A Janus-Faced Administration

Has the contrast ever been greater?

Halfway through the presidential term, we have an executive that is decidedly dovish in a domestic bread and butter sense — one that can be credibly accused of borrowing more from the Bernie-Warren agenda than thought possible back when Bernie was outmaneuvered by Biden’s centrist coalition. At the same time, the Biden administration has articulated a very muscular revision in US foreign policy. Biden has turned his back on the century of the Open Door and escalated dramatically against what the US military considers to be America’s two near-peers. We’re now committed to a proxy war against Russia and an economic war against China.

The Inflation Reduction Act (IRA), the climate bill shepherded into law by Tim Sahay, will shell out $400bn in tax credits to turbocharge the energy transition. If you buy a new EV, you’ll get a tax credit for $7500; $4000 if you buy a used one. If you invest in energy conservation at home, Uncle Sam will give you a tax credit of up to $1200 per annum; if you invest in a heat pump, you get another $2000 per annum. But the bulk of the IRA spend is corporate tax credits; some $216bn worth. As Sahay frankly explained, the logic of the all-carrot, no stick design is “mimosas for everyone.”

But all the supermassive tax credits are largely there for political economy reasons. Buried into the IRA is the secret, real plan to save the world. The Department of Energy’s Loan Program Office is to be the epicenter of the transition. What is for all practical purposes Saule Omarova’s brainchild will be able to lever up its authorized capital base of $250bn by up to 25X to fund energy infrastructure investment to the tune of $6.25tn. Tim Sahay and the Biden White House must surely be congratulated on pulling a rabbit out of the hat and saving the day on this.

The IRA’s far-reaching investments in our future are not the only thing one must congratulate the Biden team for. The White House has also poached Lael Brainard, the sharpest knife in the Fed’s drawer, to fill Deese’s shoes as the President’s top economic advisor. Although we could’ve used her at the Fed, this is still fantastic news, not just because Brainard is the best man for the job, of course she is, but because of the signal it sends — the American president is being advised by the best informed.

Yet, this doesn’t seem to be true more generally of this presidency. In foreign policy, the president is being advised by midwit supremacists like Victoria “fuck the EU” Nuland. It was already a worrying sign when she was appointed. Early in the administration, one could still imagine that she was just part of the partisan turnover and unlikely to be the lead on any big question. But that seems not to be the case — she seems to very closely involved in US policy in Eastern Europe.

Nor is it just Nuland. The rest of Biden’s foreign policy team seems no less hawkish. Because our media elites are craven sheep when it comes to US international relations, we still don’t know what exactly happened in August 2021. Why was Zelensky suddenly invited to the White House on September 1? Who advised President Biden that it was a good idea to force Putin’s hand in Ukraine?

All the moral grandstanding around Ukraine by Western elites is not helpful. Of course, Putin is a bad guy! Of course, Russia is an imperialist power! And, of course, Putin’s invasion of Ukraine is morally odious. These normative issues have nothing to do with appropriate US Russia policy, which must be considered in light of American interests and the world situation.

The fundamental issue is that Russia is not going anywhere, if for no other reason that that it is a great nuclear power that enjoys strategic parity with the United States. Putin is not going anywhere either. As I’ve explained, he enjoys a stronger grip on power than any other great power leader. Russia also cannot be brought to heel with the economic weapon, as I predicted (for the correct reason), and as the most serious analysts have since conceded. Nor can the flow of American arms guarantee ultimate battlefield success for Ukraine. The Ukraine conflict is frozen where it is because of obvious anthropological facts on the ground.

Any serious American analyst, starting with CIA Director Bill Burns, could’ve told you that Russia will fight if we tried to absorb Ukraine in our geopolitical orbit. So, the only way to make sense of Biden’s Ukraine policy innovations in the summer of 2021, consummated with the strategic partnership agreement signed that November, is that US security principals consciously decided to force the issue. In other words, they forced Putin’s hand because they wanted to bleed Russia.

This picture of Jake’s nest of hawks is reinforced by Sy Hersh’s very credible report — studiously ignored by the prestige media — that the White House authorized the sabotage of the Nord Stream pipelines. I was not very sympathetic to this idea because I did not imagine that US security principals’ risk appetite could be this high. I stand corrected. Their risk appetite is indeed too high. And they seem hell-bent on destroying America’s position in the world based on … what?

What is the diagnosis of Jake’s nest of hawks? Tucker Carlson suggests that American security elites think that the US is so powerful that it can simultaneously crush all confrontation states together. This model is similar to Osgood’s for the Kennedy escalation.

By 1964, after the Cuban missile crisis and before large numbers of American forces got bogged down in Vietnam, the United States looked so powerful that not only some Americans but others too (particularly Frenchmen) began to think of the world as virtually monopolar and of America’s position in the world as comparable to that of a global imperial power. The only remaining gap in military containment might be closed if the United States could demonstrate in Vietnam that wars of national liberation must fail.

Osgood (1969), Quoted in Farooqui, “The Logic of the Kennedy Escalation, 1954-1968.” Emphasis mine.

But do the hawks actually believe the world to be monopolar? That seems rather unlikely. Surely they can’t be so poorly informed. In any case, the thrust of the Biden escalation is an attempt to temper and reverse the decline in America’s relative power position by crowding in investment in domestic manufacturing capacity, and kicking China down the ladder.

The Biden escalation seems to be based on misinformed ideas about what makes nations powerful. Ultimately, it is based on mercantilist fantasies that are in turn based on the discredited net-flows paradigm. Nations running large current account surpluses aren’t stealing our lunch, or even doing well; they simply have macroeconomic imbalances with high savings (correctly traced by Klein and Pettis to wage suppression). Conversely, large current account deficits are not a sign of poor economic performance. Put simply, trade balances do not contain any geopolitically-relevant information.

It is absolutely true that the domestic industrial base matters to a nation’s power position. The Biden administration is correct to invest massively in rebuilding America’s production capacity. The problem is that these investments are coupled with “Buy American” provisions that are guaranteed to make our relations with our European and Asian allies bitter and confrontational. This is fundamentally counterproductive because America’s world position is not simply a function of our manufacturing output and employment, it depends on the alliance behavior of our adversaries, allies and third parties — whose responses can trump any gains to be had from US unilateralism.

The “Buy American” provisions themselves don’t worry me too much. They will be walked back and watered down as the pushback from our allies unfolds. What worries me is, above all, the chips escalation. This harebrained scheme is the fruit of longstanding Anglo-Saxon technophilia. Chips simply aren’t that important. And in as much as they’re important, we can’t actually prevent China from climbing up that value-chain.

It does, however, destroy any prospect of cooperative relations with the Chinese. Arthur Tellis memorably called the chips escalation “a counterforce strike” — if you really think chips are so fucking important, how else can you see this? We have left China no choice but to play a zero-sum game. This is a terrible idea on multiple levels.

The chips escalation, together with the our contest in pain tolerance with Putin, immediately raises the question of ‘dual containment’ in the strategic sense. Is dual containment even possible? Can we contain both these near peers together? This brings us to the heart of the problem. Which is that the United States does not have a two-war capability.

A two-war capability is the ability to wage two different conflicts located far-away from each other at the same time. The US was capable of seeing off both Russia and China at the same time in the unipolar era (1986-2008); but after the resurrection of the Russian army, the rise of China, and our self-inflicted catastrophes of the mid-2000s, this is no longer the case. Raphael Cohen suggests that Ukraine provides a template for how we can “hedge against the simultaneity problem.” But that’s not a two war capability; that’s at best a two half-wars capability.

If he had known the full Western response in advance, do you think Putin wouldn’t have attacked Ukraine? Of course not. He would do it again, precisely because the threat of a half war does not deter. Like the economic weapon (and often the threat of air power), it signals weakness and lack of commitment rather than strength. Specifically, when we say we will sanction you to death, our enemies hear that we will not enter the fight ourselves. More generally, when our threats are not commensurate with the adversary’s stakes, it makes deterrence failure much more likely.

Ultimately, our problem in both Ukraine and Taiwan is that the stakes are considerably higher for our adversaries than ourselves. To be fair, there are important differences in these two cases of extended deterrence. Russians believe Ukraine to be in the Russian sphere of influence; while the Chinese believe Taiwan to be Chinese national territory. But we have a lot more riding in Taiwan than Ukraine. For if China can forcibly take Taiwan despite our resistance, then our entire position in Asia will collapse.

Despite claims to the contrary by Bridge Colby, among others, China does not possess, nor is it likely to any time soon, the capability of landing an army on Taiwan in the face of determined armed resistance by the United States. They simply don’t have the ability to sink the most survivable of American strike platforms — quiet nuclear attack submarines and long-range bombers launched from hardened beyond-theater sites firing standoff long-range missiles against Chinese reconnaissance-strike systems.

So, we can successfully deter a Chinese takeover bid against the island. However, as Owen Cote Jr. warns, deterring and responding to Chinese coercion against Taiwan is a considerably harder problem. Put another way, we enjoy escalation dominance against China in the Taiwan Strait, but we don’t have a credible escalation threat against sub-strategic harassment, shelling, and even blockade of the island. Recall that we had to simply stand by when China blockaded the island after Pelosi’s visit. We didn’t have very many good options to respond in that scenario, nor are we likely to in the future.

China can hurt us in very many ways, not just by pressing Taiwan. Pakistan is already a Chinese satellite. China could also establish closer ties with Iran; perhaps even going so far as sending a division. China has so far been restrained in its engagement in Africa and Latin America. That could very well change, and do so virtually overnight. They could start funding the adversaries of our clients across the board. The Soviets did that, and they were only half as well-endowed as the Chinese.

China could certainly escalate support for Russia, a scenario that is becoming ever more likely as Sino-American relations continue to deteriorate. In that case, we can forget about outproducing our adversaries in the Ukraine war.

China has a much bigger manufacturing base than the West. Will they use it? It must be tempting to pin the West down in Europe.

Andrew Sullivan. The war is right and just, but is it prudent?

More worryingly still, China could prevail against us in the diplomatic struggle. It is hardly out of the realm of possibility that, with unrestrained US unilateralism, we, rather than the Chinese, could end up diplomatically isolated. The Germans have made it amply clear that they are not signing up to decouple from China. We’re not going to be able to browbeat very many nations into toeing our China line.

That’s not even the biggest risk we’re running because of the Biden escalation. Around the corner is a tripolar nuclear world; an extremely dangerous configuration with considerable risk — especially for the odd one out. By forcing their marriage, we’re making our position very difficult indeed. Balancing both under conditions where each enjoys parity with us — the baseline scenario a decade out — may very well be impossible.

The fact that we can purchase some national discipline by waging a cold war against Russia and China is poor recompense for a policy agenda that is otherwise likely to undermine America’s world position.