“The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.” —Bertrand Russell (1872-1970), British philosopher. 1933.
“We will tariff and tax foreign countries to enrich our citizens.” —Donald Trump (1946- ), American business tycoon and U.S. President, (in his inaugural speech, January 20, 2025).
“We should…recognize that one of the key factors behind our nation’s great prosperity is the open trade policy that allows the American people to freely exchange goods and services with free people around the world.” —Ronald Reagan (1911-2004), 40th U.S. President, 1981-1989, actor and republican politician, (in a radio address, November 26, 1988).
“We must make our choice. We may have a democracy or we may have wealth concentrated in the hands of a few, but we can’t have both.” —Louis D. Brandeis (1856-1941), U.S. Supreme Court justice, 1941.
“Populist regimes have historically tried to deal with income inequality problems through the use of overly expansive macroeconomic policies. These policies, which have relied on deficit financing, generalized controls, and a disregard for basic economic equilibria, have almost unavoidably resulted in major macroeconomic crises that have ended up hurting the poorer segments of society.” —Rudiger Dornbusch (1942-2002) and Sebastian Edwards (1953- ), respectively MIT and UCLA economists, in “The Macroeconomics of Populism in Latin America”, 1991.
In its entire history, the United States has never been confronted, as it is the case since January 20, 2025, by a president and an administration so ostensibly authoritarian and neo-fascist and so openly defying its constitution and the principle of the division of powers enshrined therein. This has resulted not only in upending the internal functioning of its democracy, but also in creating havoc in its external relations with neighboring countries and the entire international community.
This new domestic political reality stems in part from a number of pre-existing factors and trends. It would be useful to identify them in order to know whether the current American political crisis could lead to even more serious crises in the future.
I. Half a Century of Rising Income and Wealth Inequalities in Favor of the Super-rich Americans
Over the last half century, the US economy has increasingly become an economy of the super-rich, by the super-rich and for the super-rich. Indeed, it is an economy where the highest-earning 10% of Americans account for nearly 50% of all consumer spending and who control most of the levers of political power.
Over the years, according to a report of the Economic Policy Institute, CEOs’ compensation pay-packages in the largest American corporations have far outstripped workers’ wages and benefits. In 1965, The CEO-to-worker income ratio was 21-to-1. In 2021, the CEO-to-worker income pay ratio was at its highest level recorded since 1965 and stood at a ratio of 399-to-1. —It is thus not surprising that more than 60% of American families live paycheck to paycheck.
Another indicator of persistent income disparity in the United States is the U.S. federally mandated minimum wage, which has not been raised since 2010, and which is set at a paltry 7.25 U.S. dollars per hour. American workers have fared better in some states where the minimum wage goes from $14 an hour in Rhode Island to $17 an hour in the District of Columbia. However, five states (Alabama, Tennessee, South Carolina, Mississippi and Louisiana) do not have a state minimum wage law, and some other states have minimum wages even lower than the federal minimum wage. In a period of rising prices, a non-inflation adjusted minimum wage translates into a decreasing real minimum wage.
What this means is that there are two distinct economies in the United States. On the one hand are the top 10% of people with high incomes and huge fortunes, profiting from tax breaks and high stock market prices. Then on the other hand, are the 90% of Americans whose real incomes have been lagging behind inflation for years and whose wealth is mainly concentrated in real estate or none at all.
As a result, wealth inequality is very high: In 2023, the 3 richest American multi-billionaires had more personal wealth than the bottom 50 percent of the population. Similarly, the top 10% richest American households owned about two-thirds of total wealth, or twice what the other 90% of Americans owned. In contrast, the lowest 50% of Americans only owned 3 percent of the total wealth.
II. Political Corruption Is High and on the Rise in the United States
It would not be surprising that there could be a link between income disparities and the growing concentration of wealth in the United States and political corruption. Such corruption had been declining during the twentieth century, and especially after WWII, but it has been on the rise during the first quarter of the twenty-first century, as money is playing a dominant role in politics and as corporate media have become more concentrated.
Business mogul Donald Trump’s presidential elections in 2016 and 2024, and the arrival of “plutocrat bullies’ at the highest echelons of the US government are no accident.
Such a trend was greatly reinforced in January 2010 when the US Supreme Court removed several of the century-old laws that prevented the ultra-rich and superbillionaires, some with personal fortunes above $50 billion (Elon Musk, Jeff Bezos, Mark Zuckerberg, etc.) from unduly influencing the electoral process, from the early stages of an election to the composition and functioning of government.
There is always the danger in a democracy that crony capitalism rises and public officials sell political favors to private interests. That is the definition of political corruption. On that, one should keep in mind President Franklin D. Roosevelt’s (1882-1945) wise words when he warned Americans that
“The liberty of a democracy is not safe if the people tolerate the growth of a private power to a point where it becomes stronger than the democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group…”.
III. Public Indebtedness in the United States Is Reaching High Levels as Compared to the Economy
The level of the U.S. National debt (est. at $36.6 trillion) as a percentage of the Gross Domestic Product (GDP) (the latter est. at $29.8 trillion) is at a lofty 123% as of March 2025, according to the US National debt clock. Also, the US government fiscal deficit is $2 trillion, which is equal to 6.7% of GDP.
To somewhat personalize things, the U.S. national debt per American citizen is currently $107,019, while the same amount of national debt per American taxpayer si $323,047. In other words, the United States like other Western economies is awash with debt.
To keep things in perspective, members of the EURO monetary zone must keep public fiscal deficits at no higher than 3% of GDP, and each country’s public debt should not be higher than 60% of GDP. (N.B. Some member countries have public deficits and debt ratios much higher, which could eventually be a threat to the survival of the EURO zone itself.)
The U.S. public debt conundrum could be a handicap for fiscal policy if an economic recession were to unfold in the coming months or years. The House of Representatives recently adopted a Republican budget resolution that called for $4.5 trillion in tax cuts and a $2 trillion reduction in federal spending over the next decade. This is in line with the Trump administration’s domestic political agenda.
IV. Speculation
After the financial mortgage-backed securities crisis and the Great Recession of 2008-2009 that followed, the U.S. government has adopted a fiscal policy of large deficits, while the U.S. Federal Reserve central bank has experimented with the new expansive monetary policy of Quantitative Easing (QE).
While fiscal deficits mean more government borrowing and an increase in the national debt, it also means the issuance of additional Treasury bonds. Such sales tend to depress bond prices and to drive up interest rates. However, a Quantitative easing monetary policy by the central bank, where a central bank purchases large amounts of government bonds or other financial assets in the open market, has the reverse effect and that pushes interest rates down.
US fiscal deficits reached nearly $1.5 trillion in 2009, but doubled up to $3.0 trillion at the onset of the Covid-19 pandemic, in 2020.
Some financial markets, especially the stock market, have been in a euphoric phase, even in a bubble, for some time. Indeed, stock market evaluations in the United States can be considered stretched, as measured by the price/earning ratio (P/E), which was 36.8 at the end of 2024. Such a level is a lofty two standard deviations above the modern-era average, which is 20.4, an indication that the market is currently overvalued and could correct at any time.
Speculation and the Cryptocurrencies
President Trump has said in the past that cryptocurrencies are a scam against the US dollar. However, he named in his administration officials whose objective is to deregulate the issuance of such artificial digital assets. He went one step further in signing an executive order, mandating the US government to establish a Strategic Bitcoin Reserve, as well as a separate Stockpile of Digital Assets. A question thus begs to be asked: Is this a way to encourage speculation and the manipulation of the price of cryptocurrencies?
V. Social and Economic Division
Nobody can deny that the United States is currently as divided a nation as it has ever been since the 1861-65 Civil War. President Donald Trump is focusing on what divides Americans, with the result that the country is split in two.
We live in a time when advanced economies are undergoing rapid technological changes (Artificial Intelligence, robotization of tasks, etc.). In the United States, some workers and some regions are benefiting from these new industries, while others are stagnating.
One would think that the American central government should assist displaced workers and less dynamic regions with infrastructure and social assistance spending.
Nevertheless, the US government spends hundreds of billions of dollars annually to support costly wars in the Middle East and Eastern Europe, in addition to assuming the cost of maintaining some 800 military bases abroad. The result domestically is a system of social services, particularly health care, which is inferior to what can be found in other advanced economies.
It is therefore understandable that some Americans feel abandoned by their government and could easily fall prey to the first demagogue who comes along offering them instant solutions, such as taxing foreign countries.
The current US Trump administration 2.0 is relying on ignorance, lies, improvisation, confusion, revenge and failed policies to centralize government decision-making at the White House, under a one-man control system, in violation of the spirit and words of the U.S. Constitution, besides upending international relations. In so doing, President Trump may make promises and give the appearance of attempting to solve problems in the eyes of some of his followers, but in the process and in reality, he could end up worsening problems and even creating new ones. Sooner or later, one learns that no government can act as if the laws of economics have been abolished.
In such a dysfunctional context, economic and political polarization is likely to persist in the United States and possibly increase in the coming months and years.
VI. Imperialism, Protectionism and Great Economic Intellectual Confusion
Trump’s economic imperialism is even more abhorrent than the old one, which was based on American sanctions unilaterally imposed on a whole series of countries. In fact, President Trump often behaves like a schoolyard bully.
Indeed, since his inauguration on January 20, 2025, the Trump 2.0 administration has pursued an unprofessional, incoherent, erratic, whimsical, arbitrary and full of reversals trade policy, by unilaterally raising tariffs on imports. (N.B. tariffs are domestic regressive indirect taxes levied on imported goods.) In so doing, it has upended domestic and international economic relations besides threatening to plunge the world economy into chaos. On top of it all, D. Trump has invoked a fake “state of emergency” in order to usurp Congresses’s responsibility to raise taxes, a move that can be constitutionally contested.
Perhaps the most questionable and ill-advised example is the unilateral tariffs imposed on products imported from Canada, a neighboring country with which the United States has a military air defense treaty (NORAD) and a free trade agreement since 1988 (which was expanded to include Mexico in 1994, and which was revised in 2000 with the signature of President Donald Trump 1.0.) In addition, the U.S. and Canada have been part of NATO since its foundation in 1949. All this belongs to an unreal world.
The big losers in Trump’s trade wars affecting about $1.5 trillion in U.S. imports and the industrial dislocation that they will produce are going to be the consumers in all countries involved, including the American consumers. Less wealthy households will especially suffer the most as they are going to face rising prices while their incomes are going to stagnate or decline. The end result will be stagflation in many countries, i.e. rising prices and slower economic growth.
A historical reminder: President D. Trump seems to have been persuaded that the tariffs imposed at the end of the 19th century, when the US economy was largely agricultural and had some infant industries, could be transposed to the 21st century, where the US economy is fully developed and a leader in the world economy. Stiff tariffs of 49.5% were indeed imposed on imports in 1890, to protect infant industries and to give them time to become competitive. However, the experiment backfired badly.
Such high tariffs and other causes paved the way for the worst economic depression ever seen until then, the Panic of 1893, which lingered on until 1897. It had been preceded by an increase in the cost of living for most Americans, balance of payments deficits, bank runs, a credit crunch, a stock market crash, business bankruptcies and a 25% unemployment rate.
It would be a tragedy if such a failed economic experiment were to be repeated more than a century later in an economic and financial environment that could be more sensitive to disturbing political shocks.
Conclusion
Everything would seem to be in place for the United States to enter into a perfect storm with a convergence of several crises: political, economic, financial and constitutional crises. Most of those crises are purely man-made.
Indeed, for the time being, the Trump administration 2.0 has been behaving like a bull in a china shop. It is a major agent of chaos, uncertainty and destruction all around. —One should never forget that it is relatively easy to destroy prosperity with bad policies, but it is much more difficult to build a sustainable economic prosperity.
Inequalities: Income and wealth inequalities in the United States are important and rising.
Corruption: The main American political institutions (Congress, the Presidency and the Supreme Court) are more corrupt nowadays than at any other time in the country’s history, and all indicates that it is going to get worse.
Over-indebtedness: The ratio of the U.S. national public debt to the gross domestic product (GDP) is higher today than it was at the end of World War II, and about to rise even further.
Speculation: Financial market exuberance is especially high at this time, especially in the stock markets. A downward trigger shock could cause a severe correction at any time.
Division: The United States is a deeply divided country, both socially and regionally, and it could become even more so.
Imperialism: Economic imperialism à-la-Trump is currently unchecked and it is likely going to produce stagflation, not only in the US but also in many other economies, which would result in lower standards of living all around.
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This article was originally published on the author’s blogsite, Dr. Rodrigue Tremblay.
International economist Dr. Rodrigue Tremblay is the author of the book about morals “The code for Global Ethics, Ten Humanist Principles” of the book about geopolitics “The New American Empire“, and the recent book, in French, “La régression tranquille du Québec, 1980-2018“. He was Minister of Trade and Industry (1976-79) in the Lévesque government. He holds a Ph.D. in international finance from Stanford University. Please visit Dr Tremblay’s site or email to a friend here.
He is a Research Associate of the Centre for Research on Globalization (CRG)
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