Breaking Points with Krystal and Saagar - Mini Show #44: Jill Biden, Uvalde Coverup, Airline Dysfunction, Dem Alternatives, Abortion Story, Airline Business, & More!

Episode Date: July 16, 2022

Krystal, Saagar & friends talk about Jill Biden's comments, Uvalde coverup, Dem alternatives, Abortion story, pandemic aid, Ro Khanna, airline regulations, airline business model, & more! To become a Breaking Points Premium Member and watch/listen to the show uncut and 1 hour early visit: https://breakingpoints.supercast.com/To listen to Breaking Points as a podcast, check them out on Apple and SpotifyApple: https://podcasts.apple.com/us/podcast/breaking-points-with-krystal-and-saagar/id1570045623 Spotify: https://open.spotify.com/show/4Kbsy61zJSzPxNZZ3PKbXl Merch: https://breaking-points.myshopify.com/Matt Stoller: https://mattstoller.substack.com/James Li: https://www.youtube.com/c/5149withJamesLi Learn more about your ad choices. Visit megaphone.fm/adchoicesSee omnystudio.com/listener for privacy information.

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upcoming presidential election so we can provide unparalleled coverage of what is sure to be one of the most pivotal moments in American history. So what are you waiting for? Go to BreakingPoints.com to help us out. First lady of the United States, Jill Biden, in a little bit of hot water. She was speaking yesterday, and this is not a joke. Let's put this up there on the screen. At a Latinx inclusion, and gen is spelled with an X, luncheon in San Antonio, Texas. It was sponsored by Amazon, Google, Marriott, UPS, and Wells Fargo. The first lady is speaking about equity,

and it's got like a buzzword checkmark for everything. The foundation for equity in every sector is a pandemic, and Uvalde, all of that speaking about, what's also funny is they use the word Latinx at the top, but then they use Latino in the actual description. Cancel. Make up your mind, people. Offensive. You've got to decide. What are we going with? Come on. But it couldn't be worse than just the description of the event and its sponsors. While the first lady was there, she made a fool out of herself, mispronouncing the word bodega and comparing Latino diversity to the diversity of tacos. Not a joke. Let's take a listen.

But we can't get those things on our own. Raul helped build this organization with the understanding that the diversity of this community, as distinct as the Bogotas of the Bronx, as beautiful as the blossoms of Miami, and as unique as the breakfast tacos here in San Antonio, is your strength. Oh, my God. There's so much. It really is like— Have you never been to New York City? Like, what is happening? The perfect encapsulation of the Democratic Party's issues

with this demographic because, first of all, you're using the Latinx language that is, like, overwhelmingly rejected. They're like, we don't say this, like, why are you insisting

on calling us this when we don't call ourselves this? That's number one. Number two, sponsored by banks and Google and whatever. And then number three, just, like,

complete cultural cluelessness. You know what the— Bodega thing I don't get. I mean, have you not been to a bodega? She's like 70 years old. People seized on the taco part. That part to me was more astonishing. I'm like, wait, wait, wait.

Have you never been to New York City? Ever? Like, you're from Delaware. You obviously have to have been. So when you go, like, what do you do? Just dine at like a five-star restaurant? Like, what's happening? Weren't you on the campaign trail at all, ever, in the city? What's happening?

Bogota? I couldn't get over that. The taco part, too. I mean, imagine saying that with a straight face. Like, being the person who wrote that, being the person who reads that. Who delivers it. Who delivers it. Who, I mean, presumably, I would hope, checks her remarks ahead of time. And is like, yeah, you know what? We're going to compare Latinos to freaking breakfast. By the way, look. No disrespect for breakfast tacos. Santoni's got some amazing tacos.

Breakfast tacos. Sounds amazing. I would eat the hell out of one right now. I would eat the hell out of one right now. The idea of some Texas tacos. Specifically breakfast tacos, which are amazing. Now, I would never compare the city to them. And that's the thing, I just don't

I just don't get how this entire thing happened from top to bottom. Mispronunciation, the tacos, the lines. To be clear, she's apologized. Oh, did she? Yeah, the First Lady's office put out a statement just saying, you know, the First Lady did not mean to offend. She basically was, it was a version of, I love Latinos

and I didn't mean to compare them to tacos. Yeah, the National Association of Hispanic Journalists also said, we are not tacos. Our heritage as Latinos is shaped by various diasporas, cultures, and food traditions. Don't reduce us to stereotypes. Fair. I will say, though, you know what it reminded me, actually, was of that Trump, the Trump taco bowl tweet. Yes. Oh, yeah, like, I love Hispanics. reminded me actually was of that uh trump the trump taco bowl tweet yes oh yeah like i love

hispanics happy cinco de mayo the best taco bowls are made in trump tower grill i love hispanics it kind of has those vibes to it yeah i agree with you but democrats are supposed to be the ones that are like super you know culturally understanding i actually think part of the problem is something that chuck rocha talks about all the time, which is that they have almost no Latinos in positions of power, even either running campaigns or on staff. And certainly, to the extent that they do, they're people who are college educated. Yeah. So they're not sort of in touch with regular life among ordinary Hispanics at this point. Chuck is very unusual within the Democratic Party of having any of that sort of connectivity. That's why I would push back

on that. I'm not Latino and I'm at, you know, I have a freaking graduate degree. Like, it doesn't take a genius to figure, you know what I'm saying? Like, come on. I just grew up in Texas. I'd be like, I would never say that. That's why I would, like, look, you have to be so far removed from whatever reality is in order to use this that that's my only pushback. why I would like, look, you have to be so far removed from whatever reality is in order to use this that that's my only pushback because I'm like,

I, you don't need to. Okay, but I do, but I do also want to say that this is the sort of thing, go back to the Trump Taco Bowl tweet, that if Trump or somebody

on the Republican side said it, Democrats would freak out about it and Republicans would be like, stop working, cancel culture, and like, woke the mob or whatever. So so i do want to say that as well i don't care this is probably just

so i guess what my what i've come around to is this is far from the biggest problem that democrats have from latinos they can probably get over the breakfast taco comparison it's you know it's a lot of other things the fact that the economy and inflation and all kinds of other issues that are the real problem here. Well, here we are, and we have yet another key discrepancy in the timeline of what exactly happened in Uvalde, Texas, the day that that madman massacred children and teachers while law enforcement stood by outside the door for more than an hour before they go in and ultimately take action. Go ahead and put this tweet up on the screen. This is from CNN reporter Shimon Prokipas, who has been dogged in doing his best to try to get whatever information there is to get. His editorial here is, this is just beyond anything, anything I've ever seen in

an investigation of this magnitude. Significant piece of information released yesterday that the Uvalde mayor says is not true. So what he's referring to here is there was a report by staff at the Advanced Law Enforcement Rapid Response Training Center at Texas State University in San Marcos that said a Uvalde police officer had a chance to fire at the gunman before he entered the school. So, again, one of the areas of the timeline that has been the most confusing and the least clear has been exactly when the resource officers were there. Did they see the gunman? Did they have a chance to exchange fire? The original story was, oh, they exchanged fire and then they were hit, but the gunman went inside.

That story has now changed multiple times. So you had this written report saying, yes, he had a chance, but he decided because there were kids in the area not to take the chance and fire at the murdering gunman. And now the Uvalde mayor is coming out and saying, this isn't true. There was no chance to take a shot whatsoever. So once again, we are left with no idea of how this all unfolded and a complete inability of anyone on the ground to be able to lay out a clear and consistent timeline of events.

And then multiple people just, I mean, it's just total infighting and chaos. Everybody trying to throw each other under the bus. Well, it's hard because who this, the mayor, Don McLaughlin, has not covered himself in glory. To be honest, he's kind of covering for his guys. And they're going after Steve McCraw, who is the head of Texas Department of Civil Safety. Here's the problem. Steve McCraw is also a liar.

He lied to all of us the day after the shooting. He gave us all false information. And now he's like, oh, this week. Now he's trying to shunt the blame off of him all onto Uvalde PD. There were Texas DPS people who were on the scene, and there were people there who were initially lying about what happened. I know a way that we could solve all of this. There is a 77-minute video of the school hallway, which shows the entire thing, and all the surrounding footage. Guess who won't authorize the release? Uvalde County District Attorney Christina Busby is not authorizing the

Texas Department of Public Safety to publicly release the 77-minute unedited video. Release the video. Yeah. Then we can all know. Well, let's all watch it. Let's see what happened. Did he have a chance or not? Who ran in with what?

We have the photo, right, of the guys with AR-15s and ballistic shields who are standing outside minutes after this entire thing even began. Well, let's watch exactly all went down. Release the audio too. Apparently that exists as well of radio transmission. So there's still a coverup here of tremendous proportions where they're not revealing what's happening. They continue to blame cast each other, release the raw unedited footage, and then we'll all know. We'll know exactly what happened, but they're not doing that. And I still am calling on the attorney general and the governor there

in order to supersede whatever the heck is happening down and just release as much goddamn information to the public as possible. Because what Shimon points out is that the families are like, what is going on? We're like, who's responsible? One of those teachers, we played audio from him.

He said, I'll never forgive them. And we really should listen to that guy. There was another longer interview. He says the more he thinks about it, the more he sits with it, the more he thinks like what could have been different on that day. He was gravely wounded. Severely, severely wounded. He did not think he was going to make it out alive. And every single kid in his classroom was murdered.

Every single one of them. And he talks about how he was laying there bleeding out and hearing the police outside of the door and thinking like, they're going to burst in any second. Any second they're going to be in here to rescue me, to take this guy out. And then minutes tick by, half an hour ticks by, an hour ticks by, nothing. And he's just laying there and he can hear one of the children in the other classroom where the teacher had been killed softly calling out for help, trying to get the police to come in and rescue them. And for minutes and minutes and minutes over an hour, absolutely nothing. So, yeah, I mean, this looks like there's a good old boys network in this town that is doing their damnedest to cover up exactly what happened here. I still have no confidence that we know even close to what the real sequence of events was.

And it's incredibly disturbing. So, once again, on a really key detail, cannot get the basic answers of what happened in the moments before this madman enters the school. That's right. So an interesting idea floated in the Washington Press. Let's go ahead and put this Politico article up on the screen. This is Politico magazine op-ed here. If Tucker runs in 2024, here's who the Democrats need. This was written by Juliana Glover, who's CEO of a public affairs firm here in D.C., advised Cheney and Rudy Giuliani, Steve Forbes, John Ashcroft.

And the person that she floats here is Jon Stewart. And here is the rationale saga. The 2024 presidential race is guaranteed to be a carnival, waged eight years after former President Donald Trump blew up the whole idea of normal, and four years after a COVID-shadowed conspiracy fest of a campaign. Stewart is not just one of our most wildly popular comedians. His years hosting the Comedy Central's Daily Show made him one of the effective communicators in public life.

That's true. He's living a fairly low-key existence and using his multi-platform showbiz skills to advocate for issues he cares about. So she's basically like fight showbiz with showbiz. I mean. That's an argument you have kind of made here sometimes. Yeah. Yeah. I'm a fan. Although it's not working out with Oz, so maybe you shouldn't listen to me. I would say Jon Stewart is much more effective than Dr. I don't disagree. Listen, I think Jon Stewart would be a great presidential candidate. I think him and Tucker would be both much more dynamic than what we have actually right now.

Tucker has no interest in actually doing this, right? What do you think? I don't think so. I mean, look, I haven't talked to him in a long time. As far as I know, from what I know about him, I don't think he— I don't—listen, who would want him to get put— He already gets, what, maybe 50% of what somebody would get if you were to be in it, and it's pretty terrible.

Like, you can't really go in public. You, you know, have to base, I don't know. It's not a lifestyle that I have any desire to ever be either that famous or that controversial. And when you're in politics, it's basically, I mean, look what happened to Shinzo Abe. He wasn't even the prime minister anymore. And he just got killed because some freak thinks

that he was connected to some group or whatever. So I think that John would definitely be a strong candidate. He, the problem is, I don't know if he would win a primary because he's one of those people who – the Democratic base still trusts the media. And I don't know if they would have the same level of affinity for somebody who is willing to call out so many of the politicians and most beloved characters because he went after MSNBC plenty when he was on the air. So that kind of contrarian streak, I don't know if that would be enough in order to win the primary. But, I mean, his answer was pretty simple. He was like, no, I'm not going to do that.

Yeah, we have an answer to keep, you know, we won't keep you in suspense here. Jon Stewart did respond. Go ahead and put this up on the screen. His response was just, um, no thank you. So I don't think that is, I don't think the Stewart campaign is forthcoming.

Also, Tucker did that. He was asked that too over the, actually, a couple of days ago at Ben Smith's conference, semaphore conference. They were like, would you ever run?

He goes, I have no plans to run and I have no desire to. Yeah, I think that's, I don't know. I don't see the Tucker thing. I just don't, have never gotten the vibes that he has that kind of ambition.

I think he enjoys what he does. I mean, frankly, more powerful than most GOP politicians. Not to mention 2024 is going to be Trump. I mean, he's running again. So I don't think that Tucker is going to come in and, like, challenge Trump from the right. I don't see that. I mean, it'd be. I don't see that happening.

Yeah. On Jon Stewart, I mean, I do think he'd be a very effective candidate. Obviously, he would know how to handle himself in a debate. I think there are a lot of Democratic voters, actually, that now would be more open to a critique of the party that perhaps weren't before. That's true. It know, and I think he, well, he himself downplays his level of knowledge. He always did that at the Daily Show. You know, he'd be like, I'm just a comedian. What do I know?

But you can see, especially in his new show, and I actually point to this in this piece, there is a level of depth and engagement on a number of really substantive issues where, you know, I think he would be well prepared to handle himself. And I think it is a sign of the times that someone like him could be seriously floated, having obviously zero government experience, but that's just been taken off the table as a disqualifier at this point. Oh, I think that should be. I mean, I don't think you have to necessarily have government experience. No, I agree. He's got a requisite level of fame. The real question is, it's like, would he want to subject himself to the problems with politics, given that he spent his whole life talking and exposing exactly why it's all corrupt? I mean, having to put yourself in the gauntlet when you've spent years pointing out how horrific

the gauntlet is, that's a difficult choice for a lot of these people to make. That's why I think, personally, the incentives never align. But I mean, listen, I think he'd be a great candidate. I would definitely, I would love to see it. Personally for the country, I think it'd be very healthy, but I just, I don't think it would interpersonally line up for him. Yeah, it's also an interesting dynamic on the Democratic side where

there's a lot of critique of Biden. You have, you know, 94% of young people saying we need, young Democrats saying we need another nominee. You have historic numbers saying we need a third party. You have 64% of the Democratic base saying they'd rather have someone other than Biden. And yet, in terms of mainstream Democrats, I mean, they've all ruled it out. Like all the, you know, the Pritzker and the Fetterman and the Newsom and whatever, like the flirtations with the sort of like establishment Democratic politicians. They're all like, no, we'll take a pass. We're going to defer. So yeah. Anyway, it's an interesting moment. Jon Stewart taking himself out of contention. So I

don't think it's going to happen, but I do think it says a lot about our politics that something like that could be a feasible possibility that I think would be taken seriously. And I think he'd be a very formidable candidate. I definitely think that's right. Can you imagine the fourth largest economy on earth rationing power? I mean, that's crazy, right? And at the same time, you're going to shut down nuclear power plants and surge coal. By the way, this makes them completely non-reliant on their Paris targets, which they fought for and said was such a sacred document. The moment they're hit with it, they're like, oh no, we're good. It's just, I mean, I can't even get over how stupid this is. And the reason I wanted to tie it to us

at home is look at Texas. Texas has all the fossil fuels on the goddamn planet. And yet they're still warning about black. So it's not like it's coming to fruition that you can frack all you want. We don't have the capacity in order to burn enough natural gas to power the grid. Like we have got to have something else. And wind is not the answer, obviously. I mean, I think that's just like undeniably true. I mean, it really is one of those things where you're like, you got to trust the science, right? You got to look at the risks and the trade-offs and what's available right now and be realistic about where we are in terms of technological development. And we've seen echoes of this at home too, trying to decommission nuclear plants to lean into dirtier sources of fuel.

This is just nonsensical. It really is. And at the same time, energy is becoming even more critical to just human health and safety when you consider these massive heat waves. It's 113 degrees in Texas. In Oklahoma, it was like literally 120 degrees in parts of Oklahoma. Yeah, my mom sent me a video from her car. It's 115. You have to have air conditioning.

I mean, this is like, it's getting now in parts of this country and parts places around the world where air conditioning is like a human right, a basic need for literal survival. And so if you don't have a reliable grid and reliable energy sources, it's a very dangerous situation. So yeah, I mean, our policy with regard to Russia is just, it's backfired. It's completely foolhardy. We were just actually looking before the segment about how they have the highest current, Russia has the highest current account surplus in history. And part of that, yes, is imports collapse. But the other part is they have record-breaking oil profits thanks to our policy. We've talked before about how the Indians are happy to buy Russian oil at like a discount and then sell it back to us at a premium. That's what our policy is doing. So this is completely foolish. And actually, in my monologue, I'm going to talk about how the spillover effects around the globe

from Sri Lanka and what's happening there to a bunch of developing world nations that are truly, truly in crisis and on the brink. We are already seeing that start to happen. In part, listen, it's Russia's fault they invaded and I'm not taking any culpability away from them, but we have responsibility for how we've responded and it's been a disaster. Yeah. And that's the thing. If the Germans are worried the Russians are going to cut it off, you think the Russians wouldn't sell them the gas if they needed the money? You think they're going to willingly take hundreds of billions of euro cut a month just to stick it to the West. That's not what you do from a position. That's when you're not in a position of strength. If they desperately needed the money for the war machine, they would take it. And sure,

maybe they could turn it on the field, but they're making such a killing on oil. They don't care. They're willing to weaponize it. And here's the thing. Their strategy is already working. The Canadians buckled. They gave them the turbines. So they've got the infrastructure. They know that they're not actually going to get it cut off and the West won't really be hit where it hurts. So meanwhile, we're all paying more. And the current program is just such a nightmare. I mean, people really should get ready for the winter. I really think prices are going to be out. Whatever happened in 2021, it's going to be even worse after the invasion. Listen, again, some of the conditions in Sri Lanka are specific to them.

Bad decision-making, the fertilizer thing, the hit to the tourism industry, all of that, the tax cut, all of that is true. But it is also the case that they are not the only nation that is on the brink like this, that is already seeing protests, that is already in danger of default, that has their debt rated as distressed. And so you really could have a massive domino

effect here. And even if you're here in the US or in other parts of the rich world, if you think you're going to be unaffected, you're fooling yourself. Oh, absolutely. I mean, this is just the connection of all of this. And this is what people don't get. The natural gas crisis, it doesn't hit. The Germans, yeah, they can afford it. At the end of the day, they'll be poorer. The Pakistanis,

they can't afford it. They just have straight up blackouts for 12 hours. And I don't know if you know, Pakistan is hot as hell at this time. They almost defaulted as well. They narrowly avoided a default recently. Sri Lanka,

Africa, these nations, which relied a lot on this oil, I mean, or on gas, or Russian trade or Russian visitors. We were talking Egypt, for example, Sharm el-Sheikh in Egypt. That place is basically run by the Russians. Well, you know, if visitors can't come, well, they're screwed. And so

there's going to be all sorts of insane, crazy effects. This is what we saw in Iraq. There are 40th order consequences. And we could have 40th order consequences, which are way worse than the initial invasion of Ukraine. Who knows? I mean, it could lead to complete global instability and the rise of some insane dictator in some part of the world, which we have no idea of predicting. And the longer that it goes, the more likely that that outcome is going to happen. I mean, the longer that it happens, the 40th order, the chaos injected into the system and people have to try and balance. Is the chaos worth it relative to the political goal,, the chaos injected into the system. And people have to try and balance. Is the chaos worth it relative to the political goal, which we're accomplishing?

I don't think we're accomplishing our political goal. And that's exactly right. And these countries, I think it's really important to underscore, were already pushed to the edge because of the COVID crisis. And because of the fact that you had mass illness and sickness and death and you had huge economic impacts, especially countries that are really dependent on tourism as Sri Lanka is. So you already had these huge debt burdens. And then when it becomes more difficult to pay that debt, and when you have higher food prices, higher fuel prices, inability even in certain instances to be able to obtain fertilizer, even if you're allowing it, even if you want it, because so much of that comes from Russia,

you have a very, very precarious and very dangerous situation in a lot of nations around the globe. So this is but the first of many that I think would happen. Yeah, I think you're right. So we wanted to give you guys a little update on a case that we had made mention of here. I think specifically I made mention of it in a monologue that I delivered. But it has been cited by the president of the United States. It's gotten a lot of national attention. In the wake of Roe v. Wade being overturned, a local newspaper reported on a 10-year-old girl in Ohio who had been raped. And because she was three days past that state's six-week abortion

ban, she had to actually go to Indiana in order to get an abortion, to have someone who would provide an abortion. And it is still right now legal in Indiana, although that seems very set to change. So there were a lot of questions raised about this specific case. There were, you know, people, especially on the right, there was a lot of questioning of it on Fox News. Where's the corroboration? Where are the reports that are supposed to be filed? Well, now we have more confirmation that this story was this horrible, horrible situation did, in fact, unfold. Let's go ahead and put this tear sheet up on the screen. So an arrest was made in the rape of that Ohio girl that led to Indiana abortion, drawing international attention. Here's some of the details. Gershon Fuentes, whose last known

address was an apartment in Columbus, Ohio, was arrested Tuesday after police say he confessed to raping this child on at least two occasions. He's since been charged with rape, a felony of first degree in Ohio. Columbus police were made aware of the girl's pregnancy through a referral by Franklin County Children's Services that was made by her mother in June. This is just, I mean, as if it's not already horrific enough. The girl is barely 10. So when she was actually raped and impregnated, she was actually likely nine. Oh, I feel sick. It's sickening. And, I mean, I want to say, you know, listen, these instances where you have young girls who get abortions because they have been raped, they're not extremely common.

But they do happen. In 2020, there were 52 abortions in children 15 or younger in Ohio. In 2019, there were 63. In 2018, there were 54. So this is the new reality. And actually, the landscape is set to get worse in Ohio and in Indiana. In Ohio, they are planning a ban on nearly all abortions, starting at fertilization. So then, you know, it wouldn't matter if she was six weeks in or 10 weeks or three weeks in, it wouldn't matter. It would be illegal. And as I referenced before, Indiana is set to call a special session to impose their own bans. And the governor there, very cagey, asked specifically about this case, very cagey about whether this would still be permitted in

the state. Just be prepared because these are the types of horror stories that we're going to start seeing more and more. Yeah, it's a terrible situation. Something for everybody here. The other guy, the guy who committed this apparently was an illegal immigrant. So that's what a lot of people are talking about as well. I mean, it just it highlights a lot. Crime and then the tragedy of a lot of these cases. Also, this is one where I just have to come back to this is you can no matter what you believe politically, this is really unpopular. Like this, you know, like no matter what side you could be the most evangelical person on earth. You can't look at this and say that a lot of people aren't going to be outraged at situations

like this. And we're only a couple of weeks in, you know, so this could stack up. And that's exactly what we were talking about politically, which is that it creates a hell of a lot of uncertainty whenever you have situations like this, which of course are rare, but they are going to pop up from time to time. I mean, we don't, you have to always plan for the worst case scenario because we literally know that it happens. And, you know, I think it's very disingenuous for people to say and not acknowledge that these cases aren't going to happen and to try and turn this into a bigger thing. And I do think it will be a big political problem. And again, it may not manifest itself today. It may not manifest itself in 2022 or maybe even 2024. But at a state level, at a national level, it will rewrite some of the conversation. And I think that's a problem if you end up on the other side, again, politically, purely through political. Well, it was interesting because the response, I think this is very revealing. The response from a lot of corners of the right wasn't to defend the law or defend this horrific situation unfolding.

It was to say this didn't really happen, even though let's say even even if this story had turned out to be untrue or the girl had been older or whatever. Let's say it had turned out to be untrue, even though it did turn out to be true. The implications of the law are that this is going to happen, whether it was this instance or another instance. Like I just said, roughly 50 to 60 times a year, just in the state of Ohio, you have situations of children 15 or younger having to seek abortions. I mean, it's horrific. It's absolutely horrific. And so the dodge and

the cope was, oh, we don't believe that this really happened. We just want to cover our eyes and pretend that this isn't a real situation rather than reckoning with the direct implications of the laws that they continue to try to implement. And now that we have a direct confirmation that it is true, the new cope, this is from the attorney general of Indiana, rather than focusing on the horrific crime committed to this young girl, he wants to go after the doctor who actually performed the abortion in Indiana. Um, let's go ahead and take a listen to this. So what's going on, Todd? Jesse, thanks for having me on, but I shouldn't be here, right? I mean, first of all, this is an illegal immigration issue because likely of Biden's lawlessness at the border and everything going on down there. That's why Indiana as a non-border state has actually filed several independent

lawsuits on that. Then we have the rape and then we have this abortion activist acting as a doctor with a history of failing to report. So we're gathering the information. We're gathering the evidence as we speak. And we're going to fight this to the end, including looking at her licensure if she failed to report. In Indiana, it's a crime to not report. So he's upset about her not filing some government paper. That's what he's exercised about. I mean, it's just you couldn't make it up. You couldn't make it up. I mean, look, I do think the immigration point is fair.

Well, it's also not fair because this guy has been here for, like, longer than the Biden administration. So it has nothing to do with the current border policy. I mean, it's clearly a continuation. It's still a continuation of something which is BS. And I do think it's crazy that, you know, people like this don't even get deported until they commit like a horrific crime. But look, that's a conversation, I think, also for another day. And in general, I would look at this situation politically and I would say it's a nightmare. And while there is some there for the GOP to talk about immigration, like most people are going to look at this objectively and be like, dude, you're going after the doctor? Like, look, this isn't even late-term abortion, right? Like this is a 10-year-old girl who was raped when she was nine years old.

Yeah, also at six weeks. So the fact that it was outright banned, I mean, that is a fact of what law is now in Ohio. And Ohio was also a swing state not that long ago. So is this going to change the thing? No, I don't think so. But, you know, again, in the future, who knows how many more of these cases. You said 50 or 60. 50 or 60 headlines per year.

In Ohio. In the state of Ohio. Just in the state of Ohio. That's a lot. I mean, and I don't even know what the population of Ohio. So I'm trying to think about what that would mean. So we're talking about, what, at least thousands at the lower level, like across the country every single year. So let's say half the country, you know, that's, you're looking at several hundred of these cases per year where this

could all be happening. And I think it's going to be a serious issue. So anyway, it's terrible. All right. Update for you guys there. We'll have more for you later. All right, guys, time again for our weekly partnership segment with The Lever. And joining us this week to talk about his latest reporting is Andrew Perez. Great to see you. Thanks for having me. Go ahead and put this tear sheet up there on the screen. So you have some new data inside just what has happened to the American people after pandemic aid ended. You say ending pandemic aid created a disaster.

New data shows the end of that relief coincided with a 49 percent increase in the number of families struggling to survive. So just lay this out for us, Andrew. Sure. So, you know, this data is from the census, their survey data from June. And yeah, it shows that the percentage of people who can't afford to pay their typical household expenses is just sort of exploding. And it really has since the end of pandemic eight, it's really been taking up. Though it has increased sharp, pretty sharply lately. Between May and June, it actually,

this percentage increased 13%. So, it went from, we now have 39% of Americans who say that it's either somewhat or very difficult to pay their typical expenses. And, you know, this is higher than we've seen actually at any point since the census started asking this question in August 2020. Connect this a little bit to the politics, because at the same time as you have more and more families struggling, we covered here another story about the number of families that are struggling to put food on the table after the child tax credit ended. The economy and inflation are top concerns for voters going into the midterms. So how has this suffering hurt the Democratic Party's chances of maintaining control?

Sure. Well, I mean, I think you can probably track this pretty closely with Joe Biden's approval ratings, to be honest. For a while, when he took office and when Democrats passed their COVID relief bill, Biden's numbers were increasing and then they've decreased steadily since, right? And they're the lowest,

he's at like a historic low right now. And his numbers with Democrats aren't good either, you know, especially young people. He's in big trouble. And, you know, if, and by him being in big trouble, it's going to have big repercussions for the rest of the party, right? Yeah, I mean, absolutely. Presidential approval rating very closely tied to midterm results. And you have this very perplexing situation where, of course, Americans are very concerned with inflation. And essentially, the right used that as a way to say, see, you gave people some money in these COVID checks, you helped them out a little bit, and now this is what you get for it. And this inflation is a disaster, as if that was the major cause of what we're experiencing now. But that has created a sort of reactionary environment in Washington where the Democrats and Joe Biden in particular basically bought into that argument, at least as far as their actions are concerned. Yeah, yeah, there's no real talk right now of any kind of stimulus. Yeah, really at all. And, you know, you got to give corporate media a lot of credit for that.

There was a big narrative. And what it looked like a year ago was that there was a labor shortage. That's what the conversation really was centered around, and that giving people unemployment was making it terribly hard to find workers. And obviously states started cutting off the expanded unemployment and then it expired nationally. And, you know, we still see that, you know, places are still having trouble finding workers. So, you know, the net impact of that, it's not really clear that that solved any kind of, you know, shortage, but it did, you know, it's clearly had taking an economic toll on people now.

Yeah. And then because you have that analysis that it was, you know, all on the demand side, oh, people had too much money, they were doing too well, that's why we have this inflation. That means that their response is to go to the Fed and say, hey, you guys got to get this under control. You got to make sure that nobody has any money in their bank accounts to spend on anything. I mean, what is the potential impact? I just saw this week that now the Fed, because of the latest inflation report, could hike interest rates by as much as 100 basis points as a full percentage point increase at their next meeting. What kind of an impact could that have on people as well?

Yeah, I mean, you got to assume that it's going to continue to erode workers' power right now. You know, we had seen that workers had been seeing wage increases, and, you know, those have slowed already. But, you know, the people's actual, like, real hourly earnings are going down, down, down because of this environment with, you know, with costs increasing everywhere. And, you know, cutting rates isn't really likely to help all that much to drive these costs down. What it really will do is probably increase unemployment and continue to affect workers' wages. Yeah. I mean, they're openly talking about how they may need to spark a recession to deal with inflation. You've got people like Larry Summers saying, hey, we need 10 percent unemployment for a year.

We have Fed Chair Jerome Powell out there actively admitting, hey, we need to get people's wages down. That's their response to the problems rather than dealing with these underlying issues in terms of supply chains and also certainly in terms of corporate price gouging. Andrew, thank you so much for laying out this data, which is so important for people to understand that as we potentially head into a recession, so many American families are already so close to the edge. Absolutely. Thank you. John Bolton really got me thinking here, Sagar, about accepted coups, unaccepted coups, what the rules are, what type of corruption is acceptable, what's not, and where we all go from here.

I always said about Trump is he's a liar, but he tells fundamental truths, if that makes sense. You know, like he'll lie about specifics, but directionally he was correct about corruption, about calling out the people on stage. Yeah, I mean, but the thing is not that he said the things that were true. It's that his behavior was so undeniable, like the worst, most glaring, most obvious, boorish version of the typical behavior here. And so it's just all out there on display. You can't mask it and hide it behind this sort of like, don't ask, don't tell Washington decorum behavior. So, you know, instead of just the, I'll take the campaign contribution, we'll have a wink and a nod about the post public service, quote unquote, instead of just the, I'll take the campaign contribution, we'll have a wink and a nod about the post public service, quote unquote, gig I'm going to get. It's like, I'm

literally going to have a hotel and you're literally going to pay me directly if you want to get my time and get my favor. That's his boorishness. It's just straight up. And actually, that's what I think a lot of people appreciated about him, which is why it's kind of hilarious because he just set it out in the open and people hiding behind norms and, you know, mealy mouth, like they'll just use code language for what we all know is true. And it's like, people were just sick of that. They could, they knew what it meant when Hillary Clinton would use euphemisms and talk in like no real person, especially on trade or many of these issues, because they could feel the real effects of it. And Trump was willing to just give voice to some of that now as you said you didn't do anything about it but you know for a lot of people that's enough i mean because listen when other people

are doing the same thing and nobody and trump seems like he's the only one who's even willing to do it so yeah look if people wanted a highbrow version of trump they would have voted for him but they didn't they didn't so it's like i's like I don't know why this is so difficult to comprehend. Yeah, the garish and the boorishness. They love it. Just outright like in-your-face behavior. Yeah. That's part of what the deal was with him.

And so, yeah, I mean it does like it's such a conundrum because obviously he didn't drain the swamp. Obviously he just like put the swamp on display and made it his and was much more brazen about it. But it is that difference of, OK, is it better when you have the politicians like pretend that they're not doing this, but they actually are or when they're just out in the open? And if your choices are if those are your only choices, you don't actually have an option of people who are going to really tackle corruption, really move the country in another direction, really do something different, then, you know, I can't say that he's, he didn't come out of nowhere in the Republican Party. That's what I'm trying to say. He's not the singular evil. Getting rid of him is not going to be a cure-all for the problems.

Maybe Liz Cheney will feel better if some of it's put back under wraps. Is the country going to be any better? Hard to say that that's the case. Yeah, I completely agree. It's fascinating, the non-college degree. The college degree, again, I know people get upset about this, but it's like it's not about income. And I wish it was. It'd probably be easier. But it really is worldview versus non-worldview and cultural experience? Especially, well, I personally think that because

so little of our politics centers around economics at this point, because neither party really delivers on economics, that means that cultural considerations become incredibly potent in terms of how people align and associate with the parties. So, I mean, you have a lot of complex factors going on because we've looked at the Starbucks labor movement, you know, where clearly, like, this is about economics and being able to have a say in your workplace, democracy in your workplace, and all those things. And there are plenty of non-college workers at Starbucks, but there are also, in fact, some of the leaders of the movement, highly educated. And so, you have these sort of complex factors and these other things that are bubbling. the primary identification point for each of the parties.

I mean, it is really interesting. You can see this also shaking out right now with the shift in the footing of the cultural debates. So now that we're focused on sort of, you know, abortion and gun rights and Democrats are leaning into that for the midterms, and that voters who are focused on cultural issues, those are becoming top concerns. You also see some of these sort of like suburban college educated voters that have been flirting with the GOP coming back to the Democratic Party. And it's also remarkable that within the Democratic Party, even if you're just looking at the Democratic Party base, that class divide really determines whether you're focused on economics or focused on cultural issues. So it's, I mean, I guess it's kind of predictable. If you're more or less good from an income perspective, then that's, you're going to care more about abortion than you do

about inflation. That's just what, by the way, they're probably going to lose. I mean, but this is always, if you care more about cultural touchstone than, you know, actual events, then of course that you're going to lose. But it's a serious yo-yo effect because it also sets it up. If the GOP doesn't move on anything, then three years from now, they're going to lose. Yeah. I think Latinos are a true, a large swath of the Latino vote is a true swing vote. I mean, that's, that's what it really looks like here. You have increasingly white college educated voters becoming a pretty hard base for the Democratic Party. Black voters continue to be pretty hard base for the Democratic Party. Republican Party, white working class voters, very hard base there. And then I think that, you know, Latino voters

right now in this era are the true swing and seem to vote overwhelmingly on economic concerns, more so than some of the other demographic groups in the country. And so it's all about what have you done for me lately? Yeah, there you go. All right, guys. Representative Ro Khanna was on Fox News here, and he said something about Biden that it's not going over well, to say the least. Let's listen. I have confidence in the president. I just said that to the New York Times. I

respect him. I still think he's our best bet to defeat Donald Trump. I believe Donald Trump's going to be the nominee. I think he'll destroy dissenters. We can get into that at a later time. And I think Biden is the best bet to carry the Midwest. But there are places where I disagree, obviously, with the administration on Saudi policy is one of them. Yeah, I have confidence. I mean, this is inexcusable, right? Forget about the conversation about like the horse race angle of like who can beat who who's our best bet to beat who? Let's talk about Biden from a policy perspective. How have you been governing? Like, what are you doing? And the answer is not much. He ain't doing much. And so you look at a guy who in some polls has as low as a 33% approval rating. There's one poll that says 71% of the country says he shouldn't run again. You have the high gas prices.

You have inflation. You have all these issues. And he's not breaking out his executive order pen. He's not applying pressure to the obstructionist Democratic senators. He is a defeated man. A defeated man who can't even control his own staffers who look at him like he ain't matching the moment right now and you rokhana are going to support him you're going to say oh yeah him against trump in 2024 i mean look that is tantamount to saying

that the status quo that biden has currently given us is acceptable, right? Because you're saying, hey, let's have four more years of that, 2024 and on. That's what you're saying, is that status quo is preferable. But it's not. It's just not. It is not at all. You're talking about somebody who has the authority to abolish student loan debt right now if he wants to. He's not doing it. He has the authority to legalize recreational marijuana right now if he wants to. He's not doing it. He has the authority to free all the is now experiencing famine because we're not releasing their own money back to them. He's not doing it. I mean, the list goes on and on. And so you look at that situation and you say, yeah, because Trump is worse.

We have to have more than just basically like a neo-fascist in Donald Trump, who's open about the fact that he wishes he did a coup, right, and followed through on that, versus the ultimate of status quo defenders, which is Joe Biden. This is not it, man. This is like, it's just the lowest bar ever now you want to have the conversation about 2024 we can have the conversation about 2024 um i would far prefer marianne williamson or rafael warnock or john fetterman like there are names that are in the conversation that um would i think i think would make far superior candidates. But to just look at the current landscape and say, yeah, look, I would much prefer Ro Khanna said, well, I think Bernie should take another crack at it. I'd much prefer that, even though I have issues with Bernie.

And, you know, there are issues there that we've talked about and we can talk more about. Um, but I would have much preferred that because at least you're aspiring to something to say this. It's like you're aspiring to perpetual failure and the status quo. That's what you're doing. That's what this is. Let me aspire to continued failure and the status quo. I hate it. I hate that. I hate it with a burning passion. I think it's insufferable. And by the way, I don't know, when you look at the polls, I don't know how he can make the argument he's making. It was like 61% said they don't want Trump to run again, but 71% they don't want Biden to run again. The polls now with young people fully abandoning Joe Biden because they feel like Joe Biden's abandoned them. So how can you say, yeah, him, he's the guy. The guy who everybody hates,

who is even shitting on the base institutions that propped him up, like the pro-choice groups that he's now giving the finger to. I don't know where this comes from, man. This is super disappointing from Ro Khanna. It really is. Sometimes you're in Washington a little too long, you get that Washington, D.C. brain, and you just lose touch. You lose touch with the people.

And that's exactly what this is. I mean, there's no other way around it. You cannot get your finger more off the pulse than this. And I mean, there's no other way around it. You cannot get your finger more off the pulse than this. And I don't know, maybe he's angling because he stays in good graces with Biden and then there are political favors in return to him down the road and or whatever. But dog, you are chaining yourself to a sinking ship is what this is. Hi, I'm Matt Stoller, author of Monopoly-focused newsletter, Big, and an antitrust policy analyst. For today's Big Breakdown, I want to talk about the current crisis with airlines,

not just what's going wrong, but also how to fix it. Okay, so we're all aware of the problems this summer with travel, cancellations, bad service, lost bags. If you haven't had a flight canceled, I'm sure someone you know has or you've seen the news about it. And the crisis is real. So complaints to the Department of Transportation are up 321 percent from where they were in a similar period in 2019. Now, I want to go into why the industry is in trouble. And while it looks like it's just kind of a temporary thing this summer, it isn't. It's been a huge, it's been a disaster for years, and the roots of it go back decades. So I want to ask and answer a couple of questions. Why are airlines unable to deliver reliable service? Who is

regulating them in the government? And I want to go over the actions of the current Secretary of Transportation, Pete Buttigieg, but also delve a bit deeper into why the airline industry is structurally designed to go into crisis and what to do about it. Okay, so let's start with what happened this summer. Here it is in a headline. Okay, it's bad, unprecedented, and here's how the airlines actually explain the problem. Weather and a staff shortage. Now, the airlines aren't lying. There are weather problems and there are staff shortages. But airlines are being deceptive. There are always weather problems and

staff needs. Why did things get bad, bad this year when they weren't as bad as they were in previous years? So here's what happened. In 2020, when airlines got a $54 billion bailout from the federal government during COVID, they promised to maintain staff. That was the point of the bailout. They had to maintain the capacity that they had. Then at the depths of the pandemic, airlines encouraged their employees to take early retirement. It wasn't a crazy notion. I mean, it was sort of bad faith. But, you know, flying planes when it's entirely empty and imagining that it's going to take years before airline demand rebounds, I mean, that was something that almost everybody believed.

But the thing is, demand came back much more quickly than anyone expected. So airlines have been understaffed for this resurgent demand. Okay, that sort of explains some things, but not everything. Airlines schedule their flights 11 months in advance, so they know when they can or can't staff flights. But they scheduled flights anyway that they couldn't staff because they wanted to get customer money. And that led to a huge number of cancellations. What airlines are doing is trying to maximize the amount of seats they can sell. So they are assuming, as they didn't used to assume, that everything will go perfectly on schedule

with no reserves. They have nothing in reserve to account for bad weather, pilots being sick, delays, mechanical problems. And when things go perfectly, they capture large amounts of revenue. But when anything goes wrong, anything at all, and stuff always goes wrong, that's just life, airlines have to cancel flights. Now, normally, this kind of behavior, mistreating customers, would anger the people who pay you money, the customers, and then they could choose a different firm. Like if you don't like someone's ice cream, you know, you get sick or whatever, you'll

buy a different firm's ice cream. But that doesn't happen in the airline industry because these days customers really have very few choices. After dozens of mergers over the last 20 years or so, there are only a few airlines left. United, Delta, and American Airlines are the three what are called trunk airlines in the U.S., and if you add in Southwest, those four airlines control most of the market, 80% or so. And it's worse if you look at individual routes. So, you know, in a lot of routes, there's really only one choice or maybe

two. Now, there hasn't been a new entrant into the airline industry for more than 10 years. It's actually the largest stretch of time without a new entrant. There were a couple of small ones last year, but essentially, this is the longest stretch of not having a new entrant into the airline industry ever, like since back in the 1920s. So if you're unhappy with service, you really have very few choices. And that's especially true if you're flying out of a regional city. This isn't as bad if you live like I do in D.C. or in New York or some sort of popular city, which I'll get into a big city. I'm going to get into that in a second. But it's especially bad for people who don't live in near centers of power. Now, another reason that airlines are overscheduling and canceling

flights is because they don't always have to return money for canceled flights. Now, it's actually illegal to not give you your money back on a canceled flight. But during COVID, airlines, mostly domestic ones, you know, the big trunk ones, refused to offer refunds of between, in aggregate, $5 and $10 billion. They'll often do things like they'll try to give you vouchers or they'll try to give you miles or something like that. They actually owe you cash, but they try not to refund you for something that they didn't deliver. And the problem is that the regulator in charge, the Department of Transportation, did very little about it. Now, in June, the situation with cancellations and refusal to engage in refunds got so bad that Secretary of Transportation Pete

Buttigieg, and this is the guy with regulatory power over the industry, had to actually explain himself. And here's what he told Fox the other day. Here's what we're doing about it. We'll collaborate with airlines when they're ready to take steps that are positive and proactive, whether that's improvements in pay that are helping with hiring or flexibility in customer service. We're also going to enforce passenger and consumer rights. And this is not new for us. Matter of fact, it was last year that I announced the stiffest fines ever imposed under our consumer protection program for airlines that were failing to provide refunds to passengers after they got stuck with cancellations. Matter of

fact, we have just concluded another 10 investigations on airlines on these issues and have launched another 10 or so that we're going to pursue to make sure that consumers and passengers are protected. Okay, so that all sounds really reasonable. And there are some indications that airlines, after just a complete disaster over the last couple of months, are just paying lots and lots and lots of overtime. Although there will probably be an elevated level of cancellations for the rest of the summer, it's still a total mess. But you look at the regulator, Pete Buttigieg, he sounds like, you know, he's doing a good, reasonable job with what he, with what tools they have. I mean, a record fine, you know, and investigations,

like he sounds tough, but also wants to collaborate. The problem is that there is a lot of, to put it politely, sort of disingenuous rhetoric that he's offering to the public. And it kind of makes me mad when a regulator deceives the public. And that is what I think, unfortunately, Secretary Buttigieg is doing here. So let's go through what the secretary said. So Buttigieg says that the regulators issued a record fine against multiple airlines for refusing to refund tickets. Well, there was only one fine that I could find for not offering refunds. So that right there is a bit misleading, not multiple, just one. But OK, maybe he just misspoke a little bit. Not a big deal. But let's go to the record fine, which is true, but also misleading. So he's

pointing to this penalty of $25 million against Air Canada. Now, the fine got a lot of headlines when it was announced in June of 2021. And it sounds like a big number, $25 million, a lot of money. But the thing is, is after negotiations between Secretary Buttigieg and the company, or the Department of Transportation and the company, the fine ended up being just $4.5 million. And then $2.5 million of that was just credited to Air Canada for refunds they had given to passengers. So in terms of cash that the DOT says that Air Canada needed to pay, it was just $2 million. And we don't even know if they've paid it. And the number is so small that Air Canada didn't even have to report it to investors as a material

event. It was just irrelevant to their financial outcomes. Also, the company didn't even have to admit wrongdoing, right? So they didn't even say we did something wrong. We didn't refund passengers. The only reason, in fact, that the Department of Transportation cracked down on Air Canada is because the airline simply announced that it would not follow the law and refund passengers. It said, no, we're not going to follow the law. And that is kind of like a middle finger to the regulators. That's the only fine by DOT from refunds due to COVID, is when an airline just openly announced that they are just not going to follow the law. Now, a lot of the others didn't follow the law either. They just didn't say it outright. And so they're fine. So Secretary Buttigieg also says

the Department of Transportation has concluded 10 investigations. That sounds really impressive. But the thing is, it's been two and a half years since airlines canceled flights without refunds during COVID. Where are the results? Why does it been two and a half years since airlines canceled flights without refunds during COVID. Where are the results? Why does it take two and a half years to investigate and get refunds? And where are the results? Where are the refunds? In fact, 62% of complaints are for domestic carriers, the big guys, the Unites, the Deltas, the American Air.

And Buttigieg hasn't issued a single enforcement order against a domestic trunk line this year. More broadly, and over time, enforcement has gotten worse. So here's a chart of fines of enforcement orders by the Department of Transportation. And what you can see is that enforcement against airlines has collapsed. During the Bush and Obama administrations, the DOT issued dozens of orders a year. It was still fairly weak, but there were dozens of them. Trump's Secretary of Transportation, Elaine Chao, in 2020, her final year, issued just six aviation enforcement orderers. This goes up to 2019, that chart, but it got worse in 2020 to six. How many did Secretary Buttigieg issue in 2021, I mean, this is a bad year for airlines, he issued just four. And this year, with record cancellations and just a total mess at the airports, he's issued

three. So Secretary Buttigieg is just not regulating the industry, and it shows. In fact, six years ago, Congress passed a law saying, and this is like really, really easy kind of regulation, right? They passed a law saying that regulators should force the airlines to let children, even very young children, babies almost, sit with their parents without charging those parents a fee, right? You get to sit with your family if you are a young child. Elaine Chao didn't promulgate the rules. She should have. Congress said you should do this.

Didn't. Last Friday, Buttigieg said that he would encourage the airlines to seat families together voluntarily without charging a fee. But of course, we know that means it's not going to happen, because if there's one thing that you know about airlines, it's not going to happen. Because if there's one thing that you know about airlines, it's that airlines love fees. Now, okay, so we have a consumer protection regime and a regulator that won't enforce it.

And the DOT is the only regulator that has authority to actually enforce consumer protection laws against airlines. Well, so one obvious solution is to take power out of the hands of the Department of Transportation and Secretary Buttigieg and let airline customers and state officials themselves sue the airlines for violating consumer protection rules. There's a lot of state attorney generals, Phil Weiser in Colorado, for example, that would do that. New York passed a bill of rights for airline passengers. That was, you know, the court said, oh, DOT is the only one that actually gets to regulate the airlines, not the states.

So he just changed the rule to let other people actually regulate the airlines. But that would help. It would go a long way. But it wouldn't address part of the structural problem because Secretary Buttigieg, to be fair to him, didn't cause the crisis in airlines. The problem is fundamental. And here's what I mean. OK, so airlines offer bad service and since roughly 2011 or so, higher and higher prices. But they've also been increasingly cutting off routes to smaller cities like Olympia,

Washington, Salem, Oregon, even midsize cities like Pittsburgh and St. Louis. It's not even a terrifically profitable industry. It's been very profitable this year and 2019 or so. But structurally, it tends to go into bankruptcies or into losses. It swings. It's a very swingy industry. Delta's profit margins this quarter were lower than they were in the same quarter in 2019. And that's with incredible demand and pricing power. So it's like it's weird. You've got this industry that's very monopolistic and charges high prices and bad service, but it's also not profitable.

And to understand why, we have to go back to changes in the industry that were put forward in the 1970s. So at the time, right from the beginning of really commercial aviation in the 1930s, when it, you know, started in the 1920s, it really got regulated in 1930s, a government agency called the Civil Aeronautics Board just regulated the industry and set routes and prices. If an airline wanted to fly a profitable route from, say, New York to Los Angeles, then it also had to fly a less profitable route from, say, Tampa to Denver. This was a method of ensuring that there was cross-subsidization. And there were a lot of subsidies as well. But the basic goal was to make sure that Americans, no matter where they were, had roughly equal access to air transportation. We saw the airlines as a national resource, and we regulated them that way. Now,

the reason that you have to have these kind of cross subsidies has to do with the economics and the physics of flight, and this broadly applies to most transportation industries like shipping and railroads and whatnot. Okay, so for flight, it's costliest to take off and land. That's when you use a lot of the fuel. So airlines prefer to fly longer routes over shorter ones because once you get up in the air, you don't use that much fuel. Also, it's cheaper to serve a busy airport than an empty one because you can use the same equipment and the cost is spread across more flights. So everyone in the industry naturally wants to serve long flights because that's what the physics of flight dictate. And they want to do it between big cities because there's economies

of scale in using airports and spreading a lot of flights over an airport, over a busy airport rather than a not busy one. They don't want to do short haul flights and they don't want to do short-haul flights, and they don't want to fly to smaller or regional cities. And the result is, absent any public regulation, anyone, you know, saying, you know, here's where you guys got to fly, there's a collective action problem. Airlines will just cut flights to smaller cities, and they'll all pile into the popular routes. And if a bunch of airlines are all trying to compete on, say, the New York to LA route, every airline will be willing to cut prices to nearly nothing simply to capture an additional customer, since the plane is already budgeted to fly the route, and an additional customer, marginal customer, doesn't really cost anything. But the net effect of this is, if everybody is trying to pile into the most popular routes, is that the industry becomes structurally unprofitable. Airlines go bankrupt, and then there's consolidation. This is

because you have a collective action problem. There's no one saying, you take that route, we'll take this route, and we'll make sure that the industry can cover its cost of capital. So that was what the CAB was designed to prevent. It said, we're going to make sure that we have an air grid that, you know, lets people from all over the country get access on roughly equal terms. We're going to make sure that short-haul flights are not way more expensive than long-haul flights. And we're going to make sure that regional cities get some air capacity as well as popular cities. And we're also going to make sure that the airline industry doesn't go into these boom and bust cycles by regulating prices. And there were a lot of problems with it too, but that's basically what it did, and it worked. Okay, so when we

deregulated airlines in 1978, and there were some good reasons to do that. Their technology had changed. The old regulatory model was kind of outdated. But when we just got rid of all the public rules and let airlines charge whatever they wanted and fly wherever they wanted, what happened is exactly the ruinous competition scenario that I outlined earlier. Service to small cities ended. They just stopped flying to a bunch of places. And trunk routes went way down in price to consumers. So, you know, LA to New York dropped a lot in price. And so people thought, oh, well, especially in powerful, people in powerful areas, right, the DC, New York, LA, they were like, oh, this is great because prices went way down. But in the rest of the country, it was a different story. A lot of places lost routes, and a lot of cities are having trouble economically because it's just really hard to get there.

Also, the Department of Transportation saw promoting the financial health of airlines as its charter. So it didn't really protect consumers for fear of harming the airlines financially. And that's one of the reasons that Secretary Buttigieg, though he's not being particularly assertive, no Secretary of Treasury has been particularly assertive against the industry since 1978, because the DOT wants the airlines to be financially healthy. And they feel like if you're too—if you force the airlines to treat consumers well, then it will harm their financial health and lead to more bankruptcy. So there's a structural problem there.

Okay, so DOT didn't really protect consumers. You had this, you know, lots of expansion into trunk routes, killing of smaller routes. Then came waves of bankruptcies because they were charging fares that were too low. And then consolidation. And that led to price regulation. But this time, it was private price regulation through monopoly. So you have an oligopolistic industry, don't have new entrants. And it's the CEOs of Delta and American Air and United and Southwest that are determining which cities get access to the air grid and which ones don't.

And they're also determining the terms and services by which people have to pay. And above them is Wall Street. And Wall Street will punish airlines that don't charge baggage fees or that are not engaged in certain forms of withholding capacity from the market. So there is a regulatory scheme. It's just a regulatory scheme that doesn't treat customers particularly well and that ends up hindering the ability of lots of communities all over the country to get access to the air grid. And this is a foolish way to run a national resource. And fundamentally, that is what airlines are. That is what our airline industry has always been. It's been taxpayer subsidized since the very beginning, whether through mail contracts in the early days, through public money

used to build airports, through defense R&D to improve civilian aeronautics, or through direct subsidies after 9-11 and in 2020 during COVID. And it is a good choice to subsidize this industry. We've decided that we want a national air system because being able to fly places is great. And it requires a lot of public infrastructure and rules to make that happen. It's a good thing that we have an air travel system. But these days, we do not regulate airlines as the national resource that they are unless there's a crisis. You know, then post, you know, ex post facto, we'll dump a bunch of money in and put some maybe terms on the airlines, which they don't really have to adhere to,

because then they're like, oh, we're actually private. We're private companies. We have no public obligations. If it's not a crisis, we sort of let the system flounder. That's what we've been doing since 1978. So we can blame airline CEOs if we want, and they deserve a lot of blame. We can blame poor regulators, and that's a fair thing to do. But the reality is that the problem of a dysfunctional airline system is going to continue until we set public rules in place on where airlines need to fly and what they can charge. And it doesn't have to be the same thing as it was in the 1970s and before. We can do it differently. We have lots of new, great technology.

We can have more competitive dynamics. But ultimately, the fundamentals of the system, the physics of flight and the economics of regional inequality that an unregulated or a system regulated by private actors brings to bear, it's going to do bad things until we solve the collective action problem through our government. Now, you may not trust the government. I don't trust the government. And this is for good reason. But the problem is we don't really have an alternative.

Because either we govern through our public institutions, or airline CEOs and Wall Street will keep doing so, and they won't do a particularly good job of it. There are lots of people whose flights have been canceled that can attest to that. Thanks for watching this big breakdown on the Breaking Points channel. If you'd like to know more about big business and how our economy really works, you can sign up below for my market power focus newsletter, Big, in the description. Also, why don't you put in the comments your experiences with flying this summer? I read the comments, and I love hearing your feedback, good or bad.

So go ahead and do that. And yeah, it's been really fun to talk to you guys and learn with you. But if you want to know more, sign up for my newsletter. It's also in the description. And have a good one. Hey there, my name is James Lee. Welcome to another segment of 5149 on Breaking Points. Today, I want to talk about the airline industry, specifically some of the less talked about

causes of the chaos that is air travel right now. If you've traveled in the past three to six months, you'll know exactly what I'm referring to. Or if you haven't, you'll have most likely heard of horror stories from friends and family or seen something in the news. Fasten your seatbelts. There's travel turbulence ahead. Another day, another slew of flight cancellations. A lot of people will have to decide drive or fly. I mean, who doesn't know someone whose flight wasn't canceled? Since Memorial Day in the U.S. alone, over 200,000 flights have been delayed, 24,000 canceled, impacting nearly 2.4 million passengers, roughly the population of Houston. That's up from pre-pandemic levels, while the airlines are flying up to 25% less than 2019

and charging 45% more for airfare. For sure, those are some alarming statistics for an ailing industry, right? Flights are now more expensive than they were in the past, but the service has been more unreliable than ever, leaving passengers frustrated, inconvenienced, and sometimes stranded without much recourse. What started as a summer of so-called revenge travel after two years of the pandemic has turned in to travel hell. I'm extremely frustrated and disappointed. They got a few people on board and then all of a sudden canceled the flight. I can't even get home now. I don't know how I'm going to get home.

Airline analyst Henry Hartevelt found 74 percent who flew or planned to fly said they regret their decision. If something goes wrong, stay calm. But unfortunately, what you need to presume with your summer trip is something will go wrong. And if it doesn't, be grateful and maybe buy a lottery ticket. Be grateful and buy a lottery ticket. That's what air travel has become. It's already lost all the glitz and glamour. And now just arriving at your destination on time is akin to winning the lottery, which is fine. But the thing is, it's not necessarily the expectation of the general public, nor our government. Here is Transportation Secretary Pete Buttigieg on his expectation of the airline industry.

Mr. Secretary, when is this going to get better? When can people make an airline reservation and have a pretty good feeling about actually being on that flight? Well, I expect the airlines to be working right now to address these issues. Look, some of these things we know are long-term, the pipeline of talent development for pilots, but a realistic schedule and good customer service, that's something that should be delivered right away. And it's a responsibility that the airlines have. A lot of people, including me, are expecting to get to loved ones over this holiday weekend. And we need a system that is resilient enough to get them there. Plus, good customer service when an issue does come up. And we're talking to the airlines every day about

their responsibility to make sure that they can accommodate any issues that weather or other curveballs might throw at them. What he's describing is an airline industry that resembles a public utility. For example, fire departments, law enforcement, roads, city drainage systems, and other public infrastructure, basically baseline commodities or services that are provided to the public without necessarily a consideration of profit. Now, we know that not to be the case with airlines and news coverage of the recent airline industry woes have focused a lot on things like pilot shortages, lack of available crew members, increased demand for air travel, scheduling mishaps, weather, lack of available crew members, increased demand for air

travel, scheduling mishaps, weather, and of course, placing blame on the Buttigieg and Biden administration. But I think those are actually just symptoms of a much larger disease. And the coverage fails to address what I think is the fundamental gap between what we expect airlines to do versus what they are actually optimized to do. Let me explain. We know that all major U.S. airlines are publicly traded companies. The executives care a lot about their stock price, what Wall Street analysts think their stock price should be, their earnings, etc., and doing things like stock buybacks, cost cutting, implementing all kinds of ancillary fees to optimize revenue with the hope

of getting that analyst consensus to recommend a buy rating so they can increase shareholder returns so much so that modern U.S. airlines have been financially engineered to the point where they no longer function primarily as a transportation company but rather a financial institution. We'd like to ask for a minute of your time to tell you about a special promotion being offered on this flight. American Airlines and U.S. Airways have merged to form the world's largest airline with the world's largest frequent flyer program. This limited time offer is for 50,000 bonus miles with a new Advantage 88 or Red MasterCard. How many of you have heard that pitch on a recent flight?

Sign up for our credit card and get 50,000, 60,000 bonus miles. Don't miss out. Blah, blah, blah. I mean, you're crammed into a metal tube. Nowhere to run. Nowhere to hide. Nearly every single flight and airline from American and United all the way to Spirit and Allegiant. They're just,

they're shoving credit card offers down your throat. But the question is why? Well, it all started with the advent of the frequent flyer program. While airlines had already started tracking the activity of individual flyers, formal frequent flyer programs became technically and legally possible with the deregulation of the American airline industry in 1978. The first program was set up by a small airline called Texas International, which later merged with Continental, but the first major long-haul airline to do so was American Airlines in 1981. In 1982, American partnered with Hertz and Holland America to allow its members to earn points when renting cars or booking cruises, but the concept of earning points with partners was not what was revolutionary about this. Rather, it was the behind-the-scenes mechanics that made that possible. That's right, there's nothing really inherently sinister about

an airline loyalty or frequent flyer program. It helps build customer loyalty in a more or less commoditized industry, but what started out as something pretty innocent, which is just rewarding customers with free flights for flying with them more frequently, has now turned into a financial juggernaut bigger than the airline itself, which is the establishment of miles or loyalty points as an actual form of currency that can be exchanged by multiple parties. Here's how it works. Let's take United Airlines and their Mileage Plus program as an example. This visual, which shows how the cash flows in and out of the airline, the frequent flyer program, and its third-party partners,

is taken directly from their investor's presentation. So you have United on top, the carrier operating the flights, but below is an entity known as Mileage Plus that more or less acts as a bank managing the currency of United's frequent flyer program. When you fly United, you are awarded miles based on your ticket, the price, the fare class, etc. And the way United actually comes up with the miles to give you is by purchasing them from Mileage Plus. Once again, the entity that kind of acts as a central bank for these quote unquote miles. When you have accrued enough miles to redeem for a free flight, you go to your Mileage Plus account and say, I would like

to take this flight, which cost me 20,000 miles, for example, and Mileage Plus will then coordinate with United, the carrier, to redeem those miles in exchange for a seat on the flight. That's the most basic example of how a frequent flyer program works. And it's not really all that critical since this purchasing and redemption of miles is between United and MileagePlus, so it's all internal. Where this starts to get lucrative for the airlines is when third parties are involved. Going back to the credit card offers we talked about before with the big bonuses for signing up. If you sign up for one of these cards, in order for the credit card companies to award you the miles, they actually have to first purchase those miles from United Mileage Plus.

In this next slide, we can see an example of just how profitable selling miles to third parties can be. In the first example, a customer generates 15,000 miles from spending with a third party partner. Once again, the third party has to buy these miles first from MileagePlus to then give to you, in this case, at the cost of two cents per mile, which generates $300 in revenue for MileagePlus. Then when the customer redeems these 15,000 miles, Mileage Plus pays United $150 and keeps the other $150 as profit. Now, United doesn't state that the sales rate is $0.02 per mile for all third-party mileage sales. But according to reporting from Forbes, it's likely that the average sales rate is in this range. And you could see in the footnote, the Mileage Plus program pays

United a fixed rate of one cent per mile for redemptions. So United generally collects two cents of revenue per mile from those third party credit card providers and things like that, that we just talked about, but then just pays the one cent per mile for a 50% profit. That's quite a lucrative business. So United and Mileage Plus, along with all the other airlines and their loyalty programs, are acting basically like central banks who mint and manage a tradable virtual currency, aka these miles, that have real cash value. And they can actually manipulate the real value of this currency because they control the supply, basically how many miles or points are in circulation at any

given time, and also the demand, what goods and services they can be spent on. Now, historically, airlines have been pretty secretive about how much their loyalty programs are worth and how much revenue they generate. That is until the coronavirus pandemic hit, and they needed to apply for loans through the CARES Act, upon which many airlines offered up their loyalty programs as collateral. Taking a look at this chart compiled by the Wall Street Journal, for some of America's largest airlines, their loyalty programs are worth more than the airline itself. For example, the estimated fair equity value of American Airlines' Advantage program is more than $30 billion. But the market cap of American Airlines as a whole is only about $8 to $9 billion, which means that the core airline theoretically is worth

something like negative $20 billion. Similarly, Delta's equity value is worth roughly equivalent to its SkyMiles program, meaning that its airline business isn't worth much of anything. And United, similar to American, has an airline business with a negative valuation as well. You can see how for airlines, operating flights is quickly becoming secondary to their banking business. It's almost like the airline exists to service their loyalty program and not the other way around. And I just want to say for the business people out there who are watching this, I just need to caveat by saying that there is an argument to be made that the market cap as a metric is flawed or even meaningless. But in this instance, I think it shows us

directionally the relative value of their business units. To that point, let's examine some raw numbers. This is an analysis from Forbes magazine. American Airlines' own filings show that the airlines have been losing money from its passenger operations even before the coronavirus pandemic. In the table on your screen, you'll notice that in every quarter other than Q2 2019, the first row of the table, passenger revenue per available seat mile, is lower than the second row, operating costs per available seat mile, meaning that on average, the airline is losing money flying airplanes. However, this next table shows that by generating billions of dollars in loyalty revenue, American Airlines has been able to report billions per year in profit, you'll notice in this table that the loyalty revenue is greater than the total income, which means that they are losing money in their airline operations, but making up for that with

what I call their banking business of selling and redeeming miles. So what's the big takeaway here? Airlines or banks? So what? Well, it all comes down to incentives. If operating flights are quickly becoming a secondary source of revenue for many major airlines, if it's the loyalty program itself that's bringing in all the money and not the actual business of flying airplanes, then what incentivizes an airline to improve their operations? What incentivizes them to be resilient or accommodating or provide good customer service? The answer is, unfortunately, in a monopolistic commodity industry like the airline business, there aren't really any

incentives. I mean, as long as planes aren't regularly falling out of the sky, the airline business as a whole actually has a lot of leeway and needs to be just good enough for their miles to be valuable enough to sell to credit card companies and other third party partners. So yeah, a few delays and cancellations this summer won't really hurt them in the long run because operating flights isn't how they actually make their money. In order to radically improve the situation permanently, if we expect airlines to behave as a public utility, to be a form of transportation that gets us safely from point A to point B on a reasonably reliable

schedule, then they must be regulated as such. We need rules like how many pilots need to be staffed per number of scheduled flights, more adequate passenger compensation rights if something goes wrong, more stringent maintenance and safety regulations, etc, etc. What I'm saying is, we can't expect airlines to be publicly traded, profit driven and shareholder beholden corporations and prioritize anything else other than making as much money as possible. Thank you so much for listening. I hope you enjoyed today's discussion about the airline industry and found it helpful. If you liked this video and found it interesting and want more videos like this, please check out my channel 5149 with James Lee, where I release

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