Thought of the Week
Earlier this week, I had planned on writing about how what was once called “compassionate conservatism” has seemingly morphed into a Republican pivot away from the free market. You remember “compassionate conservatism.” It was the political philosophy that applied conservative principles—free markets, limited government, and personal responsibility—to solve social problems. It included ideas such as using market forces and economic growth to create jobs, reduce poverty, and build individual prosperity rather than relying on pure wealth redistribution. It insisted that social programs prove their worth through measurable success, and it used partnerships with local charities, religious institutions, and community groups to address social ills and help people gain the skills and independence necessary to improve their lives. This platform allowed then Texas Governor Bush to appeal to suburban voters, women, and minorities who often distrusted hardline conservative orthodoxy. It was a signal that Republicans also cared about education, poverty, and healthcare, rather than merely tax cuts and gutting government programs. By prioritizing bipartisan issues, the strategy enabled the GOP to deprive Democrats of a monopoly on social compassion. Today, Republicans’ message has shifted. To hear the party faithful tell it, the free market has failed, and fixing it requires getting comfortable with federal intervention, like tariffs to protect domestic industry, financial accounts for newborns, and government ownership stakes in corporations. Although such policies would have been anathema to Republican stalwarts just a decade ago, party leaders are cloaking the strategy in the familiar, compassionate language of faith, family, and fairness. It was at this point where I had some writer’s block, couldn’t find a hook, and didn’t feel the piece was quite coming together. Then, I came across an interesting, completely unrelated, statistic—Internet traffic will reach 10 sextillion bytes sometime next year. While I had never heard of a sextillion and had no idea how much that was, I decided to change tack, believing that an understanding of the number might lead me toward gaining some real-world context around the political debate over the vast resources required by data centers (see last week’s post). One sextillion is a 1 followed by 21 zeroes or 1,000,000,000,000,000,000,000. How big is that? Scientists estimate there are roughly 1 sextillion grains of sand across all the beaches and deserts on Earth; if all the oceans were combined as one, they would hold roughly 5.6 sextillion cups of water; and if you were to stack 1 sextillion dollar bills, they would cover the entire land area of the U.S. 115 meters (377 feet) deep. Needless to say, a sextillion is a big number. Computer scientists count information flow in bytes where one byte is the amount of information necessary to portray a single character on a computer screen. A one paragraph text message is about 140 bytes, a phone call 200,000 bytes, a picture 2 million bytes, and a movie 1 billion bytes. And while I’m sure you’ve heard of a megabyte (1 million bytes) and a gigabyte (1 billion bytes), did you know that petabytes and exabytes refer to quadrillions and quintillions of bytes respectively? A zettabyte is 1 sextillion bytes or one trillion gigabytes, which is incredible to think of when you realize a standard phone holds 128 gigabytes of storage capacity. Data centers store, process, and protect digital information. They act as the physical “brain” of the Internet, making everything from streaming video and online banking to text messages and GPS navigation work seamlessly; it is not a stretch to say that they are integral to our current way of life. And the need for data center growth becomes clear when one recognizes that from the launch of the Internet in 1990 to last year, annual data flow, all the digital information moving around the world, has grown more than 40 million times from 0.0000002 zettabytes in 1990 to 7.94 zettabytes in 2025; this unbounded growth is only expected to increase. The Washington office is monitoring the public policy debate around data centers. Please do not hesitate to contact us for updates on the latest developments.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Capital Alpha Counsels to Enjoy the Quiet in D.C., for Now. The House and Senate are safely out for August recess. The House returns for a week starting August 31 and then breaks again for Labor Day. Both chambers return on September 1 and stay in session through September 30, which is the end of the fiscal year and the deadline to agree on a continuing resolution. The September session will be fraught, with a continuing resolution, a defense supplemental, Reconciliation 3.0, appropriations, and other legislation. For instance, September will be crucial for any moves made to set up the Farm Bill, Surface Transportation, Permitting Reform, and other business in the post-election Lame Duck session. The Iran war remains unresolved for now. The 60-day period for negotiations following the June 17 Memorandum of Understanding (MOU) has expired, and there has been no progress made to end the war. Negotiations between Iran and Oman to reopen the Strait of Hormuz continue, while President Trump apparently intends to wait for Iran to crack under economic pressure. The WSJ and NYT report that Iran may attempt to escalate the war into a broad regional conflict prior to the midterm elections. Looking forward to the election, if gasoline remains over $4/gallon in September, it will set a seasonal all-time record. Blue-collar voters driving pickup trucks are an important Trump constituency, and it now costs more than $100 to fill a 25-gallon tank. Diesel fuel, at $5.45/gallon, is at the highest price ever during harvest season. Brent crude remains stable under $90/barrel, but high refining margins drive gasoline and diesel prices. The refining margin for diesel has actually been higher than the cost of a barrel of crude. While the primaries are nearly done, fundamental factors such as the economy, gasoline prices, and the president’s approval rate appear to be baked in. Republicans have amassed a huge cash advantage at the party and super PAC fundraising level, it’s now time for the individual campaigns to perform. Key senate races are within margins of error, but by mid-September, races will start to break, and they usually break one way. Democrats will most likely will win a narrow House majority; Republicans will most likely hold the Senate, but both outcomes remain uncertain.
Conference Board Forecasts Super El Niño Will Test Business Resilience. Climate volatility is increasingly becoming a business issue, not simply an environmental one. Today, meteorologists are tracking the return of El Niño—the phenomenon where warmer-than-usual temperatures in the Eastern Pacific result in extreme rainfall, heat, and drought around the globe. The forecast is increasingly dire: a 63% chance the current pattern develops into a very strong event through 2026 and into 2027. More than just a weather story, estimates of economic losses from past El Niños are staggering: $4.1 trillion in 1982–83 and $5.7 trillion in 1997-98. Executives should view the potential for a “Super El Niño” in 2026-27 as an enterprise-wide business risk that could affect supply chains, pricing, workforce operations, customer demand, and corporate reputation. Four priorities to consider:
1. Anticipate changing customer behavior. Weather disruptions can alter purchasing patterns, seasonal demand, and promotional effectiveness. Marketing teams should incorporate climate scenarios into planning where appropriate.
2. Protect trust before disruption occurs. Stakeholders expect organizations to demonstrate preparedness—not simply respond after a crisis. Clear communication around employee safety, supply continuity, and operational readiness reinforces credibility.
3. Communications as resilience planning. Communications/government affairs teams should participate with operations, legal, and risk in scenario planning to develop messaging for potential disruptions, pricing changes, workforce impacts, and stakeholder inquiries.
4. Align brands with enterprise resilience. Preparedness is becoming part of corporate reputation. Organizations that communicate proactively can strengthen confidence among customers, employees, investors, and partners.
Eurasia Group Thinks U.S.-Iran Standoff Will Drag on as Urgency for a Deal Falls. The current standoff will likely produce a limited deal that partially reopens the Strait of Hormuz before the end of the year (55% odds), while the risk of escalation remains significant (25%), and a standoff that drags on indefinitely remains less likely (20%). With oil prices at an elevated but manageable level, President Trump has reverted to a “maximum pressure” campaign, hoping that sanctions and a naval blockade will force Iran to capitulate. However, Iran is unlikely to yield, despite its worsening economic outlook, and Teheran will continue to push for a deal that recognizes its control of the strait and includes additional financial incentives.
“Inside Baseball”
The 2026 Midterm Election is on Track to be the Most Expensive in History. According to Axios, however, a cash advantage hasn’t always mattered, and the message seems to be that cash can’t compete with momentum. In three of the most expensive Democratic primaries, the winner was dramatically outspent on TV and radio. In fact, the emerging pattern is hard to miss. Consider that in Michigan, Rep. Stevens (D-MI) outspent Abdul El-Sayed nearly 10 to 1 on cable, broadcast, and radio—$52 million to $5.2 million. El-Sayed won 48.5%–47.5%. In Minnesota, Rep. Craig (D-MN) put $13.8 million into TV and radio, compared with $3.3 million for Peggy Flanagan; Flanagan won by 20 points. The same pattern played out in Illinois and in the three most competitive Republican Senate primaries. In Texas, Sen. Cornyn had a $58.8 million advertising operation—seven times the $8.2 million behind Attorney General Paxton. Paxton won the runoff 64%–36%. In Louisiana, Sen. Cassidy put $13.6 million into advertising, versus the $9.5 million from Rep. Letlow (R-La.); Letlow won the runoff 57%–43%. And in Georgia, Rep. Carter had $4.4 million behind him, compared with $925,000 for Rep. Collins. Collins won the runoff 55%–45%. Reading between the lines, President Trump endorsed the winner in all three, showing that in congressional races, his endorsement is still the most valuable currency in the Republican Party. However, money did prevail in three Democratic primaries (Talarico in Texas; Platner in Maine; and Turek in Iowa), but in all three it was paired with momentum. Heading into the general election Republican committees have a cash advantage over their Democratic counterparts, and Elon Musk is waiting in the wings. But if the environment is as bad as some GOP strategists privately fear, money won’t be able to save all of their candidates. The bottom line: candidates can spend a lot of money and still lose an election.
In Other Words
“You just eat all this protein. And, so, you go through this massive withdrawal from sugar and carbohydrates for the first 72 hours. It was a near-psychotic event for me…If I had been in this job while doing it, I would’ve been like, ‘Mr. President, we must bomb Paraguay.’ And it’s like, why? ‘I don’t know. I’m just really mad. I haven’t had any sugar,’” Secretary of State Rubiodescribing his experience trying a keto diet.
Did You Know
The Democratic Party has reshuffled its 2028 presidential election primary calendar, anchored by South Carolina at the start and Michigan and Virginia just before Super Tuesday, creating a voting sequence with no clear historical precedent.
Graph of the Week
July Consumer Price Index (CPI) Inflation Rose 0.1% m/m. The slight rise pushed year-over-year inflation down 0.1% to 3.4%. Core CPI, which excludes food and energy, rose by 0.2% m/m, which drove y/y inflation down to 2.5% from 2.6% in June. As a result, the risk of a 2026 rate hike has faded. In fact,July’s CPI reduced the likelihood that the Fed will need to raise policy rates at its September meeting, supporting analyst projections that interest rates will remain on hold in 2026. Continued progress on inflation is still needed. Given ongoing hostilities in the Middle East, the risk is that energy inflation could filter into a broader set of consumer prices. In short, although inflationary pressures are easing, overall price levels remain elevated, and the affordability burden will continue to weigh on households and limit consumer spending growth.
July CPI Shows Subsiding Inflation
