With the tenuous and fragile geopolitical backdrop of today, the US would want to be able to leverage a strong financial foundation. Whether a solid balance sheet that could accommodate an increase in military and related spending if needed or a Strategic Petroleum Reserve that was full and ready for an actual emergency, the US should be fortified and have all options available.
Unfortunately, that is not the case today. The IMF has come out explicitly and reinforced what its analysis has shown implicitly for quite some time: the current financial position of the US is unsustainable. This shouldn’t be a surprise, as this has been echoed by analysis from the Treasury, the CBO (Congressional Budget Office) and just about anyone not detached from reality.
This unsustainability creates not only an economic security issue for the US, but a national security issue as well.
After exploding the already massive size of government another 40+% over the past four years, public debt to GDP is again at levels exceeding 120%. For context, the IMF and others have noted in the past that a sovereign balance sheet becomes unwieldy at around 70-80% debt to GDP.
If the US were an emerging market, such a balance sheet would likely cause a currency crisis. Having the world’s reserve currency, as well as the relative state of other countries (a phenomenon often referred to as the US being the “cleanest shirt in the laundry”) has kept that from happening and allowed those managing the country’s finances to continue to act recklessly.
The ongoing conflicts around the globe are undoubtedly related to the perceived all-around weakness of the US on the international stage. The president projects weakness in his persona and actions, the latter ranging from releasing oil from our strategic reserves not for emergency purposes but for a political stunt in an effort to artificially, temporarily suppress prices, to loosening sanctions on Iran and providing them access just last month to another $6 billion in cash.
Not to mention that we have a completely porous southern border under the Biden administration that has let in millions of people, with no idea from where they have come or their intentions for being here.
The countries around the world who seek to further weaken the US’s stronghold economically and otherwise have been working to hasten and exploit this existing weakness. It is no coincidence that around the same time in August that, as the Wall Street Journal reported, “Officers of Iran’s Islamic Revolutionary Guard Corps had worked with Hamas” to plot the details of the attack on Israel, the BRICS alliance (Brazil, Russia, India, China and South Africa, although heavily dominated policy-wise by China) had formally extended an invitation to Iran (as well as the Saudis, the UAE and other countries) to join them.
The perception of weakness from the U.S. is emboldening countries, including many of those aligned with the BRICS, to strike out on multiple fronts, from targeting the US dollar as the world’s reserve and primary trading currency to fostering groups who want to wage war and commit violence.
This is not helped by weakness from our key allies as well. Take France, whose TotalEnergies just entered into a 27-year agreement to purchase LNG (liquified natural gas) from Qatar. It’s hard to be tough on a country that is housing the head of Hamas when you are dependent upon them for your energy needs.
The US must urgently fortify every aspect of its foundation: fortify its border, fortify its energy position, fortify its ability to get critical supplies in the face of geopolitical uncertainty and fortify its financial position by getting serious about its deficits and its balance sheet.
The financial dereliction of duty by the current administration, by Congress and by those associated with them has created not only an economic security issue, but a national security issue as well. We can’t afford what’s ahead, and our enemies want to exploit that. Those in the positions to implement reform must do so or we will all further suffer the consequences.