Copelo i ch, Ma k
A icle
How he US Dolla 's Dominance Nega es Fea s Abou Deb
and De ici s
In e economics
Sugges ed Ci a ion: Copelo i ch, Ma k (2024) : How he US Dolla 's Dominance Nega es Fea s Abou
Deb and De ici s, In e economics, ISSN 1613-964X, Sciendo, Wa saw, Vol. 59, Iss. 5, pp. 307-308,
h ps://doi.o g/10.2478/ie-2024-0059
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ZBW – Leibniz In o ma ion Cen e o Economics 307
Le e om Ame ica
DOI: 10.2478/ie-2024-0059
In e economics, 2024, 59(5), 307-308
JEL: E62, F33, H6
How he US Dolla ’s Dominance
Nega es Fea s Abou Deb and De ici s
The 2024 p esiden ial elec ion p esen s Ame icans wi h pe haps he s a kes choice in ou
en i e poli ical his o y. On he one hand, Kamala Ha is and he Democ a ic Pa y a e unning
on a pla o m e lec ing hei posi ion as a no mal, p o-democ acy, cen e -le poli ical pa y.
Al hough he Vice P esiden has s aked ou some modes policy di e ences wi h Joe Biden
(e.g. he ade policy seems likely o be a bi less p o ec ionis han ha o he cu en boss),
he domes ic and o eign policy posi ions clea ly signal ha a Ha is p esidency would e ec-
i ely be a second Biden (o a ou h Obama) adminis a ion in policy, one and go e nance.
On he o he hand, Donald T ump and he Republican Pa y ha e now c ossed one Rubicon
a e ano he , emb acing le els o au ho i a ianism, acism, an i-Semi ism and xenophobia
once hough o be beyond he pale o mode n poli ical discou se. A second T ump admin-
is a ion would push he US u he down he oad o democ a ic backsliding, endange ing
he ci il igh s o mino i ies, women and immig an s, and ushe ing in po en ially massi e
e e sals on a ange o o eign policy issues, including NATO and Uk aine, Is ael-Gaza and
US-China ela ions. T ump’s e u n o he Whi e House would se Ame ica on a s a kly di -
e en pa h, on bo h domes ic and o eign policy, han i ollowed unde Joe Biden o would
unde Kamala Ha is.
Ye amid hese s a k di e ences, he 2024 elec ion also highligh s a s iking commonali y
be ween Democ a s and Republicans. On economic policy, despi e hei many di e ences,
nei he pa y eally ca es abou deb and de ici s, e en hough bo h egula ly claim hey a e
one o Ame ica’s mos u gen p oblems.
The idea ha he ede al deb is a looming na ional c isis has been a nea -pe manen , bipa i-
san ea u e o US poli ics o decades. I was a cen al opic o discussion in he 1980s, when
deb - o-GDP was 40%; in he 1990s, when i was 60%; and in he 2010s, when i was 100%.
Panic abou US na ional deb has e u ned, now ha he deb - o-GDP a io is 120% and he
Cong essional Budge O ice’s la es o ecas 1 has i on ack o each 166% by 2054.
To be su e, US deb le els a e his o ically high, su passing e en hose du ing WWII. Ye we
con inue o bo ow in e ec i ely unlimi ed quan i ies a his o ically low in e es a es. None o
he de ici hawks’ di e p edic ions – hype in la ion, de aul , capi al ligh o cu ency debase-
men – ha e come ue. O cou se, high deb le els may in ol e eal cos s (e.g. la ge deb
paymen s) and poli ically sensi i e u u e adeo s (e.g. choices be ween aising axes and
educing spending). Bu he idea ha he US aces an imminen “sudden s op” iscal c isis, like
de eloping coun ies in he 1980s o 1990s, is a ca ego y mis ake.
So why does he deb emain a cen al issue in Ame ican poli ics? One answe is ha mos
poli icians and o e s iew go e nmen spending h ough he lens o he “household analogy.”
Few belie s a e mo e widesp ead in Ame ican poli ics han he belie ha he go e nmen ,
like a household, should cu back spending, balance he budge and educe deb . This was
pe haps illus a ed mos clea ly by P esiden Ba ack Obama du ing his 2010 S a e o he Un-
1 The Long-Te m Budge Ou look: 2024 o 2054. Cong essional Budge O ice. h ps://www.cbo.go /publica-
ion/59711
© The Au ho (s) 2024. Open Access: This a icle is dis ibu ed unde he e ms o he C ea i e Commons A ibu-
ion 4.0 In e na ional License (h ps://c ea i ecommons.o g/licenses/by/4.0/).
Open Access unding p o ided by ZBW – Leibniz In o ma ion Cen e o Economics.
Ma k Copelo i ch, Uni e -
si y o Wisconsin, Madison,
USA.
In e economics 2024 | 5
308
Le e om Ame ica
ion add ess, a he heigh o he G ea Recession, when he assu ed Ame icans ha “ amilies
ac oss he coun y a e igh ening hei bel s and making ough decisions. The ede al go e n-
men should do he same.”
The household analogy “ eels” igh and esponsible. Bu so e eign deb is no a mo ali y play,
and we ha e known since he ime o Keynes and he G ea Dep ession ha his is exac ly he
w ong way o hink abou iscal policy, especially du ing c ises. Households do no li e o e e .
They canno ax hei neighbo s, o issue bonds due decades om now. They do no issue hei
own cu encies. And hey do no (as he US does, gi en ha he Fede al Rese e and p i a e
Ame ican in es o s hold wo- hi ds o US T easu ies) owe mos o hei deb o hemsel es.
A second answe is ha p e ending o be a iscal hawk is good poli ics. Ame icans egula ly
ell polls e s hey a e deeply conce ned abou deb and de ici s, e en as hey also o e whelm-
ingly a o inc eased spending on nea ly e e y hing in he ede al budge . And o e s ha e
epea edly ewa ded he poli icians esponsible o he massi e ax cu s and la ge spending
inc eases ha a e he main d i e s o he deb . Consequen ly, i is no su p ising ha bo h pa -
ies lo e o claim conce ns abou he deb and o e p omises o educing i wi hou imposing
any eal cos s – ei he ax inc eases o budge cu s – on he public. Indeed, we a e seeing his
once again in he 2024 campaign. Kamala Ha is has ei e a ed Joe Biden’s p omise no o
aise axes on hose ea ning less han $400,000, while Donald T ump p omises u he mas-
si e ax cu s, in line wi h Republican policies popula since he Reagan e a. Nei he o hese
posi ions is consis en wi h since e philosophical conce ns abou deb and de ici s, no will
hey educe Ame ica’s deb le els o e he nex ou o eigh yea s.
Howe e , a deepe and mo e con incing answe is ha nei he Democ a s no Republicans
ac as i hey we e since ely conce ned abou deb because i simply is no a majo conce n
o he coun y issuing he wo ld’s dominan in e na ional cu ency. The dolla emains king
no only because o he size o he US economy, bu because o Ame ica’s unpa alleled deep,
liquid p i a e inancial ma ke s, in e na ional in es o s’ almos insa iable demand o “sa e as-
se s” in an e a o unp eceden edly la ge global inancial lows, he US go e nmen ’s willing-
ness o ac as he lende o las eso in global c ises, and he ac ha nei he he eu o no he
enminbi a e emo ely likely o challenge he dolla any ime soon, i e e , o global dominance.
The u h is ha dolla hegemony enables he US o inance i sel wi h ewe cons ain s
han any o he coun y in he wo ld. The e is su ely some le el o deb ha would be such
a ha d cons ain , bu we a e nowhe e nea i now, and he idea ha we a e is an en i ely
poli ical a gumen , no se ious mac oeconomics. Indeed, he e y idea ha US deb is “un-
sus ainable” o a c isis le els is a ca ego y e o . Japan has a deb - o-GDP a io o 250%
— mo e han wice ha o he US — and bo ows a lowe in e es a es. I he coun y issu-
ing he wo ld’s hi d in e na ional cu ency can sus ain hese numbe s o decades, why do
we e o e Ame ica’s abili y o sus ain a le el less han hal o ha ? This, o cou se, is no
o say ha we should abandon esponsible iscal policy, o ha he u u e may e en ually
be di e en . I is me ely o poin ou ha he ac ual iscal cons ain o he US is no e en
isible on he ho izon.
Ul ima ely, poli icians espond o incen i es, and bo h Democ a s and Republicans a e do-
ing so once again in he 2024 elec ion, using deb and de ici s as poli ical cudgels and gi d-
ing hemsel es in he obes o iscal esponsibili y by making ague bu unse ious p omises
o do some hing abou hem. The dolla ’s unchallenged and o e whelming dominance in he
global economy gi es us his luxu y. Ame ica’s eal “exo bi an p i ilege,” o bo ow he amous
ph ase o o me F ench P esiden Vale y Gisca d d’Es aing, is he abili y o make a guing abou
deb and de ici s ou na ional pas ime wi hou e e ha ing o eally ace hei consequences.
Gi en he lack o any se ious challenge o he dolla on he ho izon, we a e almos ce ain o
keep doing his o decades o come, ega dless o who wins he Whi e House in No embe .
