Shutting match: what will break the US federal impasse?

Because you didn't just say, how can I provide these investments? How do I holistically provide everything? How do I bring in the legal, the accounting, all this? And do it at a price point. No one else is doing it. Learn more about how we approach wealth management at creative planning.com slash integrated. This intelligence podcast is sponsored by Backmarket, the leading global marketplace for refurbished tech. When the kids need phones, laptops, or tablets for school, buying refurbished tech makes sense for families trying to save money without sacrificing quality. At Backmarket, tech costs up to 50% less compared to new. All devices have been professionally refurbished and come with a one-year warranty and 30-day return policy. Start saving money. Visit Backmarket.com or the Backmarket app to shop now. Hello and welcome to the economist. Hello and welcome to the intelligence from The Economist. I'm your host, Rosie Bloor. Every weekday, we provide a fresh perspective on the event shaping your world.

In recent years, jihadist rebels have swept through many countries of the Sahel. So why does neighbouring Ghana remain a sanctuary of relative peace and stability? Our correspondent travel there to find out. And when you live in lovely London, you're lucky enough in my view to have delicious water literally on tap. But those folk whose job it is to sell bottled water think they can do better and are apparently trying to turn their product into a luxury good. But first, The government shut down in America is now the second longest on record. Yesterday, it surpassed the 21-day suspension of federal services under President Bill Clinton in 1996. Hundreds of thousands have been furloughed. Many others are working without a paycheck, and some may be out of work permanently. The Census Bureau stopped work. So has the National Oceanic and Atmospheric Administration. What happens if we have... Another hurricane outbreak and some wildfires in the West, severe drought in the Midwest. All of a sudden, you're stretching that workforce so very thin. Most staff at the Department of Education have been sent home too. And as Republican Senator Ted Cruz noted, even air travel is affected. There are delays. We're seeing flights being canceled. There are 50,000 TSA employees who are going into work and they're not getting paid. There are 14,000 air traffic controllers that are going into work, and they're not getting paid. In Donald Trump's first term, play stop for 35 days, the longest in history. This shutdown could soon beat even that. So is there any sign of a deal being brokered? We're 23 days into the shutdown now, and it shows no sign of ending. Sam Beale is an international correspondent for the economist. Both Democrats and Republicans don't seem likely to budge at all on their budget demands. But despite initial fears about the economic harm that a shutdown would cause, it's been oddly tolerable in Washington, D.C., at least for now. So Sam, before we get to what's going on now, just remind us what they're fighting over. Really, it comes down to two issues. One is a narrower policy issue which relates to healthcare. There are tax credits from the Affordable Care Act that expire at the end of this year, and that could send health premiums spiking for most Americans if those aren't renewed. Democrats want to renew them. Republicans are a lot more reluctant to do that. But there's also a bigger constitutional question here at play, which is who has power over the purse. Democrats want firmer guarantees from Republicans that the president can't just call back funding that's been appropriated by Congress. But that's a much, much harder issue to deal with during a budget negotiation. Republicans have tabled a short-term funding measure, which would keep government funding at current levels. Democrats don't like that because once you factor in inflation, that's a cut.

And you say that the shutdown's been surprisingly tolerable. What impact has it actually had? The most visible issue so far has been the 750,000 federal workers that have been furloughed so far. Most of them work for agencies that aren't necessary to the daily functioning of government, but that's still a big chunk gone. But in many ways, the shutdown is weird because the Trump administration has engaged in all kinds of budgetary chicanery to keep some workers paved. The president has repurposed funds to pay the military. That's 1.2 million active duty service members who have been paid. Some agents at ICE or the Department of Homeland Security are also being paid. The president has also pledged to use revenues from tariffs to funds welfare programs for the needy, as well as pass on more loans to farmers. So in some ways it sounds like there hasn't actually been a shutdown at all, but presumably the longer this goes on, it will have a bigger impact. Most policy won't say that the economic costs will start to pile up. Oxford Economics Consultancy reckons that 0.1 to 0.2 percentage points will come off GDP each week as the shutdown goes on. And there are also some deadlines to keep an eye out for. So... Next week, funding for SNAP, which is more commonly known as food stamps, a federal program, which helps top up those on low incomes to pay for their groceries. That will expire in several states, which could affect millions of Americans. And that's what most congressional a say could put a lot more pressure on Democrats or Republicans to come to the table and try and finally solve the impasse. And how's all this going down in the US at large with ordinary people? Well, from Washington, D.C., most people seem a little bit jaded, and they've seen this happen many times before. But if you look at polling, it seems that most Americans, for now, are narrowly blaming the Republicans for this shutdown. But in recent weeks, our polling suggests that that has also now started to be blamed on both sides a little bit. So that might also push the Democrats to try and get this solved. And this just can't go on forever. So how will it end eventually? There are some feelers for a compromise. John Thune, who's the Republican leader in the Senate, has basically told Democrats that he'll offer them a vote to extend those healthcare subsidies, but only after they vote to reopen the government. For most Democrats, that's a non-starter. Trust that Republicans will stick to their word. Is that an all-time low among Democrats? So... From their point of view, they don't understand why they're being asked to vote on a budget deal, which even if it passes, the president could simply just ignore all Republicans might vote to rescind it. Unfortunately, I think what this really shows is this is the new reality in Washington, D.C. It's very hard to get even the most basic appropriations bill passed without hyper-partisan rancor. Sam, good to talk to you. Thank you so much. Thank you very much, Rosie.

For investors at the highest level of sophistication, those with strong advisory support, the natural outcome is two distinct portfolios, one public, one private. Each plays a different role in the overall strategy. Uncover new investment opportunities for you at creative planning.com slash new. Recently, I travelled to the far north of Ghana to the border areas alongside Burkina Faso and Togo. These are two countries currently experiencing significant jihadist violence. Tom Gardner is our Africa correspondent. I went there to find out why Ghana, despite the jihadist violence that's billowing across these border countries, remains relatively stable. I mean, it's been completely spared violence. And I wanted to go there to find out the secret behind Ghana is apparent invulnerability to the crisis on its doorstep.

So Tom, before you spill all the secrets, put this into context for us. You report all over West Africa. How is Ghana different from those countries that surround it? So these core Sahelian states, that's Bakina Faso, Mali and Niger, they today constitute the global epicenter of jihadist violence. In fact, more than half of all terrorism-related deaths last year occurred there. Now, the most powerful of the Sahel's militant groups, that's the Al-Qaeda-linked Jainim, has been pushing south recently into West Africa's more prosperous coastal states, in particular Togo and Benin, but also, to some degree, ivory coast as well. Now, Ghana shares a nearly 600-kilometer-long border with Burkina Faso, but unlike any of these countries, it has not had one... terrorism-related death. My hunch is that figuring out why could be useful in preventing the violence from spreading further. And so why is it, Tom? Why is Ghana so stable? That's exactly the question I put to all my interviewees in the far north. And there is an optimistic explanation for sure, which is that Ghana's politics insulates it to some degree against violent extremism. Ghana is sometimes touted as Africa's model democracy. It has very competitive elections. I went to dinner in the capital Accra. just before the start of my trip to the north with Bright Simons, he's a prominent Ghanaian intellectual. And he argued, for instance, that the existence of what he called an entrenched duopoly of two hyper-competitive political parties with large youth wings, that provides a powerful force for stability. It means the frustrations of young Garnians, even those in the far north, which is pretty marginalised, are channeled through votes rather than violence. Plenty of people I spoke to up in the north agreed with that assessment. The 1992 multi-party democratic constitution, for instance, that cropped up frequently in my conversations. And people also pointed to the Ghanaian military and the armed forces there are seen as... pretty professional and well-organized, certainly compared to some of its neighbours. And interviewees across the north talk to me about mutual trust between local communities and security forces, which means people are willing to hand over suspects, for example, to the security. Okay, so you're saying stable government and a professional army are the optimistic explanations. What are the other ones? I think... Unfortunately, maybe the most important reason Ghana has yet to be attacked is probably quite simply that the jihadists have decided not to. Something I heard a lot across the north is that they really prefer Ghana as a market and a safe haven, one where they, in the words of a local journalist, can regroup.

grab resources and gain some respite before going back over the border to carry out attacks. Indeed, some are said to own houses in Ghana, where they leave their families. And then there's fuel, for example. And I saw just a 10-kilometer stretch of road south of a border town called Paga, as many as 25 fuel stations. Locals told me that motor bikes loaded with petrol. cross into Burkina Faso every day. My suspicion is a lot of this is illegal smuggling of fuel to the jihadist groups. And then finally, there is a widespread perception in Ghana that there is some sort of tacit agreement, really, between officials in Ghana and the jihadists across the border. For sure, local leaders and government officials allow fighters be as long as they do not cause trouble on Garnay and turf. So if Garner is essentially being used as a safe haven for the jihadists, what does that say about Garner's prospects longer term? Well, I should say most people I spoke to there were really strikingly phlegmatic about the future. They did acknowledge it's impossible to rule out the calm one day. breaking. One local security expert told me, for example, about recent attacks pretty close to the Ghanaian side of the border. And in September, Garner's military said it had ramped up patrols in a town called Bongosur, which I visited. Those were in response to recent reports of cross-border infiltration. Stepping back a bit. Yes, certainly Ghana is richer than its neighbours, particularly those in the Sahel. But the far north of Ghana feels quite a lot like much of the Sahel, certainly parts that I've visited. It's very poor still. And there are quite a lot of local communal conflicts of exactly the kind which jihadists are often skilled at exploiting. So if you've got a region racked by jihadist violence and then one country being used as a market for the funds and the families, that doesn't exactly sound like a recipe for peace. Yeah, so that's why I came away, not convinced that Ghana is really a model for the region when it comes to dealing with the threat of jihadist violence. The government hasn't invested as much as neighboring Ivory Coast in particular. when it comes to job creation programs in the north to discourage young men from joining militant groups. And ideally, regional governments need to be banding together to tackle the crisis. But that's become really difficult in recent years. Since 2020, military junters have seized power in Mali, Burkina Faso, and Niger. In January, those countries quit the... region's main trading and security bloc, the economic community of West African states. Now, Garner has a new president since January. He's tried to patch things up with neighbours to make common cause against the jihadists. But my sense is there is a dilemma here, because so far, the jihadists have spared Ghana. But that's...

primarily because Ghana's taken a pretty hands-off approach to their presence on their soil. If that changes, well, that could aggravate the jihadist groups. But in the long term, if Ghana does nothing, that may strengthen them. Tom, thank you very much. Thank you, Rosie. So, Rosie, I brought you something very exciting. Carla Suberana works on The Economist Newsdesk. Volvix touch of fruit, strawberry flavor, which is a sort of sparkling water. You buried that headline. It's water, isn't it? It's water. You wouldn't tell from the can. You really know how to have fun, Carla. You know me. I'm wild. And how much did this cost? It was £1.30. Okay, so roughly the price of a Coke? Yeah, it's not too bad, but this is on the cheaper end of the spectrum. There are much more expensive products out there. For the sake of podcasts, we're going to have to try it. It smells like strawberry sweets, Carla. Oh, it's actually very sweet. That is like a... That's a soft drink. Yeah. It's not water. Carla, why did you bring me such a delightful thing to drink today? Well, because over the past few months, I've been looking into the bottled water industry. And this... Product sort of embodies the change that the industry is going through. So it sounds like bottled water is moving into drinks? Into luxury. So basically all of the big companies like Nestle and Danone, which owns Volvic, are selling their mass market brands and investing into premium ones. And another example of this is Maison Perrier. Auree, which is owned by Nesley, recently created a product similar to the one we tried, which is essentially flavored sparkling water. But it's very bougie. You may have seen the ad with star Lily Susan Collins in a villa in the south of France. And it was director by Damian Chazelle, the director of La La Land. And the whole thing kind of reminded me more of a trailer for a romantic film than for an ad for flavored water. And the packaging looks sort of like a cocktail in a can. So yeah, essentially the industry is just becoming more and more luxurious. Why is the bottled water industry trying to become more romantic, more luxurious? The main reason is actually climate change. Natural mineral water must be bottled and treated under EU laws. But there have been lots of cases where torrential rains have flooded aquifers, which contaminates the springs. And then pollution is making things worse. So natural environments are more and more polluted. And so pesticides, fertilizers and microplastics.

are contaminating even the most remote springs in the Alps. And last year, for example, there was this big scandal in which Nestle had to destroy two million bottles of Perrier after fecal bacteria was found in one of its springs. And then water shortages are an issue too. So droughts are more and more common, especially in southern Europe. So basically, sourcing clean natural mineral water is becoming harder and harder for these companies. Carla, the cynic and me says that we should turn on the tap and drink the water there, which is treated and cleaned. Both this idea of making mineral water, bougie, luxurious, more sexy, just add to the stress, the environmental stress? Yeah, it is a good point. Like, environmentalists are always accusing the water industry of being very polluting. Essentially, what you're doing, as you said, is you're extracting water from the Alps. and then flying it around the world bottled in plastic. And there's more than one million bottles are sold every minute. So it is a very polluting industry. And Danone, for example, has faced lawsuits over its environmental impact. So essentially, the idea is to sell fewer bottles at higher prices. And those bottles typically come in glass or cans, which also reduces plastic pollution. And do people actually want to drink this surprisingly sugary, sweet water substitute? Yes, so consumer demand is also in part driving this shift because younger people are drinking less and less alcohol. So there's more demand for soft drinks. Essentially people want healthy, low-calorie alternatives to alcohol. And so Nestle and their rivals have spotted an opportunity and are pushing flavored waters. And those waters... have the advantage of not being regulated as mineral water. And sales are rising quite fast. So during the first half of this year, sales in Nesles water and premium beverage division rose by 4.7% year and year. And Maison Perrier, which I mentioned earlier, was a huge success. Sales are close to matching the original brand, Perrier. So it seems to be going quite well. I should note that this flavoured water also contains artificial sweeteners, which seems the opposite of drinking water. Carla, is this strategy going to work? Is it going to pay off in the long term? It's actually not clear. There's a lot of new flavour water products that are coming, and not only from the big players. There's dash in the UK, for example, which has become very big. And also selling this water is actually very expensive. Nestle has... spend a lot of money on automated bottling lines. Obviously, on the marketing, it's not cheap to get Lily Susan Collins in a commercial. So it's not clear whether it's going to pay off in the long term. And you see it in the numbers. So Nesles operating margin are falling. So during the first half of the year, they were around 9%, whereas a decade ago, margins for its water division were closer to 12%. So essentially, they will need to sell a lot of cans for this strategy to pay off. All right, Carla, let's give this a go. Scott Bottoms up. That is disgusting. It's so disgusting. Thank you so much, Carla. Always a delight to party with you. Thank you, Rosie. That was fun.

That's it for this episode of The Intelligence. Just a reminder that if you want to listen without ads, you can do so on the Economist app. We'll see you back here tomorrow.