The US federal debt is increasing rapidly and unsustainably. As of December 31, 2024, it was approximately US$ 33 trillion with yearly interest payments well in excess of US$ 1 trillion. Interest on the federal debt is now a larger budgetary item than national defense or Medicare. Unless the US federal government changes course, the federal government will go broke. This is an arithmetic certainty.
So what is the incoming Trump administration and its political allies, in and out Congress, doing about this?
Three things: (i) Republicans in Congress want to extend tax cuts, thereby limiting US federal revenues, (ii) Elon Musk and others are looking at reducing the size of the federal government, and (iii) Trump wants to extract money and preferential treatment from other countries.
The first strategy on this list is arithmetic heresy and will only accelerate the arrival of the day of reckoning.
The second strategy would help if it consisted of reducing the three budgetary sacred cows that, in 2023, comprised half of the US federal budget: Social Security, Medicare and Defense. However, doing so is politically unthinkable at this time and the equivalent of political suicide. As a result, government reduction efforts, while potentially helpful, cannot resolve the issue.
The third strategy is what empires have historically done: shift the burden to the empire periphery. This is what Trump is doing and the surprising thing is that few have caught on. Trump’s end game is to make countries pay for: (a) military protection, (b) access to the US market, and (c) the right for the “best and brightest” (however that is defined) to invest and reside in the US where private property and other rights are sacrosanct.
Trump is spooking the world with talk of tariffs, annexation, and invasion. But, like any good stage magician, he is distracting his audience. What he really wants is cheap stuff for his people.
In a Trump world, US exceptionalism is not soft power and diplomacy. In Trump’s world, Washington D.C. is the seat of a vast empire and the subjects of the empire must pay tribute, and lots of it, or suffer the wrath of the emperor.
The problem here is that while such a vision might have been viable in the aftermath of WWII, in today’s world the subjects of the empire have productive and economic capacity in excess of the US and can themselves retaliate and inflict damage on the US. The US, while the most powerful country in the world, needs to think through the consequences of its acts.
The last paragraph does not apply to Canada, however. Because of the essential and vital nature of our main export to the US (i.e., oil, natural gas, and electricity) as well as Canada’s structural and institutional weaknesses, it is Canada that needs to think long and hard as to how to respond to US action. The Premier of Alberta may be correct in wanting to exclude energy from any Canadian response. She has met Trump recently and is obviously concerned as to how Trump would respond to large price increases at the gas pump due to Canadian supply curtailment. Canada is a US vassal and that fact cannot simply be wished away. After all, Canada became a G7 country because the US needed a second vote, not because of Canada’s inherent strengths. Similar to how Ukraine and Belarus were members of the United Nations during the time of the USSR.
