Is US Creating Economic Sinkhole By Aiding Ukraine?

US, Is US Creating Economic Sinkhole By Aiding Ukraine?
Is US Creating Economic Sinkhole By Aiding Ukraine?

NEW DELHI (CoinChapter.com) — The US has always been an economic powerhouse, especially since the end of World War II. The country alone accounts for a quarter of the world’s global wealth, innovation, and military spending.

Leaders have often leveraged the nation’s supremacy to aid other ailing economies for humanitarian, moral, ethical, or financial benefits. However, with the onset of COVID-19, the US’s piggy bank is not as cash-heavy as it once was.

The US has Paid Ukraine $13.5B in Grants

Analysts claim that piling debt and rising inflation could all weigh on the US economy and lead to an eventual economic meltdown. This is why many pundits have raised concerns about whether foreign aid is necessary during a potential economic turmoil.

Source: Twitter

Recently, Reuters reported that the US had commissioned a grant of $53 million to war-torn Ukraine. The aid aims to help Kyiv defend its energy infrastructure, which Russian troops have targeted via airstrikes.

As a result, the total US grant to Ukraine stands at around $13.5 billion from January 2021. So does the US’s sheer relentlessness to counter Russia’s military regime in Ukraine come at a cost?

There are arguments on both sides.

The Micro Picture

US Federal Reserve Chair Jerome Powell provided a momentary relief to markets on Nov 30 by calling for lower interest rate hikes. Yet, Powell’s speech carried a subtle warning, with him saying:

“Despite some promising developments, we have a long way to go in restoring price stability”

Since the beginning of 2022, the US has initiated five rate hikes to fight soaring inflation. At one point, inflation rose 9.1% year-on-year to its highest level in 40 years.

The same has gorged a hole into Americans’ average weekly pay in the past year. Nbcnews reported that Americans have ‘effectively experienced’ a 12-month pay cut of $0.31 per hour based on data from the US Bureau of Labor Statistics.

The report further added that a decrease in hours worked, Americans’ inflation-adjusted average weekly pay has decreased by only $13.20 from one year ago.

“I’ve had to take a serious look at my budget and find places to cut back,” a concerned American citizen told Boston’s wbur. Another remarked:

“My wife going to be working full time, and it’s going to cost us about 1,400 dollars a month to put just two of my kids in the childcare facility.”

Macro scale

However, on a macro level, the US economy is improving.

In a recent report, third-quarter GDP growth was revised to 2.9% from 2.6%. Although job openings decreased during October, they were considered healthy overall. It was the 16th straight month that job openings remained above 10 million.

According to Reuters, the US labor market battles rising inflation, which helps support the economy.

Yet, the government’s balance sheet is a growing issue. The fiscal deficit for the year ended 2023 climbed to $88 billion, contributing to a national debt of $31.24 Trillion through October 2022. This is the highest debt figure the US has ever recorded.

Republicans raise concerns

There are several ways of analyzing the economic state of the US. First, even though the economy looks healthy on the outside, the situation is different at the ground level. This has led to some voices being raised from within the country.

“Under Republicans, not another penny will go to Ukraine”; “Our country comes first,” said Marjorie Taylor Greene in early November, adding:

“We must stop letting Zelensky demand money & weapons from US taxpayers while he is trying to drag us into WW3. No more money to Ukraine. It’s time to end this war and demand peace.

Source: Twitter

A recent poll also showed that the number of Republicans who feel the US is doing too much for Ukraine rose from 6% in March 2023 to 30% of all Americas at the end of October.

Counterarguments add that as the world’s largest economy, it is the US’s moral and ethical duty to help Ukraine. Others argue that the US is in a proxy war with Russia and that any economic benefit provided to Ukraine would cripple Russia’s global strength.

They also say that aid to Ukraine had a negligible impact on total federal spending and the US economy.

There are different ways of looking at the scenario, and neither would be in the wrong. However, only time will tell whether the US’s efforts will pay off in the grand scheme.

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