Yves here. In an analogy to Putin remarking how he has found US presidents make genuine-sounding commitments to improve relations with Russia, then renege due to presumed bureaucratic undermining, Satyajit Das argues that both the US presidential contenders have limited freedom of action on many fronts. Readers who understand MMT can dispute his view that our rising Federal debt levels are a big impediment. But countering that is that MMT advocates point out regularly that too much deficit spending relative to economic capacity will generate inflation, and so that constrains spending. In addition, the US has this bad proclivity to effectively use MMT principles for spending largesse (deficit spend when deem necessary, like giving Ukraine oodles of weapons and budget) and not consider the other part of the equation they stress, the importance of using what they call net spending to boost the capacity of the economy. None other than the staunch neoliberal Larry Summers has pointed out that infrastructure spending boosts GDP by as much as $3 for each dollar spent, meaning it more than pays for itself. But engaging in that sort of prioritization on a widespread basis would require verboten industrial planning.
By Satyajit Das, a former banker and author of numerous works on derivatives and several general titles: Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011), Fortune’s Fool: Australia’s Choices (2022). His latest book is on ecotourism and man’s relationship with wild animals – Wild Quests (2024).Originally published at The New Indian Express
Modern US politics follows Roman satirist Juvenal’s prescription of “panis et circenses”—bread and circuses. After the soap opera surrounding President Joe Biden’s candidacy—John Kenneth Galbraith held that anyone who says he won’t resign four times will do so—the contest has been re-energised, but voters have few meaningful choices.
First, the candidates’ policies are similar. Neither candidate will address the budget deficit. The Congressional Budget Office projects that the 2024 shortfall will be $2 trillion, growing to $2.8 trillion by 2034—6-7 percent of the US GDP. The ability to control outgoings is limited.
Three-quarters of the total spending is mandatory—with social security, major health programmes and interest nearing $900 billion, around 3 percent of the GDP and nearly 18 percent of government revenues. With the untouchable defence constituting over 40 percent of the rest, only 15 percent of spending is discretionary. Politicians, irrespective of ideology, are reluctant to raise taxes to levels required for sound public finances.
Debt will rise from the current 99 percent of GDP to 122 percent by 2034. Like Ronald Reagan, modern leaders think government debt is big enough to take care of itself.
Inflation outcomes depend on energy and food prices as well as geopolitical and climatic events. The theoretically-independent Federal Reserve sets interest rates.
Democrats are cautious about the effects of globalised supply chains on employment. Republicans have abandoned their free trade roots. They embrace victimhood—America is taken advantage of by the world—and their new blue-collar constituencies. Trade barriers implemented by Donald Trump and maintained by his successor are like to increase under either candidate.
Both candidates espouse industrial policy, which is really rebadged protectionism. Sanctions, tariffs, trade restrictions, incentives for domestic procurement and subsidies are designed to re-, near- or friend-shore industrial production. It is unclear whether ‘Make in America’ is even possible, or how reduced access to and increased prices of products will restore greatness and prosperity. Restrictions on cheaper electric vehicle imports and solar panels from China are inconsistent with the planned shift away from fossil fuels.
The need to keep the lights on and feed energy-intensive lifestyles will mean, irrespective of campaign promises, both candidates must rely on fossil fuels.
Business regulation may not be eased. Trump initiated the probe into Google that has led to it being branded a monopolist.
America’s immigration policy is to drain foreign talent educated in and at the cost of their home countries to supply skills. It pays lip service to being tough on illegal immigration, which provides essential cheap labour to various industries. The flow of refugees at the US’s southern border results from deep-seated security and development problems in Latin America and further afield, often related to US adventurism. Neither candidate has a workable solution.
The candidates’ position on defence and national security are similar. They are based around American exceptionalism and a unipolar worldview that allows the US to venture forth to slay foreign monsters when it chooses. After a few top-secret security briefings, all US presidents, irrespective of ideology, succumb to the demands of the military-industrial complex.
For both candidates, China remains the primary threat. Any retreat from an adversarial approach seems unlikely. Ultimately, both sides are committed to preserving the US empire. International cooperation to strengthen global institutions, including reworking of international monetary arrangements to reduce the role of the dollar, will be resisted.
Second, even where there are policy initiatives, it is questionable whether they will be implemented. The elected president may not have a majority in the House of Representatives or the Senate. Given the lack of bipartisanship, legislation will be difficult to pass. Even if the same party controls the White House and Congress, there is no guarantee that new measures will be passed due to procedural subterfuge by politicians skilled in the dark arts.
On budgetary matters, the US Congress has completed appropriations before the start of the fiscal year only four times in the past 40 years. The last time Congress passed all budget bills on time was nearly three decades ago in 1996. There is the ongoing problem of raising the debt ceiling. Recent presidents have sought to govern more through executive orders that are vulnerable to legal challenge, which limits the scope for policy initiatives.
An activist Supreme Court keen to expand its authority limits the scope for a new administration. Ideologically rigid positions and an arcane emphasis on textualism based around interpretations of the founding fathers’ intentions cannot deal with issues that did not exist centuries ago.
The president’s ability to appoint judges and key officials to bodies such as the Federal Reserve is limited by tenure and the timing of vacancies. Congressional approval of appointees, which increasingly resembles a mediaeval inquisition, is a lottery.
Unlike in a command economy, market-driven systems are built around decentralised decisions by businesses and households. Government power is naturally limited. Many crucial choices, such as those on energy and climate, are now increasingly driven by corporations and individuals with their own agendas.
Third, as UK PM Harold MacMillan held, politics is about “events”. Presidential power is constrained by international responses to US actions and geopolitical events. Most administrations find themselves reacting to events like those in Ukraine and West Asia, or emergencies like the pandemic.
Democracy, as the cliché states, is messy. But the lack of differentiation between contestants and policies results in celebrity ‘American Idol’ politics and divisive culture wars focused on difficult issues of gender, identity, religion and personal freedoms. Campaign pitches degenerate into “I may have problems, but the other guy is far worse”. Many voters would agree with Henry Kissinger’s observation: “It’s a pity that both of them can’t lose.”
It feeds growing disillusionment with the political process. Low US voter turnouts—just over half the eligible population votes; 2020’s 66 percent participation was an outlier—make a mockery of universal suffrage and democratic engagement.
The problems are not unique to the US. Galbraith was right: “Politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable.”