Pete’s Blog 3

Saving America from Itself

Swinging from left to right, an imbalanced America is slowly being brought to its knees by its political extremes. Its biggest threat is neither China nor those crossing its borders in search of better lives. It is ourselves as we blindly elect administrations to impose only their version of America on a declining country.

For over two decades, Americans have paid insufficient taxes, spent too much, saved too little, and now face debilitating healthcare costs. Rebalancing will take decades, and only ideas from both sides of the political isle will save the country from itself.

Failure to rebalance as our leaders continue shuffling deckchairs on Titanic America will leave a severely diminished country for younger Americans. Only small changes in taxes, spending, and consumption, eminently endurable in a country with living standards far higher than most, will evade the nearest icebergs. More ambitious climate mitigation will help avoid the bigger iceberg lurking further out for all.

A cleaner, better balanced, healthier America is within reach. Well-led Americans informed by data and the tyranny of logic will step up to save their country. Glaringly absent are leaders explaining why rebalancing is needed, how it can be achieved, and then making it so.

America’s four major imbalances

In democracies, politicians focus on short-term issues to gain election; difficult adjustments rarely see the light of day. Candidates Trump and Harris offered smorgasbords of delights to earn votes, neither admitting to the decades of fiscal mismanagement regardless of the party in power. America also faces consumption, health, and environment imbalances, and the future grows dimmer each day these remain unattended.

The U.S. Federal government has run budget surpluses only four years since 1970, and endemic deficits have caused Federal debt to explode from 1981’s 31 percent of U.S. GDP to 2025’s over 120 percent. And with deficits and debt ballooning, taxes were routinely cut. Owing over US$36 trillion, the U.S. Federal government is the biggest debtor in world history. With global GDP around $115 trillion American federal debt exceeds 30 percent of global output, bad for both America and the world.

Private consumption has also been debt-financed. U.S. consumption remained 64 percent or less of U.S. GDP from 1953 to 1993 and then rapidly rose to over 70 percent by 2001. The correlation between mortgage equity withdrawals and consumption over the housing bubble shows houses became ATMs as home equity was accessed to spend. When the bubble burst and the illusory equity vanished, withdrawals stopped. But to avoid financial disaster, the Federal government stepped in to rescue failing banks and keep consumption buoyant. In 2025 consumption remains above 68 percent of GDP, supported by public borrowing. America post-2000 has to an extent borrowed its prosperity. Future generations will pay for this overindulgence.

Further, alongside fiscal and consumption imbalances, America has a debilitating health imbalance. In 2020 nearly 74 percent of adults were overweight and 43 percent obese (13 percent in 1962), and no country faces higher healthcare costs. With 17 percent of GDP devoted to healthcare compared to 1962’s 5 percent, America in 2022 spent US$12,742 per capita on healthcare. A twelve wealthy OECD country average was US$6,850, and to boot, U.S. healthcare outcomes were also below every OECD average.

Our warming climate’s existential threat is the final imbalance. While the European Union (EU) in 2023 reported a 37 percent reduction in carbon emissions since 1990, America in 2022 recorded only a 3 percent drop from its 2007 15.2 percent above 1990 levels. Unmitigated, the continued addition of atmospheric carbon will punish our children and grandchildren even more severely.

Though problem identification is easier than problem solution, an economically better-balanced, cleaner, healthier, more equitable America is within reach.

Restoring America’s fiscal imbalance

To restore America fiscally, more revenues (i.e. taxes) are imperative. In 2022 U.S. government revenues were 32.55 of GDP, much lower than most major industrialized nations and far below the 43.27 percent EU average. Revenues from 2002 to 2022 averaged only 30.48 percent. A 3-5 percent increase would bring revenues closer to 2022’s expenditures of 36.26 percent, closing the U.S. budget gap notably and lifting U.S. revenues closer to Estonia and Latvia at 38.69 and 36.54 percent respectively.

But to achieve lasting fiscal balance, expenditure cuts are also needed—hard to achieve in a democracy. With voters unwilling to impose pain on themselves, corrections typically occur only after a crisis. To rebalance without a crisis America’s political parties must agree to revenue increases and expenditure cuts so voters have no choice. Further, to keep vested interests from influencing decisions with harsh choices and tradeoffs, a blue-ribbon panel informed by public finance experts should determine the changes needed. An equal number of republicans and democrats should be on the panel, with the casting vote swapping as decisions are made. This composition and tie break protocol reflects the closely divided electorate.

And as fiscal rebalancing is done, some uncomfortable truths must be acknowledged. Most Americans have neither saved enough for retirement nor can they afford a serious health emergency. Social Security and Medicare/Medicaid are lifelines for many, and the cost of these will rise as America ages. These together with interest, labeled mandatory by the Congressional Budget Office, totaled US$4.5 trillion of the US$6.1 trillion the Federal government spent in FY 2023 (74 percent). Forecasting these mandatory expenditures is essential for informed rebalancing to take place.

In addition, Americans must be encouraged to save more for retirement and change their eating habits too. These actions will moderate the funds needed to support the country’s entitlement programs. And the fiscal imbalance not only derives from a lack of personal savings, unhealthy living, or environmental disaster. The housing bubble and COVID-19 disruptions in 2007-12 and 2019-20 caused sharp increases in federal debt. If Americans want a government to mitigate damaging economic contractions, they must be willing to pay for it.

Lastly, the Trump Administration’s promise to cut US$2 trillion with only around $1.7 trillion in discretionary expenditure is wildly optimistic. Facing rising Social Security, Medicare/Medicaid, interest payments, and increasingly destructive weather, and with defense absorbing half of discretionary expenditure, attaining fiscal balance with cuts alone is very hard to see. Facing this reality, further tax cuts are even more egregious.

Resolving America’s consumption imbalance

History will record the past 50 years as the golden age of conspicuous consumption in America. The poorest U.S. state, Mississippi, has a GDP per capita higher than every EU economy but Germany, delivering an envious material living standard for most in the country. As global consumer of last resort, its large bountiful market was relied on by many to industrialize. Following South Korea, Hong Kong, Taiwan, and Japan, China is among the most recent beneficiaries of America’s consumptive munificence.

George Carlin’s mid-1980s parody of Americans penchant to accumulate stuff underscores over consumption is an old topic, and given this, most Americans could cut consumption by 10 percent and not notice. Americans will certainly be better off consuming less food, and life will continue with 10 percent smaller houses and 10 percent less in the closet. With such a contraction, consumption will drop close to the pre-1990’s 64 percent of GDP. Similar to taxes, only a small decline, say 3-5 percent of GDP, is needed to balance consumption.

A federal borrowing decrease with a concomitant drop in consumption transfer payments of say 2 percent of GDP will also fix the imbalance, while bringing the budget closer to balance too. Among others, these are calculations the panel should consider as it rebalances America fiscally.

Repairing America’s health

Watching 1970s movies shows Americans were not always so far out of shape, and to restore their health Americans must lose weight. Like the war on tobacco, a war on unhealthy living must be widely waged so Americans eat less and exercise more. Thinner Americans will be more productive, have a higher life expectancy, enjoy a better quality of life, and face lower healthcare costs. Overindulging and relying on government transfers to cover debilitating healthcare costs must be minimized. Those already addicted to carbohydrates may need drugs like Wegovy or Ozempic, but younger Americans, with exercise, healthy eating, and discipline can avoid mimicking their parents.

Prescription drugs also cost more in America than in any other country, and reduction here is fundamental too. The 2022 Inflation Reduction Act ensures no senior pays more than US$35 per month for insulin, and from January 2025 Medicare is able to negotiate with drug companies to improve access to costly single-source brand name drugs. Both federal and state agencies must work to mitigate drug costs, just as they should strive to improve the efficiency and accessibility of healthcare itself.

Eliminating food deserts and tempering the marketing of ultra-processed foods and sugary drinks is the final domain that needs attention. Aligned with wellness and the war on unhealthy living, American public health education must stress the dangers of fast and overprocessed foods, and food manufacturers and restaurants must join in the battle. To restore American health, the quantity and quality of food consumed must change.

Dealing with the climate crisis

Markets fail when costs are left for those who did not produce or consume the good concerned, and based on this notion our centuries-long fossil fuel use is the largest market failure in history. In 2022 over US$5 trillion of environmental damage was left unaddressed, close to 5 percent of global output. America, the world’s second largest carbon dioxide emitter behind China, does not fully recognize its responsibility for this cost. It is being left for those who did not cause them or for future generations to cover.

The devastating floods and hurricanes in the Southeast and Gulf Coast in 2024 and the historic destructive Los Angeles wildfires in early 2025 show global warming effects are coming home to roost across America. Repairing infrastructure, from roads to houses to factories to power lines to water supplies, at considerable cost, is now part of American life. Insurance costs are also rising with insurers withdrawing from markets because the risk is too high. Like all worldwide, Americans are paying for our climate intransigence.

Unless we act urgently, these effects will worsen. Unabated, Trump’s drill, baby, drill will only be accompanied by build, baby, build. Yet despite that it has already left the station, America can still more purposefully act to derail the climate destruction train before it gains too much speed. Nothing stops Trump from supporting the transition to clean energy while drill, baby, drill ensures for a while longer.

Most economists support a carbon tax to remedy fossil fuel market failure with proceeds used in mitigation or to develop clean energy alternatives. These taxes may also increase oil prices when producers cut them to prevent cleaner alternatives coming to market. And jobs are also associated with the transition! In his review of climate change economics, Nicholas Stern, former World Bank chief economist, underscored the search for clean energy would lead to “significant business opportunities, as new markets are created in in low-carbon energy technologies and other low-carbon goods and services.” While the country ignores climate change others develop clean energy products, meaning America will have to import even more over coming decades.

A Trump damascene climate conversion would anger the fossil fuel industrial complex but would be in the best interests of all on our fragile planet, oil producers and his own children and grandchildren included. Unlike him, they will face the jeopardy he dismisses as a hoax. Of all our imbalances, the stakes for not remedying America’s environment imbalance are the highest for us all, in America and elsewhere.

Conclusion

Given its imbalances America is certainly in need of disruption, but securing the country’s borders while increasing tariffs, cutting other taxes, and eliminating government waste will not address even its fiscal imbalance. Neither is tariff bludgeoning nor righting political wrongs central to rebalancing. On this path and with the country still in disarray, a 2029 democratic president following a failed Trump second term will mean the cycle repeats. America will party on, still governed by extremes.

Changing this dynamic by moving to the political center and speaking truths no president has ever spoken, Disrupter-in-Chief Trump will be the best president since FDR. And relying on ideas from both sides of the isle, his republican base, independent voters, and democrats will support him too. He may disappoint some wealthy donors and vested-interest driven corporate supporters, but acting in the best interests of most Americans, he will leave a far better country for his republican successor to build upon.

To further buttress his support, President Trump must insist taxes of the wealthy increase more than others, just as he could call on big business leaders to redirect some of their remuneration to the lowest paid in their organizations. With CEO pay of big American corporations about 350 times the average salary of production/nonsupervisory workers, reducing these to 200 times will leave generous pay-packets for top executives while being a permanent costless economic stimulus. German top executives in 2019 earned around 27 percent of U.S. executives; Japanese earned 5 percent.

With Communicator-in Chief Trump providing his imprimatur, America’s political parties will agree that, after the next presidential election, preordained tax increases and expenditures cuts will be imposed. This grand inter-party bargain can easily be crafted over the next three years, and Americans will not shy away from belt tightening and sacrifice if the need is properly explained. Such a deal could supersede the reckless and messy cost-cutting attempted by Trump’s DOGE.

And American business also has much at stake. Though American capitalism would benefit from some rebalancing, America’s lack of competitiveness is not from any business weakness per se. It is due to a poorly led political economy and a failing social contract. Both parties exploit populist differences to impose policies that mostly benefit only narrow and often elite interests, and if rebalancing doesn’t occur and the country collapses, business will sink too. Given this possibility, business should be loudly calling for rebalancing too.

America has also shown itself capable of rebalancing. In World War II federal borrowing rose dramatically to 120 percent of GDP in 1946 and then dropped steadily back to 31 percent by 1980. Done over a decade or longer, the rebalancing suggested here will not irreparably harm American life or liberty.

Speaking as a naturalized citizen who lived half of his life in a struggling South Africa, America in 2025 needs more a Mandela than a Musk to show the way forward. Divided, the country will continue to wane. United by leadership asking haves to give a little more and have-nots to expect a little less, and guided by those speaking uncomfortable truths all must act upon, America will continue to lead as it has done for almost a century.

America partying on means the financial markets will eventually impose the missing discipline. And trapped in a cycle where debt servicing increasingly absorbs tax dollars and living standards plummet as interest rates rise and the US$ declines, undisciplined America might even usher in an economic crisis greater than the Great Depression.

Well-led Americans coming together to rebalance their country will ensure such a disaster is avoided.