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A Cash-Strapped US Faces Diminished Political Clout

The US continues to confront record budget deficits, high unemployment rates, stagnant revenues and global recession – with no clear end in sight. Individual citizens, worried about rising taxes and health-care costs as well as cuts to traditional programs for the elderly, want to cut spending. Naturally, such a bleak economic outlook results in reduced US expenditures on foreign products or support for foreign-policy initiatives that drain the budget. Other nations can no longer expect the US to serve as a global policeman, providing a check against historical or emerging hostilities, warns author Michael Mandelbaum. No other country stands ready to step into the US role. Some leaders and nations may take advantage of the vacuum; others could rally as a group, cooperating on security or assistance priorities. Willingness to prepare for such global action has yet to be seen. – YaleGlobal

A Cash-Strapped US Faces Diminished Political Clout

The US can no longer afford grand foreign-policy initiatives
Michael Mandelbaum
YaleGlobal, 31 August 2010
Goodbye to all that: US troops in Bosnia in 1996 to enforce peace, a mission unlikely to be repeated. Enlarge Image

WASHINGTON: This month marks the second anniversary of September 15, 2008, a date that will be remembered as one of the worst moments in the history of the global economy. On that day US investment bank Lehman Brothers collapsed, triggering a major financial crisis and dramatically worsening a worldwide recession whose effects are still being felt.

The date also matters in the history of international politics, accelerating what is destined to be the most important international political trend of the second decade of the 21st century: the growing financial obligations of the United States government. Coping with these obligations will limit the resources available for American foreign policy, thereby reducing the nation’s international role. Because that role is so important – the United States acts as the world’s de facto government, providing to other countries many of the services that governments typically furnish to the societies they govern – this will have a major, and in all likelihood dangerous, impact both on the global economy and on international politics. That impact is the subject of my new book, The Frugal Superpower: America’s Global Leadership in a Cash-Strapped World.

Coping with growing financial obligations
will limit the resources available for US foreign policy, and reduce the nation’s international role.

In the years leading up to the Lehman collapse, the United States substantially increased its national debt. To cope with the financial crisis that the collapse brought about, and the deep recession that it aggravated, the US government borrowed more money, further expanding this debt. Most ominously for the country’s fiscal future and for its foreign policy, the bill the American government expects to pay for its principal entitlement programs for the elderly – Social Security and Medicare – will soar in the decades ahead with the retirement of the 75 million members of the so-called baby boom generation, who were born between 1946 and 1964. 

Because the government will not be able to borrow all the money necessary to meet these obligations, and because the cost of paying the interest on trillions of dollars already borrowed will rise sharply, the US will have little choice but to raise taxes and reduce benefits for all citizens. In these circumstances, the domestic support for foreign policies of all kinds will fall sharply. Americans will feel considerably less generous than in the past about providing the funds for their country’s foreign policy, and the government will have less to spend on it. Consequently, the United States will do less in the world in the future than it has in the past. This will transform international relations.

The government cannot borrow all the money necessary to meet its obligations…the US will have to raise taxes and reduce benefits for all citizens.

The events of September 2008 and thereafter have already eliminated an important international economic role of the United States. With Americans spending less and saving more, their country has ceased to be the world’s consumer of last resort, on which other countries can rely to buy the products they make for export. Another major international economic role is still intact, but because of mounting national debt, looks increasingly shaky: The dollar remains the world’s principal currency, but as much because of the lack of a viable substitute as because of affirmative global confidence in American economic dependability. That confidence is beginning to waver. The long-term continuation of the special status of the American currency in world markets is not assured.

As for international politics and international security, some tasks that the United States has carried out will almost certainly be eliminated. The use of American military forces to protect people persecuted by their own governments, which the United States undertook in Somalia, Haiti, Bosnia and Kosovo, will not be repeated. Nor will the strenuous military effort to foster political stability and democracy in which the American government is engaged in Afghanistan and Iraq be launched elsewhere or even continued in those countries for much longer.

As for international politics and security, some tasks that the US has carried out will be eliminated.

The deterioration of the US fiscal condition will also affect the American defense budget. By one estimate, the US accounts for about 45 percent of the world’s military expenditures. Pressure to reduce these expenditures will increase over time, which will, in turn, affect the rest of the world because most defense spending supports missions that are of major importance to global security. Specifically, the personnel and weaponry paid for by the defense budget make a US military presence possible in three crucial regions – East Asia, Europe and the Middle East.

In the first two regions, that presence helps keep order by serving as a buffer between and among countries that are not actually hostile to one another but that harbor fears that hostility might someday arise. The American security role in Europe reassures the Western Europeans that if Russia should attempt to intimidate them, the United States will protect them as it did during the Cold War. At the same time, the American military presence in Europe and the enduring alliance with Germany reassure Russia that Germany itself, which invaded Russia twice in the first half of the 20th century, will not become an aggressive military power again.

The similar US role in East Asia reassures the countries there that they have a means of counterbalancing China, while reassuring China that Japan, like Germany an American ally and one that invaded and occupied the Chinese mainland in the 20th century, will not reprise its past pattern of conquest. The American military presence in both regions, although reduced from Cold War levels, enables the countries in each to feel that their region is safe and that they can behave accordingly, just as a policeman on patrol imparts a sense of security to a neighborhood. Any draw down of US forces in Asia will add to the nervousness of the countries of the region, which face an increasingly powerful and assertive China.

No other country or group of countries is willing or able to do what the US does
around the world.

In the Middle East, American military power serves to contain Iran, whose government is deeply and openly committed to, and works actively for, overturning the existing political and economic arrangements in the region. An American military presence in some form will be necessary to deter Iran as long as the clerical regime holds power in that country, a presence that will be all the more urgently needed if that regime succeeds in its efforts to acquire nuclear weapons.

Growing US debt, and the measures necessary to cope with it, will make it more difficult to sustain American military deployments in each of these regions, and a substantial reduction of American forces in any of them could well have adverse political and economic consequences. An American withdrawal from East Asia or Europe could produce heightened suspicion, perhaps leading to arms races among the countries of these regions, which would threaten trade and investment in both. A diminished American presence in the Middle East could trigger a regional war, which would threaten the availability of its oil, on which the global economy depends. 

In short, the impact on all countries, not only the United States, of the growing financial obligations of the American government could be serious indeed, especially since no other country or group of countries is willing or able to do what the United States does around the world. With so much wealth destroyed and with the sharp downturn in production, the direct, short-term economic consequences for the world of the September 15, 2008, events have already been severe. The indirect geopolitical consequences could, over the long run, turn out to be even worse.

Michael Mandelbaum is the Christian A. Herter Professor of American Foreign Policy at The Johns Hopkins School of Advanced International Studies. This essay is adapted from his new book, “The Frugal Superpower: America’s Global Leadership in a Cash-Strapped Era,” published by PublicAffairs.          
Rights:Copyright © 2010 Yale Center for the Study of Globalization

Comments on this Article

4 September 2010
We may be going into a very hard time. However, there will be things we can do. Foreign policy of the United States can economise , for instance, by encouraging and substituting regional cooperation and arrangements for unilateralism where possible, by relying on diplomatic rather than military offensive if it is wise and more effective, and by reducing such armed forces as can be done without.
-Yoshimichi Moriyama , Unnan City, Japan
4 September 2010
I aint surprised the US is having record deficit.Its goal as a global cop is hypocritical.They supported the Telaban against the Russians.Now they are fighting the Telbeban. During the cold war,they supported China agaginst the Soviet Union.Since the latter collapsed,the Pentagon is suffering from enemy deprivation syndrome which is needed to support the immense defence budget.
Hence China fits neatly as an enemy.The problem is China is unlike the of SU.Its economy is enmeshed with US .Although it is not a military/nuclear threat on the scale of the SU,it t is notVietnam/Iraq/Kosovo where it can be attacked with immunity/impunity.
The US shd realise the world has changed and any between it and China will be fraught with immense cost and damage. A time is coming the continuing deficit will force it to reexamine its war like policies.
-Mohd Iskandar , Muar.Malaysia
3 September 2010
The United States had done both goog things and bad things; it has acted from altruism and egoism; it has tried to do things which lay within its power and things which lay beyond its power.
In East Asia at least, its continued political, economic and military presence is desired by most East Asian countries.
There is a way where there is a will, which I understand is an English proverb. But, as Prof. Mandelbaum seems to say, there is no way where there is no money.
-Yoshimichi Moriyama , Unnan City, Japan
2 September 2010
The September 11, 2001, terrorist attack on New York City and the Pentagon, by a former CIA trained Muslim Rebel named Osam Ben Laden was the start of the decline in America's power to police and provide economic resources for the world. Seven year later, on September 15, 2008, America continues to sink deeper and deeper into a "Nazi Germany," type of ecoonmic dept which will seemingly signal the "Fall of The USA Empire. The Federal Reserve Bank can't continue to make trillions of USA dollars to prevent the "Fall of Europe and the USA. World War III appears to be coming much to soon for the average American who is living off of government Food Stamps, because the unemployment rates in America is at least 40%, and even higher for American Negroes who are still at the bottom of the USA economic scale. Unless the USA reinstates the military Draft, the USA could easily be invaded, through Alaska, and Mexico, World War II, D Day style with 100 million Chinese, Russian, and Korean, and Muslim troops. Since the military Defense computers have already been hacked by the People's Republic of China, America could easily be conquered without one nuclear missile being fired!
-Malcolm X King, PhD , Chicago, IL
1 September 2010
The suggestion that the US acts as "policeman" which reassures all interested parties is a gross misrepresentation of the title "policeman" and a sinister revision of historical circumstances. Policemen act according to laws and are not biased in favor of certain parties. They do not seek to create laws which favor themselves nor do they take it upon themselves to determine punishments. The US is unwelcome in many parts of the globe and whatever purpose it serves there only prevents that country to develop its own equivalent. Nobody is reassured by the presence of a bully, and real security exists only in one's own strength.
-Mishmael , Canada
1 September 2010
U.S. does not foster democracy.It plays a double barrel in world real politics and is hypocritical in its preaching of democracy and actual practice abroad A lot of democratic govts were overthrown by U.S. like Iran in 1953 and Allende of Chile in 1970s.If only U.S. was geniune in its preaching and practice of democracy its soft power would have been intact.U.S. supported dictators when it suits its interest like Saddam Hussein.No hypocrisy please.No more printing of money not backed by gold or otherwise which U.S. was doing since 1973.This foolery will end soon with the rise of BRIC countries .U.S. imposed its will on the world with Bretton Woods 1973.The card game has ended and would be grateful if U.S. can stast working.Finance wars by printing money.Practise democracy aboroad and stop esp supportying dictators to win back yo soft power.Another behemoth will arise and hopefully there will be greater peace in the world.U.S. power comes with its military might but term as soft power.It makes and breaks international laaw as a cowboy.Latest is refusal to ratify UNCLOS and in the past blockage of international waters off Cuba in 1963.
-Patric , Malaysia
31 August 2010
One thing is certain.USA faces the reality of emerging multipolarity. A tectonic shift in the balance of power is underway.Russia, INDIA and China will be among global powers by 2025.
-Patricio Gomes , Sao Paulo Brazil