It would be catastrophic to not pay the government’s bills, for us to be in a position where we lacked the resources to pay the government’s bills,” Yellen told CNBC this morning. “I fully expect it would cause a recession as well,” Yellen added.
Republicans are preparing for a battle over Biden’s new vaccine rule
- “Biden’s planned vaccine requirement faces a number of tests in coming weeks, as at least two dozen Republican-controlled states prepare legal challenges, setting up a clash between the federal government and local officials that could ultimately determine the fate of the rule,” Eli Rosenberg reports.
- “As the White House pushes ahead, Biden is traveling to Chicago on Thursday and is expected to make remarks about the importance of vaccine requirements. The Biden administration hasn’t said when it will formally release the policy, which will affect more than 80 million Americans.”
- “Republican attorneys general in at least 24 states are marshaling legal opposition to the pending rule, as governors such as Ron DeSantis of Florida and Henry McMaster of South Carolina vow to fight it.”
John Kerry, Biden’s climate envoy, said the president was not aware of key aspects of the U.S. submarine deal with Australia and how they would affect France.
- Kerry told French broadcaster BFMTV last night that Biden had asked for his “opinion on the submarines spat, and that the president had not been fully aware of its impact on France,” the AFP’s Jürgen Hecker and Francesco Fontemaggi report.
- “He [Biden] asked me. He said ‘What’s the situation?’ And I explained exactly. He had not been aware of that,” Kerry said. “He literally had not been aware of what had transpired.”
In the California oil spill, pipeline critics are finding a way to push Biden
- “A large oil spill continued to spread across the coastal waters of Southern California on Monday, shutting down miles of beaches, closing the region’s busiest leisure port, threatening wetlands and wildlife, and raising fresh questions about the safety of U.S. pipelines,” Erica Werner and Steven Mufson report. “The accident, which local officials as of Monday night estimated had poured as much as 144,000 gallons of oil into the waters and onto the shorelines of Newport Beach and Huntington Beach, also underscores the murky nature of who bears responsibility for pipeline accidents when the costs are far reaching.”
America’s supply chain, visualized
“Ships wait off the California coast, unable to unload their cargo.” By the end of September, 73 container ships belonging to “companies such as Hyundai, NYK Line and Evergreen were anchored off California, waiting for a berth. Some vessels sit for two weeks or more, effectively cutting capacity on trans-Pacific shipping lanes and driving up costs.” See how industry failures left the system vulnerable.
Hot on the left
Sen. Kyrsten Sinema (D-Ariz.) is daring the left to take her out. “The state party put her on notice of a potential vote of no confidence. She was greeted by protesters over the weekend when she returned home for a fundraiser, and then confronted Sunday by activists who filmed her in a restroom,” Politico’s David Siders writes. “When Sinema defeated Republican Martha McSally in one of the most closely watched Senate races of 2018, the end game for Democrats in Arizona was to elect any politician with a ‘D’ behind their name. The landscape looks different now … Calling Sinema an ‘obstructionist’ rather than a centrist, Garrick McFadden, a former vice chair of the Arizona Democratic Party, said it’s ‘not just the hippies and the 20-, 30-year-old’ Democrats who are fed up with her, but more moderate and institutional-minded Democrats, as well. ‘I don’t understand the calculus,’ he said. ‘It’s not like we’re asking her to do the Bernie Sanders or the Elizabeth Warren agenda. It’s the Joe Biden agenda.’”
Hot on the right
“Harris and the truth about Israel,” write former Trump adviser Victoria Coates and Rep. Chip Roy (R-Texas) in an opinion piece for Newsweek: “Last week Vice President Kamala Harris' new crisis communications manager had something of a baptism of fire trying to clean up after her boss, after the vice president failed to repudiate a gross demonstration of anti-Semitism during a speaking event at George Mason University. … She instead responded that she was “glad” the student had raised the point and added, ‘this is about the fact that your voice, your perspective, your experience, your truth, should not be suppressed and it must be heard, right?’ … Harris' supporters have argued that she didn't contradict the student because, while she is strongly pro-Israel, she also supports free speech. This is frankly absurd.”
Today in Washington
Biden is traveling to Howell, Mich., where he will visit a union training facility and deliver remarks on the bipartisan infrastructure bill.
Trevor Noah unpacked the idea that the names of U.S. billionaires didn’t show up on the Pandora Papers because American tax laws are so lax on the rich, they didn’t have to go offshore:
Thanks for reading. See you tomorrow.