Pete’s Blog #2

How our 47th President can really make America great again and ensure his greatness too!

President-elect Trump has a unique opportunity to really make America great again. As those seeking election do, candidates Trump and Harris offered short-term delights to voters and rarely mentioned the serious long-term imbalances our country faces. To ensure American greatness endures, these must also be addressed.

As my book Lead, Follow, or Fail in Chapters 4 and 5 reveals, America faces four key long-term imbalances: a fiscal imbalance, a consumption imbalance, a health imbalance, and an environmental imbalance. And failure to implement the challenging but bearable choices to remedy these imbalances will mean coming generations inherit a severely diminished America unable to meet its obligations, financially or otherwise, at both home and abroad.

With the mandate he received President-elect Trump can, if he so chooses, attack our imbalances and set us on a far more sustainable path. In so doing he may anger wealthy donors and vested-interest driven corporate supporters, but he will gain the support of Americans worn down by swings from left to right and back as extremes dominate the political discourse. An economically better-balanced, cleaner, more equitable, healthier America is within reach. Missing are leaders explaining why rebalancing is needed, how it can be achieved, and then making it so.

If President-elect Trump implements this blog’s ideas, America will be immeasurably better off. He will speak truths no president has spoken and act to remedy the imbalances these truths demand. And in so doing he will unite our country at a very divided time. His republican base, independent voters, and even democrats will support him, and as a bonus, so will the world. Rather than leaving a more divided country even worse off in January 2029, and instead of America facing a likely leftward swing that further deepens its problems, he will leave a far better country for his successor, a fellow Republican. This will cement President-elect Trump’s enduring greatness too!

Anyone close to President-elect Trump seeing this blog, please pass it on to him. Ideas from two former South Africans can help him fix our country, to ensure both its and his greatness endures!

Just imagine!!

Fixing our fiscal imbalance

Since 1980, but for a few years in the late 1990s, our federal government has annually used debt and not taxes to balance its budget. Lead, Follow, or Fail reveals America’s fiscal misbehaviors under both Democratic and Republican administrations, President Trump’s first term included, and also reports Americans pay lower taxes than most in the developed world. OECD data shows in 2020 that US taxes were 7th lowest among 39 countries at 25.54 percent of GDP; 5 of the lower 6 were developing countries, and the sample average was 33.5 percent. The low US percentage does not align with a great power that has run fiscal deficits since 1980. Now, with the world’s 9th highest and burgeoning national debt to GDP of 130 percent, and an aging population unable to cover its retirement or healthcare costs, tax increases and entitlement cuts are essential to ensure our country’s economic sustainability.

Facing rising retirement, healthcare, debt, and climate disaster mitigation costs, and a reasonable request that is also common sense, President-elect Trump must ask the rich to pay more in taxes. Further, asking Elon Musk and Vivek Ramaswamy to lead a cost-cutting crusade to eliminate government waste will free up resources but not move the needle much. Administrative costs are a small portion of the federal budget; Social Security, Medicare/Medicaid, defense, and interest absorb most federal funds. Rising rapidly, interest is now higher than defense.

Lead, Follow, or Fail also calls for an expert panel to determine by how much taxes should increase and entitlements be cut to place our country on a sustainable fiscal path. Ideally, this panel should be above politics, and both political parties should agree to implement its findings. Acknowledging joint responsibility for our fiscal mess and showing a much-needed political maturity to ensure that hard to impose fiscal discipline is put in place, at the next presidential election both Republicans and Democrats should canvass on a platform that revenue increases and expenditure cuts are imperative. Americans do have the fortitude to endure the belt tightening needed; they will not balk at this challenge if presented properly. Lead, Follow, or Fail estimates taxes/entitlements may have to be increased/cut by around 3 percent of GDP respectively, well within our ability to absorb. But this percentage is a placeholder for impartial experts to certify.

Other economic slights of hand offering pain-free solutions have also been used, for example, claiming higher economic growth will permit rebalancing without increases or cuts. This promise is even more egregious when tax cuts are considered essential to attain the growth. Labeled “voodoo economics” during the 1979 Republican primary, this mantra became the supply-side economics Ronald Reagan relied upon after his election in 1980. But most of Reagan’s gains were not from supply-side magic, but from classic counter-cyclical Keynesian economics: cut taxes to put money in private hands and increase government spending (some funded by borrowing) to stimulate economic growth.

Lead, Follow, or Fail fully reveals America’s fiscal misbehaviors and explains why they must be stopped. As fiscal fixes are considered, a clear choice emerges: do we cope with endurable pain now as our economy is rebalanced, or do we not act and face harsher pain later? If party on is chosen, financial markets will eventually impose the discipline needed. With a government finding it more and more difficult to borrow, interest rates will rise as the US$ declines, and our living standards will plummet as import and debt costs rise. If ignored too long, our indiscipline may lead to a US debt default that stops all in its tracks. With a worldwide crisis not unlike the 20th century’s Great Depression, this outcome must be avoided at all costs.

Fixing our consumption imbalance

Our consumption imbalance started in the 2000’s housing bubble when mortgage equity withdrawals and private consumption grew in tandem as Americans increased consumption off illusory home equity gains. Consumption was 64 percent or less of GDP from 1953 to 1993 and rose to over 70 percent by 2001, a very rapid increase in a short time. The bubble bursting meant our privately funded borrowed prosperity ceased, but the federal government stepped in to stabilize financial markets and kept US demand buoyant as the country regained financial footing. Consumption did not go back to levels before the bubble and remains today over 68 percent of GDP. Public borrowing simply continued our borrowed prosperity.

Any hope that the housing bubble would remain the high-water federal intervention mark were dashed a few years later when intervention again sustained an economy literally shut down overnight by the COVID-19 pandemic. This second major intervention in less than a decade lifted federal debt to levels far beyond the previous 1946 postwar record and left the country in the perilous fiscal state it now faces. The US$5 trillion injection extended our borrowed prosperity by putting money in the hands of Americans without matching production and with pandemic supply chain disruptions led to inflation worldwide. Though lower than most, American inflation would have transpired had President Trump and not Joe Biden been in office.

Tax increases, federal cuts, and borrowing decreases will signal the end of the American golden age of conspicuous consumption, how Lead, Follow, or Fail describes the second half of the 20th century in the country that pioneered industrialization and led the world into the Post-Industrial era. With our needed fiscal rebalancing, the next generation of Americans will consume less than their parents did. Similar to the percentage outlined above, Lead, Follow, or Fail estimates our consumption must drop by around 3 percent of GDP too. Yet, when compared to other industrialized nations, a cut of even 20 percent in living standards will still mean Americans are far better off than most. Average American home size before the 1960s was 1,500 square feet and by 2022 had reached 2,566. Homes 20 percent smaller at 2,000 square feet—the year 2000 median—will not end American quality of life as it is known. Neither will Americans eating 20 percent less food or owning 20 percent less clothing. In fact, 20 percent less food will mean healthier Americans and lower healthcare costs. Cutting consumption so Americans live within their means and increasing taxes and cutting entitlements so our federal government does too will result in a stronger better-balanced America.

Rising inequality has also long been an American malaise, and the rich getting richer while income stagnates or declines for the rest is an additional cause of our consumption imbalance. Lead, Follow, or Fail explains why markets behave in ways that need adjustment and holds that American CEO pay exceeding average worker pay on the shop floor in our biggest firms by over 350 times is unsupportable. In 1965 the ratio was 20.4. Reducing CEO pay to even 200 times average worker pay would still leave American CEOs far better off than their European or Japanese counterparts. Imagine how lowest-paid workers in our big companies would react if President-elect Trump raised taxes on the rich and urged big company CEOs to reduce their compensation and direct the savings to the lowest paid in their companies. Allocating in this manner even 20 percent of CEO pay to lower paid workers would be a non-inflationary permanent economic stimulus that benefits many. It would also provide a much-appreciated cushion to the tax increases less wealthy Americans might face as we rebalance fiscally.

Fixing our health imbalance

With the NIH/CDC reporting in 2020 that almost 74 percent of American adults were overweight and nearly 43 percent obese (compared to 1962’s 13 percent), eating less is now fundamental to our country’s economic competitiveness. In addition, with America’s healthcare costs now over 18 percent of GDP compared to 1960’s 5 percent, bankruptcy through healthcare as unhealthy Americans grow old is a distinct possibility. Widely infusing healthy eating, wellness, and physical activity across our national culture will help restore our public health, and a war on unhealthy living as was waged on tobacco usage will urge Americans to take greater responsibility for their health. Reviewing 1970s movies shows Americans were not always so far out of shape, and though how and why obesity occurs is complex and multifaceted, efforts to eliminate food deserts and temper those marketing ultra-processed foods and sugary drinks must be made.

Imagine if President-elect Trump acknowledged his Big Mac consumption was not good for him unless in enjoyed in moderation and that all Americans should eat more carefully and exercise more vigorously to regain physical balance. Those already addicted to carbohydrates might need Wegovy or Ozempic to lose weight, adding an enduring high cost to our already costly healthcare. But younger Americans, who with exercise, healthy eating, and discipline will stay in physical balance, must be warned so they do not reach the state their parents did. Educators and healthcare providers must better equip Americans about eating and health maintenance, and it is time all Americans were asked to take back responsibility for their personal health and wellbeing. This includes regaining our health so our healthcare costs are mostly covered by our own resources. Overindulging and relying on government subsidies or transfers to cover the cost is an outcome to avoid. Eating properly and exercising to maintain the correct weight is a cost-free way to avoid this outcome.

This element of rebalancing is difficult to raise, and anything said here is not to fat shame or diminish anyone. Thinner Americans will be more productive, have a higher life expectancy, enjoy an improved quality of life, and face significantly lower healthcare costs. It is imperative to find ways to highlight this sensitive issue and remedy the lethal imbalance that has appeared over the past two generations.

Fixing our environmental imbalance

Climate-change denying, which President-elect Trump embodies, is where greatest disagreement to making America great again is encountered. Hopefully, the President-elect listens closely to Elon Musk and changes his mind. Lead, Follow, or Fail puts denialist notions to rest by noting that fossil fuel use over the past two centuries is the largest market failure in history. Markets fail when the cost of producing/consuming goods are left to those who did not produce or consume them. Essentially, America, as the world’s largest polluter until China overtook it, has refused to recognize the full costs of climate change/global warming. These costs are being left to those who did not cause them and for future generations to cover. Global meltdown, Lead, Follow, or Fail’s third economic scenario, describes the consequences if sufficient steps to reduce carbon in our atmosphere are not taken. This dystopian scenario is not a future to leave to our children or grandchildren, and Lead, Follow, or Fail speculates it is more likely than balanced global growth, the best scenario for our collective futures.

America’s climate denialism has meant that for the past two decades America’s response has been poor, and it also means the country is behind in the clean energy race. In addition, the devastating floods and hurricanes in the Southeast and Gulf Coast and the historic forest fires across the Southwest and Northeast indicate climate change/global warming effects are coming home to roost across the continent. Americans, like others worldwide, are paying for our climate intransigence. Repairing infrastructure, from roads to houses to factories to electrical transformers/power lines to water supply, all at considerable cost, is now part of life in America. Insurance costs are also rising; many Americans are finding insurers unwilling to take on the environmental risks they face or are finding insurance cost so expensive as to be prohibitive.

Unless we act urgently these effects will worsen significantly over coming decades with President-elect Trump’s drill, baby, drill accompanied by build, baby, build. The IMF reports over US$5 trillion of environmental damage in 2022 alone and also reveals fossil fuel subsidies surged to US$7 trillion in the same year, a stark indication of oil producer power. America is out of balance environmentally which, if continued unabated, will prove disastrous for us and the generations to come. Yet despite the fact that the climate destruction train has left the station, America can still act more purposefully to counter the crisis and derail the train.

Many economists support a carbon tax to remedy the market failure that cheap fossil fuel has caused with proceeds used to mitigate global warming/climate change or invested to develop clean energy alternatives. Equally, a carbon tax may also increase oil prices when producers cut them to prevent cleaner alternatives from coming to market. One way to ensure alternatives don’t reach the market is to keep fossil fuels cheap, and oil producers have for decades manipulated prices to achieve this end. These behaviors not only protect market positions; they also increase the likelihood that global meltdown is the scenario we all eventually face.

Imagine if President-elect Trump accepted urgent action is needed to counter the existential threat that climate change/global warming presents. While angering the fossil fuel industrial complex, he’d be acting in the best interests of all who inhabit our fragile planet, oil producers and their families included! More importantly, he will be acting in the interests of his own children and grandchildren, who unlike him, will be around to face the jeopardy he dismisses as nonsense. Of all our imbalances, the stakes for not remedying our environmental imbalance are by far the highest.

Conclusion

Increasing tariffs will disproportionately impact poorer Americans and be inflationary, and securing our borders—though necessary—while cutting other taxes, eliminating Federal waste, and ignoring climate change will certainly not make America great again. Neither will Republicans nor Democrats acting alone. Our political parties must move beyond wokeism/fascism (as each describes the other) and work together to remedy America’s imbalances. In this joint effort they must restore our country’s fiscal balance by increasing taxes and cutting entitlements, and they must show our country can resolve its consumption and health imbalances by asking for sacrifices Americans will endure once they understand what they are and why they are needed. Finally, the effects of global warming/climate change must be fully acknowledged and our country’s vast resources deployed to mitigate this existential threat as quickly as is possible.

One reason Lead, Follow, or Fail was written is to reveal how such an America might be reached. This will really make our country great again and ensure exceptional America continues to show the way forward for all. Just imagine!!