The Morning Dispatch: Infrastructure Talks Sputter

Happy Friday! Javy Baez is a baseball wizard. There’s no two ways around it.

Quick Hits: Today’s Top Stories

• The Department of Homeland Security’s Transportation and Security Administration (TSA) announced a directive mandating that pipeline owners and operators file any confirmed and potential cybersecurity incidents with the Cybersecurity and Infrastructure Security Agency, designate an on-call “Cybersecurity Coordinator,” and review gaps in their current security apparatuses within 30 days.

• The Syrian government announced that incumbent President Bashar al-Assad won a fourth term with more than 95 percent of the vote, capping off an election widely regarded by the international community to be illegitimate. 

• AirFrance and Austrian Airlines were forced to cancel flights to Moscow this week when Russian aviation officials denied the airlines’ proposed flight paths bypassing Belarus. Many European airlines are avoiding Belarusian airspace after Sunday’s forced landing of a Ryanair plane and the arrest of journalist Roman Protasevich. 

• The Biden administration told Russia Thursday that it has decided not to reenter the Open Skies Treaty—a key arms control pact between the two nations—upholding former President Donald Trump’s withdrawal from the agreement last year. The State Department blamed Russia’s “undermining” of the treaty, saying it has failed “to take any actions to return to compliance.”

• Initial jobless claims decreased by 38,000 week-over-week to 406,000 last week, the Labor Department reported on Thursday, the lowest level since March 14, 2020.

• The United Nations Human Rights Council passed a resolution Thursday to establish an open-ended investigation into Israel’s alleged violations of humanitarian law during this month’s 11-day war with Hamas. By a 24-9 vote—with states including China, Cuba, Russia, and Venezuela in the “yay” camp—the resolution created an “ongoing commission of inquiry,” the first of its kind, to permanently monitor Israel’s activities in Jerusalem, the Gaza Strip, and the West Bank.

• The United States confirmed 27,705 new cases of COVID-19 yesterday per the Johns Hopkins University COVID-19 Dashboard, with 3.0 percent of the 916,876 tests reported coming back positive. An additional 1,335 deaths were attributed to the virus on Thursday, bringing the pandemic’s American death toll to 593,276. According to the Centers for Disease Control, 22,443 Americans are currently hospitalized with COVID-19. Meanwhile, 1,512,303 COVID-19 vaccine doses were administered yesterday, with 165,718,717 Americans having now received at least one dose.

Infrastructure Talks Sputter Along

Well, our plan was to lead off today’s newsletter with a recap of the Senate vote on establishing a bipartisan, 9/11-style commission to look into the events of January 6. The upper chamber was scheduled to vote on it at some point on Thursday night, and it just … never happened.

Declan stayed up until 2 a.m. ready to write the item [Editor’s Note: Don’t feel bad, he does that every night], but it’ll have to wait until next week.

Luckily for us, there was some more movement on infrastructure negotiations on Thursday, and Haley has the latest in today’s Uphill.

A group of Republican senators unveiled their latest offer for an infrastructure deal yesterday, which would direct $928 billion to physical infrastructure items like roads, bridges, and airports over eight years. 

The GOP proposal is a boost from their initial five-year, $568 billion offer. It would include $257 billion in new spending, with the rest made up of money Congress was already anticipated to spend for reauthorizations of federal infrastructure programs.

“We’re hoping that this moves the ball forward,” West Virginia Republican Sen. Shelley Moore Capito said when announcing the plan. 

Senate Democrats who want to proceed with President Joe Biden’s mammoth economic agenda without Republican support immediately panned the GOP plan as insufficient, comparing the $257 billion in new spending directly to Biden’s latest offer of $1.7 trillion in new spending.

“It’s just not particularly genuine,” said Sen. Sherrod Brown, who chairs the Senate Banking, Housing, and Urban Affairs Committee. “They refuse to go big.”

And Massachusetts Sen. Elizabeth Warren said on MSNBC that she doesn’t “really think this is a serious counteroffer.”

But Capito argued against an apples-to-apples comparison, given that hundreds of billions of dollars in Biden’s plan are for priorities Republicans don’t consider infrastructure at all. When comparing the amounts the two plans would spend on traditional infrastructure, she said, “I think the gaps are much less.” 

And she has a point. Republicans are offering a bill tightly focused on physical infrastructure that could pass the Senate’s 60-vote threshold, not trying to pare down Biden’s sweeping social investments plan into something smaller yet still the same in essence. They’re two totally different approaches. Democrats were never going to fulfill Biden’s most progressive goals in a bipartisan infrastructure package. Whether a deal with Republicans emerges or not, Democrats are likely to ultimately pursue Biden’s more liberal priorities through the budget reconciliation process, which would allow them to circumvent the need for GOP support. 

For now, negotiations with the GOP senators will likely continue until pivotal Democratic Sen. Joe Manchin is willing to step away from the talks and proceed on a partisan basis. He’s made clear he wants to work with Republicans on an infrastructure bill. With a 50-50 chamber, Democratic leaders can’t move on to a massive Democratic-only reconciliation bill until Manchin is ready.

The White House’s response to the Republican offer reflected that reality, striking a conciliatory tone and promising to continue to work with the lead GOP negotiators.

“We are grateful for the work of Senator Capito and her colleagues on this proposal,” White House Press Secretary Jen Psaki said, describing the boosted offer as “encouraging.”

Biden initially called for a $2.3 trillion package but revised that number down to $1.7 trillion in his negotiations with GOP senators last week. Republicans widely rejected his latest figure, saying it is too expensive and still involves items they don’t think of as traditional infrastructure—including climate change provisions and funding for home health care.

Beyond major disagreements about the scope of a potential package, Republicans and the White House are deeply divided about how to pay for the infrastructure investments. Biden has proposed hiking taxes on corporations, where Republicans have advocated raising user fees, like the fuel tax, to pay for the bill. 

On Thursday, the group of Republican senators made the case for another funding mechanism: They said the bill could be largely financed by repurposing money that was first passed in the Democrats’ sweeping coronavirus relief package earlier this year but hasn’t been spent yet. The senators didn’t offer specifics of which provisions they would repurpose, saying that would have to be part of a broader conversation.

For more on infrastructure—and all things Congress—make sure you’re registered to receive Haley’s Uphill every Tuesday and Friday by checking your settings here.  

Climate Activists Notch Big Win Against Exxon

Climate activist hedge fund Engine No. 1 won two seats on Exxon Mobil’s board of directors on Wednesday, ending a months-long proxy campaign by the company’s shareholders to transition the oil giant toward a lower carbon future.

Wednesday’s vote could be viewed as an inflection point in an ongoing trend. Shareholders and activist investors are increasingly taking environmental, social, and corporate governance (ESG) factors into consideration when making investments, and big businesses have been scrambling to adapt to a world where their bottom line is no longer the sole driver of their valuation.  

Engine No. 1 CEO Chris James launched an activist campaign against Exxon about six months ago, pleading with Exxon CEO Darren Woods to commit his company to carbon neutrality by 2050. Woods refused, so Engine No. 1 nominated prospective board members Kaisa Hietala, Gregory Goff, Anders Runevad, and Alexander Karsner to reorient the company toward a greener future. According to regulatory filings, Exxon spent at least $35 million on the proxy fight—and Engine No. 1 at least $30 million—making it one of the most expensive shareholder persuasion campaigns in recent memory.

In a blow to Woods, both Hietala, a former EVP of Renewable Products at Neste, and Goff, the erstwhile CEO of Andeavor, won seats Wednesday. The vote on a third Engine No. 1 nominee remained too close to call. “We welcome all of our new directors and look forward to working with them constructively,” Woods said in a statement.

The vote came as a shock to many market analysts, especially considering Engine No. 1 owns only a 0.02 percent stake in Exxon. “Engine No. 1 influencing this kind of change with such a small amount of shares usually never happens,” Luke Lloyd, an adviser at Strategic Wealth Partners, told The Dispatch. “Usually to get a board seat, you need to own 5-10 percent of a company. That usually costs billions of dollars for companies like Exxon.”

Exxon’s business took a drubbing last year, as the pandemic—particularly early on—drove consumer demand for gas into the ground. The company lost $22.4 billion in 2020—its worst performance ever—and was removed from the Dow Jones Industrial Average after nearly 100 years on the index. Things have bounced back a bit in recent months for the Standard Oil descendant, which announced a $2.73 billion profit in the first quarter of 2021. Its stock price is up more than  40 percent since January.

The rebound provides some respite, but in full context, the situation for Exxon remains dire. The company’s market capitalization—a measure of its overall value—sat at nearly $530 billion in late 2007. Today, it’s hovering just under $250 billion.

After Wednesday’s vote, Woods may be on the hot seat. “Exxon has failed spectacularly by every available measure: stock value, relative diminishment of value compared to peers, capital allocation, environmental stewardship reporting,” Elizabeth Wilder—a shareholder who backed most of Engine No. 1’s candidates—told the Wall Street Journal. “The people who oversaw the past decade of wealth destruction should be held accountable.”

Environmentalists say the elevation of Hietala and Goff will help the oil giant transition to a 21st-century economy increasingly dependent on renewable energy. “I think the existing board has to see this election as a rebuke of the company’s current approach, and one hopes that that will mean that they’re open to fairly significant changes,” said Andrew Logan, a senior director for oil and gas at Ceres, a sustainability nonprofit that backed Engine No. 1. “A huge part of the challenge with Exxon has been that it sees climate change as a fifty or a hundred year problem. So it’s been taking these small incremental steps assuming that it has tons and tons of time.”

Engine No. 1 is getting all the attention this week, but it’s far from alone in this push. “The type of investor who is concerned about climate change as a financial issue has changed dramatically,” Logan added, “from smaller investors or investors with a social mission to some of the biggest investors in the world like Blackrock, State Street, or Fidelity.”

Quill Robinson, vice president of government affairs at the American Conservation Coalition—a nonprofit “dedicated to mobilizing young people around environmental action through common-sense, market-based, and limited-government ideals”—told The Dispatch he “generally sees this as a good thing.” 

“We definitely are more in favor of the owners of a company—the shareholders—making those demands and having that happen in the private sector space rather than through government mandate,” Robinson added, contrasting the latest developments at Exxon to a Dutch court’s recent ordering of Royal Dutch Shell to slash its carbon emissions to 45 percent of 2019 levels by 2030.

In the United States, this fight is playing out on a variety of fronts. John Kerry, the Biden administration’s climate envoy, has reportedly been “prodding major U.S. banks privately to announce commitments for climate-friendly finance” with the goal of creating a “U.S. net-zero banking alliance.”

Republicans, Axios’ Lachlan Markay reported this week, are threatening to fight back. Fifteen GOP state treasurers wrote a letter to Kerry this week expressing concern over his efforts, and hinting that they may withdraw their state’s assets—a combined hundreds of billions of dollars—from any bank that accedes to the Biden administration’s pressure.

“As the chief financial officers of our respective states, we entrust banks and financial institutions with billions of our taxpayers’ dollars,” the letter reads. “It is only logical that we will give significant weight to the fact that an institution engaged in tactics that will harm the people whose money they are handling before entering into or extending any contract.”

Worth Your Time

• David got at this a bit in his Tuesday French Press(🔒)—and Declan in a piece for the site a few weeks ago—but there are really deep divides within the Republican Party over how (and whether) to use the power of the state to respond to wokeness and other cultural trends conservatives don’t like. National Review editor Phil Klein is out with a really great essay about this divide—and how it will continue to widen. “There have always been tensions among different factions on the right,” he writes. “Sometimes the debates have boiled down to emphasis, with more economically minded conservatives wishing that Republicans would downplay social issues, and social conservatives often feeling neglected whenever the party gained power. There have also been fierce debates over whether — and to what extent — it is appropriate to use government to promote moral values. Despite these very real debates, the movement remained largely intact for decades. Yet the phenomenon of ‘woke capitalism’ presents a much different and more acute threat to conservative cohesion than even Trump did.”

• The Dow Jones Industrial Average hit a milestone birthday this week, celebrating 125 years of highs and lows in the market. “It has risen an average of 7.69% each year and notched 1,464 record closes,” the Wall Street Journal’s Karen Langley and Peter Santilli reported Wednesday. Check out their piece to learn more about the key inflection points in the DJIA’s lifetime, including 25 recessions, historic bear markets, and fun facts like this one: “No stock has been in the Dow for the entire 125 years.” Without reading the article first, can you guess which stock has had the longest tenure in the Dow?

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

• David and Sarah caught up on all the latest legal happenings in yesterday’s Advisory Opinions, including Georgia’s anti-BDS law, Florida’s new social media law, and a case involving a New Jersey pipeline. Alec and Ryan also joined the show to describe their cicada-eating experience earlier this week.

• David’s Thursday French Press (🔒) channels Mark Twain in asking if history is about to rhyme again. “We’ve been conducting debates about the future of both parties as if the salient political and cultural realities of the recent past—low crime, American military ascendancy—were permanent conditions,” he writes. “If either changes, the debate changes. If both change, the debate changes dramatically.”

• In case you missed it yesterday, Chris Stirewalt officially launched his limited run podcast series—The Hangover. The podcast will, over the course of eight episodes, conduct a 2020 election autopsy for the Republican Party, since it doesn’t seem interested in conducting one itself. Episodes 1 and 2 are available now, with historian Richard Brookhiser and former House Majority Leader Eric Cantor, respectively.

• In a piece for the site, Thomas Koenig reviewsThe Words That Made Us, a new book by Yale law professor  Akhil Reed Amar. Amar looks back at the high level of civic deliberation that accompanied the push for the Constitution in the late 18th century. “The richness of the dialogue that Amar unearths should leave readers both proud of our imperfect yet inspiring constitutional heritage and disappointed in our present-day selves,” Koenig writes.

Let Us Know

Memorial Day weekend is often considered the unofficial start of the summer. Do you have special plans this year as our broad reopening continues?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Haley Byrd Wilt (@byrdinator), Audrey Fahlberg (@FahlOutBerg), Charlotte Lawson (@charlotteUVA), Ryan Brown (@RyanP_Brown), and Steve Hayes (@stephenfhayes).