In this blog, I discuss major issues facing the U.S., both foreign and domestic.  The analysis is based on my view that we are fundamentally a strong country.  Of course, we have problems, but our free enterprise economic system and democratic political system enable us to address our shortcomings and make steady progress in improving society.

As strong as we are economically and militarily, we have several autocratic adversaries, such as China, Russia, Iran, and North Korea, who want to diminish us for their own tyrannical purposes.  One glaring example, it has now been two years since Russia invaded Ukraine which badly needs our continued support.  Consider:

• Ukraine wants to be free and independent. Helping Ukraine defend itself is not only the right thing to do; it’s in our own best interest to promote freedom and democracy around the world.  Ukrainians are willing and able to do the fighting. But they need our continued help with military supplies.
• China wants to take over Taiwan. If we are unwilling to help Ukraine defend itself against Russia, will we be willing to help Taiwan defend itself against China?  It’s important to ensure that China gets the proper message about our willingness to defend freedom and democracy.
• Russia is a brutal, tyrannical state.  Political dissident Alexei Navalny recently died in a Siberian penal colony.  The Americans Evan Gershkovich and Paul Whelan are being held in prison on trumped-up spying charges.
• Is Eastern Europe next for Russia?  Russia’s leader, Vladimir Putin, claims that Ukraine was historically a part of Russia and therefore belongs to Russia.  The Baltic countries Estonia, Latvia, and Lithuania have significant Russian populations. If Putin is successful in annexing all or part of Ukraine, will this encourage him to invade the Balts next?
• Eleven European countries are now meeting the NATO target of spending at least 2% of GDP on defense (see chart),and several more have promised to do so this year. If necessary,  Europe must be ready to defend itself against further Russian aggression.

Conclusion.  The United States is very strong, with many democratic allies, but our autocratic adversaries around the world are constantly testing our resolve to defend democracy and freedom.  The greatest threat right now is in Ukraine.  It is vitally in our own best interest to help Ukraine defend itself against Russian aggression.  If Ukraine falls, another currently free country will become the next battleground.

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Although I normally try to discuss important national issues separate from the personalities involved, the 2024 presidential election campaign is now shaping up.  What the candidates are doing and saying has taken center stage and so becomes the focus of attention.  I have previously discussed Bidenomics, but now let’s focus on it more directly.

Consider:

• There is little dispute that it was the $5 trillion Covid stimulus spending that tripped off the latest round of inflation starting in March of 2021.  In fact, the last $1.9 trillion of this stimulus, the so-called American Rescue Plan, was signed by President Biden, right after he took office.  The attached chart clearly shows inflation taking off at this time.

  

• National Debt. From the attached chart, it is easy to determine that during 2017 – 2020, the four years of Trump, the total national debt was about $5.7 trillion.  For Biden’s four years, 2021 – 2024, using the CBO projection of $1.6 trillion for 2024, the total new debt will be $7.5 trillion.  Both of these debt totals are excessive.  But Biden’s last $1.9 trillion of Covid stimulus was worse than Trump’s $3 trillion, because by March 2021 the U.S. economy was already starting to recover from the pandemic slowdown.
  The deficit of $1.7 trillion in FY 2023 (see attached chart) was way too large with no recession or other emergency, such as a pandemic.

  
  Furthermore, the Congressional Budget Office is now projecting additional deficits totaling $20 trillion over the next ten years (see the attached chart).

  

• Interest Rates. The Federal Reserve has raised short-term interest rates to the highest level in years to fight inflation.  Of course, this means much higher interest payments on our exploding national debt.  In addition, home sales in 2023 were at a 28-year low (see attached chart), because of high mortgage rates.

  

• Average Income. The Bureau of Labor Statistics reports that real (inflation-adjusted) average wages have fallen during the Biden administration (see the attached chart).

  

Conclusion.  It is hard to avoid the conclusion that Bidenomics is a disaster.  The $1.9 trillion American Rescue Plan in early 2021 tripped off inflation which is having many harmful effects.  Continued reckless deficit spending will keep inflation higher longer. This not only hurts millions of Americans right now, it endangers our country’s future by making a new financial (debt) crisis more likely in the near future.  President Biden brags about all the money he is spending and therefore lacks any sense of fiscal responsibility.

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Normally, on this blog, I discuss public policy without referring to the personalities involved.  But the U.S. presidential primary voting season has now started and so personalities are hard to avoid!  A recent survey has discovered that 67% of voters do not want a Biden/Trump rematch.  A recent WSJ article concludes that such a rematch shows how far U.S. democracy has fallen.  Our country now has a viable alternative: Nikki Haley remains in the Republican Primary along with Donald Trump.

Consider the huge contrasts between them:

• Trump had an 11-point victory margin over Haley in New Hampshire. Trump won 75% of Republicans, but Haley won 60% of independents, crucial for a Republican victory in November.  If Trump is convicted of a felony, 42% of New Hampshire voters and a third of Iowa’s caucus goers said Trump would be unfit for the presidency.
• At a time when America often appears weak around the world, Haley, but not Trump, supports continuing to help Ukraine defend itself against Russian invasion. Such support for democracy is critical in deterring our autocratic adversaries.
• Haley, as opposed to Trump, understands that we have a huge debt problem, and that entitlement reform (SS and Medicare) is crucial for seriously addressing it.
• Right now, as voters around the country start paying more attention, she needs a strong rationale for why she is qualified to be president.  How about a freedom agenda: free from failing schools and DEI mandates, free from social media censorship, free from smash-and-grab robberies, free from unchecked illegal immigration, federal overspending, and tyrannical bureaucrats.

  

• A large part of the Trump problem is his highly disorganized way of doing business. Haley responds, “You can’t defeat Democrat chaos with Republican chaos.  And that’s what Donald Trump gives us.”

Conclusion.  Nikki Haley is now Donald Trump’s only remaining competition in the Republican Presidential Primary.  She will become an intense focus of attention in the coming days.  She can give American voters what they are overwhelmingly looking for in November 2024:  an alternative to choosing between Joe Biden and Donald Trump.

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I am mostly an optimist about the future of the United States.  But, according to press reports, we have a lot of pessimists in our midst.  Our country certainly has challenges to deal with, and many people wonder if we will be able to address them all successfully.  I understand their concern, but, with one possible exception, I believe we will meet all the major challenges we face without major repercussions. 

Consider:

• The world in disarray. There are now major conflagrations occurring in Ukraine and the Middle East.  Russia invaded Ukraine almost two years ago and Hamas surprised Israel with an attack on October 7.  Both are serious regional wars in which the U.S. is heavily involved.  The U.S. and its allies are helping Ukraine defend itself.  Ukraine wants to expel Russia from all occupied territory, but, it may have to instead negotiate a compromise settlement.  At any rate, it is unlikely that this war will spread beyond the Ukraine/Russia border area.
  In the Middle East, the Israel/Hamas Gaza war is likely to end soon in a cease-fire with some sort of international presence involved to finally achieve justice for Palestinians in Gaza and the West Bank.  I do not think that the current situation will spill out into a larger war in the Middle East because the U.S. and the local powers, Egypt, and Saudi Arabia, do not want this to happen.
• U.S./China rivalry. China is challenging the U.S.-created world order (Pax Americana) established at the end of WWII.  However, China benefits enormously from international trade with the West and is unlikely to attempt to capture Taiwan by force.  Furthermore, China currently has its own big internal problems to address. In other words, our (economic) competition with China will continue but will unlikely lead to a military confrontation.
• U.S. political polarization. The progressive left and the conservative right despise each other, and this creates much internal division.  Nationally, it means that a partisan split in Congress makes it difficult to pass bipartisan legislation.  At the state level, only Pennsylvania has a partisan split in the control of its legislative chambers.  I consider our current political polarization as democracy in action and not a sign of national distress.  Eventually, this unpleasant situation will resolve itself politically in a peaceful manner.
• National Debt. This is a very serious problem that must be addressed soon to avoid a financial crisis much worse than the one that occurred in 2008.  The only way to effectively do this is with entitlement reform, which, unfortunately, elected national leaders are loath to address.  The debt problem can be solved but, so far, the political will to do it does not exist.

Conclusion.  At the present time, there is an untidy world order with lots of regional stress.  Furthermore, the U.S. is almost equally divided between left and right political factions, and this generates great animosity.  These situations, as unpleasant as they are, will fade away over time in a relatively peaceful manner.  Unfortunately, the U.S. national debt is rapidly getting worse.  If not addressed soon by the President and Congress, a huge new financial crisis will develop that will cause great damage both to the U.S. itself and the rules-based world order that it has created and led since the end of WWII.

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Lately, on this blog, I have been discussing the need for continued U.S. world leadership.  We are the strongest country in the world, economically and militarily.  We are the leader of the free (democratic) world.  We do, of course, have autocratic adversaries nipping at our heels.  But it is our responsibility to continue promoting the free, democratic world order we created after WWII and have supported and defended ever since.

Is the U.S. capable of continuing to fulfill this critical role?  What is involved?

• First of all, we have enormous strengths as a nation.  By stretching across the entire North American continent, from the Pacific Ocean to the Atlantic Ocean, and with friendly northern and southern neighbors, we are difficult to conquer. We have a brilliant, long-lasting, constitutional form of government which has made us, and keeps us, free and prosperous.  We continue to have a dynamic, entrepreneurial economy of rugged individualists that leads the world in developing new products and technologies.
• We are making steady social progress. Slavery ended in 1865.  Jim Crow racism ended in the 1960s civil rights era. Black poverty declined dramatically from 1940 to 1960, and significantly from 1960 to 1970.  This decline still continues, but more slowly.  In addition, child poverty was lower than ever in 2022.  As another example, school choice is expanding dramatically.
• In recent years, a new problem has arisen: political polarization. The left denounces the evil of what it claims the country has always been: racist, oppressive, toxically male, transphobic. The right rages against the evil of what the country has become: perverse, perverted, Marxist, elitist, woke.   The two sides don’t trust each other.  A deeper fear is that this nightmare is just getting started.  Artificial Intelligence might magnify our differences by generating and spreading even more misinformation on its own.
• In the midst of our domestic political strife, humanity overall is making much progress.  Global child mortality is decreasing. One hundred thousand people are emerging from extreme poverty per day.  On the world health front, polio and Guinea worm disease are near eradication. In the U.S., CRISPR gene-editing techniques are starting to be used for sickle cell disease and other ailments.

Conclusion.  On the one hand, the U.S. is a strong, prosperous country that has been very successful in creating a stable and relatively peaceful world order since the end of WWII. Furthermore, great progress is being made worldwide in reducing poverty and improving health.  On the other hand, the U.S. is in the midst of great political strife.  How will our internal divisions play out in the end?  We likely won’t know the outcome for some time.  But I, personally, am optimistic that we, the “indispensable” nation, will be able to resolve our political differences in such a way that our world leadership role will continue unabated for many years to come.

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My recent posts have discussed the role of the U.S. in the world and how it could be improved.  Ever since the end of WWII, the U.S. has been the leader of the free (democratic) world.   Since the end of the Cold War in the late 1980s, the U.S. has been the dominant power in the world.  Our economic and military strength has given us the clout to maintain stability and order worldwide.

How does the U.S. stand today, both domestically and internationally? First of all, we have several very serious domestic problems:

• As a result of $5 trillion in covid pandemic stimulus spending, inflation flared up starting in Spring 2021 and is still, at 3.1% in November 2023, at a high level. The Federal Reserve has indicated that it doesn’t expect to raise short-term interest rates any higher than the current level of 5.25%, but how soon will it be able to lower this rate substantially? In the meantime, home mortgage rates are very high which greatly retards the housing market.

  

• With ever-larger annual spending deficits ($1.7 trillion in FY 2023), our national debt is ballooning. This creates a huge fiscal trap for the future, all the more urgent because higher interest rates mean higher interest payments on our current massive debt of $34 trillion.

  

• Our southern border is now virtually out of control, with 10,000 or more illegal immigrants entering the country every day. It will be difficult for Congress and the President to get this very serious problem back under control.

In addition to these domestic problems, the U.S.-led international rules-based order is becoming more unstable.

• First of all, in August 2021, was our disastrous withdrawal from Afghanistan. Biden’s own military advisors recommended keeping a small residual U.S. force to support the Afghan army but this did not happen.  Consequently, our hasty withdrawal left a chaotic situation on the ground and the Taliban took control immediately.
• In February 2022, Russia invaded Ukraine. The Ukrainian people are valiantly resisting the invasion with much material support from the U.S. and its European allies.  Russia is supported by military supplies from both Iran and North Korea.  It will be difficult for the much smaller Ukrainian army to push the Russians out.

  

• Just two months ago, on October 7, the Hamas forces in Gaza attacked Israel across the border, killing 1200 people. Now, there is a war raging in Gaza as Israel attempts to drive Hamas out.

Conclusion.  Presently, we are facing big domestic problems (inflation, massive debt, open southern border) at the same time as the stable U.S.-led world order is being challenged by several of our autocratic adversaries.  In other words, the U.S. has big domestic and international problems to deal with simultaneously.  Can our national leaders rise to the task of meeting these big challenges?

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Lately, on this blog, I have been discussing the continued need for U.S. world leadership.  We have been providing such leadership since the end of WWII and our leadership has been the main factor in preserving the stability and relative peace that has prevailed in the world since then.

But now the U.S. needs a new strategy, that understands that it remains a formidable power but operates in a far less quiescent world.  Our challenge is to run fast but not scared.  The analyst, Fareed Zakaria, has described how the U.S. can step up and achieve an enhanced role in world affairs.  Consider:

• The U.S. is now stronger than ever. In 2008, the American and eurozone economies were roughly the same size.  Now the U.S. economy is nearly twice as large as the eurozone.  Of the ten most valuable companies in the world in 1989, only four were American, and the other six were Japanese.  Today, nine of the top ten are American.  Today, the U.S. is the world’s largest producer of oil and gas, larger even than Russia or Saudi Arabia.  The dollar remains the currency used in almost 90% of international transactions.  The country has a high debt load and rising deficits.  But its total tax burden is low compared with those of other rich countries.

  

• Between worlds. Despite its strength, the U.S. does not now preside over a unipolar world.  Today, the U.S. faces a world with real competitors and many more countries vigorously asserting their own interests.  But the U.S. remains the single strongest country when adding up all hard-power metrics.  China is our main competitor but its power has limits, beyond shrinking demographics.  It has just one treaty ally, North Korea, and a handful of informal allies, such as Russia and Pakistan.  The U.S. has dozens of allies.
• The new disorder: the invasion of Ukraine and the Israel-Hamas war. In attempting to conquer Ukraine, Putin miscalculated, but it was not a crazy move since his previous incursions had met with little resistance.  Iran has now spread its influence into Iraq and Syria, and supported Hamas in its war with Israel.   But this, in turn, has brought Saudi Arabia and Egypt closer to Israel.  Saudi Arabia is also becoming closer to China, its largest oil customer.
• Staying Power. The international order that the U.S. built and sustained since WWII is being challenged on many fronts.  But the U.S. is still the most powerful player in that order.  The “free world” coalition that fought and won the Cold War has now expanded into the coalition supporting Ukraine’s military or enforcing sanctions against Russia, which includes almost every country in Europe, as well as a smattering of other states.  Overall, this “West Plus” encompasses about 60% of the world’s GDP and 65% of global military spending.  The challenge from China is a different one.  China is now a superpower.  But China is not a spoiler state like Russia.  It has grown rich and powerful within the international system and is uneasy about overturning this system.  China is searching for a way to expand its power.  The U.S. should accommodate legitimate efforts in this respect.

  

• The danger of declinism. Washington’s alliances in Asia and elsewhere act as a bulwark against its adversaries.  For that reality to continue, the United States must make shoring up its alliances the centerpiece of its foreign policy.  The greatest flaw in Trump’s and Biden’s approaches to foreign policy derives from their similarly pessimistic outlooks.  Both assume that the U.S. has been the victim of the international economic system that it created, and that the U.S. cannot compete in a world of open markets and free trade.
• Keep the Faith. But the GATT system created right after WWII was designed to let poor countries grow rich and powerful, making it less attractive to wage war and to try to conquer territory.  Much of the appeal of the U.S. has been that we have never been an imperial power on the scale of the UK or France.  The world order created was good for the U.S. but also good for the whole world.  It sought to help other nations rise to greater wealth, confidence, and dignity.  That remains the United States’ greatest strength.  The most worrying challenge to the rules-based international order does not come from China, Russia, or Iran.  It comes from the U.S. itself.

Conclusion.  If the U.S. truly turned inward, it would mark a retreat for the forces of order and progress.  Washington can still set the agenda, build alliances, help solve global problems, and deter aggression, even while using limited resources, well below the level it spent during the Cold War.  For all of its internal difficulties, the U.S. above all remains uniquely capable and positioned to play the central role in sustaining this international system.

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My last few posts discuss the need for U.S. leadership in world affairs. We are the strongest country in the world, economically and militarily, and we should step up and take this responsibility more seriously.  No other country can do it nearly as well as we can.

How are we lacking, and what do we need to do differently?  The AEI scholar, Kori Schake, gives the answer in a recent issue of Foreign Affairs.  We should always:

• Promote American security and economic power while supporting the expansion of democracy around the world. This means maintaining a strong military, cooperating with allies to advance shared interests, and advocating free trade while ensuring fair international competition for U.S. companies.
• The world is growing more dangerous, and foreign policy bears directly on the state of our domestic economy. The Biden administration works from the theory that U.S. foreign policy has failed the middle class and needs to be repaired through market protections and government subsidies.  This approach has stoked inflation, distorted markets, stunted trade, and frustrated U.S. allies.
• A majority of Americans, in both political parties, believe their country should provide better leadership, invest in military power, promote international trade, support freedom and democracy, and stand with Ukraine until it wins its war against Russian aggression. Americans are reluctant internationalists, but internationalists all the same.
• The guiding principle of U.S. policy toward China should be to force or motivate it to become a more responsible economic and geopolitical stakeholder – to play by international rules. Washington should long ago have tightened restrictions on U.S. funding for Chinese military technologies.
• The problem with U.S. strategy toward globalization in the past 20 years has not been that Washington allowed too much trade but that it permitted trade that did not establish reciprocity – trade that did not create a level playing field. Trade deficits with China cost the U.S. 3.7 million jobs between 2001, when China was admitted to the WTO, and 2018.  Three-fourths of these lost jobs – 2.8 million – were in manufacturing.
• Little unites Americans more strongly than the belief that the U.S. military should be strong. More adequate funding for defense will necessarily require entitlement reform, especially for Social Security and Medicare.  Entitlements now constitute 63% of federal spending, up from 19% in 1970.  The federal debt stands at $34 trillion.  By 2025 or 2026, interest payments on that debt will exceed defense spending.
• The failure to protect the U.S. southern border and therefore, to properly regulate immigration, is leading the U.S. to neglect its current biggest geopolitical opportunity: consolidating North American cooperation. U.S. politicians do not worry enough about the downside of Mexico sinking into criminality, especially with unregulated trade in illegal drugs.

Conclusion.  Rejoining the Trans-Pacific Partnership, negotiating and securing the ratification of other trade treaties, increasing defense spending while reforming entitlements and reducing the national debt, securing the U.S. – Mexican border, and aiding countries fighting to preserve their liberty: these are the major goals we should strive for in foreign policy.  Americans support a strong role for the U.S. as world leader, both for the country’s sake and for their own individual safety and prosperity.

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My last few posts have discussed the current great need for leadership in the world and why only the U.S. can provide it.  Wars, inflation, political uncertainty, the rapid growth of technology, all of these major events create a complicated and chaotic environment.  The reason why it is so critical for the U.S. to step up to the moment is because we are the strongest country in the world by far, and thus, only we can provide the leadership that is needed so badly.

Consider:

• We are the oldest democracy in the world, our brilliant constitution being ratified in 1787, with only 27 amendments having been passed in the last 236 years. The U.S. is an “invented” nation (as opposed to an evolved nation), established less than 200 years after the first settlers arrived in the early 1600s.  With a population of over 330 million, we are the third largest country in the world, behind only India and China.
• We have natural geographical advantages, such as stretching across the entire North American continent, with friendly neighbors, Canada and Mexico, on our borders. This makes the U.S. much easier to defend.
• As a nation of immigrants, we are descended from rugged individualists willing to risk their lives and livelihoods to travel across the ocean and establish themselves on a new continent.
• By the mid-1800s, as the nation began to fill up and industrialize, a system of universal public K-12 education developed so that all citizens would have an opportunity to become literate and acquire useful skills. At the present time, with public K-12 education floundering, especially in the larger cities, school choice alternatives are springing up across the country.
• Our free enterprise economic system provides maximum opportunity for individuals to thrive by developing their natural talents into productive careers. In fact, our amazing entrepreneurial business culture has now led to nine of the top ten companies in the world being American.

  

• Economic growth leads to social advancement. There are plenty of naysayers about the American economy, but it is still the best there is. We have achieved huge economic and social advancement in recent years and continue to do so.

  

• As the top power in the world, the U.S. has adversaries such as China, Russia, Iran, and North Korea, who envy our elevated status and want to bring us down.  But we also have many strong democratic allies around the world.  Democracies seldom go to war with each other.  Together with our allies, we have far greater economic and military strength than our adversaries.

  

Conclusion.  The U.S. has many strengths as a nation that we should clearly recognize but never take for granted.  We are the one indispensable nation in the world and should accept the responsibility to assume a strong leadership role.  It is in our own best interest to do this because the world will then be much better off as a result.

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The outbreak of war in Gaza between Israel and Palestine has created a tense atmosphere around the world, which can only be mitigated by U.S. leadership.   Republicans can help by acting in a responsible manner, but the Democrats are largely in charge under President Biden.

The problem is that Bidenomics, the economic policy of the Biden Administration, is unsustainable.  Consider:

• The main problem with Bidenomics is that it relies far too much on deficit financing which drives us the national debt.  The deficit for FY 2023 is $1.7 trillion, up from $1.4 trillion in FY 2022.  Such huge deficits greatly overstimulate the economy and, therefore, make inflation worse than otherwise and much harder for the Federal Reserve to control.
• The Inflation Reduction Act’s manufacturing tax credits include “prevailing wage” requirements, which force firms that take the money to meet or exceed the average minimum wage for that type of work. The requirements prevent firms from competing to reduce labor costs and effectively make unions wage setters.  Forcing nonunionized employers to pay the same wages as unionized ones is unionization by other means.
• Census Bureau data exposes the true cost of Bidenomics. Median real (inflation- adjusted) income has decreased each year since 2019 (see chart).
• The following chart shows even more dramatically the comparison between wage growth and inflation between the Trump years and the Biden years. Wage gains exceeded inflation during the Trump years but started to fall behind shortly after Biden took office in January 2021.  Only in the last few months has that trend reversed itself.
• Swing state voters, according to age, education, or income, all think that Donald Trump’s management of the economy is preferable to Joe Biden’s.

Conclusion.  The world now needs U.S. leadership more than ever.  The U.S. can’t continue to provide strong leadership without a strong economy.  Bidenomics does not provide a strong economy in the long run.  This is a huge problem going forward, with  implications for the U.S. presidential elections next year.

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