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What We’re Watching: NATO members’ defense budgets, Social Security as a political weapon, China’s support for Sri Lanka
NATO chief wants more defense spending
As Russian aggression in Ukraine enters year two, NATO members need to boost their defense spending. That was the message from NATO chief Jens Stoltenberg Wednesday after a summit with member states’ defense ministers. Back in 2014, around the time of Russia’s invasion of Crimea, NATO states committed to raising their respective defense spending to 2% of gross domestic product. (NATO’s direct budget is separate from national defense budgets.) Still, while many have increased their spending on military equipment and training, most NATO states – including Germany, France, Italy, and Canada – still fall short of the 2% threshold. The US, for its part, leads the pack, spending 3.47% of GDP on defense. (You’ll likely remember that former President Donald Trump made a habit of slamming NATO members, particularly Germany, for not paying their fair share. As war ravages Europe again and tensions with China soar, Stoltenberg says that the 2% target, which expires next year, should be the floor – not the ceiling. Finland and Sweden, both vying to join the bloc, respectively spend 2% and 1.3% of GDP on defense.
The politics of entitlements
President Joe Biden has made crystal clear that he believes the protection of Social Security and Medicare benefits – federally protected pension and healthcare entitlements for seniors – is a powerful political weapon that Democrats can wield against Republicans. Some in the GOP have inadvertently helped him. A number of Republicans have signaled support for plans to reduce spending on these programs by raising retirement ages and finding other ways to reduce future benefits, and Florida Sen. Rick Scott has proposed a plan that would require Congress to reauthorize all federal programs every five years. The GOP’s House and Senate leaders, Kevin McCarthy and Mitch McConnell, respectively, have said publicly they have no such intentions. But politics aside, the funding problems that Republicans point to are real. On Wednesday, the nonpartisan Congressional Budget Office released a report warning that Social Security and Medicare spending will grow much faster than federal tax revenues over the next decade as the fast-rising number of retirees puts measurable strain on the solvency of both programs. Biden says the gap can be filled without cutting benefits by asking wealthier workers to pay more in payroll taxes. Republicans counter that tax increases on the needed scale would weigh heavily on future economic growth. The two parties remain miles apart on solutions.
Will China offer Sri Lanka debt salvation?
Sri Lanka is grasping for debt relief as it heads into a key international meeting with foreign lenders organized by the International Monetary Fund on Friday. Colombo hopes to pump the brakes on the country’s downward economic spiral that saw the country run out of foreign currency and experience its first-ever default last year, triggering food shortages, power cuts, and the wrath of protesters, which forced the resignations of the president and prime minister. The island nation pines for cuts in its debt from international backers, especially China, as the Middle Kingdom is one of Sri Lanka’s biggest creditors, holding about 10% of its $51 billion debt. Beijing has so far been opaque about debt reduction. It expressed ‘support’ for Sri Lanka this week heading into the meeting but stopped short of committing to lowering the debt. Doing so would be a dodgy proposition, not just for Chinese creditors who want to be paid, but for fear that other heavily indebted poor countries will want reductions in their debt burden as well. This puts the 22 million-strong nation, often cited as a cautionary example of China’s debt trap, in yet another tough bind: It needs an emergency IMF loan, but the Fund wants creditors to reduce Sri Lanka's debt beforehand. We’ll be watching to see how far China goes for Sri Lanka.
Will US Congress change Social Security?
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC shares his perspective on US politics.
Is Congress considering changes to Social Security?
No. Social Security's been in the news this week because of a record high adjustment to retirees’ benefits that's set to take place next year. Social Security benefits are indexed to inflation, and with inflation running at over 8% over the last year, seniors are going to get a cost of living adjustment equal to 8.7%. This is the largest increase since 1981 and comes after nearly a decade where Social Security benefits were nearly flat because inflation has been so low and stable. Inflation is continuing to run out of control at the moment, with rent prices and food prices rising at record rates, but this is not the only reason that Social Security's in the news. President Biden and other Democrats are campaigning on the premise that Republicans are set to put Social Security benefits "on the chopping block" should they win in the November elections.
The only problem is that this probably isn't true. Biden is seizing on a plan from Senator Rick Scott to reauthorize Social Security every five years, and while this could result in cuts to future benefits, Scott's plan has been rejected by nearly every other Senate Republican. Biden's also been warning about a proposal from Wisconsin Republican Ron Johnson to make Social Security subject to annual appropriations, which Johnson says is done to protect Social Security from going bankrupt. This is another fringe idea with very little support in the Republican Party, and based on the recent history, it seems like it could actually result in an increase in spending on seniors and not cuts, because what politician wants to alienate the most reliable voting block in America every year when it comes time to renew the program?
There is an enduring myth that Democrats want to raise middle class taxes and Republicans want to cut social spending, but the reality is that when it comes time to govern, neither party has the political will to follow through. Democrats typically limit their tax increases to high income Americans and corporations, who of course pay middle class wages, and Republicans typically run from proposals to cut individual benefits as they did the last time Social Security reforms were on the table in 2005. Nevertheless, these kinds of political attacks will continue. Social Security is funded by a trust fund that, as early as 2034, will not be able to fully fund the benefits of recipients without a transfer of general revenues from other parts of the government. This is a huge fiscal challenge for the US, and while politicians talk about protecting Social Security, neither party is prepared to fully face the consequences of what that will entail: either higher taxes or reduced benefits.
NatCon 2022: Conservatives rethink foundations of the American right
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC reports from the 2022 National Conservative Conference in Miami, Florida.
What is national conservatism?
I'm down here in Miami, Florida, attending the third annual National Conservative Conference where we're hearing from a large group of conservatives who want to rethink the foundations that have held together the American Right for the last 50 years. Part of this is in response to Donald Trump's surprising election in 2016 and his dismantling of the conservative coalition that had supported the Republican Party to that point. Another big theme that we're hearing about is a reaction to what folks here call the woke Left who, in their mind, have dominated educational, business, and cultural institutions for a very long time and have pushed out the traditional Christian conservative values that built this country.
Coming out of that, some of the conference organizers want to explicitly allow states to bring back religious education into schools in order to make the United States once again a more explicitly Christian nation. Other folks here put an emphasis on de-emphasizing the role of free market economics, in what used to be known as the conservative three-legged stool between cultural conservatives, national conservative hawks, and free market economics. They want to take economics out of this altogether and capitalize on the political gains that were made by President Donald Trump, pushing a much more economically populist type of political philosophy.
And then I think one of the final big themes that we're hearing about today is that the era of limited government is over in the US. For the folks that are gathered here today, they see a much more robust role for taking power in the US and then using that power to advance conservative causes. For example, by reforming the civil service —— one speaker talked about putting term limits in place, not only for elected officials, but also for federal bureaucrats —— so that you didn't have these group of empowered Americans who had these jobs for decades and decades and could push policies that the national conservative movement does not like.
The conference has gathered together a range of folks from political philosophers, religious leaders, several leading Republican politicians including Florida Governor Ron DeSantis, Florida Senator Rick Scott, Florida Senator Marco Rubio, and Missouri Senator Josh Hawley, along with a number of conservative intellectuals who are engaging in this robust debate around the future of what conservatism is in the US politics.
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