Worldwide Currency: We’re Number 1

Since the end of World War II, the US dollar has been the most influential and significant currency in the world. There are, however, challenges to the dollar’s supremacy. Keith Rockwell, former chief spokesman for the World Trade Organization, sees three challenges:

“The most direct threat comes from a growing group of emerging countries that resent Washington’s weaponization of the dollar on global markets and payment networks. A second threat arises from technology, as central banks around the world work to develop their own digital currency networks. Another threat stems from the possibility that political grandstanding on Capitol Hill over the budget may undermine efforts to raise the debt ceiling and could subsequently lead the U.S. to default on its loans.” .

Political grandstanding was on full display during the 118th Congress. Republicans, holding a slim majority in the House of Representatives and feeling the pressure from its far-right wing, brought the United States to the brink of defaulting on its debt obligations in June 2023. As Rockwell has written, “the mere suggestion that some members of Congress are prepared to make a political point by allowing the nation to default is the kind of thing that rattles investors and shakes global confidence in the US.” The far-right wing faction collected its pound of flesh but the debt ceiling was raised and would not be visited again until after the 2024 presidential election. And in the new 119th Congress, grandstanding, threats and political pressure will undoubtedly be at the forefront.

The dollar dominates as the largest international reserve currency. During the first quarter of 2023, the International Monetary Fund (IMF) reported that 59.02 percent of the world’s official exchange rate reserves were held in US dollars; 19.77 percent were held in Euros; 5.47 percent were held in Japanese Yen; 4.85 percent in UK pounds sterling; and 2.58 percent in Chinese renminbi. In 1999, the share of US dollar assets in central bank reserves was 71 percent, the year the euro was launched; in 2023, the dollar has dropped to 59 percent.

The Chinese renminbi is the world’s fifth-largest payment currency, third-largest trade financing currency, and fifth-largest international reserve currency. While its importance and influence has grown over the past two decades, it has far to go to replace the dollar as the dominant international currency. As Eswar Prasad of Cornell University and the Brookings Institution wrote in 2020, “While the renminbi has the potential to become a significant reserve currency, it is unlikely to attain safe haven status in the absence of far-reaching reforms to China’s institutional and political structures.”

Sources: Keith Rockwell, “An Exorbitant Privilege Now at Risk? The Once (and Future?) Almighty Dollar,” Wilson Center, May 1, 2023, https://www.wilsoncenter.org/article/exorbitant-privilege-now-risk-once-and-future-almighty-dollar; “Currency Composition of Official Foreign Exchange Reserves,” IMF, https://data.imf.org/?sk=e6a5f467-c14b-4aa8-9f6d-5a09ec4e62a4; Serkan Arslanalp and Chima Simpson-Bell, “US Dollar Share of Global Foreign Exchange Reserves Drops to 25-Year Low,” IMF Blog, May 25, 2021, https://www.imf.org/en/Blogs/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low; Junhua Zhang, “Prospects of the Yuan Unseating the Dollar,” GIS Reports, August 21, 2023, https://www.gisreportsonline.com/r/yuan-unseating-the-dollar/; Eswar Prasad, “The Renminbi Rises but Will Not Rival the Dollar,” Brookings Institution, October 2020, https://www.brookings.edu/articles/the-renminbi-rises-but-will-not-rival-the-dollar/.

Defense Spending: We’re Number 1

By 2022, total military expenditures throughout the world topped $2.24 trillion according to the Stockholm International Peace Institute. The sharpest rise in defense spending in 2022, a 13 percent increase, came from European countries in response to the Russian invasion of Ukraine. In all, the $876.9 billion spent by the United States constituted about 39 percent of the entire world’s military spending.

The United States military budget in 2023 was $876.9 billion (3.5 percent of GDP). China was 2nd, with an estimated military budget of $292.0 billion (1.6 percent of GDP). Russia was 3rd, with $86.4 billion (4.1 percent of GDP), and India was 4th, with $81.4 billion (4.1 percent of GDP).

Source: “World Military Expenditure Reaches New Record High as European Spending Surges,” Stockholm International Peace Research Institute, April 24, 2023, https://www.sipri.org/media/press-release/2023/world-military-expenditure-reaches-new-record-high-european-spending-surges. Stockholm International Peace Research Institute, https://www.sipri.org/media/press-release/2023/world-military-expenditure-reaches-new-record-high-european-spending-surges.

Nuclear Power Generation: We’re Number 1

The first US commercial nuclear power plant went online in 1957 and most of the subsequent plants were built in the 1970s through the 1990s. At its peak in 2012, there were 104 nuclear reactors in the United States; many of them were built decades earlier and were approaching the end of their useful life. Since 2012, about twenty reactors have been decommissioned and only two new reactors, Vogtle Unit 3 and Unit 4 in Georgia, have gone online. In 2021, there were a total of 93 nuclear power plants, generating nearly 20 percent of America’s electricity.

In 2011, following the nuclear power disaster in Fukushima, Japan, the German government determined that it would close its nuclear facilities. Eight of seventeen units were closed in 2011, and in 2021, six units were still operating. Then by 2023, all such units were shut down, despite protests that the Russian invasion of Ukraine might put Germany’s energy supplies at further risk.

One of the major, unresolved issues for commercial nuclear power plants is the disposal of spent nuclear fuel. The Nuclear Waste Policy Act (1982) had authorized the Department of energy to determine a geologic repository for a permanent disposal; after much political wrangling, the remote and geologically inert site of Yucca Mountain in Nevada was chosen as the permanent disposal site for the entire commercial nuclear industry. This did not sit well with Nevadans, many of whom called the legislation the “Screw Nevada” bill. About $7 billion had been collected from energy companies for nuclear waste depository fund, and most of that had been spent preparing the Yucca Mountain site. But when President Obama took office in 2009, powerful Senate majority leader Harry Reid from Nevada convinced the administration to abandon the Yucca Mountain plan. Congress has not come up with a plan for a permanent storage site since. Meanwhile, some 72,000 metric tons of spent nuclear fuel, and growing every day, was stored at 80 sites scattered about in thirty-four states.

The United States is not alone in failing to solve the spent fuel problem. “No country, including the United States, has a permanent geologic repository for disposal” of spent nuclear fuel, according to a 2020 Congressional Research Service analysis.

Higher Education: We’re Number 1, but . . .

Higher education presents a different and mixed story. The elite American universities, both private and public, are the envy of the world. In a 2014 survey conducted by US News, American institutions of higher education dominated, with sixteen of the top twenty universities worldwide found in the United States; 134 American institutions were among the 500 top universities worldwide.

Altogether, there are nearly 4,000 degree-granting colleges and universities in the United States. The top 100 private schools enroll only about 500,000 students; the remaining 10.5 million students attend the other state-supported and private institutions. Included among them are hundreds of weaker institutions: those relying heavily on tuition, having little endowment, and increasingly dependent on a diminishing supply of both US and international students.

Many such institutions are hanging on by a thread, admitting 80, 90 or even 100 percent of the students who apply. In a 2022 study, the American Enterprise Institute found that in 355 colleges accepted between 80-90 percent of its applicants; 303 colleges accepted 90-99 percent; and 226 colleges accepted 100 percent of its applicants. These are the bottom-tier schools that rarely crack the top 200 in the US News rankings. The Pew Research Center found that 57.4 percent of colleges admitted at least 70 percent of its applicants in 2023; just 0.4 percent of schools (the most elite schools) accepted less than 10 percent of its applicants. The fate of these schools is compounded by the harsh reality of a declining American student population. In the 2011 academic year, 24.8 million undergraduates were enrolled in American colleges and universities; in 2023, enrollment had dropped to 20.3 million. Between 2026 and 2031, the number of high school graduates is expected to drop by 9 percent, translating into a loss of 280,000 American students enrolled in four-year colleges. In addition there have been cuts in state funding, the drying up of private support, and increased competition from other schools.

Many more schools are predicted to fold or merge. A headline in the April 26, 2024, Washington Post declared that “Colleges Are Now Closing at a Pace of One a Week.” In 2023, the rate of college closings was a little more than two a week, according to the State Higher Education Executive Officers Association. The educational consulting firm EAB predicted that by 2030 some “449 colleges are expected to see a 25 percent decline in enrollment and 182 colleges are expected to see a 50 percent decline.” Schools received federal emergency relief funds during the pandemic years, but those funds—a lifeline for many institutions--have mostly dried up. In addition, student enrollment has not rebounded in all sectors, and many institutions face significant enrollment pressures.

Compounding these demographic and financial difficulties was a growing sense that college simply wasn’t worth the time and effort. In a recent Wall Street Journal poll, conducted with the independent research institute NORC of the University of Chicago, some 56 percent of Americans didn’t think college was “worth the cost”; that figure was up by 16 percent since the same question was asked ten years ago.

Seth Bodnar, president of the University of Montana, noted the skepticism among many on whether a college education was worth the time and money, and he was particularly worried about those who encourage young people to forgo high education. “Our competitors are certainly not advising their youth, ‘Don’t get an education.’ They’re playing a long game, and they’re playing to win.”

Indeed, the United States is the outlier among OECD countries when it comes to higher education goals and aspirations. On average, notes journalist Paul Tough, OECD countries “have increased their college-attainment rate among young adults by more than 20 percentage points since 2000, and eleven of those countries now have better-educated labor forces than we do.” It is not just Japan, South Korea and Britain, but also smaller countries like the Netherlands, Ireland, and Switzerland.

In June 2023, the US Supreme Court ruled that Harvard College and the University of North Carolina had violated the equal protection clause of the US Constitution through their affirmative action admissions programs. For the six conservatives in the majority, Chief Justice Roberts wrote that the student “must be treated based on his or her experiences as an individual — not on the basis of race. Many universities have for too long done just the opposite. And in doing so, they have concluded, wrongly, that the touchstone of an individual’s identity is not challenges bested, skills built, or lessons learned but the color of their skin. Our constitutional history does not tolerate that choice.”

In a blistering dissent, Justice Sonia Sotomayor, joined by Justices Elena Kagan and Ketanji Brown Jackson, wrote, “The devastating impact of this decision cannot be overstated. The majority’s vision of race neutrality will entrench racial segregation in higher education because racial inequality will persist so long as it is ignored.”

The immediate partisan and ideological reactions were predictable. President Biden declared “I strongly—strongly disagree with the Court’s decision. . . I believe our colleges are stronger when they are racially diverse. Our nation is strong because . . . we are tapping into the full range of talent in this nation.” On the campaign trail, Donald Trump calling it “a great day for America.”

Now with Donald Trump in the White House, Diversity, Equity, and Inclusion (DEI) programs are also under attack at colleges and universities, with critics arguing that such programs lead to reverse discrimination, violate free speech, and are simply attempts promote affirmative action by another name. The University of Michigan, a leading voice in promoting DEI programs, has spent a quarter billion dollars over the past decade on such efforts, only to find students, faculty, administrators, and alumni, of all political stripes frustrated with the implementation, educational and societal ramifications, even the fundamental premises of diversity, equity, and inclusion.

Sources: “Best Global Universities Rankings,” US News, October 2014, http://www.usnews.com/education/best-global-universities/rankings; George F. Will, “Colleges Hide the Truth About Tuition,” Washington Post, August 30, 2023, https://www.washingtonpost.com/opinions/2023/08/30/high-college-tuition-marketing-tool/; Preston Cooper, “After Decades of Competitive Admissions, Getting into College Has Finally Become Easier,” AEIdeas, September 11, 2024, https://www.aei.org/education/after-decades-of-competitive-admissions-getting-into-college-has-finally-become-easier/; Jon Marcus, “It’s Becoming Easier to Get Into Many Colleges,” Washington Post, November 18, 2024, https://www.washingtonpost.com/education/2024/11/18/college-acceptance-rates-easier-to-get-in/; Drew Desilver, “A Majority of US Colleges Admit Most Students Who Apply,” Pew Research Center, April 9, 2019, https://www.pewresearch.org/short-reads/2019/04/09/a-majority-of-u-s-colleges-admit-most-students-who-apply/; “Undergraduate Enrollment in US Universities, Statista, n.d., https://www.statista.com/statistics/235406/undergraduate-enrollment-in-us-universities/; Jeffrey J. Selingo, “Despite Strong Economy, Worrying Signs for Higher Education,” Washington Post, August 3, 2018, https://www.washingtonpost.com/news/grade-point/wp/2018/08/03/despite-strong-economy-worrying-financial-signs-for-higher-education/?noredirect=on; Jon Marcus, “Colleges Are Now Closing at a Pace of One a Week. What Happens to the Students?” Washington Post, April 26, 2024, https://www.washingtonpost.com/education/2024/04/26/college-closures-student-impact/; EAB report cited in Olivia Sanchez, “Experts Predicted Dozens of Colleges Would Close in 2023—and They Were Right,” Hechinger Report, January 12, 2024, https://hechingerreport.org/experts-predicted-dozens-of-colleges-would-close-in-2023-and-they-were-right/; Josh Moody, “A Harbinger for 2023? Presentation College to Close,” Inside Higher Ed, January 18, 2023, https://www.insidehighered.com/news/2023/01/19/more-colleges-will-likely-face-closure-2023-experts-say; Douglas Belkin, “Americans Are Losing Faith in College Education, WSJ-NORC Poll Finds,” Wall Street Journal, March 31, 2023, https://www.wsj.com/articles/americans-are-losing-faith-in-college-education-wsj-norc-poll-finds-3a836ce1. Students for Fair Admissions v. President and Fellows of Harvard College, https://www.supremecourt.gov/opinions/22pdf/20-1199_hgdj.pdf; “Remarks by President Biden on the Supreme Court’s Decision on Affirmative Action,” The White House, June 29, 2023, https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/06/29/remarks-by-president-biden-on-the-supreme-courts-decision-on-affirmative-action/; Neil Vigdor and Jonathan Weisman, “The GOP Presidential Field Is Hailing the Dismantling of Affirmative Action,” New York Times, June 29, 2023, https://www.nytimes.com/2023/06/29/us/politics/affirmative-action-republican-reactions.html; Nicholas Confessore, “The University of Michigan Doubled Down on DEI. What Went Wrong?” New York Times, October 16, 2024, https://www.nytimes.com/2024/10/16/magazine/dei-university-michigan.html.

Size of the Economy: We’re Number 1

According to the International Monetary Fund (IMF), the United States ranks as number one in the world economy, with a gross domestic product (GDP) of $20.49 trillion. This is nothing new. The United States has had the largest economy in the world since 1871. In second place, and growing rapidly during the twenty-first century, is China with a GDP of $13.4 trillion. The third largest economy is Japan ($4.97 trillion) and the fourth largest is Germany ($4.25 trillion)

California, the economic powerhouse in the United States, has an estimated GDP of $3.63 trillion (2022) and is about to overtake Germany as the fourth largest economy in the world. On a per capita basis, the Golden State is the second largest economy in the world. California surpassed Brazil and France in 2015 and supplanted the United Kingdom in 2017.

Source: Matthew A. Winkler, “California Poised to Overtake Germany as World’s No. 4 Economy,” Bloomberg News, October 24, 2022, https://www.bloomberg.com/opinion/articles/2022-10-24/california-poised-to-overtake-germany-as-world-s-no-4-economy