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Edited by: James Desio and Lexi Baker

Good morning and happy Thursday! In today’s newsletter, we examine the ballooning federal debt, a surprising polar-ice discovery, and China’s disruption of the world economic order.

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1. Debt Delusions

Topline: By 2035, the Congressional Budget Office (CBO) projects that federal debt will reach 118 percent of US GDP. AEI’s Yuval Levin writes that to change course and correct the skyrocketing deficit, Republicans must look to cuts in entitlement spending rather than discretionary spending.

Historic Proportions: If current tax rates are maintained, CBO data indicate that federal debt will expand to well over 200 percent of the US economy over the next three decades. Aside from the current moment, the last time the US debt equaled the size of the economy occurred during World War II.

The Root of the Problem: Entitlement spending accounts for a much larger percentage of the federal budget than domestic discretionary spending—50 and 14 percent, respectively. According to CBO, this trend is expected to continue well into 2035.

“If Republicans are going to pursue politically complex spending cuts, as they are doing in the ongoing reconciliation battle, they might as well target the actual sources of our deficit and debt challenges, rather than expending immense political capital to no significant long-term effect by focusing on domestic discretionary spending.”—Yuval Levin

2. A Sea Change for Polar Ice

Topline: Two separate studies recently found that ice mass at both poles has reversed course, increasing slightly over the past few years. These results reveal the complexity of Earth’s climate and the importance of staying prepared for the unexpected, offers AEI’s Roger Pielke.

Satellite Measurements: Accumulation of ice at the North and South Poles has been declining for multiple decades, contributing to a dangerous rise in sea levels. NASA satellites—launched in 2002—measured a reduction in total mass of Antarctica’s glaciers until 2021.

An Uncertain Future: While the researchers do not offer insight into whether the trend is expected to continue, the shift is significant and should be taken seriously. Pielke posits that surprises and uncertainties such as these illustrate that risk management is the best resource for coping with climate change.

“Perhaps the most important lesson to take from the new polar-ice findings is that ongoing efforts in Washington, DC to gut climate data and research are deeply misguided. The global climate system has more surprises in store for us—and we ignore them at our peril.”—Roger Pielke

3. The Dangers of China's Economic Growth

Topline: China’s share of total world GDP has risen from 3.5 percent in 2000 to just under 17 percent today. AEI's Aaron Friedberg highlights that as China’s share has grown, the United States’ share fell from 30 to 26 percent over the same interval of time.

On Manufacturing:

• China’s share of total world manufacturing output grew from 6 to 30 percent from 2000 to 2017.
• The United States’ share fell from 25 to 17 percent of total world manufacturing output from 2000 to 2017.
• Some estimate that in a few years China could make up 45 percent of global manufacturing.

The Underlying Worry: As China grew to dominate the global economic order through subsidized and underpriced exports, the country avoided adhering to the rules of a liberal trading system, asserts Friedberg. The US will need to work alongside allies to ensure the free flow of goods, capital, and information to have a chance at a fully integrated global trading system.

“Even as it has grown wealthier and stronger, instead of being transformed, China has continued to pursue policies that now threaten to distort and damage the economies and societies of those countries. In order to defend themselves and preserve a partial international economic order based on liberal principles, the democracies must therefore also work actively to extrude this profoundly illiberal power from their midst.”—Aaron L. Friedberg

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