The Morning Dispatch: The Russia-Ukraine Holding Pattern

Happy Thursday! Congratulations to future Hall-of-Fame pitcher, cancer survivor, and all-around good guy Jon Lester for calling it a career on Wednesday after 16 seasons, five All-Star Game appearances, and three World Series championships.

Quick Hits: Today’s Top Stories

• The Bureau of Labor Statistics reported Wednesday that inflation, as measured by the consumer price index, hit 7 percent year-over-year in December, the steepest annual price increase since June 1982.

• According to preliminary data from the National Law Enforcement Officers Memorial Fund, 458 federal, state, and local law enforcement officers died in the line of duty in 2021, a 55 percent increase over 2020. 301 of those deaths were attributed to COVID-19, 84 to felonious assaults (including 61 killed by firearms), and 58 to traffic-related causes.

• The State Department announced Wednesday it had sanctioned eight DPRK-linked individuals and entities for their ties to North Korea’s weapons and missiles program. North Korea has launched two test missiles off its east coast in recent weeks.

• A new peer-reviewed study from American, Chinese, and Italian researchers published in Advances in Atmospheric Sciences found that global ocean temperatures in 2021 were the hottest on record. “The long-term ocean warming is larger in the Atlantic and Southern Oceans than in other regions and is mainly attributed, via climate model simulations, to an increase in anthropogenic greenhouse gas concentrations,” the authors write.

• Rep. Kevin McCarthy declared Wednesday he will not voluntarily cooperate with the January 6 Select Committee, hours after Rep. Bennie Thompson, the committee’s chair, requested information about the House minority leader’s conversations with former President Donald Trump before, during, and after last January’s attack on the Capitol. Thompson told CBS News that former White House press secretary Kayleigh McEnany met virtually with the committee for several hours on Wednesday.

• GOP Rep. Trey Hollingsworth of Indiana announced Wednesday he will not run for reelection this year, citing a pledge he made when first running for office in 2016 not to serve more than four terms. He is the 14th House Republican thus far this cycle to retire from Congress or seek another office.

The Russia-Ukraine Holding Pattern

Russia’s peacekeeping operation in Kazakhstan appears set to end nearly as quickly as it began. After several days of metastasizing unrest in the former Soviet republic last week, President Kassym-Jomart Tokayev appealed to his neighbor to the north for help quashing what he described as an attempted “coup d’etat” that had been carried out with the help of “foreign militants.” The Russian-led Collective Security Treaty Organization (CSTO) promptly deployed forces to extinguish clashes between protesters and Kazakhstani security forces—but not before the country’s cabinet resigned and the death toll climbed to more than 160.

In a virtual meeting with other leaders of the defensive alliance’s member states, Russian president Vladimir Putin vowed to prevent any future “color revolutions,” referring to rebellions in Georgia and Ukraine responsible for the overthrow of Russia-friendly governments. “The measures taken by the CSTO clearly show that we will not allow anyone to stir up trouble at home,” he said.

“Crucially, our organization and its secretariat have been able to take all the necessary decisions in a swift and well-coordinated manner,” Putin added. “In fact, we had very little time and had to act in a matter of hours to prevent the foundations of state authority in Kazakhstan from being undermined, and the situation inside the country from deteriorating, as well as to stop terrorists, criminals, looters, and other criminal elements.”

With the situation in Kazakhstan stabilized and the risk that additional Russian deployments will be necessary sufficiently mitigated, Moscow is now freed to once again set its sights squarely on the border regions of Ukraine, where more than 100,000 Russian troops and accompanying armaments remain gathered in possible preparation for a military assault. The Kremlin has reportedly deployed attack aircraft, including attack helicopters and fighter jets, signaling a forthcoming offensive.

It’s against this backdrop that the Biden administration launched another diplomatic blitz this week in an effort to talk Putin down. Delegations from the U.S. and Russia—led by Deputy Secretary of State Wendy Sherman and her Russian counterpart Sergey Ryabkov—convened in Geneva on Monday. While both sides walked away from Monday’s nearly eight-hour conference in good spirits, they remain far apart in their expectations of the other. 

Meetings between Russian, U.S., European Union, and NATO officials will take place throughout the week—and NATO Secretary-General Jens Stoltenberg said yesterday Russia and NATO will “explore a schedule for future meetings” as well—but the State Department sought to lower expectations for the efforts before they even began. “I don’t think we’re going to see any breakthroughs in the coming week,” Secretary of State Antony Blinken told CNN’s Jake Tapper on Sunday.

U.S. officials quickly rebuffed the Kremlin’s opening demand—that the U.S. offer binding assurances preventing the expansion of NATO eastward, particularly in reference to Ukraine—labeling it a “non-starter.” 

“We will not allow anyone to slam closed NATO’s ‘Open Door’ policy, which has always been central to the NATO alliance,” Sherman said after Monday’s meeting. “And we will not make decisions about Ukraine without Ukraine, about Europe without Europe, or about NATO without NATO. As we say to our allies and partners, ‘nothing about you without you.’”

Stoltenberg echoed those sentiments on Wednesday. “It is only Ukraine and 30 allies that can decide when Ukraine can become a NATO member,” he said. “No one else can, and of course Russia does not have a veto.”

Ryabkov, for his part, publicly maintained that Russia has no plans to invade Ukraine. But he nevertheless put the onus on NATO to de-escalate. “The U.S. and Russia in some ways have opposite views on what needs to be done,” he said on Monday. “It should be NATO that is making a step toward Russia rather than the other way around, so Russia shouldn’t modify its position regarding key issues.”

Dmitri Alperovitch, the Russian-born co-founder of both CrowdStrike and the Silverado Policy Accelerator, said the “only positive” to come out of the recent meetings has been a cooling of the rhetorical temperature. “Unfortunately, when you look at the details of the negotiation, it doesn’t appear that much has changed, and both sides are very entrenched in their respective positions,” he told The Dispatch. “The Russians have come in, as expected, with a very hardline stance—demanding, in their words, ‘waterproof,’ ‘bulletproof,’ ‘ironclad’ guarantees that Ukraine will never join NATO, which the U.S. as expected rejected out of hand.”

Washington thus far appears to be making use of a carrot-and-stick approach. Sherman told reporters Monday that the U.S. would consider “reciprocal actions” if they would defuse tensions between the two sides, including mutual limits on the “size and scope” of military exercises in the region. The delegations will also consider restoring the Intermediate Nuclear Forces (INF) treaty from which former President Donald Trump withdrew in 2019 after violations by Russia, though Ryabkov insisted that couldn’t be their “only” focus. 

Of the “sticks” at the administration’s disposal, the most frequently threatened is sanctions. In the event of a further invasion into Ukraine, Sherman warned, the U.S. and its allies will impose “significant costs and consequences well beyond what they faced in 2014.” As we detailed last month:

The U.S. is also reportedly considering sanctions against Russia’s largest financial institutions that would hinder the country’s ability to exchange rubles for foreign currencies or prevent speculators from purchasing Russian debt. As two “people familiar with the matter” told Bloomberg, the U.S. could theoretically seek to bar Russia’s access to the SWIFT System that facilitates international money transfers, but the Biden administration is leaning against it because of the hardship it would inflict on the Russian people.

Another of the proposed penalties targets the Nord Stream 2 pipeline that, once operational, would allow Russia to more easily bypass Ukraine and export natural gas to European consumers. The Biden administration, however, is working to thwart current Republican efforts to sanction the project immediately in the hopes of preserving its  “leverage” over Moscow.

That legislation, which was proposed by Sen. Ted Cruz, “will not counter further Russian aggression or protect Ukraine,” National Security Council spokeswoman Emily Horne said yesterday. “Instead, it will undermine our efforts to deter Russia and remove leverage the United States and our allies and partners possess in this moment all to score political points at home.” The administration favors a separate bill, from Democratic Sen. Bob Menendez, that conditions additional sanctions on Moscow’s actions with respect to Ukraine.

But economic pressure can only do so much to shift Putin’s calculus. “I don’t think that sanctions are a deterrent at all for Russia,” Alperovitch said. “They’re not going to like it, they’re not going to think that this is a good thing by any means, but it’s not going to deter his decision to act or not act in Ukraine.”

2021 Ends With an Inflation Bang

Just because it was expected doesn’t mean it wasn’t shocking: Year-over-year (YoY) inflation hit 7 percent in December per the Bureau of Labor Statistics’ consumer price index (CPI), the largest annual price increase the country has experienced since June 1982.

It’s been about nine months since inflation started to take off in earnest, but—as Derek Thompson and Morgan Housel helpfully discussed on a recent “Plain English” podcast—the burden of these higher costs has not fallen on all Americans evenly. CPI is calculated by using consumer surveys to determine what Americans are spending their money on, and then amassing a variety of those goods and services—food, housing, transportation, energy, etc.—in one theoretical basket. The Bureau of Labor Statistics then weights each individual line item by importance, and measures the cost of that total basket over time. The topline figure it spits out—7 percent this month—is a helpful benchmark for policymakers, but it says very little about any one person’s financial situation.

Gasoline, for example, is weighted at about 4 percent of the CPI basket, and—although prices fell 0.5 percent from November to December—it cost 49.6 percent more in December 2021 than in December 2020. Hotel room prices have jumped 27.6 percent this year, used cars cost 37.3 percent more, meat is up 14.8 percent, and men’s suits and sport coats are 10.7 percent more expensive. If you’re a traveling salesman who drives town to town and has bacon for breakfast every day, you might look at that 7 percent overall number and think, That’s it? Conversely, you may live in a city and rent an apartment (+3.3 percent YoY), take public transportation (+2.4 percent YoY), subsist primarily on fresh vegetables (+2.4 percent YoY) and pasta (+2.8 percent YoY), and be wondering why everyone is freaking out.

But far more Americans are feeling the squeeze than aren’t, as evidenced by the fact that 84 percent of respondents in a recent Fox Business poll reported feeling “extremely” or “very” concerned about inflation. A plurality of them labeled it the “biggest issue facing the economy.”

After months of downplaying concerns about rising costs—he dubiously told reporters in July that “no serious economist” believed “unchecked inflation” was on the way—President Biden has adapted his rhetoric, if not his agenda, to this new reality. “Today’s report—which shows a meaningful reduction in headline inflation over last month, with gas prices and food prices falling—demonstrates that we are making progress in slowing the rate of price increases,” he said yesterday, pointing out that month-over-month inflation has slowed from 0.9 percent and 0.8 percent in October and November to 0.5 percent in December. “At the same time, this report underscores that we still have more work to do, with price increases still too high and squeezing family budgets.”

Other than a few tweaks on the margins, there’s not a whole lot the Biden administration can do at this point to stem the tide. But those with actual power over the situation have said repeatedly this week that they will soon exercise it. “If we see inflation persisting at high levels longer than expected, if we have to raise interest rates more over time, we will,” Federal Reserve Chair Jerome Powell told the Senate Banking Committee this week in the confirmation hearing for his renomination. “It is really time for us to begin to move away from those emergency pandemic settings to a more normal level.” Powell is expected to easily receive enough support to be confirmed.  

Lael Brainard—Biden’s nominee to serve as the Fed’s vice chair—is expected to tell the same committee later this morning that inflation is “too high” and getting it back down to 2 percent is the central bank’s “most important task.”

Jason Furman, a top economist in the Obama administration, told The Dispatch earlier this week he believes rate hikes will most likely begin in March. In the days since, several Federal Reserve Bank Presidents—Loretta Mester of Cleveland ​​and Raphael Bostic of Atlanta—have signaled their willingness to do just that. “If things looked like they do today in March I would support raising, lifting off from zero at that point,” Mester told The Wall Street Journal, adding she foresees three rate hikes this year. 

Worth Your Time

• Derek Thompson has a “simple” plan to solve all of America’s problems: an abundance agenda that focuses on increasing the supply of essential goods. “America has too much venting and not enough inventing,” he writes in The Atlantic. “We say that we want to save the planet from climate change—but in practice, many Americans are basically dead set against the clean-energy revolution, with even liberal states shutting down zero-carbon nuclear plants and protesting solar-power projects. We say that housing is a human right—but our richest cities have made it excruciatingly difficult to build new houses, infrastructure, or megaprojects. Politicians say that they want better health care—but they tolerate a catastrophically slow-footed FDA‪ that withholds promising tools, and a federal policy that deliberately limits the supply of physicians.”

• There’s been a lot of doom and gloom about the future of the country in the national conversation of late, with pundits of all political persuasions increasingly arguing the United States could be on the path to civil war. In his latest column, Ross Douthat argues that everyone needs to take it down a few notches. “The problems that undergird the civil-war hypothesis are serious, the divisions in our country are considerable and dangerous, the specific perils associated with a Trump resurgence in 2024 are entirely real,” he writes. “But there are also lots of countervailing and complicating forces, and the overall picture is genuinely complex—at least as complex, let’s say, as the informant-riddled plot against Gretchen Whitmer. And as with that conspiracy, it’s worth asking whether the people who see potential insurrection lurking everywhere are seeing a danger rising entirely on its own—or in their alarm are helping to invent it.”

Presented Without Comment 

Toeing the Company Line

• Jonah has some thoughts about President Biden’s speech in Georgia on Tuesday. “Biden staked his entire presidency on taking the high road; on not being like Trump,” he writes in Wednesday’s G-File (🔒). “He cribs Obama’s better rhetoric about there not being red states and blue states but the United States all the time. And he threw it all away yesterday.”

• Alec took a crack at the Biden speech in a Dispatch Fact Check, as well. In addition to what we covered in TMD yesterday, Biden also misled on former President Trump’s absentee voting, the partisan breakdown of filibuster use, and his own involvement with the civil rights movement.

• On Wednesday’s Dispatch Podcast, Sarah, Steve, Jonah, and David discuss Omicron and—you guessed it—President Biden’s Georgia speech. “Maybe for the first time of Joe Biden’s presidency, I’m angry,” Sarah said. “I’m a little outraged. And I don’t use that word lightly.”

• In this week’s Vital Interests (🔒), Tom Joscelyn breaks down the State Department’s annual Country Reports on Terrorism and argues it “shows why jihadism will continue to be a major international security concern—even if many others in Washington have already moved on.”

• The Biden administration took a victory lap last month when—contrary to many economists’ predictions—shelves were stocked for Christmas despite ongoing supply chain issues. But was it White House policies that saved the day, or adaptations from American businesses and consumers? Check out Scott’s latest Capitolism (🔒) for more.

• Speaking of Cato Institute economists, Ryan Bourne was on The Remnant for the first time this week, joining Jonah for a conversation about the economics of COVID-19.

Let Us Know

Looking through the Bureau of Labor Statistics’ detailed breakdown of cost increases by category, do you think that—based on your spending habits—you’ve dealt with higher or lower inflation than the average American this year?

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@lawsonreports), Audrey Fahlberg (@AudreyFahlberg), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), and Steve Hayes (@stephenfhayes).