The Affordability Dilemma (December 12, 2025)

Welcome to Home & Away. The word “dilemma” tends to be misused, but it applies in what I am about to write. Poll after poll (and election after election) show that Americans are increasingly feeling the pain of the rising cost of living, specifically the costs of housing, electricity, health care, and food. “Affordability” is the word of the season. President Trump wants to show that he understands popular frustrations and will fix it. This explains everything from his copasetic meeting several weeks ago with New York City’s mayor-elect to his public event this past Tuesday night in Pennsylvania, which was ostensibly meant to focus on affordability although, along the way, it turned into something of an anti-immigration, anti-media screed.

But Trump has a problem. To talk about affordability is to implicitly admit that the economy is not a 12 out of 10, as the president is wont to boast. Worse yet, inflation is stubbornly persistent, in no small part because of the tariffs at the center of the president’s economic program. Trump thus alternates between trying to demonstrate he is sensitive to affordability concerns and denouncing it as a hoax. But it is hard to have it both ways. Hence the dilemma.

Out of Europe

Late last week, the Trump administration released its National Security Strategy (NSS) with little fanfare. It was published late on a Thursday night and had no accompanying rollout. (For those of you who missed it, here is a link to the special edition of this newsletter from Monday with my analysis of the strategy along with a link to the NSS.)

The president followed this with a long interview with Politico. Consistent with his NSS, he showed contempt for Europe, describing it as militarily weak, overregulated, unwilling to control its borders, obsessed with climate change, and facing “civilizational erasure.” All in contrast to Russia. Elon Musk is busy calling for the demise of the EU, seemingly unaware of its historical role in reconciling Germany and France so that war between them became unthinkable. Yes, the EU needs to be reformed, but throwing out the baby with the bathwater makes little sense.

The sections of the Politico interview about Ukraine are revealing, and not in a good way. Trump sees Ukraine as inevitably losing the war to Russia, leaving it with little choice but to accept a peace deal that tilts in favor of the ostensibly stronger party. Putting aside that he exaggerates both Russian strength and Ukrainian weakness, what seems not to occur to the president is the alternative approach; rather than imposing a one-sided deal, Trump could opt to support Ukraine with arms, intelligence, and dollars. To do so would disabuse Putin of his faith that time favors Russia, sidestep a peace that rewards aggression, and make it possible for the United States to avoid having to make additional, costly new security commitments in Europe down the road. We would ultimately get the peace the president wants—and it would be a peace worth having.

Borderline Irresponsible

There are several pieces in what used to be called the newspaper of record (a title that has been taken in the eyes of many by the New York Post) that are worthy of your attention. One tells the inside story about how the Biden administration got immigration so wrong. Senior White House advisors repeatedly rejected suggestions that the open-border policy was resulting in chaos and needed to be rolled back. Why they did so is a tad unclear, but the story seems to suggest that Biden and his aides were in denial, choosing to stick with a failed policy rather than confront it—and that some of the aides made the political calculation, one that proved to be wildly off the mark, that the policy would help win progressives and Latinos. There is a book in this, or at least a case study, that could be used at Harvard’s Kennedy School of Government. There is also a journalistic question: Why is this story only appearing now rather than in year one, two, three, or four of the Biden administration? It may be time to bring back the ombudsman.

Indefensible

The Times does get points for a series of editorials on defense spending and the state of America’s military. They echo what John Ellis and I have been discussing on our podcast Alternate Shots, namely, that America’s armed forces are increasingly ill-designed for the geopolitical and technological landscape the country confronts. This is consistent with one of my laws of public policy: how money is spent tends to be more important than how much money is spent.

It is not that we spend too much on defense – to the contrary, if anything we spend too little given the number and range of threats that we face, and indeed we spend well below the Cold War average if evaluated as a share of GDP – but that we spend it on the wrong things. We continue to devote too many of our defense dollars to a relatively small number of capable but costly ships and aircraft that are vulnerable to large numbers of much cheaper systems that can overwhelm them in battle. The exchange ratios – what it costs to destroy one of our platforms versus the cost of the platform itself, or what it costs for us to defend against certain systems as opposed to their cost – are unsustainable.

It was President Eisenhower who, in his farewell address, warned about the risk posed by the military-industrial complex. The risk remains, but it has morphed into the military-industrial-legislative complex, as the armed services, a handful of big corporations, and senators and congressmen band together to make sure certain systems are built no matter what.

I have suggested, and I am not being entirely facetious, that we need two defense budgets: one for legacy systems, and another for cheap drones and interceptors and the like. We could reduce the size of the current budget and allocate increased spending to a new, more innovative, hi-tech military. It is not a perfect solution, but it is preferable to what we are doing.

One Man, One Boat

The latest off Venezuela is that we have expanded our activities to larger ships. So, after attacking twenty-plus small boats allegedly carrying drugs (and killing all on board), the United States has seized a tanker for violating Iran sanctions (but in this case carrying Venezuelan oil, most likely en route to China). It represents an effort to ratchet up the pressure on the Maduro regime, which the Trump administration wants to encourage to give up power or be overthrown.

My sense is this all has very little to do with drugs, and much more with oil still in the ground. Venezuela has the world’s largest proven reserves, and getting American companies back in would be good for those companies, increase world oil supply (thereby further reducing prices), and be beneficial for Venezuela, as it is only producing one million barrels a day yet has the potential to do many times that. I could also see the Trump administration demanding a piece of the action as a reward for bringing about the opportunity. It all fits perfectly with the NSS’s emphasis on the Western Hemisphere and commercial interests anywhere and everywhere.

Few countries in the region would miss the Maduro regime, but few would welcome a new era of frequent American intervention. Trump’s threats to Colombia’s president won’t help here. My guess, though, is that China and Russia would not mind, as all this is consistent with their view that if the United States is insisting on exercising more power in the Western Hemisphere, then they too should be able to have a freer hand in Asia and Europe respectively. It would also fit neatly with the Trump administration’s worldview that major powers ought to enjoy outsized influence, and potentially even spheres of influence.

Made in China

Many are frantically looking for signs as to the likely trajectory of the administration’s China policy. This week brought an important data point, namely the decision to allow Nvidia to export its H200 chip to China. This will be good for Nvidia and China, but less so for the United States, even though it is set to receive 25% of all sales to China. Export controls are meant to slow China’s emergence as an AI competitor, but they appear to have been set aside as the near term takes precedence over the long. What comes to mind is the maxim attributed to Vladimir Lenin, that “the capitalists will sell us the rope with which we will hang them.” That is pretty much what is happening here. It all makes for a foreign policy that is less America First than Business First.

Shooting the Messenger

One of the first political novels I recall reading was Allen Drury’s classic Advise and Consent. I thought of it this week when I heard that the president had fired James McCrery, the lead architect for the White House’s East Wing ballroom project, after they clashed over the scale of the proposed new building. McCrery, while agreeing that a larger ballroom was needed, balked at having one that dwarfed the White House. So, Trump fired him, replacing him with an architect who, predictably, thought an enormous ballroom was just what was needed. The management principle at work here is crystal clear: If you don’t like the advice you are getting, find a new advisor who gives you the advice you seek.

The Road Not Taken

This week was the occasion of the first Martin S. Indyk Memorial Lecture at my former place of employment, the Council on Foreign Relations. Martin, as many of you will know, spent his professional life dedicated to promoting peace in the Middle East as a White House official (he succeeded me at the NSC when Bill Clinton became president), at the State Department, and as ambassador to Israel, a post he held twice.

The speaker at Wednesday’s event was appropriately enough Bill Clinton, in conversation with yours truly. I thought Clinton was remarkable, and I was surprised and impressed with his candor when he expressed regret for not doing more in the summer of 2000 to bolster Arab support for Yasir Arafat as he contemplated whether to accept the offer on the table. In the end, Arafat rejected it. What makes it all so sad is that nothing remotely as attractive to the Palestinians will ever again be available, something that makes the task of diplomacy all the more difficult (to the detriment of Palestinians and Israelis alike). Here is a link to the event. Do watch it; I promise it will be an hour well spent.

The Sporting Life

The Giants managed not to lose this past weekend, but that is only because it was a bye week for them and they didn’t play. Actually, they won by not playing as thanks to the outcome of various games they now possess the worst record in the league and hence the first pick in the next NFL draft. Not needing a good young quarterback (as they have found one in Jaxson Dart), they could trade their pick to a team desperate for a quarterback and in return get a number of picks that would allow them to add much-needed young talent to the team. There is only one problem with this scenario. The Giants have three games left, and I am confident that they will finally manage to win one or more and, in so doing, improve their record so they no longer hold the top pick. It is diabolical.

I want to end on a positive note, so I will turn to the Indianapolis Colts, who lost their starting quarterback (former Giant Daniel Jones) and did not want to place their playoff hopes in the hands of a second-tier quarterback. So, they have brought out of retirement Philip Rivers. Rivers had a long, impressive NFL career, but he has been out of the game for four years, is 44, and is a grandfather. I am hoping he and the Colts do well, as it opens up all sorts of possibilities for the rest of us contemplating our next chapter. But it looks to be a long shot. Father Time (much less Grandfather Time) I am told is not a football fan.

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Richard Haass in the news

Wednesday, December 10: Martin S. Indyk Memorial Lecture.

Thursday, December 11: NPR on Venezuela.

Thursday, December 11: Chris Jansing Reports on Venezuela.

Friday, December 12: Alternate Shots Episode 10.