Is America able to lead the world?

President Joe Biden, in foreign policy terms, is like an alcoholic. The U.S.’s meddling in the affairs of other countries is something Biden can’t stop enjoying. He pulled American troops out of the Afghan impasse, but he also declared that the U.S. is ready to wage a proxy war against Russia.

Where would he find the funds to end so many wars? The United States is on the verge of national bankruptcy. The President George W. Bush took this course of action, and he went on an extravagant spending spree along with the GOP Congress. President Barack Obama was supportive of massive spending during the financial crisis. President Donald Trump encouraged Republicans to spend wildly and did little to restrain Democrats after the latter took control, especially after the spread of Covid-19.

And so it goes. It doesn’t matter what Treasury Secretary Janet Yellen warned about the “unsustainable US debt path” and said that it was impossible to sustain under existing tax and spending plans. Everyday, the Biden administration envisions new programs or expenditures. Recent is “Build Back better Lite”, a bill that Joe Manchin, West Virginia senator, negotiated. Its impact if enacted will fuel inflation already in full swing.

The Congressional Budget Office warned of a growing debt burden that eventually will put the average wastrel developing state to shame. Governments don’t become bankrupt. Insolvent governments can renegotiate or even cancel debts, speed up the printing press and devalue currencies. They also stop paying their employees and cut other social programs. They cease to be a world colossus that continues to dominate the world, subsidizing defenses near and far and intervening in remote hotspots of no importance for their people.

How long can Washington continue to play such an inordinate international role?

CBO reports look like horror scripts. The total national debt is about $30.6 trillion. Publicly held debt (subtracting intra-government lending) is $23.9 trillion, a bit over 100 percent of GDP. The pandemic has relaxed budget pressure, but the projected rise in U.S. debt is inexorable and soon will bust the record of 106 percent set in 1946 at the Second World War’s end. With strong economic growth the ratio came down dramatically, with an average of 46 percent over the last half century, and at 35 percent as recently as 2007, before the financial crash triggered massive bailouts, subsidies, and other outlays.

A decade later, a worldwide pandemic caused another tsunami of spending. Although those expenditures will continue to ebb, after 2024, warned CBO: “Outlays then steadily increase, reaching 30.2 percent of GDP in 2052. Rising interest costs and growth in spending on the major health care programs and Social Security–driven by the aging of the population and growth in health care costs per person–boost federal outlays significantly over the 2025-2052 period.”

Revenues are also high but not as high as they should be. Indeed, reported the budget agency: “revenues rise to 19.6 percent of GDP in 2022, one of the highest levels ever recorded, because of sizable increases in collections of individual income taxes. After falling in relation to the size of the economy for the next few years, revenues increase in 2026, largely because of scheduled changes in tax rules. They continue to rise after 2030 as an increasing share of income is pushed into higher tax brackets. In 2052, revenues reach 19.1 percent of GDP.”

The growing gap between revenues and outlays, made worse by higher interest rates, leads to larger deficits. CBO explained: “In CBO’s projections, federal deficits over the 2022-2052 period average 7.3 percent of GDP (more than double the average over the past half-century) and generally grow each year, reaching 11.1 percent of GDP in 2052. That projected growth in total deficits is largely driven by increases in interest costs: Net interest outlays more than quadruple over the period, rising to 7.2 percent of GDP in 2052. Primary deficits–that is, deficits excluding net outlays for interest–grow from 2.3 percent of GDP in 2022 to 3.9 percent in 2052.”

Interest Rates have started to rise in response to the Federal Reserve’s efforts at reducing inflation. The Federal Reserve cannot reduce interest payments without renouncing the national debt. This would, naturally, destroy Uncle Sam’s credit rating. This means that this spending is eliminated, which leaves less money to spend on everything else including military and foreign policy. To pay back past borrowing, the federal government will continue to borrow more.

Indeed. The agency’s estimations are alarming. Today, interest equals 1.6 percent GDP. Between 2043 and 2052 that number is likely to average 6.2 percent, more than total domestic discretionary expenditures and almost as much as Social Security spending. That could mean $1.2 trillion annually in interest.

What does all this mean for federal debt repayment? Detailed CBO:

By the end of 2022, federal debt held by the public is projected to equal 98 percent of GDP. The rapid growth of nominal GDP–which reflects both high inflation and the continued growth of real GDP (that is, GDP adjusted to remove the effects of inflation)–helps hold down the amount of debt relative to the nation’s output in 2022 and 2023. In CBO’s projections, debt as a percentage of GDP begins to rise in 2024, surpasses its historical high in 2031 (when it reaches 107 percent), and continues to climb thereafter, rising to 185 percent of GDP in 2052.

That number, 185 percent, is stunning. Great countries like Greece reached the fiscal wall long before they could reach that point. Washington has long benefited from the absence of effective monetary competition. This is gradually changing. Many people around the globe are desperate for alternatives to the dollar. It is currently used by the U.S. as a tool for political dominance. Investors who are concerned about America’s ability to pay a growing debt load will likely demand higher interest rates.

The U.S. will be weakened fiscally by rising debt in many other ways. Explained the agency: “When the government borrows, it does so from people and businesses whose savings would otherwise finance private investment in productive capital.” Thus, Washington displaces the latter, reducing the rate of economic growth. With lower earnings, the public can pay more interest and spend less.

A fiscal crisis is more probable. Warned “Concerns over the government’s fiscal situation could lead to an unexpected and potentially spiraling rise in people’s expectations of inflation, a large fall in the dollar’s value, or a loss in confidence in government’s ability to repay its full debt, all which could make it more probable for a fiscal crises.” This is because the United States has a key role in international financial systems, and could lead to a global crisis .”

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When interest rates, deficits and outlays rise, how will this affect military spending? The Blob is a group of foreign policy experts who use the phrase “national security” to defend increased military expenditures. This argument is less persuasive the more expansive the foreign policy, and the higher the military expenditures. Today, Americans are realizing that the defense of America is not in keeping troops in countries like Afghanistan, Iraq and Syria. Popular enthusiasm to treat Asian and European industrial countries as military dependents will wane, especially with the increasing U.S. financial difficulties. Americans will be asking why the U.S. is doing so much for others to do so little.

Another favorite argument for those favoring open Treasury doors to the Pentagon is the claim that the nation’s debt crisis stems from domestic outlays, and not military spending. A few simple reforms, such as reducing Social Security benefits or raising the retirement age, would fix everything.

While social programs will occupy an increasing amount of budget and GDP, as baby-boomers retire, military spending remains a major burden. Even if entitlement reform were simple, it would have been done years or even decades before. American will likely be skeptical if they are told their entitlements should be reduced to allow the wealthy Europeans to spend more money on their welfare systems.

Of course, tax increases are an option. Although the U.S. has become accustomed to receiving a free ride due to many benefits that are financed with large amounts of foreign currency, there is still a lot of risk involved. Political resistance to raising rates or adding levies is likely to be strong, particularly since most of the money will go to defense of those who are less wealthy. It is unlikely that “Pay up so your allies can afford less” will be an electoral winning slogan. Because they are beneficial to Americans, middle class benefits can be quite appealing. Contrary to this, a large portion of U.S. defense budget is used for foreign countries.

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This year’s war at Europe’s Eastern border saw the U.S. do more than NATO members to help Ukraine, while Washington’s supposed allies tried to tie it up in conflict with Russia. The same people in 2020 told pollsters that in a crisis they opposed aiding their NATO allies but expected the U.S. to intervene on their behalf. It was even more bizarre to see a submissive president Joe Biden visit the Kingdom of Saudi Arabia promising U.S. military personnel for personal protection of the oppressive and corrupt Saudi royals.

World War II saw America as the dominant economic power in the world and was able to face the Soviet Union, its gang of allied states and clients. After the collapse of USSR, the United States was the world’s most powerful military force. These benefits are disappearing.

Americans must decide their priorities and whether or not they will continue to play globocop in the face of a fiscal crisis. While war is necessary sometimes, for America, it has been a silly, almost trivial matter of choice. While the endless Global War on Terrorism was terrible, conflict with Russia, China, North Korea, Iran or North Korea would make matters worse. There will be at least one positive outcome to the looming US debt crisis: Americans must rethink their foreign policy.