I Would Build a Great Wall

"I would build a great wall!" These were the words spoken by Donald Trump from the lobby of the Trump Tower on June 16, 2015, when he announced his candidacy for President of the United States.

Most people took him to mean that he would build a physical wall between the U.S. and Mexico, and while that was certainly true, it only captured a small part of what he wanted to achieve. What the commentators failed to comprehend at the time is that Trump was, and continues to be, an anti-globalist who closely holds the parochial view that what we can't grow in or dig out of our own soil, or assemble with our own hands, we do not need. He rejects the post-WWII paradigm that guided U.S. domestic and foreign policy for the past 80 years in which the U.S. consumer was the engine of global growth, and that what is good for other countries is ultimately good for the United States. During that postwar period, the global GDP has grown by over 50 times (from $2T in 1965 to $105T in 2023) and the U.S. GDP has grown from $742B in 1965 to $28.5T in 2024, during which time the U.S. percentage of global GDP has remained relatively constant (from 38% in 1965 to 26% in 2023). What this means is that the world has grown wealthier on the back of the U.S. consumer, but the U.S. has grown wealthier as well.

However, what those numbers do not explain is why the median U.S. household feels less wealthy today than they did in the 1960's. In 1965, U.S. manufacturing accounted for 53% of U.S. GDP and the median U.S. household income was $6,900 ($69,585 in current dollars). By 2024, U.S. manufacturing as a percentage of GDP had fallen to 10%, while the median U.S. household income for 2024 was $80,020, only 15% higher in a time period in which the global GDP has increased 50 times and in which the U.S. share of global GDP has only decreased slightly. If we look at the U.S. stock market, the story is quite different. In 1965, the S&P Index of U.S. publicly traded companies peaked at $93.07 ($941.45 in today's dollars). The S&P Index peaked at an all-time high on February 19, 2025 at $6,144, or an increase of 553% since 1965. So, according to this metric, only 2.7% of the increase in U.S. wealth during the postwar period has flowed to U.S. households.

But wait, if the global GDP and U.S. GDP have grown so much in the post-war period, how is it possible that U.S. household income has only increased by 15%? How are these households able to afford this level of consumption with such meager wage increases? The short answer is by adding debt. In 1965 the national debt was 37% of the U.S. GDP; by 2024 that percentage had increased to 124%, a threefold increase. In 1965, the U.S. federal debt per capita was $1,632 ($16,444 in real terms). By 2024 the U.S. federal debt per capita had increased to $101,198, or a sixfold increase. Additionally, the U.S. household private debt has also increased dramatically, from 15% of GDP in 1965 to 62% of GDP in 2024. When you combine total public and private debt, the median U.S. household is currently carrying a debt load of $445,568 at a time when real household incomes have barely increased over time.

Median U.S. Household Income, 1975 - 2024

The combined pressures of stagnant wages and an increasing debt load generated the seismic forces that manifested themselves in tremors in Trump I (2016 - 2020) which are now full-blown earthquakes under Trump II.

As these earthquakes ripple out, they will create tremendous pain, dislocation, and economic loss to large swathes of the U.S. population and the U.S. and global economies. From the Trump Administration perspective, this is the shock therapy that the U.S. and world needs to reset the paradigm from one in which the world looks to the U.S. as the consumer of last resort and as the policeman overseeing the world order.

Assuming no radical changes to the current Trump trajectory, how might this play out in the short term (over the next 1-3 years)? In the short term, we can expect significant pain as prices for everything go up, as scarcity increases, as businesses dependent upon exports lose sales, as the unemployment rate goes up, as the U.S. GDP shrinks, and the U.S. dollar devalues. The drop in overall U.S. production, combined with the dramatic cuts to the federal workforce (particularly at the IRS) and the anticipated tax cuts, will cause the tax revenue collected to be reduced and will cause the U.S. debt to spike up even further, which could lead to a U.S. sovereign debt crisis that would most likely be temporarily resolved through a forced conversion of short term debt instruments into long term debt instruments.

In fact, the seemingly deliberate nature of the chaos that has been unleashed leads me to believe that the goal of the Trump Administration is some form of "creative destruction", leading to a "reset" where the debt gets wiped out (or, at least postponed into the far distant future) and all foreign alliances and obligations are severed to be reconstructed under different terms.

This sort of extreme, radical reset (akin to Mao's Cultural Revolution that led to as many as 2 million dead Chinese out of a population of 742 million) should never be undertaken by a liberal democracy without public debate and input from the people's representatives. While the problems that led to the seismic forces that allowed Trump to rise to power are as real as our elected representative's inability or unwillingness to do anything about them, the solution to the people's problems must come directly from the people, not through tyrannical rule. The test we face now is how our elected officials respond to the gauntlet that Trump has dropped before them. Let us pray they are up to the challenge, lest we go the way of the Weimar Republic.