KEY TAKEAWAYS
- Fiscal deficit: The U.S. faces a growing fiscal deficit that neither major political party seems prepared to address meaningfully. Short-term policies have deepened the problem, with debt now reaching critical levels. Printing to infinity coupled with the gradual yet ongoing process of de-dollarization is a toxic combination.
- Erosion of global hegemony: The U.S. dollar, long the world’s dominant reserve currency, is losing ground. As more countries opt for alternative currencies, America’s ability to influence global finance weakens.
- Federal Reserve’s challenges: The Federal Reserve struggles to control inflation and stabilize the economy, raising concerns about its capacity to manage monetary policy effectively. This loss of control may lead to greater economic instability.
- Military power in question: Once unrivalled, U.S. military dominance is being challenged by nations like China and Russia, whose advanced technologies could undermine America’s global strategic presence.
- Over-financialization: The shift from industrial production to financial markets has made the U.S. economy overly dependent on volatile sectors like debt and real estate, making it vulnerable to future crises.
- Multipolarity: The rise of a multipolar global order poses both a challenge and an opportunity. To remain competitive, the U.S. must adapt, moving from unilateral dominance to cooperative engagement with other powers.
The upcoming U.S. election has stirred considerable debate about the future trajectory of American governance, economic policy, and global influence. However, beneath the surface of campaign promises and political rhetoric lies a grim reality: regardless of which party assumes power, neither candidate’s policies will fundamentally alter the profound structural issues facing the United States. In fact, the country is likely to continue its current path of financialization on steroids, economic stagnation, and declining global hegemony.
The illusion of change: Election rhetoric vs. economic reality
Every election cycle brings a wave of promises from candidates on both sides of the political spectrum, pledging to resolve America’s mounting challenges. Yet, as the 2024 election approaches, it is increasingly clear that the rhetoric from both the Republican and Democratic camps is just that—rhetoric. Both Donald Trump and Kamala Harris, representing their respective parties, have outlined ambitious plans, with Trump emphasizing tax cuts and Harris pushing for increased social spending. However, the reality is that neither candidate is likely to effect substantial change in the most pressing issue: the unsustainable fiscal deficit.
America’s deficit continues to grow at an alarming rate, exacerbated by policies from both parties that prioritize short-term gains over long-term fiscal health. The unwillingness to take decisive action only deepens the country’s fiscal woes, with the deficit set to balloon regardless of which candidate is elected.
The inescapable burden of debt
The U.S. fiscal deficit has now reached such staggering proportions that it threatens to destabilize the entire economy. In 2023, the federal deficit was $1.7 trillion, equal to 6.3 percent of gross domestic product; and the U.S. government spent a total of $875 billion on interest of public debt, with $497 billion on interest for debt held by the public. These figures are only set to grow as the national debt expands further. The key problem, however, is that the nominal cost of servicing the debt is outpacing economic growth. Once this tipping point is reached, the U.S. will be unable to sustain its debt burden without resorting to drastic measures carrying their own catastrophic consequences. Regardless of the election outcome, the U.S. is on an unsustainable fiscal path, where debt continues to grow unchecked.
The gradual yet decisive decline of the U.S. dollar’s global hegemony
At the heart of America’s economic and geopolitical power lies the U.S. dollar, which has served as the world’s primary reserve currency since the Bretton Woods agreement in 1944. The dollar’s dominance has allowed the U.S. to exert outsized influence on global financial markets, enabling it to finance its deficits by selling Treasury bonds to foreign governments. However, this dollar hegemony is now under serious threat as the world moves toward a multipolar economic order.
Countries like China, Russia, and even traditional U.S. allies such as Singapore are increasingly shifting away from reliance on the dollar. Bilateral trade agreements in non-dollar currencies are on the rise, reflecting the growing sentiment that the unipolar era of U.S. economic dominance is drawing to a close. The multipolar world that is emerging challenges the dollar’s status as the default global currency, and with that, the U.S.’s ability to dictate global financial terms is waning.
The erosion of the dollar’s global dominance is a gradual process but one that has accelerated in recent years. This is a gradual yet decisive process—and presently it is gradual, until it reaches the point of not being gradual anymore. This shift began in earnest after the 2008 financial crisis and gained momentum following geopolitical events like Ukraine’s 2014 moment. The slow and steady decline of the dollar’s hegemony could soon lead to a seemingly sudden collapse in confidence, with potentially disastrous consequences for the U.S. economy.
The Federal Reserve’s loss of control
Compounding America’s fiscal issues is the Federal Reserve’s increasing inability to manage the economy. The Federal Reserve, long seen as the steward of monetary policy, has in recent years struggled to maintain control over inflation, interest rates, and economic growth. The recent decision to cut interest rates has backfired, as inflation remains stubbornly high, and the yield curve has reverted to an inverted state—a classic sign of looming recession.
The Fed’s failure to rein in inflation or stabilize long-term interest rates suggests a deeper issue: the central bank has lost its ability to effectively manage the U.S. economy. This loss of control is symptomatic of a broader breakdown in the U.S. financial system, particularly the growing disconnect between the financial markets and the real economy. As the U.S. Treasury and dollar complex continues to unravel, the likelihood of a severe financial crisis increases.
The political implications of the Fed’s impotence are profound. Neither Trump nor Harris has articulated a viable plan for addressing these issues, and it is unlikely that either will be able to restore confidence in the Fed’s ability to manage the economy. As the Federal Reserve loses control, the U.S. is entering uncharted territory, where economic outcomes become increasingly unpredictable and dangerous.
The illusion of military power
For much of the 20th century, U.S. global influence rested not only on its economic might but also on its unrivalled military power. However, as U.S. military prowess has been shown to be ineffective in conflicts like Afghanistan and Ukraine, and as rival powers such as China and Russia develop superior military technologies, the U.S.’s ability to project power globally is in question.
The Pentagon’s enormous budget—sustained by the very deficit that is weakening the economy—supports over 800 military bases worldwide. Yet, maintaining such a vast military presence is becoming increasingly unsustainable. Moreover, the U.S. military’s technological edge is eroding, particularly as countries like China and Russia develop hypersonic missiles that presently outmatch U.S. defences.
The question now is whether the U.S. can afford to sustain its military commitments globally, or whether it will be forced to bring its troops home. However, even if the U.S. retrenches militarily, it faces the problem of reintegrating a vast military force into a domestic economy already struggling with unemployment and economic dislocation. The once-unquestioned dominance of the U.S. military is fading, much like its economic hegemony.
The financialization of the U.S. economy
Another underlying theme in the discussion of America’s decline is the over-financialization of its economy. Over the past several decades, the U.S. has shifted away from industrial production toward a financialized economy, where growth is driven by inflated financial assets and equities rather than real economic activity. The rise of debt bubbles in sectors like commercial real estate, retail real estate, corporate debt, and personal debt has created a fragile financial system that is vulnerable to shocks.
This over-reliance on financial markets is compounded by the fact that much of the financial system has moved out of traditional, regulated banking institutions into less-regulated areas such as private credit and exchange-traded funds (ETFs). These sectors are less transparent and more prone to systemic risk, which could trigger another financial crisis akin to the 2008 meltdown.
The U.S. political system, with its short-term election cycles and focus on immediate electoral gains, has done little to address this growing problem. Both parties have failed to push for meaningful reform that could rein in the excesses of the financial sector or support a more balanced, sustainable economy.
The challenge of reindustrialization
Amid all these challenges, there is growing recognition that the U.S. must reindustrialize if it hopes to remain competitive in the global economy. However, the path to reindustrialization is fraught with obstacles. The regulatory environment in the U.S. is notoriously burdensome, making it difficult for new industrial projects to get off the ground. Projects are often delayed, run massively over budget, or are scrapped entirely due to regulatory hurdles and bureaucratic inefficiencies.
Moreover, the U.S. cannot compete with countries like China on labour costs. Attempting to reindustrialize would require paying wages that are unsustainable within the current economic framework, leading to massive inflation in consumer prices. Additionally, the U.S. lacks the natural resources needed for large-scale industrial production and is reliant on imports from countries it has labelled adversaries, such as China, Russia, and Iran.
The challenge of reindustrialization is one that neither Trump nor Harris has fully addressed. While both candidates have offered vague promises about bringing jobs back to America, neither has proposed a viable solution to the structural issues that make reindustrialization so difficult. Without a clear strategy, the U.S. risks falling further behind in the global economy.
The multipolar world and America’s future
Ultimately, the proverbial elephant in the room is the rapidly ongoing shift from a unipolar world dominated by the U.S. to a multipolar world where power is more evenly distributed among nations. As countries like China and Russia gain economic and military strength, the U.S. must come to terms with the fact that it can no longer dominate the global order as it once did, and reinvent its role in order to be optimally positioned in tomorrow’s world.
The future of the U.S. depends on its ability to adapt to this new reality. Rather than clinging to outdated notions of global hegemony, the U.S. must work to become a great nation among equals in a multipolar world. This will require significant reforms in governance, economic policy, and foreign relations—to avoid further decline. The territory of the U.S. is notoriously safe: two oceans left and right, Canada and Mexico above and below. It does not suffer from a paucity of resources adequate to sustain its population. In a scenario according to which the U.S. ceases to pursue an unviable unipolarity by degrees of force—an ‘End of History’, a ‘full-spectrum dominance’, an ‘indispensable nation’ mindset, all of which are not aging well—and accepts the predicament of a multipolar world, it may very well have a bright future as a great nation among many. A stubborn collision course in order to bring about by force the return of an impossible unipolarity, however, endangers this best-case scenario.
The United States must reconsider its approach to global engagement, moving away from the unilateralism that defined much of the 20th century and toward a more cooperative, multilateral stance. In a multipolar world, nations are increasingly interdependent, and the U.S. will need to forge alliances based on mutual respect and shared interests rather than coercion and military dominance. The future success of the U.S. lies not in maintaining global supremacy but in securing its position as a leading nation within an equitable international framework.
The need for a fundamental shift
The challenges facing the United States are profound and multifaceted. The election of 2024, while important, will not fundamentally alter the trajectory of the country unless deeper structural reforms are undertaken. Neither Donald Trump nor Kamala Harris offers solutions that address the root causes of America’s decline—an unsustainable fiscal deficit, the erosion of the U.S. dollar’s global hegemony, a failing Federal Reserve, and the collapse of military and economic dominance.
The political system, with its focus on short-term gains and election cycles, has failed to produce the kind of long-term thinking needed to navigate this transition. Moreover, the financialization of the economy, coupled with the country’s inability to reindustrialize effectively, threatens the very foundation of American prosperity.
In this context, the rise of a multipolar world presents both a challenge and an opportunity. The U.S. can either resist this shift and continue down the path of decline, or it can embrace the reality of a more balanced global order and work to strengthen its position as a leading nation among equals. To do so, however, will require a radical rethinking of the country’s governance, economic strategy, and foreign policy.
Only by addressing these core issues can the United States hope to avoid the fate of other empires that failed to adapt to changing global dynamics. The road ahead is uncertain, but one thing is clear: without significant change, the U.S. will face a future of economic stagnation, diminished global influence, and deepening societal division. The time for bold action is now, and the stakes have never been higher.
* Sotiris Mitralexis holds a doctorate in political science and international relations; he works at University College London as a research fellow.