Iran War pushes debt to dangerous level

 

Iran War pushes debt to dangerous level

Tariffs lead others to avoid U.S.

 

Gordon L. Weil

Americans are getting richer and poorer at the same time.

Last year’s changes to the federal income tax have brought lower taxes for many, showing up in their refund checks.  This year’s Iran war has created shortages.  Coupled with the effects of tariff policy, they push consumer and business prices higher.  Some economists calculate that the increased cost of gasoline exceeds the tax refunds.

Inflation is growing.  President Trump’s quest to have the Federal Reserve lower interest rates to promote growth would serve to boost it even more.  Even if he can remove Jerome Powell as Fed chair, its rate-setters probably won’t agree to a cut; they may even raise rates.

The national debt grows.  Tax cuts have been funded by both reducing programs and increasing borrowing.  Debt is the present borrowing from the future.

The International Monetary Fund, a worldwide financial agency, neutral on political issues, published its annual outlook last week.   Its view of the world’s economy reveals much the same concerns as exist in the U.S.

Two major forces are shaping the economy now, and they may have long-term effects. Both are made in the U.S.A. and especially in the White House:  the new tariff system and the U.S.-Israel war in Iran. 

The new tariff regime was quickly installed and is now resulting in entirely new trade patterns rapidly developing among nations.  The war has spread in the Middle East, impacts China and Japan, and drives up worldwide oil and gas prices.

While the Iran war has brought increased defense spending, that provides only limited help to the economy.  Unlike much other spending whose effect is multiplied as it flows through commerce, military outlays are consumed on the battlefield with much less of a multiplier.  Other elements of domestic production are reduced, and the debt grows.

For the IMF, much depends on how long the war continues.  The current ceasefire could be extended, though Israel may be reluctant to end the conflict.  If not, the war’s economic impact could “mean a close call for a global recession.”  It would take at least a couple of years to recover.

What about world trade?  Will the U.S. allow tariffs to stabilize, based on real economic justification?   New trade patterns are emerging that could revive commerce, though the American role would not remain the same.

American trade has declined with China and Canada, the two countries that retaliated against U.S. tariff increases.  U.S. trade shifted to Taiwan, Vietnam and Mexico.  China, setting a record in the export of its goods in 2025, focused on Asia and Europe.   Canada created new links with them as well, and it’s unlikely that these links will later unwind.

If Trump resumes raising tariffs on short notice for political reasons, the uncertainty will have an economic impact.  His moves would encourage other nations to continue orienting their trade away from the U.S.  The World Trade Organization, designed to keep trade fair and free and now largely ignored by the U.S. and China, will disappear.

One big question mark is the effect of artificial intelligence.  It may produce productivity improvement that could offset some of the negative impacts of the Iran war.   Much would depend on where and when these gains occur.  The IMF assumes its growth could be beneficial, but does not deal with concerns about its increasingly worrisome effects.

The U.S. remains the world’s dominant economy in the IMF’s current view.  Rather than allowing the private sector to retain its influence, the federal government asserts its ability to direct the economy, going beyond fiscal policy, to economic investment and even increasing its role in monetary policy.

But its influence is sure to decrease as other countries seek to develop more stable relationships.  The U.S. will continue to be an importer and its producers will want foreign markets, but its global position will be reduced.

The worst is yet to come. The national debt is about $39 trillion, far more than GDP, and steadily increasing.  Its annual servicing cost is now higher than military spending. 

The Trump administration won’t estimate the cost of the Iran war, though it is hundreds of billions of dollars.  Without a congressionally funded appropriation, most of the cost will be added to this year’s deficit and to the national debt.

The dollar is the world’s standard reserve currency.  In 1933, the U.S. killed the gold standard, the previous reserve, replacing it with a devalued dollar, backed by the American economy.

National debt payments could swamp the budget, surpassing the ability of future generations to pay it off.  The dollar would have to be devalued again, so that debt could be repaid in cheaper dollars.  Seeing this grim future, the world will gradually abandon the dollar as the stable reserve currency, and America’s last dominant power will be gone.

 

 

 

 

 

Trump's last gasp?

Trump’s last gasp?

Helping MAGA survive

 

Gordon L. Weil

Donald Trump believes that he is exceptionally qualified to carry out a mandate to reshape America according to his own vision.

Above all, this mandate allows him to exercise personal and virtually absolute control, not only over the federal government, but over a myriad of aspects of national life.  Accomplishing his mandate, he could fulfill his claim to be the GOAT – the greatest of all time.

He runs the risk that original constitutional processes will frustrate his mandate.  The most basic are the elections that choose the president and Congress.  He devotes much attention to undermining elections with false fraud claims and attempts to suppress voting, but he cannot erase them.

As the congressional election year grinds on, threatening at least the GOP House majority, he is compelled to make an extreme effort to achieve his goals.  The elections might produce a Democratic majority that could thwart his hopes.  Or they could produce Republican victory, reaffirming his vision.

He must achieve his MAGA ambitions quickly.  If he faces rejection, and this is his last gasp in November, he must accomplish all he can now.   If the voters approve of his efforts, his two lame duck years will be transformed to give him the third term powers he has coveted.  Either way, between now and November 3, the public can expect his all-out effort to achieve his goals.

While observers focus on the Iran war’s impact on affordability and foreign relations, Trump may see winning the war and destroying as much as possible of Iran’s dangerous regime as being key to an eventual recognition of his greatness in dismantling a potential nuclear threat.  That may be why he presses on.

In misunderstanding NATO, he may be forcing the alliance to update itself.  Europe will be better able to defend itself, becoming more independent of the U.S.  Trump assigns himself credit for inducing the Europeans to play a bigger role; he lauds himself for military budget increases among America’s allies.  He scorns allies for not doing his bidding and now targets NATO.

Trump obviously sees the armed forces as a major tool in exploiting American power to bring change to the world and the use of the threat of war as a believable and acceptable policy.  His easy but limited success in Venezuela has obviously been intoxicating and encourages him to try to duplicate it.   Cuba is a tempting target, and he will press on in seeking others.

In the process, he and Pete Hegseth, his amazing and alarming choice to lead the armed forces, reshapes the military.  Without regard to morale and readiness, they are stripping high command of women and African Americans. Hegseth believes such people are promoted simply because of their sex or race, and will continue to pursue military ethnic cleansing until yearend.

Trump sees federal judges as political, not judicial, officials.  He reflexively attributes his court defeats to liberal judges.  If Congress flips in November, he will not be able to put his backers on the bench.  Thus, it reasonable to expect a rush to get his nominees confirmed before the elections. 

Executive orders, questionable legislating by the executive, will continue to cascade. Trump can be expected to kill as much regulation that remains as possible, especially any surviving elements of environmental or financial protection.  As needed, he will tighten his control of supposedly independent boards.

While U.S. dependence on certain imports could moderate his tariff policy somewhat, he seems determined to press ahead with it.  He uses tariffs in the same way as he deploys military forces, as a demonstration of the America power at his disposal.  In both cases, his preoccupation with power obscures the ability to appreciate unintended consequences.

Trump’s unyielding pursuit of his agenda is bringing two reactions that increasingly call his insistence into question.

Europe, Canada, Australia and others are becoming increasingly critical and more independent of the U.S., which was accustomed to working with allies, even if it had the greatest force.   When Trump says the U.S. can go it alone, he pushes other countries into new relationships and reducing ties with it.  American power decreases, opening opportunities for China. 

The other factor is the gradual erosion of his support among some congressional Republicans.   Trump has taken over many congressional powers with GOP majority backing.   Despite being responsible for their own loss of control, some members slip away from him and others leave Congress.  Democrats expect usual mid-term election gains and maybe more.

Congressional races have become national elections.  Because of Trump’s sweeping and bold actions and the relatively minor influence of Congress, the election unavoidably becomes a decision about him. 

Trump finds himself in a political spotlight of his own creation.  Win or lose, perhaps that’s what matters the most to him. 

Trump’s mythical mandate for war

 

Trump’s mythical mandate for war

‘Unprecedented’ victory?

 

Gordon L. Weil

President Trump justifies his broad assertion of authority to wage war against Iran or abolish entire agencies of government by his election victory claim that “America has given us an unprecedented and powerful mandate.”

He sees his supposedly crushing victory as authorization by the American people of his exercise of extraordinary powers.  Or he knows that his win was not particularly unusual, but believes that he can spin the result by boldly asserting a false claim.   Then, it’s carpe diem – seize the day – and make the most of your opportunity without much thought for the future.

That explains the Iran war.  He thought he could win quickly and did not worry about the long-running economic crisis that his war could create

Karoline Leavitt, his highly promotional press secretary, touted that, “the American people gave President Trump an overwhelming mandate.”

That he could live off his self-proclaimed mandate came from the acquiescence of intimidated congressional Republicans.  “We have taken back control of the Senate. Wow, that’s great,” he proclaimed post-election.

In short, his presidential actions, ignoring historic constitutional practices, are justified by the “unprecedented,” “powerful” and “overwhelming” mandate he received.  

Something is “unprecedented,” when there is no previous example of it.  Implied in his claim was that his victory was by the largest margin ever and that he swept his party into unusually taking control of both houses of Congress.    

What are the facts about the mandate that is the basis of his power?

● Margin of victory.  In 2024, Trump’s popular vote margin was the smallest since 1968.  In the 13 elections over the 52 years beginning with the 1972 contest, no margin of victory in the popular vote had been as narrow as his in 2024.

● Congressional coattails.  A presidential winner being accompanied by the congressional victory of his own party has happened six times since the 1980 election of President Carter, including Trump’s own 2016 election.  Only one of the six retained his party’s congressional majority in the following mid-terms: Carter in 1982.   So, the Senate win was virtually routine.

● The Trump world interprets his 2024 election as an act of the “American people”.   His win did not produce an “overwhelming” or “unprecedented” result, and it was hardly the voice of the American people?  Here’s the data.

            Citizen population aged 18 and older      236 million

            Registered voters                                     174 million     73.6% of total 18+ population

            Voters                                                        154 million    63.7% of registered voters

            Voted for Trump                                          77 million     49.8% of voters

Among all citizens 18 and over, Trump received 32.6% support.

● Number of votes.   Trump did not achieve the greatest number of popular votes for president; Joe Biden did in 2020. 

● Electoral vote.  Presidents Reagan, Clinton and Obama (twice) had bigger electoral vote margins.

The claim that Trump won unprecedented, overwhelming support from the American people is false.  He clearly won the election, but he has used his appraisal of the result as authority for the virtually unlimited use of presidential powers, as he understands them. 

Further, the voters who supported him count as the American people; everybody else is not.  He says he “hates” those who did not support him and misuses his power to go after them.

His four-year mandate misrepresents the political will of a plurality of voters, expressed through an election on a single day.   Their political act, misrepresented by him, can only be reversed or confirmed through political action.

One alternative would be impeachment by the House and conviction by the Senate.   Trump fears impeachment for a third time, which indeed would be unprecedented. 

He strives to retain control of the House, though his methods involve unusual mid-census redistricting and an ongoing effort to reduce the electorate by false claims of fraud.   He must win in the House to prevent impeachment.  This may be a tough challenge given his unpopularity in the polls.   

If impeached, he is unlikely to be convicted in the Senate.  That would require the votes of 67 senators, and that could only result from a huge landslide defeat for the Republicans.  GOP senators would be unlikely to break ranks.   It’s inconceivable that there would be enough Democrats and Independents next year to produce the majority needed to convict.

Still, the alternative could come at the ballot box in November.  The congressional elections emerge more as a referendum on Trump than as a routine collection of partisan, local contests.  The Democrats could take control of the House (likely) and perhaps also the Senate (increasingly possible).

Seats can flip if voters want to impose limits on Trump’s powers and to shift Washington’s focus to affordability issues.  Or they could confirm that they want more authoritarian rule.  Either way, Trump might then learn the true extent of his mandate. 

Drone revolution: great powers waning

Drone revolution: great powers waning

Europe resists U.S.

 

Gordon L. Weil

Domination of world affairs by the great powers is waning.

A great power might be defined as a country that can influence other countries, wherever they are located, but cannot be dominated by any other nation.  Great Britain was once such a power as was the Soviet Union.  More than a century ago, the U.S. succeeded Britain and more recently so has China, occupying the USSR’s slot.

Conventional wisdom says the world will be subject to the dictates of the United States and China.   Russia, once thought to be a member of the great power elite, has weakened and become dependent on China.

The U.S. and China have the two largest economies and armed forces.  They have vast territories, and many nations may depend on their protection.   It looks like they will be rivals for ultimate control and will engage in competition, if not outright conflict, for years to come.  But do they now meet the definition of a great power? 

President Trump translates America First into both pre-eminent domination and the expectation of ready acceptance by Europe, Latin America and others.  But countries resist and are aided by technology that empowers smaller states to evade or deny great power domination.

The drone revolution has changed the nature of war and the role of great powers.  Medium-state brains in the lab beat great power boots on the ground.

Ukraine may be the leader in undermining the notion of great power status.  At first, Washington believed that Russia, which it saw as a great power, could easily overrun its weak neighbor.  Last year, Trump, thinking in great power terms, said that Russia had all the cards, while Ukraine had none. 

Ukraine lost an estimated 99 percent of U.S. support last year.  It developed its own attack drones, that have effectively blunted Russian advances.    A Ukrainian drone costs about $50,000 or less as opposed to a comparable U.S. Patriot missile costing $2 million.  Some drones are reused.

Last August, Ukraine offered to assist the U.S. with its drones, but was dismissed as a client state, seeking attention.   Last week, the U.S. asked for Ukraine’s help with drones.  So much for not having any cards; the great power needed the smaller nation.

Trump has also alienated allies.  He wants Europe’s military to help in his war against Iran, though he had not consulted them in advance.  While they help to the extent it serves their interests, they have declined some of his demands.

Greenland rankles with them.  When Trump raised the possibility of a military takeover there, Europe resisted.  It has been revealed that Denmark, France and Germany sent troops there to blow up its airfields to block a U.S. invasion.

Europe supposedly avoids a deeper break with the U.S. because of American troops there and its nuclear umbrella.  But does Europe really depend on American protection and, if so, from what country?   Russia is the historic NATO threat, but it cannot even defeat Ukraine.  Its ace card is nuclear arms, but France and the U.K. have them as well.  That can affect U.S. power.

Trump called the Europeans “cowards” for not backing his war, but they have found the courage to resist him.  America’s influence as a great power declines.

Ukraine also indirectly reduced China’s clout.  Its major goal is to take Taiwan.  To achieve this goal, it would have to invade the island, more difficult than Russia attempted with neighboring Ukraine.  Having potential access to Ukraine’s drones may allow Taiwan to force a change in China’s calculations and, at the same time, make it less dependent on the U.S. for protection. 

Middle powers have an increased ability to affect world affairs.   Technology levels the field.  AI is increasingly available, adding to the ability to tamper with foreign government software.  The size of ground forces may matter less than the ability to deliver hits through remote technology.  Last week, drones flew unchecked over the residences of key cabinet secretaries. 

More nations can develop their own nuclear weapons.  The EU has announced an aggressive effort to promote regional energy resources, renewables and nuclear.  These moves reduce the power of the world’s giants.

Canadian Prime Minister Mark Carney warned that if a country is not at the table, it is on the menu.  When Trump attacked Iran, expecting Europe to play a supporting role, that’s what happened.  Though it had no influence on his strategy, Europe must pay the higher price of oil and deploy its air forces to support the U.S.

In his second term, Trump has lost other nations’ trust, which depends on reliability and cooperation.   They now seek increased self-reliance, and are forming new inter-regional relationships to escape U.S. influence.

Whatever the beliefs about a coming bipolar world, many countries, especially the middle powers, want to ensure it won’t happen. 

Trump’s war thwarts ‘drill, baby, drill’, boosts renewables

 

Trump’s war thwarts ‘drill, baby, drill’

He boosts renewables

Gordon L. Weil

President Trump is unintentionally remaking energy policy.

Not reckoning with the huge energy impacts from his Iran War, perhaps because he had no thought it would last long, he has brought deep and likely permanent changes to America’s energy economy and possibly the world’s.  He missed Iran’s ability to quickly use its key position as an oil exporter in retaliation for the U.S.-Israel attacks.

He learned that Iran could limit or prevent oil exports through the narrow Strait of Hormuz, causing a large reduction in the amount of oil available in Europe, Asia and elsewhere.   Iran’s move was the major unintended consequence of the war.

The president’s answer was to see Hormuz as a naval blockade that could be overcome by naval force.  Deploy an armada of warships and minesweepers and the major naval powers could quickly end the blockade. 

He did not reckon with Iran’s decision to allow tankers destined for countries not aligned with the U.S. to pass through the Strait.  Now did he count on the effectives of Iran’s small speedboats to harass and damage larger vessels to the point they would not seek passage.

More significantly, he learned that European and other allies would not respond to his request for their help.  He seemed to believe that NATO Article 5 meant they should support the U.S.  But NATO is a defensive alliance, designed to aid member countries that have been attacked. But the Iran conflict is a war of choice, and NATO members have declined to aid its instigator.

Desperate for more oil, Trump eased oil market limits placed on Russia.  He placed a new burden on European allies.  His move will give Russia more to spend on its Ukraine war, and Europe, as Ukraine’s prime backer, would have to spend more to keep pace.

The effectiveness of Iran’s response has been shown by the record drawdown of the international community’s petroleum reserves.  Intended to help when national supplies were reduced by wars and similar interruptions, the reserve has become an instrument of war.   And the drawdown left major countries less well defended and more vulnerable.

The Iran war has gone on longer than Trump had anticipated.  The longer it goes, the longer it will take to restore a quasi-normal petroleum market.  Like Trump’s tariffs, it will encourage the creation of new trading relationships that could continue even after the war ends.  The object lesson of the Iran war is for nations to reduce energy risk.

More U.S. oil production won’t help.   As the world petroleum prices increase, oil companies boost their prices and profits, though their own costs don’t increase.  It happened immediately, and their initial gain has been estimated at $63 billion.  It would be more with a longer war.

Trump’s greatest accomplishment from the Iran war may be his inadvertent assistance to the development of renewable energy.   He has long scorned solar and wind power as being by-products of “woke” environmental policies.   Yet he is creating the conditions that will make renewables more attractive.

Perhaps the principal complaint against renewables is their cost.  They require new investment in facilities and in electric transmission lines.  The new facilities add to the already substantial investment by fossil fuel generators, nuclear power and transmission companies.

Add to the cost the perception that, while oil and natural gas can flow continuously to existing power plants as needed, the availability of wind and solar power depends on the weather.  It is less reliable and must be backed up.

If oil supplies are cut and the price of oil almost doubles, the economics of renewables improve radically.  The cost of redundancy to improve reliability and the development of large-scale power storage becomes more competitive.  In fact, with the price of oil over $100 a barrel, that point may have been reached.

As the Straits of Hormuz blockage demonstrates, geography and politics matter.  A significant share of world oil is jeopardized by a conflict remote from the markets that need that oil, making obvious the case for siting generation closer to markets.  Power supply from domestic renewables is more secure than supply originating abroad or subject to foreign cost-setting.

Wind power from Maine at known costs can become more economically attractive in New England than natural gas, even from U.S. suppliers, subject to world market prices.  Along the same lines, increased nuclear generation and the rebirth of hydropower are now attractive alternatives. 

While the federal government has long subsidized and supported fossil fuels, Trump has given renewables a boost.

Energy prices will increase, as they have, and remain higher.   Reducing pressure on family budgets could overcome environmental concerns about hydro and nuclear, while recognizing the new economic competitiveness of renewables.  

It’s a trade-off where affordability trumps “drill, baby, drill.”

‘Guilt by association’ becomes political weapon

 

‘Guilt by association’ becomes political weapon

Applied to Muslims, Democrats

 

Gordon L. Weil

Last week, a man destructively drove his car into a Jewish synagogue in Michigan.  A guard there killed him.

The man was an American who had immigrated from Lebanon, though much of his family remained there.  Some of them had been killed by an Israeli bomb attack, part of its extensive aerial campaign against Hezbollah, the terrorist group operating there.

The Michigan attack was likely the man’s response to his family’s loss of life.  He acted against an American Jewish religious site, though the bombing had been carried out by Israel, the Jewish state in the Middle East.   Attempting to punish one Jewish community for the actions of another would be a case of guilt by association.

Guilt by association occurs when “an individual is guilty of a crime simply because of his association with the person who actually committed it.”   It is based on an assumption without evidence.

The assumption in this case was that American Jews support Israel’s actions.   In fact, some do and some don’t, so it is incorrect to assume that all Jews agree with Israel simply because they are Jews.

Quite properly, the governor of Michigan quickly condemned the attack.  But she went further, proclaiming that it was an act of antisemitism.   She assumed that the man hated Jews because they were Jewish and acted against them in expressing his sentiment. 

She, too, engaged in guilt by association, ascribing the action to a motivation she assumed rather than the more obvious possibility that the man, not having been known for antisemitism, had not disliked Jews but associated them as members of the same group that had killed members of his family.

Guilt by association has become increasingly frequent in the U.S.  Entire groups are regularly held responsible for the actions of individual members of the group.

Nowhere is that more evident than in attitudes toward Muslims.  The Al Qaeda terrorists who conducted the 9/11 attacks were Muslims.  There are about two billion Muslims in the world, most of them not connected to the Middle East terrorists.  Yet some Americans, reacting to the religious zeal of militant groups, have become strongly opposed to Muslims.

The reaction has gone so far as members of Congress proposing that Muslims should be denied legal entry to the U.S. and, even if legally in the country, should be deported.  Proposals go so far as suggesting that naturalized citizens who are Muslims should be stripped of their citizenship and deported.  This is surely acting out guilt by association.

President Trump asserts that Somali immigrants are “garbage” and says, “We don’t want them in our country.”  In a Minnesota scandal, an organization run by Somalis fraudulently recovered funds meant for food programs.  That action did not involve most of the 260,000 Somalis in the U.S. or impugn their character.

Thanks to guilt by association and a dislike of their country of origin (among what he calls “shithole” countries), Trump wants them removed.  He backed the ICE armed and masked invasion of Minnesota, where the principal casualties were two U.S. citizens, neither of them of Somali origin.

Similarly, Trump says he “hates” Democrats.  Though  he is president of the government of all the people, he treats his opponents as the enemy, implying they are a “socialist” threat to the country.   Because Communists consider themselves socialists, the implication is that Democrats are associated with a traditional American enemy.

Sen. Bernie Sanders, an independent aligned with the Democrats, labels himself as a democratic socialist.  It’s a short step from his affiliation to intentionally confusing the Democrats with socialism, with its barely hidden implications.  The opposition party can be made into a subversive force, which must be defeated.

If you believe GOP allegations that Democrats are socialists, then it becomes possible for voters to abandon them and become unquestionably loyal, conservative Republicans.  One recent report shows that is happening in Maine municipalities, though the cause is not known.  Guilt by association with Bernie’s label is a possibility.

On a much more minor scale, the Epstein documents reveal the names of many people, though none of them has been charged with supporting his illegal actions.  Just having known him is a cause for public scorn and possible retaliation.  Guilt by association has become so common a standard that it can be self-righteously applied to some previously well-regarded individuals.

“Judge not lest ye be judged” is a biblical maxim.  It is obviously tempting to assign guilt to others from a safe or dominant position in society.  But guilt by association clearly has no limits, and anyone may one day find themselves the unwarranted target of those who oppose them.

Not only can it be personally risky, but guilt by association can be a major contributor to the national divisiveness that people say they oppose.