Big government is back

More than 40 years after policymakers embarked on a crusade to slash taxes and disentangle government influence from the economy, the pendul [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( More than 40 years after policymakers embarked on a crusade to slash taxes and disentangle government influence from the economy, the pendulum is swinging back. From Washington to Tokyo, elected officials are unleashing an avalanche of cash to shield people and companies from skyrocketing prices and pouring money into bolstering national industries after decades of globalization. Key reading: - [Big Government Is Back With Massive Interventions to Avert Chaos]( - [Biden Rebrands Reagan’s Supply-Side Economics to Save His Agenda]( - [Germany Nationalizes Gas Giant in Step to Avert Energy Collapse]( - [EU to Weigh Feasibility of Gas Price Cap Before Energy Talks]( - [Fate of World’s Biggest Free Food Program Rests With Modi]( As [Alan Crawford]( reports, state intervention is back in a way not seen since the 1980s. And while the scale is reminiscent of the taxpayer-funded bank bailouts of the 2007-2008 financial crisis, much of it is aimed at parts of the population hammered by decades of inequality. The pandemic was the start: The US allocated about 25% of annual gross domestic product to Covid relief, according to the IMF. More recently, China has rolled out some $461 billion in tax breaks to soften the blow of its Covid Zero policy. Inflation is another driver: India is giving away free rice and wheat to 800 million of its people to the tune of 9% of its annual budget. Then there’s the energy crisis, sparked by Russia’s war in Ukraine. Germany announced a second multibillion euro nationalization of a power utility last week, adding to the bill for taxpayers in European Union countries and the UK of about an estimated 500 billion euros and counting. The measures confound years of economic orthodoxy and lectures to developing countries to pay down debt and reduce political meddling in the economy. Investors are so far tolerating the swing, but not at any cost. UK Prime Minister Liz Truss’s government is scrambling to shore up its credibility after announcing a vast package of spending and unfunded tax cuts that sank markets. It’s a new dawn for big government, but the battles to come are over who’ll eventually pay for it all. — [Michael Winfrey]( A woman collects subsidized grain in Madhya Pradesh, India, on Aug. 7. Photographer: Dhiraj Singh/Bloomberg Click [here]( to listen to yesterday’s Twitter Space discussion with reports on the UK party conferences and market meltdown, as well as the aftermath of the Italian election. And if you’re enjoying this newsletter, click [here]( to sign up for Balance of Power. Global Headlines Mounting pressure | Truss remained [defiant]( today as she faces calls from members of her ruling Conservative Party to reverse a package of planned tax cuts that sparked days of turmoil in financial markets, and prompted the Bank of England to stage a dramatic intervention. [Growing anger]( has left the Tories, who've been in power since 2010, trailing the opposition Labour Party by a record 17 percentage points, according to a YouGov poll. - US President Joe Biden’s administration is [alarmed]( over the market turmoil triggered by the UK’s economic program and is seeking ways to encourage Truss’s team to dial back the tax cuts. - The pound [snapped]( a two-day gain after the BOE’s bond-buying program failed to quell jitters over the tax-cut plan. Drone attacks | After being hammered on Ukraine’s battlefields by US-provided kamikaze drones and longer range rocket systems, Russia is striking back with a [new capability]( of its own — winged missiles supplied by Iran. Loitering munitions, which can fly long distances and wait for hours before hitting a target, have brought the war back to Ukraine’s southern port city of Odesa, [Marc Champion]( reports. - The highly prized HIMARS [artillery]( system included in the US’s latest $1.1 billion security package for Ukraine will take a few years to build, a Pentagon official said. - The EU proposed a new package of [sanctions]( that would ban European companies from shipping Russian oil to third countries above an internationally set price cap. - A fourth leak was discovered on the Nord Stream pipelines, casting [further doubt]( on whether it will be possible to repair the gas infrastructure that traverses the Baltic Sea to Germany from Russia. Giorgia Meloni, the right-wing firebrand who scored a landslide victory in Italy’s elections, has signaled to voters that she will govern as a moderate. But her opposition to abortion and campaign claims that families are under attack are [worrying]( members of the LGBTQ+ community in Italy, which lags behind much of Europe in protecting their rights. Storm impact | Hurricane Ian [slammed]( into Florida with a deadly surge of water and winds that are expected to cause more than $67 billion in damages, one of the costliest in American history. The storm has left millions without power, forced global shipping to divert from its path, and comes as climate change has fueled extreme weather worldwide this year. - Read here about the six [biggest threats]( Ian is posing. Satellite image of Hurricane Ian at 5:20 p.m. on Wednesday. Source: NOAA; Bloomberg Best of Bloomberg Opinion - [Trussonomics Mess Has France Fearing Contagion: Lionel Laurent]( - [Peak Oil Has Finally Arrived. No, Really: David Fickling]( - [Will Bolsonaro Really Leave If He Loses?: Clara Ferreira Marques]( Military role | Mexican President Andres Manuel Lopez Obrador is finding his push to put the army at the center of his security strategy challenged by revelations about the role of soldiers in one of the country’s most [horrific massacres](. Eight years after 43 students at a teachers’ college disappeared, he is struggling to strike a balance between carrying out his pledge to dig up the truth in the case while not discrediting the army. Demonstrators rally on the anniversary of the 2014 kidnapping in Mexico City on Monday. Photographer: Luis Antonio Rojas/Bloomberg Explainers you can use - [Britain’s Crisis of Confidence Was Years in the Making]( - [Trump Picked the Special Master but Now He Has Complaints]( - [Why Libya Lurches from One Crisis to The Next]( High-stakes talks | The latest drama between the world’s biggest superpowers is unfolding in a Hong Kong office tower, where number crunchers and regulators will determine the [fate]( of hundreds of billions of dollars in US-listed Chinese shares — and possibly the future of financial cooperation between Washington and Beijing. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1pm ET, with a second hour on Bloomberg Radio from 1 to 2pm ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - US Vice President Kamala Harris went to the Demilitarized Zone dividing the two Koreas, in a [high-stakes visit]( for Washington that came just hours after Kim Jong Un’s regime fired two short-range ballistic missiles into the sea. - Democratic infighting [has stalled]( a US House proposal to restrict stock ownership and trading by members of Congress and other US officials including the president. - Myanmar’s ousted leader Aung San Suu Kyi was sentenced to three more years in prison today, after she was found [guilty]( of violating the Official Secrets Act, a source says. - Elections in Kuwait today to a 50-member legislature [may decide]( whether the Arab Gulf nation can end years of political impasse. - Virginia “Ginni” Thomas, a conservative activist and the wife of Supreme Court Justice Clarence Thomas, is set to be [interviewed]( this week by the House committee investigating the Jan. 6, 2021, insurrection at the US Capitol. And finally ... The angry street protests roiling Iran were sparked by the death of a 22-year-old woman detained by the so-called morality police who enforce Islamic laws on women’s clothing. But as [Golnar Motevalli]( reports, they now highlight the scope of all the [grievances]( against the Islamic Republic: acid attacks on women, laws that limit their freedom and economic rights, the state murders of intellectuals in the 1990s, and a ban on “Western” vaccines at a time when Iran was suffering the region’s deadliest Covid-19 outbreak. A protest in Tehran on Sept. 21. Source: Anadolu Agency/AFP/Getty Images Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022