Joe Biden is proving to be the economic nationalist Trump only pretended to be.
America isn’t just back, baby. We’re rolling over the world. The dollar is as high as it’s been in 40 years. Inflation is headed down, even if markets don’t yet know it. We’re at full employment. Even manufacturing is coming back.
But there can be too much winning. When everyone else, including your friends, is losing, winning makes you the bully.
That’s what is going on now. That’s the real message of the Swedish and Italian elections. Voters there are turning on the U.S. as an economic bully. We’re exporting inflation to them, and they’re looking at a very long, cold winter.
When you treat your friends like adversaries, they become your adversaries. It’s one thing to crush your enemies. Russia is being crushed. China is in very bad shape. But when everyone is on the ropes it’s time to be a good winner.
What built American prosperity is we were good winners. We won World War II, then instituted the Marshall Plan, aid and loan forgiveness meant to give democracy a chance against the Soviet Union. We were magnanimous toward Japan, too, so that by the time of the Korean War they were mostly in our corner.
This is another such time. The Fed’s interest rate hikes, which quadrupled what the best borrowers pay for money over just three months, are going to cure inflation. Many prices are already coming down. But we don’t have to treat inflation as Sherman did Georgia to win. It’s time to take the foot off the gas, not on behalf of America but on behalf of England, of Germany, of Japan, even of China. They’ve had enough.
If we make clear what we’re doing, if we accept longer-term inflation in the name of a reasonably priced dollar, we’ll still have more economic strength than any other country. More important, we’ll have credibility. We can use that credibility to take out Putin. We can use that in the climate fight. We can use that in the Middle East, and in Europe, and even with China.
Make clear why we’re slowing down the interest rate hikes. Focus on shrinking the Fed’s balance sheet. Then help Europe get through the winter, offer decent terms to China, for our supply chains if nothing else, and really act like that shining city on the hill, rather than that giant gun emplacement the world has seen us as for as long as I’ve been alive.
Use our soft power, and we may not have to use as much of the harder stuff. We’ll also help our own markets and reassure corporate America. Win-win-win.
