Hello, and welcome to the Dispatch for October 29 to November 14!

I’d love to say I was waiting for the conclusion of the Chinese summit or the European Troika meeting (or that I was prescient enough to predict what happened in Israel), but I honestly just didn’t get around to writing until today. Apologies for the tardiness - I think it’s a good dispatch, though, and I hope you’ll agree.

Let’s get to it!

US Election

Barack Obama was re-elected president on Nov 6, defeating Mitt Romney with a margin of 2.5 million votes (or around 2.9%) and 126 electoral votes.

By now an incredible amount of ink has been spilled about this election, so I’ll be a bit spare in my analysis. My wonderful girlfriend rightly reminds me that I don’t actually have the data to back up any of this, so the following should be read as nothing more than my opinion.

The biggest problem the Republican party faced was demographics - after a year of talking about forced deportations, border fences, voter ID laws, and the danger of China, the Republican party lost the hispanic, black, and asian votes by significant margins. This isn’t overwhelmingly different from the Republicans’ performance with these groups over the last decade, but the groups now make up larger percentages of the population. Paired the demographic changes with what seems to be an increased embrace of gay rights (Maine, Maryland, and Washington all approved same-sex marriage laws), and it appears several of the tenets of the GOP’s 2012 platform will be even more expensive in 2016.

More concerning for the GOP should be that Obama passed 276 electoral votes before the totals were in from either Ohio or Florida, both exceedingly close states expected to determine the election. Virginia broke solidly Democratic, as did Colorado, Wisconsin, and several other battleground states. Whether the Democrats can carry these states again in 2016 is an open question, but it looks like the days when Ohio determines the election may be at an end. For the GOP, this is bad news: the so-called “swing” states swung to the Democrats by an average margin of 3.5 points, and even if Romney won Florida and Ohio, Obama would still have won the election. In total, this year presented a much, much worse electoral map for the GOP than expected.

The real losers in this election were the Tea Party and the Super PACs. Several GOP Congress members faced primary challenges from PAC-supported Tea Party candidates - Karl Rove’s American Crossroads PAC alone spent almost $250M on various races - and in many cases, the results were disastrous. The one senate seat the Democrats picked up was in Indiana; there, six-term Republican senator Dick Luger lost a well-financed primary challenge from Richard Mourdock, a Tea Party backed candidate. Mourdock would later make statements during a debate opining on God’s position on rape, losing his election and giving the GOP a black eye in the process. Luger won his last re- election with 86% of the vote - Tea Party-aligned PACs spent several million dollars to hand a senate seat to the Democrats.

The next four years should be a soul-searching experience for the GOP - unlike 2008, Obama was a much more vulnerable candidate this year. They have no-one to blame for this loss but themselves.

China

The Chinese Communist Party promoted a new slate of leaders to the top of the party, affecting a once in a decade transition of power. While the identity of the new party leader and President of China Xi Jinping has been known for several months, the composition of the Politburo Standing Committee, the highest decision-making body in the nation, was until now unknown. Reports over the last couple months have pointed to a larger than normal amount of jockeying and infighting among the Chinese elite during the transition.

The leadership of China is of some significance to the US, so this transition is worth watching. Chinese politicians are not elected, typically getting their positions through either personal relationships or family ties, which means the scope of any leader’s ability to influence policy is the strength of his power base relative to other factions. By most reports, Xi is coming in with a very strong hand - a series of scandals and corruption cases have given the faction controlled by Hu Jintao, the outgoing president, a bit of a black eye - but it still remains to be seen what sort of latitude the new President has. Much of the speculation so far is basically Kremlinology, since the party tends to be fairly tight-lipped, but it’s unlikely the leadership change will be cause for any real major reforms in China - whatever faction the new leaders are from, they’re still of the same system.

Israel

On Wednesday, the Israeli Defense Force assassinated the head of the Al- Qassam Brigades, the military wing of Hamas, in a precision airstrike. The Al-Qassam Brigades have threatened retaliation, but the Israelis are already readying ground forces and have issued a warning to Hamas fighters to stay out of sight for the next few days.

This is a dangerous move for Israel. They seem to have decided they can either withstand or prevent the immediate blowback from this attack and that it’s worth whatever the cost might be for such an aggressive action, but the long- term outcome is more questionable. This works long-term for Israel under a short list of assumptions: 1) Jaabari contributed significantly to Al-Qassam’s operation capabilities and its influence among other groups, 2) Hamas’s retaliation will be containable, and 3) going forward, Hamas’s more moderate political arm will be able to exert itself over the weakened Brigade, with whom it has been sparring for much of the year. In short, Israel is assuming this is a short-term risk to its security to ensure a better long-term outcome. I’m skeptical. Al-Qassam has been rather restrained so far this year, and the idea that the public bombing of a prominent figure will benefit those in Hamas who favor diplomacy is a rather dubious one. Unless Jaabari was absolutely the glue holding Hamas’s militant wing together, I find it very unlikely this breaks well for Israel.

Greece

The Greek government approved another round of austerity measures, pushing through a budget for 2013 which included $12Bn in spending cuts in addition to another package of $17Bn worth of structural reforms. On Monday, members of the European Central Bank, European Commission, and the International Monetary Fund - the so-called “troika” - met in Brussels and agreed to give Greece two more years to meet the required debt levels of 120% of GDP, pushing the deadline from 2020 to 2022. The debt level is currently near 190% of GDP.

For Greece to hit its target by 2022, it would need to either grow its economy or shrink its debt by about 6% per year for the next decade. Given that this year Greek GDP shrank by roughly 6% and it’s forecasted to drop another 5% next year, the target is insane. Presumably someone in the troika has a calculator, but its use is not evident in these demands.

The latest round of austerity measures hit public salaries, including for the first time the police and the military. This could be dangerous given the increasingly cozy relationship between the police and Golden Dawn, the rapidly growing Greek fascist party. The state of the Greek economy, the growing failure of the Greek government to be able to provide basic goods and services, the rising popularity of Golden Dawn, and increasing reports of police acting on behalf of the group all point to serious danger to the Greek state over the next year without a concerted effort to stabilize the country.

Thanks for joining me, and my best for the weeks ahead!

Eric