Conor here: The empire’s latest war will only accelerate the trends Jomo lays out here and has the potential to fulfill the “Gradually, then suddenly” trajectory the US is on to…whatever comes next.
And how exactly are the citizens supposed to peacefully break this cycle?
“Epic fury” is what many Americans feel when, instead of what they voted for, they get yet another war in the Middle East.
When you get McCain no matter who you vote for, it’s a matter of time before people decide elections are pointless (and unnecessary). https://t.co/XJvFaYtsyg— Nebojša Malić (@NebojsaMalic) February 28, 2026
By Jomo Kwame Sundaram and Kuhaneetha Bai Kalaicelvan. Jomo was formerly the UN Assistant Secretary General for Economic Development. Bai is a policy researcher at the Khazanah Research Institute. Originally published at Jomo’s website
As US President Donald Trump pushes the world to war, arms spending has been rising worldwide. Wars secure more budgetary allocations, mainly benefiting the US-dominated military-industrial complex.
US Military Spending Increases
After bombing Venezuela, the Trump administration raised its war budget from $1.0 trillion, 47% of discretionary government spending in 2024, to $1.5 trillion!
In 2024, the US accounted for over 36% of the world’s military spending of $2.7 trillion! This exceeded the total expenditure of the next nine biggest spenders – China, Russia, Germany, India, UK, Saudi Arabia, Ukraine, France, and Japan!
China’s military budget for 2025 was $250-300 billion. Most others are US allies who have pledged to increase war spending from under 2% of GDP to 5%!
The US and its allies will be even further ahead despite pushing friends and foes to spend more. Fortune magazine projects that US spending will exceed that of the next 35 highest-spending countries combined!
Despite its huge economic costs, the hike is being justified as helping to achieve ‘peace through strength’. After all, bombing ten nations in Trump 2.0’s first year did not incur any significant American military casualties.
Borrowing for War
Early this year, Dean Baker warned that President Trump was planning to increase annual military spending by $600 billion. Just under 2% of GDP, the spending increase would be massive.
As Trump is more committed to cutting taxes than the US federal public debt, the “$600 billion increase in annual taxes would come to $6 trillion, roughly $45,000 per household” over the next decade.
The independent Committee for a Responsible Federal Budget projects federal debt for military spending will increase by $5.8 trillion over the next decade!
Trump has long promised to cut US public debt, which is already equivalent to 120% of annual output, and not to increase the deficit! But this would require massive tax increases, impossible to raise with tariffs alone.
Worse, federal government debt, which Trump promised to cut, will rise. Meanwhile, 94% of his Big Beautiful Bill (BBB) tax cuts benefit the top 60%, with only 1% trickling down to the poorest fifth.
The top fifth nominally gets 69%, but only the top 5% will actually pay less! The bottom 95% will pay more tax, with low-income households paying relatively more for tariffs!
Trump’s Department of Government Efficiency (DOGE), led by Elon Musk, was supposed to cut federal government fraud, waste, and debt, but instead cut US growth in 2025’s last quarter.
While the BBB cut $186 billion of food aid for poorer Americans, rising war spending will mainly benefit US military-industrial complex cronies.
US Consumers Will Pay More
Increased tariff rates would have to be impossibly high. And these would need to be even higher if exemptions are granted. Imports would fall sharply with such high tariffs.
Trump claimed additional tariff revenue would cover half a trillion dollars of additional military spending. He has long claimed other countries pay for tariffs.
With deindustrialisation over the past half-century, consumers have been buying more imports, paying for most tariff revenue.
Imports would fall sharply with such high tariffs. As many imports are intermediate goods used in manufacturing, high tariffs would hurt the industries Trump is claiming to promote.
High tariffs will raise consumer prices sharply. Cost-of-living increases would be unaffordable to many, including in Trump’s political base.
Before the 20 February Supreme Court decision declaring them unconstitutional, the tariffs were only expected to raise $300 billion in the first year.
Revenue was expected to fall as consumers bought more domestically produced goods instead of imports.
As many intermediate goods for manufacturing are imported, higher tariffs would hurt the very industries Trump claims to be helping. Thus, high tariffs will sharply raise consumer prices for both imports and US-made substitutes.
Also, massively increasing military spending will divert resources, including labour, away from more productive uses.
Military Industrial Cronies
US military contracts mainly went to five corporate groups even before Trump 2.0. While projects are worth more, beneficiaries are fewer, reflecting lobbying efforts.
More government military spending is unlikely to increase jobs in the long run, as jobs have decreased drastically since the 1980s due to greater automation.
Military contractors pass the costs of R&D and capital expenditures onto taxpayers, freeing revenue to pay for cash dividends and stock buybacks.
In 2024, the Pentagon’s leading contractor, Lockheed Martin paid out $7 billion for stock buybacks and dividends.
Although Trump once offered to work with China and Russia to cut the trio’s military spending by half, it was difficult to take his offer seriously given his other pronouncements and actions.
US military spending will continue to rise, driven by the same interests and impulses behind the recent massive hikes.
Military expenditure needs wars to secure yet more allocations for buying more military equipment, to the beat of war drums.
The actual political and business relationships are complex and ever-changing. As Walter Scott observed in 1808:
Oh, what a tangled web we weave,
When first we practice to deceive
Related IPS Articles
· A New Non-Alignment for the Global South
· Trump Accord Sows Discord in US Empire
· Trump Wants World to Subsidise US Empire
· America First Deepens World Stagnation
· New Geopolitics Worse for Global South
· The Global South in the New Cold War
· War or Peace, Barbarism or Hope
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Jomo Kwame Sundaram and Kuhaneetha Bai Kalaicelvan should read Warren Mosler’s White Paper for a primer on US monetary operations.
How will the tariff “revenue” reduce the national debt? The debt is owned not owed; how does one pay back something that is not owed?
Congress is nothing if not a legislative protection racket for the arms industry, among others.
Indeed.
The ‘national debt’ is the accounting mirror image of the money supply, although I disagree with MMTers that there is no consequence to flooding the system with Treasuries.
What are you talking about. Of course the debt is “owed.” People pay dollars for treasuries and get those dollars back when the treasury matures. There’s no reason tariff revenue couldn’t be applied to pay the owners of treasuries at maturity, not that that matters. Does the government have to borrow to fund the government? No, but it does borrow.
Hi James,
Who owns the debt if not the owners of the Treasuries?
The money in your savings account; do you own it or does the bank?
There are no dollars to “get back” because the owner of the Treasuries never relinquish ownership of the dollars used to buy them.
Treasuries are not loans for spending because the spending precedes the purchase of those government bonds.
There is no contradiction in “People pay dollars for treasuries and get those dollars back when the treasury matures.” and the debt being owned.
Thank You
I am curious since there really is no debt to payoff then who do the interest payments go to? And if there really is no debt to payoff why pay interest anyway? So then who cares how much he spends on the military. Sorry maybe just not as financially astute as most people on this site so just trying to understand.
James T., you might want to look into Modern Monetary Theory (MMT). It’s 30 years of scholarship on what money actually is and how sovereign monetary systems operate.
Start with two basic steps:
Step 1: In a fiat system, money is a liability of the currency-issuing government and an asset to everyone else. The U.S. government creates dollars when it spends. By definition, it cannot need to “borrow” the thing it alone creates.
Step 2: Treasuries are simply another form of state money – term-limited, interest-bearing dollars. When you buy a Treasury, you’re swapping one government liability (reserves/deposits) for another (a bond). It’s an asset to you and a liability to the government – so in that sense it is both “owned” (as a private asset) and “owed” (as a legal obligation). But it is not analogous to a household debt.
In a fiat currency system, there is no operational need to issue Treasuries to “fund” spending. Government spending occurs first; bond issuance comes after and functions mainly to manage interest rates and provide safe interest-bearing assets for savings portfolios. That’s a policy choice, not a financial necessity.
Since the U.S. government cannot run out of dollars needed to repay dollar-denominated Treasuries, default risk is effectively zero. MMT therefore argues that the so-called “risk-free rate” could just as well be set at zero. Paying interest is therefore also a policy choice – and it primarily benefits holders of financial wealth.
So to your question: who gets the interest? Pension funds, banks, households, foreign governments, the Fed (which remits most of it back). It’s government spending – income to the private sector.
The real issue isn’t whether the government can afford military spending financially. It can. The real issue is whether we want to devote real resources – labor, steel, electronics, scientific talent (and, increasingly, Chinese imports) – to weapons rather than to civilian uses. That’s an economic and political choice, not a solvency constraint.
Hope that helps clarify the accounting without getting lost in rhetoric.
Thank you for the detailed explanation. So essentially we do not need to sell the debt just do so one group with most of the money already gets more money through interest at the expense of those who do not have money to invest. Also. those on the lower income scale get less support since we are wasting money paying interest. Seems logical just to create the needed money for government needs and not issue any treasuries since it will never be paid back anyway. Again, I really appreciate the explanation as it was very helpful.