America’s Problem Is Policy, Not Power
Risks of a “bank run” on American security guarantees are overblown—if we can get our act together.
IN FEBRUARY 1982, IN THE MIDDLE OF A RECESSION, the Hartford Federal Savings and Loan Association in Connecticut faced a 12-day bank run following news of its heavy losses the previous year—and NBC’s unfortunately timed broadcast of a film about the Wall Street crash of 1929. A large chunk of Hartford Federal’s total deposits was withdrawn in the resulting panic, mainly by older customers. Yet, against the odds, the small financial institution survived the storm.
Management made sure that branches had enough cash on hand. Hartford Federal even offered to waive the penalty fees for early withdrawals of time deposits. Its employees, the New York Times reported, even “offered to call and pay for taxis for persons leaving the branches with cash. One customer who got a huge amount of cash was persuaded to let a Hartford Federal officer walk with her to a nearby commercial bank, where she redeposited the money.”
In short, Hartford Federal demonstrated confidence and reassured its customers that, regardless of what they had read in the newspaper about the bank’s losses or seen on TV about a past financial crisis, all was well, and the bank could make good on its guarantees.
Today, we are told, there is a similar “bank run” happening on America’s security guarantees around the world. “Nations such as France, India, Saudi Arabia, Japan, Mexico, Brazil and others are suddenly hedging their bets by looking beyond the United States of America for partnerships and stability,” observes Douglas MacKinnon, a writer and communications official in the Reagan, George H.W. Bush, and George W. Bush administrations, citing one unnamed “former high-level U.S. government official, now a CEO” as his primary source. (It shouldn’t be news to anyone, much less a veteran of three administrations, that India, Saudi Arabia, and Brazil are intermittent security partners, and that France and Mexico are ambivalent about American power.)
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MacKinnon isn’t alone. Because of our overextension and the ambiguity of our commitments to, say, Taiwan, “the bill is coming due,” warns Foreign Policy columnist James Crabtree.
The Biden administration ought to take a lesson from Hartford Federal’s confident management of its bank run. U.S. alliances and tripwires, much like financial institutions, are based on confidence. That confidence is difficult to acquire, easy to lose, and almost impossible to restore. Just like a bank, which cannot convert all of its illiquid assets into cash to honor all their depositors if they show up to withdraw their money on the same day, there is a limit to the power that the United States is able to project simultaneously in different theaters.
Yet, the answer cannot be an “overwhelming prioritization of China” at the expense of everything else, as Senator Josh Hawley’s national security advisor, Austin Dahmer, suggested on X, following the logic articulated most prominently by Elbridge Colby, Donald Trump’s former deputy assistant secretary of defense for strategy.
Just as it would have been disastrous for Hartford Federal to respond to the run by closing some of its branches or turning depositors away, reneging selectively on our commitments—including those made to Ukraine—erodes confidence in all of America’s promises, including on issues that we care about the most. It’s no wonder why America’s allies most threatened by China, including Taiwan, Japan, and South Korea, have been so supportive of Ukraine.
Hartford Federal didn’t panic, but neither did it “bluff”—which is what Colby suspects the current administration of doing. Instead, the company took significant losses that later led to its merger with a different regional bank. (Here, admittedly, the metaphor with international relations breaks down—the United States can’t merge with another country.) In short, the display of confidence bought it time to squeeze just enough liquidity from its balance sheet, which was largely sound.
The strategic position of the United States is also largely solid. America’s economy is a powerhouse of innovation, weathered COVID and its aftermath better than China and Europe, and still undergirds the world’s primary reserve currency. Its defense industrial base, while smaller and less flexible than it needs to be, remains unparalleled in the world. If the political class can act with the urgency that the moment requires, the United States can easily afford a military build-up on a Cold War scale. Aid to Ukraine, meanwhile, does not come “at enormous opportunity costs,” as Dahmer claims. It constitutes about 5 percent of the Pentagon’s annual budget and in fact directly contributes to the strengthening of our defense industrial base, starved by slow and underfunded procurement.
Most of the crises the United States faces overseas are not crises of capability (though the military does need more people and significant recapitalization), but of policy and will. We have the resources to stop Iran’s and the Houthis’ depredations in the Red Sea, if only Biden abandons his penchant for self-deterrence. We have the capability to deter Iran from further aggression in the Middle East, but only if we decide we’re serious about doing it.
There are no deep reasons why the United States cannot or should not remain the world’s preeminent superpower. There is only one explanation for why we are currently failing to meet that expectation, thus letting down Americans as well as our allies, and making the world less safe. It is our political dysfunction.
While there is plenty of blame to go around for this predicament, it is impossible to miss the destructive role played by Dahmer, Colby, and others who hide their isolationism behind a thin sheet of China-firstism. More importantly, however, the false dichotomy that they present, and the urge to prioritize one part of the world over another, does little to restore America's credibility—and capacity to deter its adversaries from aggression. Growing at least as much of a backbone as the management of a small loan and savings association in the 1980s New England would be a good start to fixing the problem.