The US state debts crisis and the worldgendarme role
Many European and German politicians and elites hope that if Trump isn´t reelected the crisis of the West, its postwar institutions, NATO and the US calls for burden-sharing would disappear and there could be some sort of reset. But the underlying force for the US calls for more burden-sharing is the escalating debt crisis in the USA and worldwide. This trend won´t be reversed if not radical cuts in social security, medicare, and military spending might occur which would lower the world gendarme role and the living standard of the US and Western population in dramatic ways, but might create international instability and domestic riots. And it is also clear that nobody ever can repay the state debts, but only the interest rates. The other hope for a reversal of this trend could be a new economic boom of a long wave ala Schumpeter or Kontradieff by digitalization and new technologies that creates new income and prosperity. One voice addressing this problem very openly is the libertarian CATO-Institute. Doue Bandow addresses the „bankruptcy“ in his article „How Can a Bankrupt Republic Run the World?“ on January 2, 2019:
„The so-called “defense” budget is the price of America’s aggressive foreign policy. Playing global gendarme—or gauleiter, depending upon one’s location when America’s bombs fall—is not cheap.
Even if the U.S. once felt wealthy enough to squander its financial resources in such pursuits, those days have ended. Washington is effectively bankrupt, with massive unfunded liabilities.
Last year the Republican Party, once the self-proclaimed guardian of the treasury, approved a deficit approaching $779 billion. The Congressional Budget Office figured the president’s 2019 budget will push the deficit to nearly $1 trillion, and the numbers will continue to rise, to $1.527 trillion in 2028.
This debt increase would be accompanied by rising interest rates. CBO figured “net interest,” which disguises federal costs by subtracting interest paid to Uncle Sam, will rise from $315 billion last year to $819 billion in 2028.
Of course, Congress could cut domestic expenditures. Hah, hah … only kidding! To achieve anything approaching a responsible budget requires addressing the four big domestic boulders, which along with military outlays make up 85 percent of the budget: interest, which cannot be reduced without repudiating debt; Social Security, the traditional “third rail” of U.S. politics; Medicare, the equally popular elder health care program; and Medicaid, the perennially under-funded promise of medical services for the poor.
More likely, Congress will act like, well, Congress, and both spend more and collect less than under current law. If so, the CBO’s “Extended Alternative Fiscal Scenario” predicts that the deficit as a percentage of GDP will rise from 78 percent last year to 105 percent in 2028, 148 percent in 2038, and an astonishing 210 percent in 2048. America’s average over the last half century was just 41 percent; only during World War II and in its immediate aftermath did the federal debt exceed 70 percent, peaking at 106 percent in 1946.
With larger deficits and debts, interest rates likely would be higher and GDP growth lower. Moreover, noted CBO: “Large federal budget deficits over the long term would reduce investment, resulting in lower national income and higher interest rates than would otherwise be the case.” A financial implosion would become more likely: Imagine a 2008-style crisis, but with the debt burden twice as great to start.
Of course, Congress could raise tax hikes, but they are no more popular than spending cuts. Moreover, the growing deficit is mostly a result of increased spending.
Military cuts are inevitable. The starting point, though, is to revise foreign policy. Cutting expenditures without trimming tasks risks creating a dangerous mismatch. Instead, the administration should end unnecessary wars, stop nation-building, and drop obsolete alliances, adjusting its force structure accordingly.“
First-it is not only the USA, but the debt ratio of the GDP and state debts have risen worldwide. It’s also a global debt crisis that might reach a tipping point in the future and produce a gigant global financial crisis and maybe a currency reform. The Eurozone has its Maastricht criteria and its austerity policy, but the PIGs states don’t fulfill their obligations and at the moment more and more economic and political groups and parties propose an end of the austerity policy to finance infrastructure and digitalization programs. Japan has a debt ratio of 200% and just wants to start a new stimulus program. About Chinese state debts, you also hear bad news. The USA might reach a new burden-sharing in its alliances, but this would only produce more debts in other countries as they had to finance the rising military spending on its own and not fundamentally change the world debt ratio.If Europe had to build its own European military this would cost at least 750 billion euros.
„The U.S. government has no more important duty than defending the nation. However, providing for the “common defense,” as the Constitution puts it, is remarkably easy. America has vast oceans east and west and pacific neighbors north and south.
Today only Russia, with an arsenal of nuclear-tipped missiles, could launch a serious attack on America. However, Moscow has no incentive to do so, since the result would be devastating retaliation. China’s military is expanding but directed at preventing Washington from dominating the People’s Republic of China at home and in its neighborhood. Playing global gendarme—or gauleiter, depending upon one’s location when America’s bombs fall—is not cheap. Terrorists abound, but mostly result from maladroit U.S. policies that create enemies and make other people’s conflicts America’s own. Nor do America’s conventional forces and nuclear arsenals offer the best response, since promiscuous war-making does more to accelerate than diminish terrorism.
Why, then, is Washington spending $717 billion in 2019 to maintain vast armies, fleets, and air armadas around the world? Not for defense, of America, anyway. It is to protect allies, assert influence, remake failed societies, dictate behavior, promote values, and more.“
If the USA is canceling its alliances -NATO, Taiwan, Japan, South Korea, Egypt, Israel, etc., this could be an invitation for other powers as Russia, China, North Korea , Iran to change the geopolitical world order. If no New world architecture and security architecture is reached by a multipolar compromise, there won’t be a power equilibrium, but a fierce Hobbesanian struggle about spheres of influence in the vacuum of an isolationist USA and the danger of a new world war. This also could bring Eurasian alliances Brzezinski always warned of and the USA might have to protect itself against a rising Eurasian power again in the future. This was always the narrative of the world gendarme role. It will also influence the freedom for international navigation which was based on the Pax Americana and could influence sea trade and maritime stability international trade which could have a backlash on the US economy. The question is if the USA could produce a new foreign policy that makes the transition period to a new world order somehow smoothly and stable and if the USA would accept a reduced role in world politics and economy. But if such a new multipolar world order would be stable and better than the old pax Americana nobody knows. And if a new economic boom by a long wave might occur is also not sure.