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How a “Defense Tax” Can Finance Europe’s Higher Defense Expenditure (2024)

See also: https://ip-quarterly.com/en/how-defense-tax-can-finance-europes-higher-defense-expenditure

Highly indebted European NATO countries should levy a “defense tax” to make their long-term commitment to higher defense spending politically credible and financially sustainable.

This year, 23 out of 32 NATO members are expected to meet the 2 percent of gross domestic product (GDP) defense spending target that the allies agreed to in 2014. While this is an improvement, the failure of nearly one third of NATO members to meet the relatively modest two-percent spending target speaks for itself. To strengthen its political-strategic and deterrence effect, defense spending needs to be made politically credible and financially sustainable. A long-term commitment to higher defense spending would also incentivize Europe’s private sector to make the investments necessary to rebuild Europe’s indigenous defense-industrial base.

European NATO countries have a sufficiently large economic resource base to balance Russia militarily. In terms of economic size, measured in purchasing power parity (PPP) terms to adjust for differences in prices, NATO GDP exceeds Russian GDP by a factor of 12, European NATO GDP exceeds Russia’s by a factor of six, and the combined GDP of Germany, the United Kingdom, and France exceed Russia’s by a factor of two and half. (Measured at market exchange rates, European NATO member GDP is more than 20 times larger than Russia’s.) 

The challenge European governments face is how to mobilize the necessary resources in the face of domestic distributional conflict. To the extent that greater resources are allocated to defense, fewer resources will be available for private consumption or non-defense investment (or both), unless they are borrowed from abroad. If the increase in defense spending comes primarily at the expense of private consumption, the population will be economically worse off. If it comes primarily at the expense of non-defense investment, longer-term growth will suffer. Allocating greater resources to defense implies economic tradeoffs and gives rise to domestic distributional conflict.

High Government Debt Constrains Larger European NATO Members

The five economically largest Western European NATO members (Germany, the United Kingdom, France, Italy, and Spain) account for 60 percent of European NATO GDP. Their ability to mobilize resources will have an outsized impact on European defense capabilities. But with the exception of Germany, government debt in these countries exceeds 100 percent of GDP and the International Monetary Fund (IMF) projects debt ratios to continue to exceed this level by the end of the decade. Financing substantial increases in defense spending through larger fiscal deficits therefore would seem at best financially imprudent. (All the other 25 European NATO members have more manageable debt levels of 80 percent of GDP or less, except for Belgium, Greece, and Portugal.)

Admittedly, France and the United Kingdom already spend 2 percent of GDP or more on defense, compared to 1.5 percent of GDP in Italy and Spain as well as Germany (if one discounts the contribution from its €100 billion special defense fund). However, should it become necessary to raise defense spending to 3 percent of GDP, as recently suggested by Poland, they would be faced with financial challenges. All of them are already faced with significant spending pressures as a result of higher spending related to demographic change, climate change, and defense. The European Central Bank (ECB) estimates that eurozone governments would need to raise an additional 3 percent of GDP – and substantially more than that in France, Italy and Spain – to cope with these increasing spending pressures and stabilize their debt-to-GDP ratios at current levels. But this would, according to the ECB’s projection, only prevent debt levels from increasing from today’s already high levels. It would require an additional 2 percent of GDP to bring government debt levels to the eurozone target of 60 percent of GDP. 

How to Finance Increased Defense Expenditure

So how should they go about financing higher defense expenditure? First, governments can increase defense expenditure by simply running larger deficits and accumulating additional debt. Germany has some fiscal space to do so in the short- to medium term. The other large European NATO members, as suggested, do not have that option. At the very least, it would be financially imprudent to do so, as it might undermine financial sustainability and therefore also political credibility. In terms of distributional politics, however, it would be the least challenging option, as it largely sidesteps distributional conflict by pushing the costs into the future and leaving it uncertain who will end up having to pay for higher spending.

Second, governments can cut non-defense spending (or, if no major immediate increase is necessary, reduce its increase relative to economic growth over time), thus freeing up resources to be spent on defense. According to the OECD, public social spending, by far the largest single expenditure category in the five countries, exceeds 30 percent of GDP in France and Italy. It is also high in Germany and Spain. 

Economically, reducing non-defense spending would be the preferred option, as the concomitant reduction in transfers to households for consumption purposes would help finance higher defense expenditure without reducing national savings. But politically it would be the most challenging option, as reducing social welfare spending or “acquired rights” typically mobilizes significant opposition, not least because who will incur economic losses, even if the materialize in the future, will be far less uncertain than in the case of issuing additional debt. Governments can also reduce public investment or other types of expenditure, like subsidies. But the former is costly in terms of foregone future economic growth, and the latter can just easily lead to significant political opposition if it affects well-organized or highly mobilized interests, such as farmers.

Third, governments can increase revenues, primarily income taxes, social security contributions, and taxes on goods and services. Higher taxes are hardly politically popular, and they, too, can trigger distributional conflict, particularly if they are perceived to exempt or favor one group over another. And increasing social security contributions to finance defense expenditure would be a difficult sell, even if higher contributions simply helped plug existing social security deficits and thereby allow the government to redirect resources to defense. But unlike spending cuts, higher taxes, if properly designed, can help spread the costs more evenly and more widely, thus limiting domestic political opposition.

Economic Effects of Higher Defense Spending Will Vary 

The macroeconomic effects of increased defense spending will depend on how they are financed, but also on how the additional funds are spent. If financed by additional debt in the absence of binding financial constraints, higher defense spending would provide a demand stimulus, at least in the short term. In debt-constrained economies, however, higher debt would increase the level of interest to be repaid, thus offsetting some or even all of the fiscal stimulus. In a worst-case scenario, it might undermine economic confidence altogether and force the government into a strategically disastrous fiscal retrenchment.

If financed by higher taxes or lower non-defense expenditure, the impact on short-term economic growth would likely be limited. Much would depend on where higher defense expenditure is directed. Increased spending on personnel, maintenance, and infrastructure would support domestic demand, while spending on overseas operations and equipment, much of which is currently being bought from abroad, would lead to what economists call fiscal leakage. But with spending on equipment typically accounting for about one third of defense spending, the broader macroeconomic drag—all other things being equal—would be limited. Over time, the build-up of intra-EU defense production capacity would also lead equipment spending to be redirected to the EU economy and support domestic and growth in the future. 

However, without a complete offset from a reduction of domestic consumption, allocating greater resources to defense would weigh on longer-term economic growth, at least in savings-constrained economies. Here again, Germany’s very large current account surpluses, which reflect “excess savings,” would provide it with much greater leeway to increase defense spending without jeopardizing non-defense investment than France, Italy, Spain, and the United Kingdom, whose current account positions are far less favorable.

European Governments Should Consider a “Defense Tax” 

In view of the need to raise defense spending in a financially sustainable and politically credible manner, fiscally constrained EU governments should consider introducing a “defense tax” at the national level. The related recurrent revenues should be earmarked for defense spending and finance the gap between current defense spending levels and current (and future) expenditure goals. If properly designed, such a tax would spread the financial burden broadly across society. 

This should help make it politically more palatable, compared to the alternative of financing increased defense expenditure through cuts to welfare spending. After all, the defense of the realm is a public good. So, everybody should contribute to it. Naturally, such a tax would not help governments avoid tackling broader, politically painful budgetary reform to address current and future spending pressures related to demographic change and the green transition. But by earmarking the revenue raised with the new tax for defense, it would go quite some way toward credibly and sustainably committing European governments to higher long-term defense spending, thus bolstering its strategic and deterrence effect.

Why Germany Can and Should Increase Defense Spending (2024)

See also: https://ip-quarterly.com/en/why-germany-can-and-should-increase-defense-spending

Economically and financially, Germany is well-positioned to increase defense expenditure and provide support to Ukraine. Over the short- to medium-term, a declining debt-to-GDP ratio allows Germany to increase expenditure without jeopardizing debt sustainability and without having to increase taxes or cut non-defense expenditure. The government should consider reforming, but not abandoning the constitutionally mandated debt brake to allow for structurally higher medium-term defense spending. Given its economic size and financial strength, Germany is pivotal in terms of strengthening European defense and deterrence.

Increasing Defense Expenditure Is Strategically Necessary

Maintaining the conventional military balance in Europe and denying Russia victory in Ukraine are both critical to European security. Strategically, a credible NATO, European and German commitment to match Russian defense expenditure offers the best prospect of maintaining the military balance of power in Europe as well as ending hostilities in Ukraine. Russia’s best policy is to weaken the West’s economic-financial resolve and thereby undermine its support for Ukraine. If NATO or European NATO members managed to credibly commit to matching any Russian defense spending increases and providing support to Ukraine to make a Russian victory impossible, Moscow’s political and military objectives in Ukraine would be thwarted and its incentive to continue the war would diminish, if not under the current leadership, then under the next one. 

Economically Possible

In terms of potential economic resources, if not necessarily resource mobilizability, Russia is at a significant disadvantage vis-à-vis NATO and European NATO members. Economically, Russia is far smaller than NATO and smaller even than the big-4 European NATO members, France, Germany, Italy and the UK. 

Economic size is of course only a rough proxy for the ability to “buy” security and prevail in long-term strategic competition. Available economic resources need to be mobilized politically and they need to be converted efficiently and efficaciously into security. [1] A sufficiently large economic resource base does not guarantee strategic success. It also requires an effective security strategy. But any credible and effective security strategy needs to be supported by adequate resources. 

But Politically Difficult

Although NATO and European NATO members produce collectively far more economic output than Russia, high debt levels in countries like France, Italy and the UK, and even the United States, constrain the degree to which these countries are politically willing to increase defense expenditure and provide support to Ukraine. But this constraint is political, not economic or financial in the sense that Western countries are weary of raising taxes or cutting non-defense expenditure to free up financial resources. They sit on a far larger economic resource base than Russia. Meanwhile, Russia is being forced to divert more and more resources to defense spending, resources that will not be available to finance investment to support future economic growth, and will sooner or later force difficult economic and financial choices on the Russian government. 

European countries do face fiscal and debt sustainability challenges. The European Central Bank[2] estimates that for euro area economies to cope with higher spending related to demographic change, climate change and defense by 2070 (!), governments would need to raise an additional 3% of GDP (or reduce spending by the same amount) starting 2024. But this would, according to the projection, only prevent debt levels from increasing from today’s high levels. It would require an additional 2% of GDP to bring euro are government debt levels to the 60% of GDP target. 

Distributional conflict and difficult choices over defense expenditure and Ukraine aid are real. But it does not mean that the economic resources are not in principle available to support tangibly higher defense spending or Ukraine. For some countries, the near-term constraints and ensuing trade-offs are more immediate due to high debt levels and limited fiscal space (France, Italy, UK), than for others, the challenges are more long-term (German), meaning that politically difficult choices can be pushed further into the future. Countries that face greater near-term choices would need to reduce non-defense expenditure or raise additional revenue to support substantially higher defense expenditure. Nevertheless, raising the level of defense expenditure from currently low levels is first and foremost a political issue. However, Russia’s economic resources are not unlimited, either, even if in the short run its low level of government debt and continued export revenues give it more short-term financial flexibility than its Western opponents, while a lesser need for political responsiveness give it more political room for maneuver, at least in the short- to medium-term. The fact remains that Russia’s economic resource is insufficient to compete with NATO or even European NATO member, provided the latter are politically willing to mobilize the necessary resources. 

Why Germany Can and Should Raise Defense Expenditure

Germany, the second-largest economy in NATO. It is also the most populous country in Europe (other than Russia). It has the largest economy and the largest and most advanced technological-industrial base. It benefits from far greater fiscal space and fewer economic-financial constraints than its European allies. Germany has therefore has a crucial role to play in terms of European defense.

Fact #1: NATO and European NATO member economies are far larger than Russia’s economy

The combined, purchasing-power-parity-adjusted gross domestic product (GDP) of NATO is about ten times larger than Russia’s. The combined GDP of France, Germany, Italy and the UK (or E-4) is three times larger. Germany’s economy alone is slightly larger than Russia’s. In addition, the per capita income of the E-4 is higher than in Russia, which, economically, if not necessarily politically speaking, translates into larger resources mobilizable for national security. E-4 per capita income ranges from $57,000 to $67,000, compared to only $38,000 in Russia.

This economic balance in favor of European NATO countries will not change meaningfully if at all in the next few years. The IMF projects Russian economic growth to average 1.7% annually in 2024-29, compared to 0.9% in Germany. However, unless Russia makes a much more intensive use of its existing capital and labor, it is not likely to grow twice as fast as Germany or the other larger European economies, not least given the medium-term effects of sanctions, the increasing share of national resources Russia is dedicating to “unproductive” defense economy and the war’s negative effect on labor supply. But even if Russia’s were to grow at twice the rate of Germany over the next five years, it would have a very negligible effect on the two countries’ relative economic size over the medium-term and would not change the E-4/ Russia economic balance meaningfully.

On the assumption that all countries have access to comparable military technology and that PPP conversion rates roughly reflect the price differential of military goods and services, the E-4 have a substantial edge over Russia as far as the mobilizable economic resources are concerned. The resource advantage is particularly salient in case of long-term security competition, like the Cold War, and wars of attrition, like World War I and II, where the side with the greater resources prevails over the long term, provided it is politically able to mobilize the necessary resources for defense purposes in time. [3] In short, the large European countries’ economic resource base is sufficiently large to compete with Russia and prevail. The obstacle to higher spending is domestic distributional conflict, not economics

Fact #2: Russia is currently outspending the E-4 , but only because it allocates a far greater share of GDP to defense

The Stockholm International Peace Research Institute (SIPRI) estimates that Russia spent $100 billion on defense in 2023, measured in current dollar terms at market exchange rates, compared to a combined $200 billion in France, Germany and the UK. Adjusted for PPP, however, Russia spent $250-300 billion, or roughly as much as Germany, France, Italy, the UK, and Poland combined. To be able to do so, however, Russia needed to mobilize nearly 6% of GDP, compared to a GDP-weighted average of less than 2% of GDP in the E-4. If the major European NATO countries doubled their defense spending, Russia would be forced to raise defense spending to 12% of GDP to match it. This would represent a massive increase and force Russia to curtail private consumption or investment, or both. Over the medium term, the former risks causing political discontent, while the latter will lead to economic problems, including declining productivity and growth.

Fact #3: German defense expenditure Is low by historical standards and on a comparative basis

German defense spending peaked in the early 1960s at just over 4% of GDP. In 2023, it stood at 1.5% of GDP, up from an all-time low of 1.1% of GDP in 2016. German defense spending has not exceeded 2% of GDP since 1991. In terms of defense spending as a share of GDP, Germany currently ranks 21st out of 30 NATO countries. Germany also spends tangibly less than France, Italy and the UK where defense expenditure was 2.1%, 1.6% and 2.3% of GDP, respectively. By comparison, Poland spent almost 4% of GDP and the United States spent 3.5% of GDP last year. The NATO defense spending target is 2% of GDP, which was supposed to be reached this year.[4]

Fact #4: Germany can afford to increase defense expenditure in the medium-term without having to cut social expenditure or raise taxes

German government debt is comparatively low and the debt-to-GDP ratio is set to fall by more than one percentage point a year until the end of the decade. A more sophisticated financial is unnecessary to understand that Germany has ample financial room to increase defense expenditure. A one-percentage point increase in spending would help keep the debt-to-GDP ratio roughly unchanged. In the short run, a larger fiscal deficit would boost domestic demand and economic growth. Germany is therefore well-positioned to raise defense expenditure “on the cheap” without having raise additional taxes or cut non-defense, including social expenditure. In other words, a permanently larger fiscal deficit would not undermine the outlook for debt sustainability, certainly not in the near or medium-term. 

Fact #5: Germany has far greater fiscal flexibility than its major European allies

In 2023, German defense expenditure was 1.5% of GDP, making Germany one of the lowest spenders while being one of the countries with the greatest fiscal space. Government debt in the next four largest European NATO countries, France, Italy, Spain and the UK, is much higher, nearly (more than) twice as high in some instances (see chart). Even if projected long-term pension and healthcare spending are added to the debt stock (and suitably discounted) German debt, while high, is far lower than in the other large NATO countries. Finally, German debt is less costly in terms of both nominal and real interest rates. Naturally, larger fiscal deficits and less favorable debt dynamics could help raise interest rates and hence medium-term and long-term debt servicing costs, and thus limit the fiscal space in t future. But thanks to a relatively favorable maturity structure, this would take time. 

Fact #6: Constraints on higher German defense expenditure are legal and political in nature, not economic or financial

If Germany does face short- and medium-term constraints on defense spending, they are legal and political, far less financial or economic. The constitutionally mandated debt brake forces the government to limit the federal budget deficit to 0.35% of GDP. This acts as a check on substantial defense expenditure increases, unless government revenue is increased or spending reductions in other areas are implemented, neither of which would be politically popular. Nonetheless, some poll suggest that the public supports higher defense expenditure. A recent poll has shown that the majority of Germans or 68% supports higher defense spending and 29% oppose it. Support for higher spending was highest among Conservatives (90%) and Liberals (88%) followed by Green voters (75%) and Social Democrats (72% of Social Democrats).[5] It is likely that popular support would be lower if it had to be financed by higher individual income taxes or lower pension and health expenditure, both of which would negatively affect private consumption. This suggests that the constraints in higher German defense spending are legal (debt brake) and political, due to a lack of political leadership, including a willingness or ability to reform the debt brake, less so due to a lack of popular support or outright opposition.

Recommendations

> Explain to voters the economic costs and benefits as well as the strategic rationale of higher defense spending and the provision of aid to Ukraine. Higher defense spending enhances national and alliance security as well as deterrence. Economically, higher government spending on defense helps support the rebuilding of the defense-industrial base, provided military aid comes out of German/ European production rather than imports from the United States (and procurement accounts for a significant share of the spending increases) as well as domestic demand and domestic employment. But increased defense expenditure, unless financed by non-defense expenditure reductions or revenue increases, translates into higher debt levels (relative to the baseline forecast). Importantly, savings-constrained economies also suffer if savings are reduced to support the consumption of defense goods (and services). However, Germany’s large current account surpluses suggest that it is not a savings-constrained economy; if anything, it suffers from excess savings and insufficient domestic demand. This should limit the negative effects of higher defense expenditure on non-defense investment, and if increased defense expenditure is deficit-financed boost short- and medium-term economic growth. 

> Reform the constitutionally mandated debt brake to make room for moderately larger fiscal deficits while remaining committed to long-term debt sustainability. The new rules need to strike a better balance between greater short- and medium-term budgetary flexibility and long-term debt sustainability in order to allow for a reasonable increase in defense expenditure. How this can be done is a highly technically issue. But the rules should allow for a higher defense expenditure and a slightly larger deficit as long as long-term debt sustainability is not jeopardized. This may require a commitment to cut expenditure or, more likely, raise revenue in the future. 

> In conjunction with European NATO allies, make a credible and sustainable commitment to matching future increases of Russian defense expenditure beyond the two-percent NATO expenditure goals. Such a commitment should seek to match any Russian defense expenditure to the extent that the existing NATO commitment to spend 2% of GDP on defense fall short of this goal. [6] Germany and the European NATO members should commit to matching increased Russian military expenditure to the extent that Russian spending increases exceed NATO-related increase, including channeling a share of the increase to Ukraine. Strategically, this should help diminish Russian incentives to continue the war. Economically, it would help incentivize industry to invest in defense production by providing a longer planning and investment horizon, thereby helping to rebuild Germany’s defense-industrial base. (Admittedly, it will be difficult to get all European NATO members to commit to such an automatic increase, but even a non-binding political commitment do doing so would be a signal, if perhaps not a very credibly one, of European resolve. Commitments should be made more credible by other European countries committing to raise additional defense-related taxes or, politically even more challenging, cutting non-defense expenditure).

> Ensure efficiency and efficacy of defense spending, including greater European defense industry integration. The amount of spending share of resources allocated to defense is a proxy and does capture how efficiently it is spent nor how efficaciously economic resources are converted into military power, security and deterrence. Germany should learn from other countries’ best practices as far as procurement is concerned. European defense integration would allow for greater economic efficiency and help military inter-operability.

[1] Markus Jaeger, The Economics of Great Power Competition, DGAP Policy Brief, 2022
[2] European Central Bank, Longer-term challenges for fiscal policy in the euro area, ECB Economic Bulletin 4, 2024
[3] Similarly, Paul Kennedy, The rise and fall of the great powers, New York: Random House, 1987
[4] National defense as well as collective defense are public goods, economically speaking, prone to free riding. Mancur Olson & Richard Zeckhauer, An economic theory of alliances, The Review of Economics and Statistics, 48(3) 1966
[5] Internationale Politik (Forsa), April 2024
[6] NATO, Defence Expenditure of NATO Countries (2014-23), Press Release, July 7, 2023

Foreign Economic and Macroeconomic Policies After the US Presidential Elections (2024)

> Foreign trade and macroeconomic policies under a Harris administration would largely provide for continuity with the Biden administration, while policies under another Trump administration would have the potential to be highly disruptive

> Regardless of who becomes the next president, US national-security-focused trade and investment policies will continue to be tightened in the context of US-Chinese strategic competition

> Trump trade policies could prove hugely destabilizing to international trade, severely strain US-EU trade relations, and lead to a full-blown trade war with China

> Fiscal policy will remain loose under both a Harris and a Trump administration, but the latter would also seek to pressure the Federal Reserve to pursue loose monetary and weak dollar policies

> The EU should ready its new geoeconomic instruments to deter US discriminatory measures, while signaling openness to negotiations about how best to defuse transatlantic economic conflict

 See also: https://www.cesifo.org/en/publications/2024/journal-complete-issue/econpol-forum-052024-us-presidential-election-2024

International Politics & Bon Mots (2024)

ALLIANCES

There is only thing that is worse than fighting with allies, that is fighting without them (Winston Churchill)

We have no eternal allies and we have no perpetual enemies (Lord Palmerston)

NATO is to keep the Soviets out, keep the Germans down, and the Americans in (Lord Ismay)

It is our policy to steer clear of permanent alliance with any portion of the foreign world (George Washington)


BATLLES

You know how to win a victory, Hannibal, but not how to use it (Maharbal)

You know, you never beat us on the battlefield. Response: That may be so, but it is also irrelevant (Colonel Harry G. Summers to Vietnamese official)

France has lost a battle, but she has not lost the war (Charles de Gaulle)

The insurgent does not need to win, army loses when it does not win etc. (Henry Kissinger).


CREDIBILITY

Now we have a problem in trying to make our power credible and Vietnam looks like the place (JFK)


DIPLOMACY

The Schleswig-Holstein question is so complicated, only three men in Europe have ever understood it. One was Prince Albert, who is dead. The second is a German professor, who has gone mad. I am the third and I have forgotten all about it (Lord Palmerston)

When you say you agree with a thing in principle, you mean that you have not the slightest intention of carrying it out in practice (Otto von Bismarck)

Diplomacy without force is like music without instruments (Frederick the Great)

Diplomacy is the patient accumulation of partial successes (Henry Kissinger)

All war represents a failure of diplomacy (Tony Bennett)

Never believe anything in politics until it has been officially deniedr (Otto von Bismarck)

Wenn man sagt, dass man einer Sache grundsätzlich zustimmt, bedeutet das, dass man nicht die geringste Absicht hat, sie in der Praxis durchzuführen (Otto von Bismarck)

I wonder what he meant by that? (Talleyrand’s reaction n hearing of the death of the Turkish ambassador)

Le Congres ne marche pas, il danse (Charles Joseph de Lingne)

EMPIRE

Fear, honour and interest (Athenian delegation to Sparta on Athens has acquired an empire in the guise of the Delian League (Thucydides)

Britain acquired its empire in a fit of absentmindedness (Sir John Seeley)

Si vis pacem, para bellum (Publius Flavius Vegetius Renatus)


FOREIGN POLICY WONKS

The society that separates its scholars from its warriors will have its thinking done by cowards and its fighting done by fools (Thucydides)

Well, Lyndon, they may be every bit as intelligent as you say, but I’d feel a whole lot better if just tone of them had run for sheriff once (House Speaker Sam Rayburn to LBJ after the latter extolled the brilliance of the members of JFK s cabinet)


GEOPOLITICS

I have no way to defend my territory but to extend them (Catherine the Great)


HISTORY

History repeats itself, first tragedy, then as farce (Karl Marx)

Man makes his own history, but he does not make it out of the whole cloth; he does not make it out of the condition chosen by himself, but out of such as he finds close at hand (Karl Marx).

We will go down in history either as the world’s greatest statesmen or its worst villains (Adam Driver)

History will be kind to me, for I intend to write it (Winston Churchill)

History is a set of lies (we have) agreed upon (Napoleon)


INTERNATIONAL POLITICS

International politics, like all politics, is a struggle for power (Hans Morgenthau)a


JUSTIFICATIONS & REASONS

Pleikus are like streetcars (McGeorge Bundy)

It is ours. We should hang on to it. We stole it, fair and square (Senator Hayakawa, opposing the return of the Panama Canal).


MILITARY POWER

The great questions of the day will not be settled by means of speeches and majority decisions — that was the error of 1848 and 1849 —but by iron and blood (Otto von Bismarck)

Prussia is an army that acquired a state (Voltaire)

The Pope? How many divisions has he got (Stalin …. Laval, France, Catholicism). Perhaps in keeping with dialectical materialism, Stalin also coined the phrase:


MORALITY

Morality is simply the attitude we adopt towards people we dislike (Oscar Wilde)

MYSTERIES

How horrible, fantastic, incredible it is that we should be digging trenches and trying on gas masks here because of a quarrel in a faraway country between people of whom we know nothing (Neville Chamberlain)

I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma (Winston Churchill)


NATIONALISM

Patriotism is when love of your own people comes first; nationalism, when hate for people other than your own comes first (Charles de Gaulle)

Patriotism is the last refuge of the scoundrel (Samuel Johnson, rebuking Willian Pitt the Elder)

My heart is French, my ass is international (Arletty)

Language is a dialect with a navy and an army (Max Weinreich).

We have created Italy, now we need to create Italians (Mazzini)

The flag is a pseudo-archetype, a reflexive semion designed to pre-empt and negate the critical function (Foster Wallace)


ORDER

To strike a balance between the two aspects of world order – power and legitimacy – is the essence of statesmanship (Henry Kissinger)

Order always requires a subtle balance of restraint, force and legitimacy (Henry Kissinger)


PEACE

Auferre, trucidare, rapere, falsis nominibus imperium; atque, ubi solitudinem faciunt, pacem appellant (Tacitus quoting Calgacus)

It is far easier to make war than peace (Georges Clemenceau)


POLITICS & POWER

Political power grows out of the barrel of a gun (Mao Tse Tung)

Politik ist das Streben nach Macht (Weber)

Die Politik bedeutet ein starkes langsames Bohren von dicken Brettern mit Leidenschaft und Augenmaß zugleich (Max Weber)

Might does not make right (Talleyrand)

Politics is the art of the possible (Otto von Bismarck)

Men naturally despise those who court them, but respect those who do not give way to them (Charles Maurice de Talleyrand)

It is better to be feared than loved, if you cannot be both (Machiavelli)

War gives the right to the conquerors to impose any condition they please on the conquered (Julius Caesar)


PRAGMATISM

We don’t have a dog in this fight (James Baker on war in Bosnia)

Balkans not worth the life of a single Pomeranian grenadier (Otto von Bismarck)

He may be a son of bitch. But he is our son of a bitch (FDR about Somoza)

Americans do the right thing – after they’ve tried everything else (Winston Churchill) 

it is worse than a crime, it is a mistake (Talleyrand)

PROPGANDA

Since the masses are always eager to believe something, for their benefit nothing is so easy to arrange as facts (Charles Maurice de Talleyrand)

If you tell a lie big enough and keep repeating it, people will eventually come to believe it (Joseph Goebbels)

Falsehood flies, and the truth comes limping after it; so that when men come to be undeceived, it is too late; the jest is over, and the tale has had its effect (Jonathan Swift)

The first casualty when war comes is truth (Hiram Johnson)

Mundus vult decipi, ergo decipiatur

Elected leaders always had to shape inchoate public attitudes into support for specific foreign policies (Robert Zoellick)


RHETORIC

Ceterum censeo Carthaginem esse delendam (Cato the elder)

Dum Rome deliberat, Saguntum perit

Not by speeches and votes of the majority, are the great questions of the time decided — that was the error of 1848 and 1849 — but by iron and blood (Otto von Bismarck)


RISE AND FALL

What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta (Thucydides)

We, my dear Crossman, are the Greeks in the American empire. You will find the Americans much as the Greeks found the Romans – great, big, vulgar bustling people, more vigorous than we are and also more idle, with more unspoiled virtues, but also more corrupt (Harold Macmillan)


REPUTATION

At the moment, he looks like Lord North (Tim Shipman, on historical legacy of David Cameron after Brexit)


STATESMANSHIP

Der Mensch kann den Strom der Zeit nicht schaffen und nicht lenken, sondern nur auf ihm fahren und steuern, um mit mehr oder weniger Erfahrung und Geschick den Schiffbruch zu vermeiden (Otto von Bismarck)

Die ganze Kunst der Politik besteht darin, sich der Zeitumstande richtig zu bedienen (Sun King Louis XIV)

The goods are offended by hubris (Henry Kissinger)

He is almost a statesman. He lies quite well (Napoléon)

Events, dear boy, events (Harold Macmillan on what a prime minister most fears)

Speak softly, carry a big stick (Teddy Roosevelt)


STRATEGY

Strategy is the process whereby political will is translated into military action (Andrew Wilson)

The political object is the goal, war is the means of reaching it, and the means can never be considered in isolation from their purposes (Carl von Clausewitz)

The purpose of war is to make a better peace (Basil Liddell-Hart)

The strong do as they please, the weak suffer as they must (Delian dialogue)

Kein Plan überlebt die erste Feindberührung (Helmuth von Moltke)

The commonest error in politics is sticking to the carcasses of dead policies (Duke of Salisbury)

War is too important to be left to the generals (Georges Clemenceau)


THEORY

The primary purpose of any theory is to clarify concepts and ideas that have become confused and entangled (Carl von Clausewitz)


TREATIES

Pacta sunt servanda

Les traités, vous voyez, sont comme les jeunes filles et les roses: ça dure ce que ça dure! (Charles de Gaulle).


U.S. FOREIGN POLICY

Peace, commerce and honest friendship with all nations, entangling alliances with none (Thomas Jefferson)

America goes not abroad, in search of monsters to destroy (John Quincy Adams)

WAR

Der Krieg ist also ein Akt der Gewalt, um den Gegner zur Erfüllung unseres Willens zu zwingen (Carl von Clausewitz)

War is the realm of chance, passion and reason (Carl von Clausewitz)

War is the father of all things (Heraclitus)

War made the state, and the state made war (Charles Tilly)

Vae victis (Brennus)

Wrong war, wrong place, wrong time (Omar Bradley, opposing war with China in 1951)

Waterloo was won the playing fields of Eton (Duke of Wellington)

The history of failure in war can almost always be summed up in two words: too late (Douglas MacArthur)

You fight for your country, but you die for your comrades

How can you ask a man to be the last man to die (John Kerry)

Vietnam was a country where America was trying to make people stop being communists by dropping things on them from airplanes (Kurt Vonnegut)

 

Germany Needs to Reform the Debt Brake to Address Urgent Spending Needs (2024)

Germany, like many other advanced economies, is facing significant spending pressures related to climate change, defense, infrastructure and demographic change, including healthcare and pensions. Estimates by the IMF and the European Commission put projected spending needs somewhere around 2-2.5% of GDP annually. Between now and 2030, spending related to pension and health is projected to increase by 0.6% and 0.3% GDP. Defence spending needs to increase by 0.3% of GDP, while spending on climate and infrastructure ought to increase by 0.2% of GDP and 1% of GDP. In view of these spending needs, Germany should reform the so-called debt brake, which overly constrains its ability to run larger deficits to finance urgent and necessary public expenditure.

Constitutionally Mandated Debt Brake is Overly Constraining

In 2009, Germany enshrined the so-called debt break in its constitution. The debt brake limits the structural deficit to 0.35% of GDP at the federal level and to zero at the state level. On its face, the debt brake has been very successful. Measured as a share of GDP, German government debt fell by 17 percentage points between 2010 and 2023, whereas it increased by an average of 28 percentage points in the other G7 countries. Last year, all G7 countries had government debt exceeding 100% of GDP, except for Germany where debt stood at a mere 64% of GDP. 

All other things equal, lower debt means sounder public finances. A low debt ratio allows governments to quickly mobilize resources in response to unforeseen shocks or in support of important policy objectives without having to raise taxes or cut expenditure. But low public debt is not an end in itself, and reducing public debt that is already at manageable levels has significant opportunity costs in terms of foregone spending and investment. In Germany’s case, the debt brake is overly constraining. Not only has its rigidity forced an unnecessarily large fiscal adjustment on the economy this year in a context where debt levels are already low and would have continued to decline over the medium term regardless. But restrictive fiscal policy, such as a failure to invest in productivity-enhancing infrastructure and national security, also has negative consequences in terms of long-term growth and national security.

A back-of-the-envelope calculation suggests that Germany can afford to run a fiscal deficit more than a full percentage point of GDP higher than what is mandated by the debt brake without experiencing an increase in the debt-to-GDP ratio. The IMF estimates that a deficit of 1.6% of GDP would suffice to stabilize the debt ratio at 60% of GDP provided nominal GDP growth averages 2.7%. If, on the other hand, Germany were to strictly adhere to the debt brake indefinitely, the debt ratio would fall to less than 40% of GDP by 2050 and less than 20% of GDP by the end of the present century. Hardly a sensible policy. 

A Sensible Reform Would Afford the Government Greater Flexibility Without Jeopardizing Sound Public Finances

Current debt levels are more than manageable and adhering to the debt break prioritizes the reduction of debt over urgent spending needs. A sensible reform of the debt brake would allow the government to run larger deficits without increasing the debt ratio. Even the German Council of Economic Experts and the Bundesbank – hardly bastions of unorthodox economic thinking – support a reform of the debt brake. The Council has proposed a reform that would allow for a higher fiscal deficit of 1% when debt is less than 60% of GDP and a deficit of 0.5% of GDP deficit when debt is 60-90% of GDP. The Bundesbank has proposed a golden rule, which would allow the deficit to exceed 0.35% of GDP provided public investment exceeds a pre-specified level. 

However, if the IMF and EU Commission estimates are in the ballpark, increasing the deficit limit from 0.35% of GDP to 1.6% of GDP would not be enough to cover all spending needs. But it would go some way toward addressing the most urgent expenditure needs, including defense and infrastructure. Covering all expenditure needs without raising the debt ratio will require economically and politically difficult choices to be made, such as reducing non-priority expenditure, raising taxes or improving the quality of public spending. But reforming the debt brake would make these choices politically and economically less daunting. Most importantly, however, the government could start addressing high-priority needs right away.

A country as pivotal to Europe’s economy and security as Germany needs to pursue a more well- calibrated fiscal policy. It should not adhere rigidly and unnecessarily to an arbitrary and economically-difficult-to-justify fiscal rule. Instead, a more strategic and adaptable fiscal policy should be put in place to address urgent strategic priorities and challenges, such as the defense of the realm, climate change and a declining infrastructure. Compared to its advanced economy peers, whose debt levels are far higher, Germany has some leeway to increase expenditure without having to raise taxes or reduce non-priority expenditure. Germany should therefore reform the debt brake to take advantage of this flexibility, while continuing to safeguard sound public finances.

 

Proposed Institutional Reforms Risk Undermining Mexico's Ability to Attract Foreign Direct Investment (2024)

Mexico’s president-elect pledge to implement a potentially major institutional and judicial reform has increased investor nervousness and, if it is implemented along more radical lines, would diminish Mexico’s attractiveness as a destination for foreign investment at the every moment when the country was supposed to benefit from global supply chain restructuring. Similar to populist politician elsewhere, Mexico’s left-wing leaders see existing institutions as representing the deep state that prevent political change. But proposals to substantially reform or weaken existing institutions could heighten domestic and foreign investor concerns about Mexico’s institutional stability and predictability. Radical judicial reform would deter portfolio and especially foreign direct investors at a time when geopolitically driven economic fragmentation, de-risking and friend-shoring was making Mexico an increasingly attractive investment destination. 

> On June 2, Claudia Sheinbaum of the left-wing Morena party was elected president and succeeded Andres Manuel Lopez Obrador or AMLO (2018-24). She will serve a single six-year term and will take office on October 1.

> The president-elect’s left-wing electoral alliance Sigamos Haciendo Historia controls 373 out of 500 seats in chamber of deputies and 83 out of 128 seats in the Senate. This gives the alliance a constitutional two-thirds majority in the House, while falling two seats short of one in the Senate.

> On February 5, President AMLO submitted a package of 18 constitutional amendments and two legal reform initiatives that would affect the executive and legislative branch, the electoral system and eliminate various regulatory agencies and autonomous constitutional bodies, among other things.

Mexico’s economy has underperformed in the past few decades, while it proved resilient to external shocks. In the 2000s, the IMF classified Mexico as a high-growth emerging economy. But Mexico never succeeded in growing more than 2.5% on a sustained basis. Explanations for Mexico’s relatively disappointing economic growth vary, including labor market informality, limited human capital and insufficient investment. Mexican economic growth is sensitive to the U.S. economic cycle and in particularly U.S. industrial production given Mexico’s extensive integration into U.S. manufacturing supply chains and the large share (85%) of Mexican exports to the U.S.. But economic shocks like the 2001 dotcom bubble, the U.S.-centered global financial crisis of 2008 or COVID-19 pandemic lead to sharp economic downturn, but they do not prove financially destabilizing due a robust macroeconomic framework, including sustainable debt levels, inflationary targeting by an independent central bank and floating exchange rate. The energy-focused reforms under President Enrique Pena Nieto (2012-18) were supposed to unleash Mexico’s growth potential by opening up and liberalizing the Mexican energy sector to foreign investors. But economic growth failed to accelerate. Under President AMLO, the government began again to play a more important role and liberalization and market competition were rolled back. While Mexico’s economic performance does not differ much compared to other large Latin American economies, such as Argentina and Brazil, the latter have experienced far greater economic and financial volatility and instability in the past three decades. 

> Between 2000 and 2023, real GDP growth averaged a mere 1.7%. Under AMLO, real GDP growth expanded 1% a year, compared to 2% under Pena Nieto. This compares poorly to upper middle income economies in Eastern European and Asia. The IMF projects real GDP growth to average 2% in 200224-29. This is roughly in line with historical performance since the pay moratorium of 1982 and subsequent structural reform.

Mexico’s macroeconomic fundamentals are stable, but the government will need to rein the fiscal deficit. During the first few years of his mandate, AMLO stuck to a disciplined fiscal policy, leading to a broadly stable government debt-to-GDP ratio. The COVID-19 shock did lead to a sharp increase in the debt-to-GDP, like everywhere else. However, in the 2024 pre-election budget, the government increased social expenditure and investment, which led to a sharp increase in the deficit, which is expected to reach almost 6% of GDP. Meanwhile, state-owned of oil company Petroleos Mexicanos (PEMEX) required (and will require) government financial support in the context of a continued tangible reliance of the government on oil-related revenues.

> The IMF projects net public sector to stabilize at 50% of GDP, roughly the same level it was in 2020. But the IMF also forecasts Mexico’s fiscal deficit to reach almost 6% of GDP in 2024, a level that exceeds the deficit of 4.3% of GDP during COVID-19 when economic growth collapsed. The MF also predicts a change in the primary balance worth more than 2% of GDP, implying a substantial fiscal adjustment in 2025. If the Mexican government fails to lower the deficit next year, government will continue to increase, even if only gradually. But the risk of a credit downgrade, let alone broader financial instability would remain low as long as the new president remains credibly committed to adjust fiscal policy in 2026-27.

> Oil revenues amount to around 15% of budgetary revenue or a little more than 3% of GDP. This continues to make revenues sensitive to oil prices. But the government’s hedges it oil revenue, making situation manageable. Declining oil production does represent a challenge, but much more so over the medium term. Moreover, PEMEX has significant liabilities, which are contingent liabilities from the government’s point of view. Total liabilities of $106 billion as of 2023, almost half of which is set to mature in the next three years. The government has already allocated $ 10 billion to help PEMEX repay its maturities. With a GDP of around $ 2 trillion worth 5-6% of GDP. This represents a manageable risk in the short- to medium-term.

> Mexico’s net international investment position has been stable at – 30% of GDP. Its current account deficit is less than 2% of GDP and fully financed, generally over-financed by net foreign direct investment inflows in the form of reinvested earnings (rather than greenfield investment and intercompany loans. Mexico also has access to the IMF’s Flexible Credit Line worth $ 35 billion dollars, which more than financing provides Mexico with a seal of approval of its overall economic policies and financial position. The three major international rating agencies assign an investment grade rating of BBB or BBB- (or its equivalent) to Mexico.

Investors are concerned about the outlook for continued institutional stability. A stable, predictable and professional judicial system is important in terms of a country’s ability to attract long-term foreign (direct) investment. Financial markets reacted negatively to the electon outcome, less so because of Sheinbaum’s victory, which was expected, but because of unexpectedly strong performance of her electoral alliance in the congressional elections. With a two-third majority in the chamber and a near-two-thirds majority in the Senate, the likelihood of wide-ranging institutional reforms being approved has increased substantially. The president-elect has lent her support to the proposed reforms, which, among other things, could lead to an overhaul of the judiciary, including the firing of 1,600 judges and their replacement through popular elections. In principle, the reforms could be enacted as soon as September, but Sheinbaum has promised broad consultations, possibly as a way to give excuse to water down the reform. Her cabinet appointment point towards a more collegial, less top-down approach to policy-making. This may also suggest that she might be less keen to push through wide-ranging institutional reforms, particularly if they weigh on investment and economic confidence.

> The peso lost 10% of its value, and Mexican stock markets was down 6% the day after the elections, reflecting investor concerns about the risks associated with (uncertain) judicial reform.

> The nomination of Marcelo Ebrard, former foreign minister and PRD stalwart (and rival for nomination), as Economy Minister in charge of Industry, Trade and Investment and the decision to reappoint Rogelio Ramirez de la O as finance minister are important signals in terms of economic policy.

> Historically, ex-presidents have held little sway over Mexican politics, in part because they cannot run again for president, in part because consecutive re-election of members of the Chamber and the Senate is prohibited. Ousting a sitting president would require 2/3 majorities in both houses. This should limit AMLO’s ability to pressure Sheinbaum to do things she does not want to do.

In the context of reshoring and friend-shoring, Mexico is faced with a unique opportunity to attract foreign investment and integrate itself further into the North American economy. In the 1990s and 2000s, Mexico faced significant competition from low-cost China in terms of U.S. market share. But with international companies, including Chinese and American ones, seeking to diversify their supply chains, Mexico is again becoming a very attractive destination of foreign direct investment. With international companies pursuing supply chains diversification in the context of increasing geopolitical risks, Mexico’s membership in the United States-Mexico-Canada Agreement (USMCA, formerly NAFTA) provides companies with relatively easy access to the U.S. markets in terms of geography and tariffs. 

> The IMF has shown that capital flows, and especially foreign direct, less so trade flows between geopolitical allies has increased, while it has decreased between geopolitical adversaries. To the extent that investment and trade flows are redirected, Mexico should be expected to benefit.

> In 2023, Mexico replaced China as the United States largest import partner for the first time 20 years. Annual FDI inflow data do not yet point to a significant increase in FDI. Inflows have been fluctuating between $25 billion and $35 billion a year. In the first quarter of 2024, the United States accounted for half of FDI inflows.

US Partisan Politics Risks Leading America to Make an Unforced Strategic Error (2024)

(This blogpost was written several months prior to its publication. But its content remains relevant in the context of the foreign policy debate in Washington.) Europe and Germany cannot take timely and sufficient American support for Ukraine for granted. Partisan-political divisions and the prospect of a second Trump administration are creating heightened uncertainty. Brussels and Berlin should make it clear to both American policymakers and legislators that Europe has thus far provided far more total aid than Ukraine than America. They should also emphasize that US support is highly cost-effective in terms of America’s broader, China-focused national security strategy.

The Biden administration’s request for an additional $60 billion of Ukraine aid remains tied up in a hyper-partisan Congress. Worse, a second Trump administration may threaten to reduce or even withhold further Ukraine aid altogether, possibly in an attempt to force Europe to increase its support. To the extent that transatlantic disagreement over cost sharing is amenable to rational argument, Europe should emphasize two important points in its negotiations with America: Europe has already committed to providing much more aid to Ukraine than America; and American aid generates significant economic and strategic benefits to the United States at a comparatively small cost, while a reduction, let a alone complete withdrawal in aid would jeopardize Washington’s broader strategy goals. 

Europe has committed far greater resources to Ukraine than America 

As of October 2023, EU countries, directly and indirectly, have committed about twice as much military, financial and humanitarian aid to Ukraine than America. According to the Kiel Institute for the World Economy, total commitments by EU countries and EU institutions have amounted to $133 billion, compared to $72 billion since the beginning of the war in February 2022. The United States is the largest single provider of total aid ($71 billion) as well as military aid and assistance ($44 billion), followed by Germany (total aid: $21 billion/ military aid: $17 billion) and the UK (total aid: $13 billion/ military aid: $7 billion). As a share of GDP, however, Lithuania and Estonia have been the most generous providers of aid worth 1.8%. By comparison, Germany has provided aid worth 0.9% of GDP (including through EU institutions) and the United States 0.3% of GDP. 

If contributions were adjusted to take into account America’s slightly larger economy compared to the EU-27 (15.2% vs 14.3% of global GDP on a purchasing power parity basis) and its significantly higher per capita income ($80,000 vs $57,000 in PPP terms), Europe’s relative “adjusted” share would be even greater than what is implied by dollar contributions alone. Any transatlantic discussion of how to share the cost of support in future should start from an acknowledgment that Europe is committing far greater resources to support Ukraine than America. Far from free-riding, Europe is pulling its weight.

America’s Support for Ukraine is Highly Cost-Effective in Terms of its Broader Strategic Goals

A second issue European should emphasize is that America derives significant economic and strategic benefits from supporting Ukraine, and it does so at a relatively low cost. Financially, American aid is small, amounting to a little more little more than $70 billion since the start of the, or less than 0.15% of GDP on an annual basis. The $60 billion of additional aid requested by the Biden administration would amount to another 0.2% of GDP in 2024. To put this into perspective, a sustained 100 basis point increase in US interest rates costs the US taxpayer $260 billion, annually. 

Economically, Ukraine aid is not simply “money out of the door”. American aid, unlike EU aid, consists primarily of military aid and assistance. To the extent that military aid comes out of new production rather than existing stockpiles, the money flows directly to the US defense industry and US workers. According to the American Enterprise Institute, 90% of the funds spent stay in the United States. To the extent, however, that aid is financed by debt issuance, the American taxpayer is ultimately accountable for servicing it. But 0.15-0.2% of GDP worth of additional annual spending is as close to a rounding error in GDP terms as it gets.

Strategically, US military aid helps maintain the balance of conventional military power in Eastern Europe, and thus stability and security in Europe. From Washington’s point of view, it does more than that: it weakens Russia strategically. Leaving aside Russian losses in equipment and personnel as well as the impact of sanctions, the continued flow of Western aid to Ukraine is forcing Russia to increase “unproductive” military expenditure, thereby reducing the ability to invest to support long-term economic development. Russia’s trend growth has already decelerated to less than 1% over the past decade, and it is set to decline further, thereby weakening the country’s strategic position.

Keeping Russia at bay militarily in Ukraine is consistent with, and conducive to America’s primary strategic goal, as articulated in the National Security Strategies of both the Trump and Biden administrations: countering China. The war in Ukraine has led Moscow and Beijing to form a closer relationship. Preventing Russian from making gains in Eastern Europe is therefore in America’s best interest in terms of its broader national security strategy. From Washington’s point of view, spending less than 0.2% of GDP a year to prevent Russia, China’s major international partner, from making gains in Ukraine is simply efficient and effective strategy.

Reducing US Support for Ukraine Would Be Nothing Short of an Unforced Strategic Error

A second Trump administration may wager that a reduction of American aid will force the Europeans to increase their support and such a move would not fundamentally change the prospect of Russian gains in Ukraine. After all, Europeans feel more immediately threatened by the war in Ukraine than America. But this is a risky approach to take. A substantial reduction in aid would benefit Russia and might allow it to make military gains. And even if American aid does come through in the end, uncertainty about the availability and timing of future funding might undermine morale in Kyiv and embolden Moscow. Withholding Ukraine is also risky because Europeans, who have delivered more financial than military aid, are not well-placed to replace shipments of US military equipment necessary to support Ukraine effectively.

Washington might insist that Europeans purchase the necessary defense goods from America. But this would lead America to incur significant reputational costs in the eyes of its European and Asian allies. Uncertainty over America’s commitments to its security alliances would increase and weaken America’s geo-strategic position in East Asia. So even if the Europeans manage to increase their financial support to the level required to preserve the military balance in the Ukraine – and it is far from clear that this will happen – withholding or substantially scaling back American support for Ukraine looks like an unforced strategic error in the making. 

Should serious transatlantic disagreement over Ukraine funding emerge, then Europe would do well to point to the significant support it has provided thus far. It should also remind America of the significant strategic and reputational costs it would incur and of the very limited financial savings a reduction of US support would generate if it were to sharply reduce or withhold support altogether. These argument may not sway ideologues among policymakers, nor congresswomen (sic!) under electoral pressure. But they are squarely aimed at the Downsian median “voter” in Congress and pragmatic policymakers. Europeans must hope that America’s strategic interests prevail over populist, partisan domestic politics as well as some of its latest or not-so-latent unilateral-isolationist instincts.