26th January 2024  - Gary Mead

The Devil and the deep blue sea

The Devil and the deep blue sea

It will take a serious disaster to stop Donald Trump from gaining the nomination as the Republicans' candidate for the US Presidential election in November. And only an equally serious catastrophe will stop Joe Biden from running as the Democrats' nomination. Americans look like they will go to the polls with perhaps the worst choice in recent times. For neither candidate has either a great track record, or a vision for the future that offers Americans - or the world - hope that investments and money will be safe. According to a Gallup poll published in October 2023 63% of US adults supported the proposition that Republican and Democrat parties do "such a poor job" of representing them that a "third major party is needed." By winning the Republican nomination and by clinging on to the Democrat nomination Trump and Biden guarantee months of uncertainty, market stress and considerable uncertainty - and that's before the actual vote. Given recent history we can expect the result of the vote to be hotly contested, further exacerbating the divisions within American society.

Free money

Both candidates supported 'stimulus' programs, giving away taxpayers' money, during and after Covid-19. President Trump issued an executive order giving an extra $400 per week to people getting more than $100 in weekly unemployment benefits; this ended 27 December 2020. He also imposed a moratorium on student loans, signed into law an $8.3 billion package aimed at fighting the virus, and supported multi-billion Dollar 'stimulus and relief packages' that included direct payments to individuals earning less than $75,000/year. President Biden was just as big a spendthrift. In March 2021 he oversaw the 'American Rescue Plan', costing an eye-watering $1.9 trillion, $350 bilion of which was allocated to state and local governments.This 'free' money was not only inflationary, it also added to the US national debt, currently more than $34 trillion , almost 100% of gross domestic product (GDP), i.e. as big as all the goods and services America annually produces. That figure ought to be deeply alarming - the US Peterson Foundation forecasts it will be almost twice America's GDP in 2063. The Penn Wharton budget model from the University of Pennsylvania said last October that the US "has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt...this default...would reverberate across the US and world economies."

Where is trust?

If the forthcoming US Presidential election offers an unpalatable choice, pretty much the same can be said of the UK's upcoming general election, which must happen by the end of January 2025, or the elections for the European Parliament in June this year. A January poll for the European Council on Foreign Relations estimates that right-wing parties will make significant gains in June's elections. In spring 2023 King's College London's Policy Institute surveyed 24 countries on their attitudes towards various national institutions. In the UK trust in government was spectacularly low, just 12.5% have confidence in political parties, down from 16% in 2018. The UK has witnessed a series of scandals that have seriously undermined confidence in public institutions that were one regarded as beyond reproach - the police, politicians, broadcast and print media, the National Health Service, universities, business organizations...all have fallen, all are facing funding difficulties. Not even the Post Office has escaped the tarnishing; more than 700 people running small post offices branches were falsely accused of stealing money thanks to a faulty networked computer system enforced and defended for years by senior executives. On top of this run of disasters the UK's public finances are in the most parlous condition since the Second War.