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- [00:00]
A
Foreign. Welcome back, everybody, to what really Matters. I'm Jeremy Stern with you in Los Angeles. I'm here as always with Walter Russell Mead of tablet, the Wall Street Journal, Hudson Institute and the Hamilton School at the University of Florida. Let's start with this week's news. First story of the week, the US national debt now exceeds 100% of GDP, crossing a once unthinkable threshold on the way to breaking the record set in the wake of World War II. As of March 31, the country's publicly held debt was $31.265 trillion, according to data released Thursday. That puts the ratio at 100.2%, compared with 99.5% when the last fiscal year ended Sept. 30. That figure will likely climb for the foreseeable future because the federal government is running historically large annual deficits of nearly 6% of GDP, which added to the debt. The government is spending $1.33 for every dollar it collects in revenue. And the budget deficit this year is projected at 1.9 trillion. That is little change from 2025 as the Republicans tax cuts kick in before their spending cuts take effect. Walter, this certainly isn't news, so I won't ask you that. But as maybe the slowest, burning, terrifying story in my lifetime for which there has, you know, nevertheless, there haven't been any actual consequences yet. So I'll just ask you the question our listeners probably want to know the answer to. How much does this actually matter?
- [01:42]
B
That is actually a really good question. You know, Thomas McCauley wrote this great book on the history of England, and he writes in there about the fact that foundation of the n English national debt when the back when the bank was of England was started in the 17th century. And what he then does is he gives you sort of every 20, 30 years, there were these prophecies that national bankruptcy was at hand because the debt had grown so far, and then, you know, these wonderful hysterical prophecies of fiscal doom. And it is true that all during that time, the British were haunted and horrified by a debt that was inexorably rising. You know, every time they fought another war with the French, they owed more money. In fact, it was fear of the national debt was one of the factors that led them to want to tax the colonies. And then they so they had the American Revolution, which they lose, but they've acquired a lot more debt immediately followed by the Napoleonic wars. And it's just an insane debt fest. And McCauley's point is that through all of this inexorable rise of the debt, the country kept getting more prosperous, that the hour of doom prophesied by all the leading figures never quite came. And I think he has a point that to some degree, as a society becomes more economically and technologically and socially advanced, it both needs greater government debt to function and is able to carry an increasingly high level of debt with decreasing effects on the general prosperity. And you think about, okay, the last time we were at this level of debt was the 1940s with World War II. Well, we don't really remember the 1950s as an era of penury and disaster. So the idea that a level of debt like this is necessarily associated with some kind of horror, I think is, is a little premature. Now I can just imagine all of our faithful listeners having heart attacks as I utter these heretical thoughts. I want to immediately qualify them by saying, you can push it too far. Ask the Argentines, ask the Weimar, Germans. You can engineer yourself into a situation in which all of the feared consequences of debt overload really happen. And there's also, of course, the question of, you know, why did you take on the debt? I mean, for us, historically, for the Americans, up until now, our debt has basically been related to wars, either foreign or domestic. And the Civil War debt was immense. But again, we come out of it with, you know, we come out of that whole episode 30 years later as the world's greatest economy. So the question in some ways is, why are we going into debt? Why is the spending so high? And I honestly think you can reduce a lot of this simply to the inefficiencies and absurdities of our healthcare system that we have locked ourselves into a system that is very expensive to operate. We have largely failed to apply the potential savings that come from the development of AI and generally of information technology to make health services cheaper to deliver. We also have sort of systems that build on it, like the tort system for malpractice and so on, that, that enormously increase both the costs of providing treatment and then costs associated sort of around the system. These will drive us into a dark place if we don't fix them. But you notice, I'm not saying that the first thing we have to do to fix the deficit is to cut spending. We need to put the growth of expenditures on a more sustainable slope and be able to use artificial intelligence and other forms of it to reduce the cost of government. There are other things I think we could do that would, you know, a lot of the costs of government don't even show up in deficit figures. The fact that the courts enable these 20 year NIMBY guerrilla wars to delay needed infrastructure or whatever else adds immensely to government debt and cost. So I would actually say while worrying about the deficit is a good thing, I think one of the reasons we haven't gone the way of the Argentines or some of the others is because we do worry when the number is gets high. So I'm not saying it's a bad thing to worry, but I'm saying don't panic. Think intelligently. There really are things we can do
- [07:29]
A
to the Macaulay point that, you know, maybe you can kind of grow or advance your way, maybe not out of the debt, but out of having to reckon with it in a, in a way that would really, really impact society in a bad way. How much of our ability to do that now do you think is really kind of riding on AI and this whole AI revolution working out versus are there kind of other sources of growth and advancement?
- [07:58]
B
Well, I think it's a mistake to try to isolate AI too much. There's a whole suite of developments and you actually look under the hood at what people call AI and there are all kinds of, you know, there's sort of, you know, agents, there are enterprise specific applications. You know, this. It's almost like, you know, the Internet is a very big thing and has a lot of implications. So I, I think we shouldn't fetishize the role of AI in the economy. And I, but I think what we are going to see is the increasing, increasing ability, whether it's machine aided or in other ways of human society to process, organize, draw conclusions from and use information does potentially drive an immense increase in productivity and economic growth.
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A
All right, our second story. The Supreme Court on Wednesday sharply weakened a key provision of the landmark Voting Rights Act, a ruling that limits the consideration, consideration of race in drawing voting maps and could usher in Republican gains in the House. According to the Washington Post, the decision is expected to touch off a scramble by Republicans to redraw majority minority districts, especially in the South. New districts could shift the balance of power in Congress by imperiling the reelection prospects of some black Democrats, possibly as soon as November's midterms. In some instances, minority representatives in state legislatures and local offices could also be redistricted.
- [09:39]
B
Outside out.
- [09:40]
A
Walter News or phone news.
- [09:42]
B
Not news in the sense. I can't imagine. I don't know what the poly market betting was on this decision, but I really can't imagine that many people woke up surprised. Oh my goodness. What, you know what Was this so not news in that sense, impactful? Yes. Not necessarily in the way that a lot of the sort of immediate commentary would, would have you believe. For one thing, get the. The minority majority districts that were drawn under this whole system when they. They concentrated Democratic votes into a small number of districts which actually effectively gerrymandered whole states kind of in a Republican direction. And for many, many years, a quiet force in Southern politics has been that both black Democrats and white Republicans have been kind of happy with a system that sort of said, okay, blacks will have representation, but they won't have a majority. And the big losers in that were actually white Democrats, many of whom would never be represented by Democrats. And so as actually you break up the minority majority districts, that's going to be. There are going to be a number of other districts out there where the Republican edge is going to be significantly lessened. And that could well mean, suppose, hypothetically that we have a bit of a wave election in the midterms of this fall. You could actually find a lot of surprising Democratic victories in Southern congressional districts. So I think it's not quite the sort of Democrat destruction decision that some of the immediate commentary has seen it as it may ultimately actually by in a sense, forcing both black and white elected officials to think about black votes in more districts, but also think about white votes in more districts. It might not be a bad thing in the long run.
- [12:14]
A
All right, final story of the week. The UAE has withdrawn from opec, signaling a dramatic geopolitical realignment in the Middle east as the war with Iran reshapes long standing forces fault lines between the Arab world and Israel. Rather than maintaining traditional Arab solidarity, the UAE is deepening security cooperation with Israel recently receiving Iron Dome missile defense technology and Israeli troops to operate it, something unthinkable elsewhere in the Arab world. The UAE's exit from OPEC, timed to coincide with a Gulf summit in Riyadh, was designed to shock and to declare that UAE national interest comes first. Officials say the UAE is also reconsidering its ties to the Arab League and Organization of Islamic Cooperation, practically leaving OPEC frees the UAE to ramp up production. Roughly 30% of its capacity has been bottled up by quotas and fund pipelines bypassing the Strait of Hormuz. Iran has fired 2,800 drones and missiles at the UAE more than any other target during the war, while other Gulf states have hesitated to respond. Walter, is this news or phone news
- [13:28]
B
here? I'd have to say too soon to tell, because if this alignment persists, historians will look back on this and say, okay, something happened that week, but it's quite possible that 18 months from now or even less, the UAE will suddenly rejoin OPEC. You know, this is not some kind of they're not burning down the house. And we've long seen these sort of spats and quarrels that happen in particularly in unstable regions of the world. Or we can even think of some of the threats and comments that have emanated from our own White House, where we now live in an era where people say and do things that might have been unthinkable 10 years ago, but then unsay them and undo them the next week. So this could be simply a manifestation of the greater volatility and vix. You could say that, that we see in world affairs generally, or it could be the start of something big. What will determine that is nothing, nothing that we see today but will be what is the pattern of events going forward? And there the UAE is going to be looking at, you know, what is, what is Saudi policy going or I think on some past episodes, we've talked about how much how, how important the relationship between the UAE and Saudi Arabia is for a lot of the policy changes that we see in the region. And we've seen the UAE definitely leaning, being more forward, leaning on both Israel and the west in ways that often in the past had as their target not so much Israel in the west as saying to foreign businesses, the UAE is the place you should be putting your regional headquarters, not Riyadh. So there all sorts of things that are, that are kind of churning around here. And this will shock some of our more tenderhearted readers. I know, but listeners. But I don't think that any of the leaders in the Middle east are that interested in making candid public explanations of their motives when they, when they do things like this.
- [16:03]
A
All right, that does it for the news this week. Let's have the big conversation. Walter, you wrote this week on the establishment consensus about Trump's war in Iran, which is that it's a strategic catastrophe, but that you think this view may be underestimating the president's position both at home and abroad as of now, and maybe overestimating his desperation for an exit from the war. So tell us more about that.
- [16:38]
B
Yeah, the column was really less about the state of the war column was kind of agnostic about where the war might end up, which generally speaking, I think is, is, is, is the smart stance when it comes to evaluating what is or isn't happening in a war. But what I think I really want to say is it doesn't look to Trump as if the war is lost. Trump actually believes that he has a number of moves to make, Actually, by the way, since that column came out, I think we've seen some modifications. People have realized. One of the main points I was making in the column was that the American Navy's ability to. To blockade the Strait of Hormuz without coming into range of Iranian fire or taking casualties was actually kind of a big deal. Certainly a big deal in Trump's mind. Because if you want to think from Trump's point of view, what is the kind of am of military action that Americans might be willing to put up with for a longer period of time? A passive military blockade without casualties is the kind of thing that's easier to sell to voters than ground invasions of Iran. And the fact that this blockade of the Strait really does have an immense ability, on the one hand, to hit the Iranian economy, but on the other, to change the narrative. I mean, before the US Blockade, everybody's talking about, ha, Iran controls the Strait. Look at that. Uncle Sam is helpless. And that was actually driving a lot of the establishment. I won't even say pessimism. I'll say catastrophism about the war. And now suddenly Trump comes up with this counter that flips the narrative. America is in control. And actually the status quo on the Strait hurts Iran much, much worse than. Than it hurts the United States. So from Trump's point of view, he's found a counter to the Iranian moves around the Strait, which themselves were a counter for Trump's original conventional strikes. So I think in Trump's mind, he's actually one up here, and he believes that he has a path to getting a result in the war that will be significantly, invisibly superior to what came as a result of the jcpoa. So that as long as that's the dominant view in Trump's mind, all of the sort, it's just not going to be Taco Tuesday if Donald Trump is of the opinion that he's got a fairly clear path toward a favorable outlook.
- [19:41]
A
And then, final question. You know, something we've talked a lot about on the podcast. You know, a big prediction at the beginning of the war was, you know, how much this was going to cost him with his base. You know, these are people who voted for no new wars in the Middle East. Here he goes starting a new war in the Middle East. The Tucker Carlson wing of MAGA has been fixated on Israel and Jews for a while, and they Take this as the kind of ultimate betrayal of America first. But it actually, you know, it doesn't seem like, at least at this stage, it's actually really cost him that much with his. His base. Where do you see that?
- [20:20]
B
Yeah, it's cost him in the general public, I think, and it's. I'm sure it's cost him some in. In his base. And honestly, I'm kind of glad I live in a country where white war is unpopular, that people are really skeptical about war. Living in the other kind of country would be an adventure of a very different kind. But I think what we've seen is that the Tucker Carlson wing of MAGA is getting smaller, and there's almost a death spiral happening on that far, far right where they simply cannot come up with a political coalition or group that seems able to wrest control of the MAGA wing of the Republican Party from Donald Trump. And as that happens, there's sort of outrage, you know, intensifies. They're trying harder and harder to stay relevant, which means doubling down on their stands and raising their rhetoric. And it probably does consolidate their hold over a certain element in public opinion, but it's not a big enough element in public opinion, at least at this point, to be a serious political force. And again, from Trump's point of view, he went into. He was more worried about what that ultra MAGA wing might do at the start of the war than he is today. That actually, again, for Trump is a sign that the war is not a horrible disaster that he must strive to liquidate at any price, but rather a situation that offers him some real opportunities as well as real risks.
- [22:32]
A
All right, that does it for the big conversation. Let's end on the tip of the week. Listener Sam from DC by way of London writes in this week to ask you, Walter, what you made of our video visit from King Charles.
- [22:52]
B
King Charles has had a very, very good visit to Washington, possibly the best week of his life in terms of political impact. You know, it. It's very, very common in any human government for. For num. The number two person to be the kind of, I don't know, magnet for all the negative feelings that people don't want to address. To number one. So you can see there are a lot of people who sort of turn on Vance. It's safer than turning on Trump in some ways. But the number two is often seen in much more negative way. So being the Prince of Wales longer than anybody in history has been. The Prince of Wales is sort of like people who didn't want people who maybe are skeptical about the monarchy or whatever. They didn't want to talk about the grand national granny, Queen Elizabeth and say bad things about her. So bad mouthing Charles, despising Charles, seeing Charles as an, as a duddy, you know, fuddy duddy, a dimwit, or whatever, all of that was, you know, just sort of a natural channel in which public emotion flowed. And I think what we saw in the Washington trip was very different. Here was, here was Charles, who was doing things that the elected officials could not do. Keir Starmer cannot fix or have any positive impact on U.S. british relations. You know, if he moves toward Trump at all, he'll be hated by his own party. And if he doesn't move toward Trump, he'll, you know, he'll get bashed over the head by Trump. It's lose, lose, there's no good way. So here's Charles, who cannot make any decisions about what Britain is going to do. Can't change British policy about anything, right? But he is able to build a relationship. I think the case for monarchy in Britain is stronger now than it was a week ago. And I think that has an impact. You know, it's not just about attracting tourists to stately homes. It actually can be useful. Meanwhile, the other thing that was interesting is Trump, in his, his own royal way, granted a pardon to Scotch whiskey. So that Scotch whiskey isn't going to be coming under U.S. tariffs. And in the, in terms of the economy, this is, this is not a big deal beyond a few sort of peat bogs in Scotland or wherever they're. They're getting that stuff. But if you're thinking about, you know, for, for Scottish national, for people in Scotland who have real doubts, do we get any value out of this United Kingdom? Shouldn't Scotland be independent? Shouldn't we go our own way? Here's the king of, you know, Great Britain and Northern Ireland going and bringing you back a really nice presence. So arguably, Charles's visit has made it more likely that Britain will be both united and a kingdom into the future. That is a real accomplishment for a septuagenarian with cancer who's been dismissed for years and years as a lightweight Blow hard dimwit. I would think it's very satisfying for him. I certainly hope he's taking some satisfaction from it. The poor man has had a hard life.
- [27:13]
A
All right, there you have it. Thanks to our producer Josh Cross and Quinn Waller, thanks to Alex Fatana of Hudson and my co host Walter Russell Mead. I'm Jeremy Stern. We'll see you next week. And until then, please go rate and review us. This helps other people find the show.