It's a New World and $1.5 Trillion in Defense Spending Won't Change That

Trump Has Lost Touch With the World

Pres. Trump’s request for $1.5 trillion dollars in defense spending shows that he is completely out of touch with the evolving position of the United States in the world.  He seems to believe that, if he spends enough on our military, he will be able to substitute raw military power for the economic power that we have been gradually losing for years. He will fail because military power cannot really take the place of economic power.

The Power of the United States Was Always Mainly Economic, Not Military

We have dominated the world since 1945 partly through military power but mainly through economic power. At the end of the Second World War, we were the only major industrial power still standing. Our factories had not been destroyed in the war, and we produced more than half of the world’s industrial production. We used the power that gave us to construct a worldwide economic and financial system based on the U.S. dollar. 

Initially, the dollar was strong because it could be converted into gold at a fixed rate. However, when we went off the gold standard 1974, we were able to maintain the position of the dollar in world trade through an agreement with Saudi Arabia that it would price and sell its oil only in dollars. This “petrodollar system” meant that anyone who wanted to buy oil had to have dollars to pay for it, and that created a strong, international demand for dollars. The dollar remained the currency that all nations used in international trade.

The centrality of the dollar in international trade gave us an enormous amount of geopolitical power, but it rested on trust. The countries of the world trusted that we would not weaponize our economic power against them, and for many years we upheld that trust. However, in 2014 in response to the Russian support for separatists in Ukraine, we and our allies froze billions of dollars in Russian assets in Western banks.

U.S. Power is Declining Because Countries Are Diversifying Away From Dollars

All the central bankers in the world saw that action and asked themselves, “If the Americans can do that to Russia, what stops them from doing it to us?” So, in the name of their own national security, they began to diversify their foreign currency holdings away from dollars, and they began to look for ways to avoid dependency on dollars. As a result, the dollar's share of international currency reserves is declining. At the beginning of the twenty-first century, U.S. dollars constituted about 70% of the foreign exchange reserves held by all countries worldwide. Now, U.S. dollars are down to about 57% of foreign exchange reserves, and that percentage is falling. 

China Has Built a System That Bypasses the Dollar

In the meantime, the Chinese have established a system for conducting foreign trade in their currency, the yuan. The system is called “CIPS” (Cross-border Interbank Payment System), and it bypasses dollars entirely. Trade between China and Russia is handled in that system, and as of 2025, organizations across 121 countries were connected to CIPS. In the fall of that year, Saudi Arabia began to accept payment for oil in yuan. In addition, other countries are building shared systems that allow them to use their own currencies for international trade. This means that foreign countries now have alternatives to the dollar for international trade. They don’t depend on the United States to the same degree as before, and therefore, our economic power is waning. In addition, we are no longer the most important manufacturing country in the world. China is. We can no longer dominate the world's economy.

Trump's Military Spending Will Drive Us Further into Debt and Make Our People Poorer

Trump thinks that we can substitute military power for economic power, and he has asked for $1.5 trillion in military spending. Where will the $1.5 trillion that Trump is asking for come from? It will have to be borrowed because he is not suggesting that we should raise taxes. However, the United States is already spending $980 billion per year just to pay the interest on its existing debt. The cost of servicing the debt is now the largest item in the federal budget, and if we borrow $1.5 trillion more, that cost will go up. He is already talking about cutting Medicare and Medicaid to cover some of the cost. If he does that, our healthcare will become even more unaffordable than it is now, and our people will be poorer and sicker.

Military Power Cannot Substitute for Economic Power

He will do all that in the vain hope that military power can somehow substitute for our lost economic power, but military power cannot really substitute for economic power because we cannot go to war every time a country does something we don’t like. We are going to have to accept the fact that we are living in 2026 and not in 1946. We are going to have to accept that the world has changed, and we cannot dominate it completely. Spending $1.5 trillion on armaments will not roll back the clock.