Disagreeing with Joe Nye

By Graham Allison

By Graham Allison

As a colleague who has been learning from Joe Nye for many years, I join the chorus applauding his latest in a string of pearls of wisdom about power in international affairs.  The Future of Power is a must-read.  Imaginatively, judiciously, Joe tours the horizon of current debates and offers thoughtful, policy-relevant advice.

From questions about the rise of China and decline of the U.S., to cybersecurity and changing metrics of power in 21st century international affairs, he advances the debate. (Read Joseph Nye’s inaugural Power & Policy blog post)

With so much to agree with, what’s to disagree?  While my major difference is more one of emphasis than fundamentals, let me overstate it for the sake of clarity.  Consider the core question: what is the single biggest threat to American power today?

Chairman of the Joint Chiefs of Staff Adm. Mike Mullen

Chairman of the Joint Chiefs of Staff Adm. Mike Mullen (DoD Photo)

Interestingly, the current Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, has answered an analagous question unambiguously.  As Mullen has stated on several occasions, his considered judgment is that “the single biggest threat to American national security is our debt.”  By debt he means not only the current mountain of $14 trillion of gross federal debt that has accumulated mostly over the past decade, but also the current trajectory that will add an additional $1.5 trillion this year, and even worse, embedded trendlines in future spending and taxing that are undermining America’s balance sheet.

In the words of our colleague Larry Summers, who just returned from Washington: “Is there not something odd about the world’s greatest power being the world’s greatest debtor?”

To be unambiguous: my answer to the question is that the single biggest threat to American power and security today is what Americans have been doing over the past decade and are continuing to do to ourselves.  In assessing the shift in position, potential, and perception of American power over the past decade, developments outside the US are less significant that what has happened inside our borders.

Compare the balance sheet President George W. Bush inherited in January 2001 with the balance sheet he left to President Obama in January 2009.  Recall that in March of 2001, Fed Chairman Greenspan gave a major speech identifying his key worry for the Fed: namely, that the U.S. would soon pay down the national debt so that it would no longer issue 30-year Treasuries (jeopardizing the benchmark role these play in financial markets).[1] After eight years of squandering, spending, borrowing, and not collecting taxes, at least we buried that problem.

Former Fed Chairman Alan Greenspan

Former Fed Chairman Alan Greenspan (trackrecord photo)

The major challenge President Obama inherited was a country sliding towards a second Great Depression.  Historically unprecedented actions by the U.S. government—Paulson, Bush, and Bernanke at the end of ’08 and Obama in early ’09—mobilized a global response, including a major Chinese stimulus, that prevented a second Great Depression.  But the new conventional wisdom that says we’ve snapped back to business as usual before the economic crash is greatly misguided.  The U.S.-led global financial system had a massive heart attack.  An extraordinary medical response saved the patient, but he required multiple bypass surgery during an extended period on the operating table.  Thus the bad news is that the patient who left the operating room is no longer the man he used to be.  Though he may have quit smoking and is trying to lose 50 pounds, his road to recovery will be long, hard, painful, difficult—and uncertain.

The best test of the success and stability of a national government is its ability to deliver real improvements in the well being of its broad middle class, earning their confidence that their children’s lives will be better than their own.  Over the past thirty years, incomes of middle-class Americans have been stagnant as the average Chinese worker has seen his income grow roughly 13-fold.  Today, three in five Americans believe that their country is “going in the wrong direction,” as compared to roughly one in ten Chinese.  The latest polls also show that 60% of Americans believe that their children will have fewer opportunities and lower incomes than they do.  Few in China could imagine that.

Foreign affairs mavens will continue talking about threats posed by the Taliban in Afghanistan, Iran’s nuclear aspirations, and instability of Arab regimes.  And no doubt we live in a dangerous world. Increasingly, however, Americans’ attention will be consumed by what I call “Four D’s”: deficits, debts, deleveraging, and disorientation.  A society that is locked into structural deficits, heavily burdened by debt, in a necessarily long cycle of deleveraging (corporate, financial, and personal), with high, sticky unemployment, will become increasingly disoriented.

American politics is only now attempting to enter the reality zone about current trendlines of spending, taxing, and borrowing that are unsustainable.  Recall Stein’s law: “If a trend can’t continue forever, it won’t.”  While the report of the National Commission on Fiscal Responsibility and Reform offered an intelligent start, the unanimous unwillingness of Congressional members of the Commission (both Rs and Ds) to endorse its recommendations is a foul bellwether.  As Peter Orszag (President Obama’s director of the Office of Management and Budget for the first two years) recently wrote: “If policymakers will not act before we have a fiscal crisis at the federal level, a fiscal crisis we will ultimately have.”

Averting this crisis will require nothing short of a revolution in convictions across the society and government about taxing (a word that the Republican core has demonized), cutting spending on programs citizens regard as “entitlements” (something core Democrats regard as unthinkable), and borrowing (which even the manager of the world’s reserve currency cannot do forever).

Pogo the Possum: We have met the enemy and he is us

Pogo is © 2010 Kelly Studios

In sum, assessing the state of American power today, my view is that the number 1 problem for the U.S. is the United States.  The major challenges to the future of American power are internal rather than external.  I hold to the persuasion Warren Buffett once told me: no one ever made money for long by selling America short.  But American recovery and renewal are not inherent birthrights.  Unless a new generation of Americans awakes and mounts a response with courage and sacrifice way beyond anything currently on the agenda, American power will continue to erode and American security will deteriorate.

For the foreseeable future, as the old Pogo cartoon put it: we’ve met the enemy and he is us.


[1]Testifying before the Senate Committee on the Budget on March 2, 2001, Greenspan said: “In almost any credible baseline scenario, short of a major and prolonged economic contraction, the full benefits of debt reduction are now achieved well before the end of this decade…Thus, the emerging key fiscal policy need is now to address the implications of maintaining surpluses beyond the point at which publicly held debt is effectively eliminated.” (emphasis added)

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About Graham Allison

Since the 1970s, Graham Allison has been a leading analyst of U.S. national security and defense policy, with a special interest in nuclear proliferation and terrorism. He served as assistant secretary of defense in the Clinton Administration, and was a longtime member of the Pentagon's Defense Policy Board. He is the founding dean of the modern Kennedy School. Full bio >
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5 Responses to Disagreeing with Joe Nye

  1. Peter Meyer says:

    I generally eschew medical analogies, but the heart attack image you have used seems all too apt as a description of the problem we face. Unfortunately, the analogy breaks down when we turn to examining responses.

    Intentionally or not, you seem to follow the medical model again when you argue that, “Unless a new generation of Americans awakes and mounts a response with courage and sacrifice way beyond anything currently on the agenda, American power will continue to erode and American security will deteriorate.” The point about courage and sacrifice may be warranted, but the new generation — such as new procedures, devices and medicines in the hospital or ER — does not make sense.

    The reason is that we have had vibrant, fast growing, low unemployment economies in the United States before this heart attack struck — and before we developed the arteriosclerosis that began in the Reagan years. Eisenhower and his political colleagues managed a US economy with a much simpler tax code and top marginal tax rates n individual incomes more than double those about which we argue today. They also oversaw much higher corporate taxation with far fewer companies escaping all taxes through long-obsolete supposedly necessary stimulative tax expenditures. (Their economies were also far more equitable and grew at more rapid rates than those we now experience.)

    We don’t need the new generation to act with (implicitly new) courage and make (apparently unacceptable) sacrifices. We just need the older generation’s wisdoms to be rediscovered and accepted. In medicine, we have discovered the potential value of using leeches; the economists among us (of which I am one) similarly need to look to our older insights and successful practices.

  2. Robert Borlick says:

    Mr. Allison paints a convincing picture of the gargantuan problem the nation faces today but is short on solutions. He is correct that getting us back on the right track will require sacrifices but I submit that the sacrifices need to start at the top. The working and middle class people have already made great sacrifices.

    We can start by substantially raising income taxes on all earned income in excess of $20 million per year, i.e., in the range of 80 to 90 percent. There is no justification for paying CEOs, bond traders and hedge fund managers any more than that very generous amount. Let’s end this self-destructive competition for management talent. Surely there is more to motivating top managers than unmitigated greed.

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  4. Until the politicians lead by example we cannot turn this economy around. No matter what we are promised it remains the same group of professional group whos sole purpose is to get re-elected.

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