Dec 10, 2018

Axios AM

By Mike Allen
Mike Allen

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1 big thing: America's BIG problem
Illustration: Rebecca Zisser/Axios

The big and powerful are getting bigger and more powerful — and the clear and dominant winners are big cities. 

  • You see this with the big tech companies (Amazon, Google, Facebook), big government in Washington, big media in New York and Los Angeles, and the super rich big-shots in the big cities, Axios' Sara Fischer and Felix Salmon report.

Why it matters: With wealth, jobs, and power increasingly concentrated in a few large cities, we are witnessing a growing economic and political divide between urban and rural America. As we've previously written, it's part of a larger dynamic favoring "superstar" countries and companies, too — behemoths that appear positioned to dominate the future global economy. This fuels us-versus-them.

  • We see this in jobs: Roughly half of all U.S. zip codes still have lower total employment than they did in 2007, while the top 20% of zip codes have added 3.6 million jobs, per John Lettieri of the Economic Innovation Group. That’s more than the economy as a whole. Amazon, after surveying the country, picked New York and D.C. for its 50k person expansion. 
  • We see this in technology: New cool technologies hit cities first, be it 5G, autonomous transportation or drone delivery. This gives cities a huge edge for future growth. 
  • We see this in health care: Rural Americans have far fewer hospitals, workout facilities and health specialists, feeding a rise in obesity and disabilities. 
  • We see this in education: Big employers and better technology makes cities magnets for better teachers, schools and specialized training. 
  • We see this in news and information: Big media companies, almost all located in cities, are getting bigger. The flip-side: 500+ newspapers have been closed or merged in non-metro communities since 2004.

Be smart: All of this is hitting politics hard. Democrats own the fast-growing cities and Republicans rule rural. The polarization could easily get worse, not better, as technology speeds change. 

  • Telling stat: Donald Trump carried 2,584 counties to Hillary Clinton’s 472. But the counties she carried accounted for nearly two-thirds of U.S. economic output, per the Brookings Institution.
  • Telling stat 2: Orange County flipping to blue marks the end of the last Republican urban area in America, per Felix. 

Worst case scenario: Ian Bremmer’s Eurasia Group, which examines geopolitical trends, warned earlier this year that the next great worldwide independence movement could be prosperous, powerful cities breaking off on their own. Doubtful, but fun for parlor games.

Go deeper:

2. Wanted: Chief of Staff. Maybe.

Illustration: Lazaro Gamio/Axios

White House staff turnover is normal. President Trump’s chief of staff mess is most definitely not. 

Let’s go to the tape:

  • Trump picked John Kelly to restore order and quickly turned on him for restoring too much order. 
  • They fought and fumed, yet vowed he would survive until 2020. Then endured monthly leaks about Kelly quitting or Trump booting him. 
  • They agreed Kelly would announce his resignation Monday — until Trump spilled the news on TV Saturday morning.  
  • Nick Ayers seemed set to replace him — until he begged out Sunday, refusing to commit to the 2020 deadline Trump had said Kelly would hit.
  • Now, Trump does not know what he will do, Axios' Jonathan Swan reports. 
  • Trump has asked confidants what they think about the idea of installing Rep. Mark Meadows, the chairman of the ultra-conservative House Freedom Caucus, according to three sources.
  • Trump has also mentioned three other candidates besides Meadows, according to a source with direct knowledge.
  • The New York Times said speculation centers on "Treasury secretary, Steven Mnuchin; Mr. Trump’s budget director, Mick Mulvaney; and the United States trade representative, Robert Lighthizer."
  • "Former Gov. Chris Christie of New Jersey, who as a onetime United States attorney could help Mr. Trump in an impeachment fight, was also being mentioned. And some Trump allies were pushing for David N. Bossie, the deputy campaign manager in 2016."

Be smart: This is a bad way to head into a sliding economy, Democratic control of the House and Robert Mueller’s investigations. 

Go deeper: Swan's latest on the chief of staff search

Bonus: Swamp wealth

The five wealthiest counties all surround the Big Government of Washington, D.C., according to the U.S. census.

  • Loudoun County, Va.
  • Fairfax County, Va.
  • Howard County, Md.
  • Falls Church City, Va.
  • Arlington County, Va.

The lowest:

  • McCreary County, Ky.
  • Holmes County, Miss.
  • Sumter County, Ala.
  • Bell County, Ky.
  • Harlan County, Ky.

Why it matters: The big get bigger, the rich get richer, the more powerful get more powerful — all in a place many Americans disdain or distrust.

3. Breaking bad, Wall Street edition

The markets are tanking — the S&P 500 is down 8% in last two months alone — as investors brace for bumpy, if not bad, times ahead. Their fear is driven by at least four factors: 

  1. The simple fact this record period of growth will undoubtedly come to an end, in America and globally. A closely-watched bond-market bellwether is this close to flashing a recession signal, Axios' Felix Salmon writes.
  2. The trade war between the United States and China has gotten personal, with the arrest in China of Huawei CFO Meng Wanzhou. That's erased most hopes of a trade truce. Go deeper.
  3. The Fed is beginning to bite. "Three years’ worth of interest rate increases by the Federal Reserve are finally starting to pinch interest-rate-sensitive sectors, particularly housing, the auto industry and companies with heavy debt loads," Neil Irwin writes in the NYT.
  4. The Trump tax cuts gave the U.S. economy a one-off boost in 2018. That "won’t be repeated in 2019," writes Irwin, "meaning a harder slog for companies seeking higher profits."
4. Google gets Facebooked

Illustration: Lazaro Gamio/Axios

Google CEO Sundar Pichai, making his first-ever appearance before Congress on Tuesday, will face the same grandstanding anger Facebook CEO Mark Zuckerberg encountered when he testified in April, Axios' David McCabe reports.

Why it matters: The hearing will provide a gut check on Washington’s willingness to truly take on Google, Facebook and Big Tech. To date, it’s all bark, no bite.

Google’s soft spots:

  1. Competition: Google has been dogged by questions about its dominance, including whether it boxes out smaller competitors to favor its own services.
  2. Privacy: Google faces many of the same concerns about how it handles user data that have defined Facebook's visits to Congress this year. Lawmakers from both parties have called for a new national privacy law.
  3. China: Multiple Judiciary Committee members signed a letter to Pichai earlier this year demanding more information about Google’s plans to re-enter the Chinese search market with a censored product.

Go deeper: Google's turn for the Facebook treatment

5. Coal in Poland’s stocking

Illustration: Lazaro Gamio/Axios

The Trump administration is pushing coal and other fossil fuels at a global conference on fighting climate change, Axios’ Amy Harder writes from Poland.

The irony: The conference is an offshoot of the 2015 Paris Climate Agreement, which calls for a reduction in greenhouse gases emitted from oil, natural gas and coal to slow warming.

The money quote: "I have long believed that the GOP position on the science undermines its ability to put forward a real climate policy," said George David Banks, a former top adviser to Trump on these issues.

The intrigue: Katowice, a small city in the heart of Poland’s coal-mining region, is hosting the big annual United Nations confab that's seeking to make progress on the 2015 deal. Trump has vowed to withdraw the United States from that agreement. Coal’s presence is both palpable and shunned here:

  • Corporate sponsors include coal producers.
  • Poland’s public-relations pavilion is literally made out of coal, with coal soap, coal earrings and coal shower gel.

Go deeper: Read Amy's full column

P.S. ... The climate may be warming even faster than the UN's dire warning

6. Making the rich sweat

Mirror, mirror on the wall: how do I get my fat to fall?

The latest fad in life and fitness is to be a loner, staring at a screen.

  • Enter The Mirror: a knockoff of the Peloton bike, which allows you to join live biking classes at home via a big monitor.
  • You slap the $1,500 mirror on your wall, pay 40 bucks a month for access, and get to do exercises alone with an instructor beamed in to ride with you. Business Insider reviewed it; read it if you care.

Why it matters: This is the hot new trend in fitness for the rich.

  • Tonal, a start up: "The system combines software and an interactive LED screen with electromagnetic weights and cables to create an experience that does not rely on plates, barbells and gravity."
  • Flywheel and Nordic Track are doing knockoffs of Peloton, too.

Be smart: Peloton recently raised money at a $4 billion valuation.

Mike Allen