Why did the US suspend military aid to Ukraine?
There will surely be geopolitical arguments, but I will focus on the economic ones.
Why do I consider economic factors important for understanding the overall situation? Because Trump is not a geopolitical strategist in the classical sense of the term.
First and foremost, he is a businessman, and he views every geopolitical project as a business plan.
Where there is an amount of investment, a time factor, and a risk indicator of capital depreciation in the form of a discount rate; there is cash flow, profit, and net present value of the project.
And there is EBITDA, depreciation, and IRR — a threshold borrowing rate at which the net present value of the project approaches zero.
This is his way of thinking.
You may not accept this, you may even condemn it. But it is worse than the truth. This is how it actually is.
Now, let's move to the economics.
There is an important indicator called Net Government Savings.
It is defined as the difference between current government revenues and expenditures, including the central (federal) budget, state budgets, and local government budgets.
According to last year’s results, this indicator in the US reached -1,931.6 billion dollars.
Also, in this context, it is important to analyze the government’s net borrowing/lending indicator.
The US statistical site states:
“Net lending (+) or net borrowing (−) is an alternative measure of the government’s fiscal position.
Net borrowing is the need to finance the public sector, calculated as net government savings plus consumption of fixed capital and net capital transfers received, minus gross investments and net purchases of non-produced assets.”
In simple terms — it’s net government savings plus depreciation of critically important infrastructure in which the government invests its funds.
That is, the higher the need to renew critical infrastructure, the more the negative net borrowing indicator deviates from the indicator of its negative net savings.
I won’t even mention that with negative government savings, it is very difficult to finance expanded reproduction of fixed assets — in practice, there is just enough money to replace depreciating capital assets, i.e., “patching holes.”
And the very statement that “Government net borrowing is an alternative measure of the government’s fiscal position” makes sense only when you have an unsecured fiat reserve currency, in this case — the dollar.
But investors won’t always be generous.
US federal government net borrowing in Q4 2024 amounted to 2,256.9 billion US dollars.
This has led to the fact that the US, literally, began to economize.
What does US statistics say?
Here are a few quotes (for Q4 last year):
“Consumption expenditures slowed, increasing by $24.2 billion in Q4 after a $36.3 billion increase in Q3, reflecting a slowdown in national defense consumption expenditures.
The slowdown in national defense consumption expenditures was caused by a decline in nondurable goods and a slowdown in defense services expenditures.
Non-defense consumption expenditures accelerated slightly.
Grants for aid to state and local governments were rejected in Q4, declining by $0.5 billion after an increase of $32.5 billion in Q3, reflecting cuts in grants for educational programs, as well as grants for social welfare and social services.
… Other current transfer payments “to the rest of the world” decreased by $19.8 billion in Q4 after an increase of $58.9 billion in Q3, reflecting a reduction in aid to Ukraine.”
At the same time, the social model and environmental quality are two “Molochs” that consume most of the US federal budget (over 70% of expenditures).
What’s more — judging by the structure of federal spending, the US is a hypertrophied welfare state on a “green course.” It’s certainly not a country preparing for a “big war.”
Here are more quotes from American government statistics:
“Subsidies increased in the fourth quarter, rising by $1.4 billion after a $1.6 billion decrease in the third quarter. The growth was largely due to subsidies related to natural disasters.
Capital transfers accelerated in the fourth quarter, increasing by $67.2 billion after a $18.9 billion increase in the third quarter.
Capital transfers to state and local governments accelerated, reflecting increased investments by the US Environmental Protection Agency (EPA) in clean water and pollution control.
Public social benefits to citizens grew in the fourth quarter, increasing by $44.8 billion after a $40.7 billion increase in the third quarter, reflecting accelerated payments on Medicare and social security programs.”
In simple terms, Americans are sick and need money for social insurance.
Americans study and need money for educational subsidies.
And the price of medical and educational services in the US is through the roof.
But it is precisely on this inflated cost of services that the bloated virtual American GDP rests, the material component of which is shrinking every year (in relative weight).
Americans want to drink clean water and breathe clean air. They want to renew critical infrastructure and minimize the risk of environmental disasters.
In its personal country balance, the US is already running a $2 trillion annual deficit. Where to get this money?
Only through new government borrowing. There are simply no other ways to cover the budget deficit. The question is only where to get new debt: from the market or directly through the Federal Reserve’s issuance.
This means that each term of a new US president adds at least $8 trillion to the national debt — every four years.
Since 2012, this has been the case:
Obama — plus $9 trillion new debt.
Trump (first term) — plus $7 trillion new debt.
Biden — plus $7 trillion new debt.
Trump (second term) — ?
When George W. Bush first took office in 2001, the US national debt was just under $6 trillion.
Now it is already $36 trillion.
A very dangerous macroeconomic spiral is forming.
Low net national savings lead to the need to compensate with a significant government budget deficit (there is no other solution according to balance formulas).
A large budget deficit means a greater need to attract new debt.
Net positive government borrowing of more than $2 trillion a year means that to attract investors to government bonds and bills, the interest rate on debt servicing must be raised more and more, which in turn increases the budget deficit.
And so the spiral goes down.
Of course, there are examples where the debt-to-GDP ratio is even worse than in the US. For example, Japan.
But in Japan, this phenomenon occurs amid a long (decades) period of negative interest rates and deflation. Investors buying government bonds actually pay the government, not the other way around.
Even now, the basic interest rate of the Japanese central bank is 0.5%, not 4.5% as in the US.
Debt servicing in America currently costs the federal budget about minus one trillion dollars.
It’s also important to relate debt growth to GDP growth.
GDP nominal growth is formed by two factors: real economic growth and the inflation component (GDP deflator).
At the moment, both the first indicator of nominal GDP growth (real economic growth) and the second (deflator) are significantly slowing down.
The first reason is the cooling of the American economy, the second — the Federal Reserve’s monetary policy and the decrease in inflation.
Trump submitted a “beautiful and big law” to Congress.
It really is big — nearly 1,000 pages.
But as for the “beauty”…
The bill provides for raising the US government debt ceiling by $5 trillion.
This amount will be enough for 2025, 2026, and 2027 — if they cut spending.
After that, Trump plans to reduce the federal budget deficit in the US from 6.6% of GDP to 2-3%, i.e., by half.
As we see on the chart, the maximum deficit of government savings in the US occurred in Q1–Q2 2021 — overcoming the consequences of the coronavirus pandemic.
Then, the government savings deficit sharply decreased and by Q1–Q2 dropped below the $1 trillion mark. But from Q3 2022 — a sharp rise, reaching almost $2 trillion.
This cost the Democrats the election victory.
At the moment, Trump has achieved several intermediate results.
One of them — the balances on US Treasury accounts have somewhat increased, and the federal budget, based on two quarters of 2025, is in surplus for the first time: $60 billion due to increased tax revenues (import tariffs) and $40 billion due to spending cuts.
But the surplus situation is fragile.
Overall, the stakes in American politics are extremely high now.
The question is who will “conditionally” win in the dispute between Trump and Musk. Here, the personalities matter less than the forces behind them (Musk, as is known, criticizes Trump’s bill, calling to stop government debt growth by sharply cutting the spending side of the budget).
If Trump’s model of external tariffs and internal tax incentives wins (shifting taxation emphasis from domestic producers to imported goods) — the conservative wing of the Republicans, MAGA, and J.D. Vance — the next US president — will win.
If Musk’s model of total tax and budgetary restrictions wins (or rather, if he proves his point and his prophecy of a US debt crisis is at least 5% justified) — the technocratic elites, technocratism, and the “Technological Sparta” with a new model of “meritocracy democracy” will win as the third political force in America, the emergence of which we are now witnessing.
So the stakes are very high.
Harris and the Democrats could also “win.” But then for the US, this would be akin to electing Gorbachev and “perestroika” in the late USSR.
That is why all moral appeals to Trump from our side will have no response.
“Washington doesn’t believe in tears.”
Trump needs a business plan, or he will reduce geopolitical “investments” to the level of a “project freeze.”
Unfortunately, all the theses of our experts that “$100 billion aid to Ukraine is pocket change for the US since it’s only 0.3% of US GDP” turned out to be untenable.
In America, this position doesn’t work. It’s like asking a billionaire for $100,000 (even for a good cause) because it’s “pocket change” for them.
A geopolitical business plan is needed. Maybe not highly profitable, but above all — realistic.
