TheMarketForIdeas

During the recent midterm congressional elections, I had the opportunity to observe a polarized nation at the ground level while in Washington, DC. This was a competition in which political affiliation has become an element of identity as strong as, if not stronger than, race or religion. The Republicans talked about inflation and mismanagement of the economy, while the Democrats marched on the emotional message of the democracy under attack. In such a polarized society, there are no strong victories – the party in the White House has a habit of losing in the first midterm elections after the presidential campaign promises of rivers milk and honey fail to materialize; the Republican tsunami did not materialize, either, bypassing the Democrat majority in the Senate and winning a very small majority in the House of Representatives. In practice, the Republicans can only frustrate the Democrats. Any achievement in the next two years will have to come through bipartisan means, at a time of peak political and societal tension. Like the presidential elections, the congressional elections ended up being decided by the skin of one’s teeth, generating precarious and contrary majorities, deepening the political decay of the American state.

Two things are now clearly visible. The first is that there is no likelihood for President Biden to implement an ambitious domestic agenda, despite having previously achieved a number of noteworthy victories, most notably the “Inflation Reduction Act”, which, despite the name, is mainly a massive plan for investment in renewable energy-related industries. Therefore, Biden, like Trump in his second term after losing his double congressional majority, will turn to foreign policy to build his legacy and the case for a second Biden term.

The second is that, in the logic of party politics, small majorities elevate party dissidents, whose votes have greater negotiated value. Current dissidents in both parties are part of populist trends that unsettle mainstream American leaders, who alternate between the collegiality required to govern and their marginalization. We hear about the ascendant Trumpist wing of the Republican party most frequently due to the American mainstream media’s liberal slant. This was established on the basis of the Trump agenda, although some are also after the image and likeness of the former President. However, the Democrats have their own rising populism, one much more oriented towards fragmented identities and much more left-wing economically, but just as radical in its anti-mainstream positions, for example on the sensitive issue of support for Israel. Just a few weeks ago, a small group of Democrat congressmen published an open letter advocating for a decrease in American engagement in the conflict in Ukraine, startling Washington, which considered this view to be solely held by Republicans. After additional pressure, the letter was withdrawn, and the entire mainstream political elite in Washington is currently actively participating on one of the few current bipartisan constants of the moment: support for Ukraine. 

Ukraine, the main vector of the unified foreign policy 

With continuous forewarnings of the invasion’s impending arrival in the months prior to the “special military operation”, the United States of America assumed an early leadership role in the Western response to Russia’s invasion of Ukraine. Although they have been outdone by the Europeans in the spirit of sacrifice, the Americans have been at the forefront of the movement to sanction Russia. They have emerged as Kyiv’s primary military and macroeconomic sponsors, deepening a military relationship that was established in recent years as the Ukrainians prepared for the continuation of the war that began in 2014. The 60 billion dollars that the Americans have already sent to Kyiv in the form of military, humanitarian, and macroeconomic aid mark the biggest transfer to one country and the fastest transfer in American history. Israel has received the equivalent of $150 billion in help since 1948, and $38 billion in total aid (excluding military assistance after 2007) has been granted for the years 2019 through 2028. Egypt comes in second with significantly more modest values. Two more years at this pace and the Ukraine will have received more help overall than all of Israel’s aid combined. Another first in the help given to Ukraine is the financing of the state budget using American funds, in order to cover pensions, salaries, and other expenses, as opposed to only purchasing American goods and services in a predetermined ratio as was the case with conventional aid. For this reason, the Ukrainians, in the midst of a severe economic downturn, made the decision to cut their budget deficit, managing to reduce it from 5 billion dollars per month to 3 billion, of which 1.5 billion dollars are provided by the Americans.

This level of assistance was made possible by the only congressional and popular supermajority that any foreign policy issue has had in recent years – possibly even since the attempt by Barack Obama to withdraw from Iraq – which probably could not have been predicted by any American leader before February 24, 2022. Democrats and Republicans came together in support of Ukraine, and even though non-interventionism remains a strong minority viewpoint, the public reacted by empathizing with the Ukrainian people. Republicans only had two partisan options when faced with the confirmation of decades-old suspicions about Russia at a time of maximum polarization: either criticize the White House for its involvement or criticize it for its insufficient involvement and for the means of delivery of assistance (National Security Adviser Jake Sullivan has been heavily criticized for the cadence of arms deliveries from US stockpiles). They went with option two and have succeeded in excluding their non-interventionist wing thus far.

The issue is that, given its size during a time of severe economic hardship for the American state and particularly for the electorate, that is being battered by inflation and the doubling of fuel costs, this aid is unsustainable in the medium and long term. US aid must inevitably change to become more palatable in the context of the ongoing US election campaigning in order to prevent both a populist triumph in two years (including in Congress) and a reorientation of mainstream politicians toward decreasing aid in order to maintain their congressional seats.

The first solution will be to cut the offered aid – the military is the safest component (which also has additional issues related to supplies through the undersized munitions industry), followed by the humanitarian aid. The funding of foreign payroll and pension systems will be the first and hardest hit because it is difficult for Republicans in particular to explain to the electorate how such systems are paid for when their constituents do not even have equivalent systems at their disposal.

The second solution, which should be used in tandem with the first, entails increased financial involvement from the EU for Ukraine, particularly for reconstruction and macroeconomic assistance. Given the current energy prices and the economic suffering of the population, the Europeans would argue that they are already contributing as much as they can. However, the Americans only acknowledge European efforts in comparison to their own and are irritated by the way in which the EU, which aspires to be an independent geopolitical actor, gathers member actions, including their unfulfilled promises (such as those of Germany), and assigns the label of EU to them.

In the transatlantic duo, the Americans feel comfortable maintaining their leading position on security, if the Sisyphean burden of reconstruction remains on the shoulders of the Europeans, preferably managed through the American financial sector. Long-term, the pivot to the Indo-Pacific will force the Europeans to assume a greater security role as well, but the Americans themselves are schizophrenic about this, alternately urging Europe to fund its own security and cautioning against “duplicative measures” with NATO. Undoubtedly, the decades-old tradition of criticizing Western Europeans for underfunding their own security, particularly after the 1990s, has had an impact on the American perspective on the EU’s involvement in Ukraine. Now, they see another situation where the US is bearing a disproportionate burden. 

Other priorities 

The future Republican majority of the House of Representatives has, in addition to Ukraine, two main issues on the agenda – China and Iran. They can only influence Administration policy and stop unwanted initiatives without a majority in the Senate, which implies they have no chance of deciding on American foreign policy towards these two countries. On the Iran issue, Republicans want to torpedo any attempt by the White House to revive the Iran nuclear deal, which was the heyday of the Obama Administration when Joe Biden was Vice President. The involvement of Iran in Ukraine in support of the Russians has strengthened the Republicans’ intransigence on the issue, although Iran giving up on this support would be a logical and beneficial negotiating point for a new agreement. 

The Biden Administration inherited the China issue from the Trump Administration due to its popularity and compatibility with American strategic interests in obstructing a competitor with systemic ambitions. American politics have undergone such a radical upheaval that only a few can (or care to) remember today that, before Trump’s inauguration in 2016, an adversarial relationship with China and protectionist measures were a political taboo for which Trump was heavily criticized. Relationships between the US and China are comparable to those between Germany and Russia (“Wandel durch Handel” – change through trade) because the former believed it could influence the latter politically through economic interdependence. Republicans want to tighten China’s technology embargo, particularly on components needed for advanced dual-use technologies, meaning both civilian and military. They also want the rest of the world to join them in opposing China’s foreign strategic initiatives, such as its export of 5G technology, the Belt and Road Initiative, and its monopolization of key resources in Africa, as well as the maintenance of its hegemonic position in certain key resources for the electronics and green energy industries. They want to crack down on those powers, including the Saudi partners, who have been drawn by China into a system of economic relations that marginalizes the U.S. dollar, affecting the US ability to finance its ongoing deficits. The hostile relationship with China is particularly evident on the topic of Taiwan, where the new House of Representatives will attempt to pass a legislative act on Taiwan that is more stringent than last year’s despite the possibility of failure in the Senate (Taiwan Policy Act). Its value will be symbolic and serve to weaken the strategic ambiguity on the Taiwan issue maintained by all previous presidents, including Trump and Biden. An example given to me in Washington would be the possibility of the career diplomat who heads the unofficial US mission in Taipei to be appointed through congressional hearings, as are all US Ambassadors.

It is clear that China would take this message very seriously, and during his exchange with Joe Biden at the G20 Summit in Indonesia, Xi Jinping highlighted Taiwan as a red line for China, breaking with previous summit tradition that prioritized potential areas of cooperation (like climate change) and left the warnings to the Foreign Minister. 

Conclusion 

The results of the midterm elections confirm the extreme polarization of American society. Ukraine is one of the few regions where Democrats and Republicans can get along. Despite potential disagreement with the White House, the incoming Republican majority will also be interested in China and Iran. Thin bipartisan majorities increase the power of dissident minorities because they can impose certain games in Congress that a great majority would have rendered irrelevant. Even though it may appear that little has changed and that the United States remains enrolled in a predictable conflict pattern, these elections mark the acceleration of the process of ideological realignment of the two parties in response to the influences of new socio-economic interests in American society. Current politicians will either adapt or withdraw from politics, and intra-party primaries are where the fiercest contests take place, between the mainstream and the populist option that gains more and more strength with each election cycle, as long as the main grievances of Americans remain unaddressed.