Mitch Daniels, the former governor of Indiana and ex-president of Purdue University, recently penned a provocative article in The Washington Post acknowledging that he may have been too optimistic in thinking that the United States could navigate its political and financial problems without a major crisis. He was certain until recently, he reports, that the nation would eventually overcome its mounting troubles, as it has on many occasions in the past. He is no longer quite so sure about that, as he writes in the article.
Governor Daniels cites several factors behind his growing doubts, including rising debt, the inability of Washington to rein in spending, and a widening gulf between the two political parties. These were already significant problems a decade ago, but they are growing more serious year by year. The federal debt has doubled over the past decade from $16 trillion in 2013 to more than $34 trillion this year, with trillion-dollar budget deficits forecast for years to come, even as interest rates are rising. The two parties, led respectively by President Biden and Donald Trump, seem to live in separate political universes. Instead of trying to find agreement on important issues, they focus on finding ways to destroy one another. Governor Daniels is right: things do not look good.
In the course of his essay, Governor Daniels cited my own book Shattered Consensus (2015) as one of the volumes published in recent years that forecasted a national crisis of some kind. In a review of the book several years ago in The Wall Street Journal, he sympathized with my argument in part, but also pointed out that I was vague as to how such a crisis might unfold. He had a point. While I had a sense that a crisis was developing, I was unsure what events might precipitate it or how the crisis might be resolved. I wrote that rising debt would eventually cause a financial crisis as the Baby-Boom Generation retired in the 2020s and as spending on entitlements soared. It did not appear, given the drift of events, that political leaders would make the difficult decisions required to head off such a crisis. This is where Governor Daniels and I disagreed: he was confident that leaders, in a crunch, would step up to make those decisions and accept the necessary sacrifices.
I noted a couple of additional political developments during that period that suggested a major crisis was brewing. There was, for one thing, President Obama’s declaration that he wanted to “fundamentally transform” the United States. Why would a responsible leader wish to “transform” the most successful nation-state in history? It gradually became clear what Obama meant by this: he looked forward to a time when his multiracial and multicultural coalition would overthrow the repressive white voters that had governed the country for generations up until his election. It seemed obvious even then that his vision could not be accomplished without a political upheaval of some kind. Obama, in effect, set in motion a political war that would be layered over the nation’s mounting fiscal and financial problems.
There was also the response to Governor Walker’s 2011 Wisconsin Act 10, which placed major curbs on public-employee unions in the state. That was a controversial piece of legislation, though widely supported by Republicans and officials in local jurisdictions who had to deal with rising salaries and pensions for public employees. Yet, instead of making their case and accepting the outcome, Walker’s opponents sought to shut down the state government in order to stop the bill from going through. Democrats in the legislature fled the state to block a quorum in the body, and public employees paralyzed the state capitol in Madison with unprecedented protests, sit-ins, and disruptions. Though the bill passed (and has been a success by all measures), these reactions were a sign that the mounting fiscal issues in that state and in the nation as a whole could no longer be addressed without an upheaval.
Things have not improved since that time. The federal debt has doubled, as noted, and federal interest payments this year will approach $1 trillion, exceeding expenditures on national defense. Last year the federal government spent $6.1 trillion, 23 percent of the GDP, and ran a deficit of $1.7 trillion. The Congressional Budget Office forecasts deficits exceeding that sum every year for the next decade. The response to the coronavirus pandemic led to more spending and debt, on top of the spending and debt incurred during the 2008 financial crisis. How many of these crises can the nation absorb while remaining solvent?
There are sixty-seven million Americans receiving Social Security; sixty-six million receiving Medicare; eighty-eight million receiving assistance through Medicaid and related programs; and forty-two million on what used to be called food stamps. More than half the population receives government assistance of some kind. There are more people receiving government assistance than the number of people employed across the economy. Most of the beneficiaries of these programs are voters: and all of these programs are defended by active advocacy groups. Can these benefits be cut in a financial squeeze? Millions of undocumented migrants have crossed into the country in recent years, many of whom seek public assistance. What will happen to them in a crisis? There are also foreign claims on the federal budget: Ukraine and Israel, plus military and other forms of assistance to dozens of other countries. At an accelerating pace, the funds used to cover these expenses are borrowed, thus adding to the debt and interest expenses. Those nations now depending on the United States might do well to make plans for the time when this assistance dries up.
Like most, I did not foresee the rise of Donald Trump, who had announced his candidacy just a month before Shattered Consensus was published. No one in the establishment of either party took him seriously, though the same could not be said of Republican primary voters and a significant swath of independents and conservative Democrats—many of whom were happy to give the upraised middle finger to leaders in Washington.
Trump outdid Obama by challenging the post-war consensus with regard to foreign policy, criticizing trade with China, the wars in Afghanistan and Iraq, and the failure of European nations to ante up for their own defense. More importantly, Trump countered Obama by charting a cultural revolution of his own in response to the “diversity” revolution. Many in Washington and in the press claimed that Trump’s campaign was “unfair,” as, in their view, Obama’s revolution was legitimate while Trump’s was not.
The Washington establishment, which generally accepted Obama’s agenda, did not take kindly to Trump’s more fundamental objections to the post-war order or to his defense of the political and cultural claims of those white voters across the country who were expected to step aside peacefully as Obama’s diversity coalition took their place. Democrats in Congress, with the assistance of officials in the FBI and the Justice Department, did what they could to sabotage Trump’s presidency and drive him from office. They had some success in that enterprise, though at the expense of alienating seventy million voters across the country who cast ballots for Trump in 2020. Meanwhile, Trump has not gone away, as officials in Washington hoped—and expected—he would. This year he is looking to finish what he started in 2016. In light of recent polls, he may succeed.
Trump’s presidency and the opposition to it, along with his presidential campaign this year, has provoked a “legitimacy crisis” in the United States in which millions of Americans have lost confidence in key institutions, including the federal establishment in Washington, leading universities, and the mainstream news media. Obama’s diversity coalition continues inadvertently to threaten those same institutions from a different direction by undermining their legitimacy—see Claudine Gay—thus intensifying the crisis. What happens when a majority of the population loses confidence in the legitimacy of the political order? Will they still send their sons and daughters into the military? Will they still make sacrifices to fight wars in foreign countries, or to support wars like those taking place in Ukraine and Israel? Will they still accept the judgments of courts of law? At some point they may stop paying their taxes. The United States is beginning to look like an “administered” polity that does not have the support of its population.
These are the accumulating issues that caused Governor Daniels to throw in the towel, abandoning his confidence that national leaders will step in to avert a crisis. He does not know, nor does anyone else, how it will end. The point is that the national enterprise is now vulnerable to any number of surprises or shocks, such as a stock market crash, a run on the dollar, rising interest rates, a serious recession, another pandemic or financial crisis that places new pressures on the federal budget and the central bank, or still another war that requires U.S. intervention—all at a time when the enterprise has neither the resources nor the political capital to deal with them.
Large events have a way of creeping up on us without advance notice. There is still hope for a “soft landing,” though as Governor Daniels acknowledges, the evidence is pointing in a different direction.