The Morning Dispatch: U.S. Economy Back to Sea Level

Plus: The latest on the prospects for another Iran Deal, and Biden moves to pressure federal workers to get vaccinated.

Happy Friday! Declan wandered off silently into the woods after the Cubs traded away his favorite player, Anthony Rizzo, last night. We’re hoping he’s back by Monday, but we have no idea.

Quick Hits: Today’s Top Stories

  • The United States’ gross domestic product grew at a 6.5 percent annual rate in the second quarter of 2021 per a Bureau of Economic Analysis report released yesterday, coming in well below the 8.4 percent Dow Jones estimate. GDP has, however, now rebounded to pre-pandemic levels, adjusted for inflation.

  • President Biden on Thursday announced a series of new requirements and incentives designed to boost vaccine uptake among federal employees and the public at large. 

  • Congress voted overwhelmingly on Thursday (98-0 in the Senate, 416-11 in the House) to advance a $2.1 billion emergency spending package that will fund improvements to the U.S. Capitol’s security apparatus and the evacuation and resettlement of Afghans who aided the U.S. military during the War in Afghanistan.

  • The House also voted yesterday along party lines to advance an appropriations package funding several federal agencies ahead of the new fiscal year beginning October 1. For the first time in 45 years, the package did not include the Hyde Amendment, which prohibits the federal funding of abortions in all but the rarest circumstances.

  • First implemented last September, the Center for Disease Control’s nationwide eviction moratorium is set to expire on Saturday. Because the Supreme Court signaled last month it would not support another extension of the executive action, the Biden administration has been pressuring congressional Democrats to come up with a legislative fix, but a deal has yet to be reached.

  • Former Cardinal Theodore McCarrick has been charged with sexually assaulting a teenage boy in the 1970s, making him the first U.S. cardinal to ever be criminally charged with such crimes. McCarrick was defrocked by the Vatican in 2019.

  • Former Sen. Carl Levin of Michigan, who served for 36 years before retiring in 2015,  died on Thursday at the age of 87.

  • Despite star gymnast Simone Biles dropping out, the U.S. still brought home gold in the women’s individual all-around: 18-year-old Suni Lee won the event Thursday. While the U.S. continues to pace the field with 41 total medals, China now holds the lead for gold medals with 18, followed by Japan with 16 and the U.S. with 14.

U.S. Economy Back to Sea Level

The U.S. economy grew to its pre-pandemic size during the second quarter, but the 6.5 percent annualized rate of GDP growth—in normal times, an incredible pace—fell well short of economists’ 8.4 percent estimate. Q1 GDP growth was revised downward ever so slightly to 6.3 percent.

“This is a direct reflection of [President Biden’s] commitment to America’s economic recovery and is further evidence of a strengthening labor market,” Commerce Secretary Gina Raimondo said of the Bureau of Economic Analysis (BEA) data. “As more Americans are vaccinated, more Americans have a better chance to get ahead.”

But Noah Williams—an economist at the University of Wisconsin and adjunct fellow at the Manhattan Institute—attributed the lower-than-expected figure in large part to employers’ struggle to find workers. “The supply problems we’ve seen in the labor market restricted growth more than a lot of forecasters anticipated,” he told The Dispatch. “I also think Wall Street tends to overestimate demand side factors and the impact of fiscal stimulus programs relative to supply. That showed up here.”

We’ve written plenty about the worker shortage—and the myriad factors contributing to it. The job market continues to make gains (a net 850,000 jobs in June), but unemployment remains at 5.9 percent—well above the pre-pandemic 3.5 percent—and there are still 6.8 million fewer people working now than in February 2020.

Although the topline number fell short of expectations, there were some bright spots in Thursday’s BEA report: Americans, unsurprisingly, appear to be more willing to shop, travel, and dine out. Overall consumer spending increased 11.8 percent from Q1 to Q2, and spending specifically on services increased 12 percent—up from a 3.9 percent gain in the first quarter.

But as we’ve discussed at length, inflation continues to run hot. If it persists, yesterday’s growth numbers could end up looking a whole lot worse. “The biggest risk to the economy are inflationary pressures that could erode real income and wage gains,” American Enterprise Institute’s Michael Strain told The Dispatch.

Federal Reserve Chairman Jerome Powell seemed to acknowledge this at a news conference on Wednesday. “As the reopening continues, bottlenecks, hiring difficulties, and other constraints could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect,” he said.

Economists are already releasing their third and fourth quarter predictions, but how things go with the Delta variant over the next couple of weeks could render most of them moot—or in need of revision. Goldman Sachs earlier this week cut their third and fourth quarter growth projection by 1 percent—citing a slow recovery in the service sector fueled in part by the deceleration in vaccine administration.

“I think that uncertainty and additional restrictions that come with the Delta variant will slow the economy down further,” Williams added. “Because of both the Delta variant and lower-than-expected GDP growth, expectations for economic growth in quarter three and four will be lower this week than they were last week, and I think there’s a good chance that growth still won’t reach expectations.”

Iran Sanctions and JCPOA

It’s been more than three months since the Biden administration reengaged Iran in an effort to hit the brakes on its nuclear program through diplomacy, and to no avail. A public messaging war between the U.S. and Tehran—with each placing blame on the other for the stalemate—sets the stage for a rocky round of talks should they resume next month under incoming Iranian President Ebrahim Raisi.

Further complicating negotiations, the administration plans to ramp up sanctions targeting Iran’s drones and guided missile programs, per the Wall Street Journal yesterday. Supreme Leader Ali Khamenei has repeatedly demanded that all sanctions imposed from the Trump administration onward be lifted as a condition of coming to an agreement, regardless of whether those sanctions fall under the text of the Obama-era Joint Comprehensive Plan of Action.

On Wednesday, Khamenei denounced the U.S. as “malicious” and “unjust” in its diplomatic dealings with Tehran for refusing sanctions relief thus far. “Whenever you made our affairs contingent on reaching an agreement with the West and the U.S., you were unsuccessful and unable to advance,” he is quoted as saying on his website. “The Americans have stuck to their obstinate position. On paper and in words, they promise to remove the sanctions, but they have not and will not remove them.”

In an apparent indirect response, Secretary of State Antony Blinken shifted responsibility for deteriorating talks to Iran. “We have clearly demonstrated our good faith and desire to return to mutual compliance with the nuclear agreement,” he said from Kuwait yesterday. “The ball remains in Iran’s court, and we will see if they’re prepared to make the decisions necessary to come back into compliance.”

The imposition of new sanctions follows a dramatic increase in drone, missile, and rocket attacks on U.S. and coalition forces from Iranian-backed groups in Syria and Iraq. Just yesterday, two rockets aimed at the U.S. embassy in Baghdad hit within the city’s fortified Green Zone, according to militia source Sabereen News. 

Other U.S. allies in the region, including Israel and Saudi Arabia, have long been subjected to rocket fire from Iran’s proxy groups. In its ongoing conflict with Yemen’s Iranian-backed Houthi rebels, for instance, Saudi Arabia has absorbed more than 100 attacks in the past several months. 

While the current administration has responded to attacks on its own positions in the region twice thus far, it has been hesitant to carry out regular air strikes on militias in Iraq and Syria. On Monday, President Biden announced the cessation of combat operations in Iraq by the end of the year. But Tehran and its regional proxies have signaled that the U.S. “shift” to an advisory role for the Iraqi military is insufficient.

“The agreement, which has effectively given a mere new name to the US military mission in Iraq, has enraged Iraqi resistance groups, which have played a significant role in defeating the Daesh (ISIL or ISIS) terrorist group in Iraq in 2017,” the semi-official Iranian Fars News Agency wrote of the change Thursday.

But by bolstering sanctions that take on Tehran’s malicious regional activities beyond its nuclearization, and by perhaps coming to terms with the futility of a deal if it fails to address a similar range of issues, the administration may be poised to take on a more robust Iran policy. 

“The Islamic Republic is not just a threat to the United States and to our allies in the region because of its nuclear program. In fact, it’s perhaps more of a threat because of its non-nuclear capacities. The nuclear bomb that they are striving for would be an umbrella under which they would expand their other activities in the region,” Cameron Khansarinia, policy director at National Union for Democracy in Iran, told The Dispatch. “These are all threats that are going to continue to face the United States and the Biden administration as long as the regime is in power.”

Biden Mandates Vaccines for Federal Workers

Yesterday, President Biden rolled out a series of new federal initiatives and requirements aimed at combating what he described as the “American tragedy” of preventable COVID-19 deaths.

“Right now, too many people are dying or watching someone they love die and say, if ‘I’d just got the vaccine,’” Biden told reporters from the East Room of the White House. “People are dying who don’t have to die.”

Most noteworthy was an announcement that the United States’ 4 million federal workers will now be asked to provide proof of their vaccination status or must submit to a series of health protocols, including mask wearing, social distancing, weekly testing, and avoiding work-related travel. Biden also said the federal government would take similar steps for contractors, both on- and off-site.

Biden said he asked the Justice Department to determine whether local communities and businesses can legally mandate the vaccine, and that the answer was yes. “It’s still a question whether the federal government can mandate the whole country,” he said. “I don’t know that yet.” (It probably cannot.)

Federal workers had mixed feelings about the new requirements. Larry Cosme, national president of the Federal Enforcement Officers Association, told the Washington Post earlier this week there would be a lot of resistance to the mandate. “It’s going to be an avalanche,” he warned. “No one should be mandated to have a medical procedure. We do encourage folks to get vaccinated, but our position is that’s someone’s individual choice.”

Likewise, the American Postal Workers Union issued a statement yesterday saying that while its leadership encourages workers to get vaccinated voluntarily, “it is not the role of the federal government to mandate vaccinations for the employees we represent.”

On the other hand, some unions were supportive of Biden’s new vaccine announcement. Paul Shearon, the president of the International Federation of Professional and Technical Engineers, said requiring federal workers to get immunized was the right call. “This country is in the middle of a terrible pandemic, more than 627,000 Americans are dead, and we don’t want any more of our members dying,” he wrote. “This is not an easy decision President Biden made, but it’s the right one for our members and for the nation.”

Health experts expressed optimism that the announcement would improve vaccination rates across the country.

“People would much rather roll up their sleeves and get a jab, than undergo weekly testing and universal masking,” Lawrence Gostin, a Georgetown professor of global health law, told reporters

Also on Thursday, Biden said he was directing the Department of Defense to look into how and when it would mandate COVID-19 vaccination for military personnel, praising an earlier announcement from the Department of Veterans’ Affairs requiring COVID-19 vaccines for members of its medical staff. 

Other initiatives announced Thursday include federal reimbursements for small- and medium-sized businesses that grant employees paid leave to get a shot, support for state and local programs offering individuals $100 to get immunized, and endorsement for pop-up vaccination clinics at schools and colleges.

“The vaccine was developed and authorized under a Republican administration, and has been distributed and administered under a Democratic administration. The vaccines are safe, highly effective. There’s nothing political about them,” Biden said. “It’s an American blessing that we have vaccines for each and every American. It’s such a shame to squander that blessing.”

Worth Your Time

  • Charlie Warzel’s latest post for his excellent Galaxy Brain Substack is about the Simone Biles culture war that broke out this week, and how social media platforms like Twitter enable such asininity. “In its online iteration, the Simone Biles conversation has immediately become a proxy for Every Single Thing—politics, geopolitics, American Pride, privilege, race, gender, ‘woke self care culture,’ coddled generations, you name it,” he writes. “It seems the cultural conversation around Biles for the past 36 hours was never really centered around this extremely talented athlete—who also happens to be a human being—or the sport, or the Olympics, or mental health. Biles, as an individual, didn’t matter. Instead, all that actually mattered was whatever argument people felt like having. The specifics of her decision weren’t actually considered. They were cherrypicked and transformed into crucial data points for ongoing meta-narratives about everything in the world and how it works. But, as is so often the case, tidy events that explain everything often end up meaning very little.”

  • Among the Republicans running to replace Rob Portman in the Senate next year, J.D. Vance, author of the best-selling 2016 memoir Hillbilly Elegy, may be the most well known in the Beltway. But that isn’t necessarily the case among the voters he needs. For Politico, Sheehan Hannan writes about how the Vance candidacy is playing out on the ground in Ohio, not just on Twitter. “In nearly two dozen conversations with politics watchers and regular voters here before and after Vance officially announced his candidacy, a few did not recognize Vance’s name at all,” Hannan writes. “Most voters, with some prompting, possessed a sometimes-vague knowledge (or loathing) of him as someone they had seen on the news, or whose life story had been made into a movie on Netflix. Almost none knew much about him as a politician, and those Republicans that did had learned about him recently from Fox News or directly from his campaign. And to observers here, that makes his chances at a Senate seat look very different than they might look from Washington.”

Anthony Rizzo Appreciation Corner

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

  • David’s latest French Press (🔒) is about Simone Biles, and her decision to withdraw from Olympic competition earlier this week. “A sport is not worth your life,” he writes. “It’s not worth your spine. Thus the comparisons to, say, basketball players who ‘freeze up’ and brick three after three are off-base. If LeBron James has a bad game, he’s not risking paralysis with every shot. Moreover, the desire to demonstrate your toughness is not worth the harm to your squad.”

  • Washington Examiner columnist Tim Carney joined Jonah on The Remnant yesterday for a conversation about political philosophy, the state of the COVID-19 pandemic, and why people should have more babies. Does it really take a village to raise a child?

  • On this morning’s Advisory Opinions, David and Sarah discuss a new 10th Circuit ruling touching religious liberty and a lawsuit against Alabama Rep. Mo Brooks. And on The Dispatch Podcast, Sarah and Steve were joined by former Rep. Will Hurd to discuss congressional dysfunction, the January 6 committee, and the ongoing centralization of power in Washington.

Let Us Know

Who is your favorite athlete of all time? What do or did you appreciate the most about him or her?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@charlotteUVA), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), Tripp Grebe (@tripper_grebe), Emma Rogers (@emw_96), Price St. Clair (@PriceStClair1), Jonathan Chew (@JonathanChew19), and Steve Hayes (@stephenfhayes).