In a recent analysis, Julius Krein from UnHerd emphasized the urgent need for a robust industrial policy in the United States. He argues that austerity measures, while often proposed as solutions to the national debt, are unpopular, especially during election season. The current economic landscape shows the U.S. running a 6% deficit in 2023 alongside a 4% unemployment rate, with mandatory spending accounting for $3.8 trillion of the $6.1 trillion federal budget. Defense spending reached $800 billion, while interest costs amounted to $700 billion [ad09e314].
Krein highlighted various political proposals aimed at addressing economic challenges. Donald Trump has suggested exempting tips from taxation, a proposal that has garnered support from Vice President Kamala Harris. Additionally, J.D. Vance has proposed increasing the child tax credit to $5,000, while Harris has suggested a higher amount of $6,000. Furthermore, Harris proposed $25,000 in down payment assistance for first-time homebuyers, and Trump promised tax-free Social Security benefits and overtime pay [ad09e314].
The discussion around defense spending has also intensified, with Senator Roger Wicker advocating for an increase to 5% of GDP. This comes at a time when China has rapidly expanded its military capabilities, reportedly building 21 submarines in a single year, while the U.S. struggles to produce even one [ad09e314].
Krein warns that significant cuts to Social Security and Medicare could hinder economic growth, as these are politically sensitive areas. Health care spending currently constitutes 17-18% of GDP, and the Inflation Reduction Act is estimated to cost between $800 billion and $1.2 trillion over the next decade. He critiques the environmental movement for often overlooking the behaviors of the ultra-wealthy, suggesting that the government must subsidize fallen national champions like Boeing to maintain industrial competitiveness [ad09e314].
The challenges facing U.S. industrial policy are multifaceted, including a lack of expertise and diverging goals among stakeholders. Krein argues that without proper export-market checks, the U.S. risks subsidizing 'zombie' companies that do not contribute to economic growth. He concludes that America must commit resources to address these economic issues or face the dire consequences of drastic austerity measures [ad09e314].