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Then I think all that’s left for us to think about is how far the desperation of the United States will take it, because it can’t tolerate a defeat. And in this way, I think it’s really quite similar to the almost by now absurd hysteria of the Europeans vis-à-vis Russia. Not because they have a chance to defeat Russia — they don’t — but because the thought of a defeat of Europe by Russia frightens them to such a point.

By them, I mean the leaders of the countries. Their careers would be over, their political life, history would be kind of erased. The whole world would see the kind of slavish subordination Europe accepted after World War II. Perhaps it had no choice, but in any case, it accepted it. And this is the end of that process — the United States throwing them under the bus because it has its own problems.

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So then the question becomes: how far will the United States go? And that becomes the question. How far will the American people, on the one hand, and the American employer class — and I choose my language carefully — how far will it let Mr. Trump go?

And that will depend not very much on what happens in Iran or even in the Gulf. That is going to be determined by the domestic, inside the United States, consequences of a prolonged war.

And if I were Mr. Trump, I would be extraordinarily worried that this time may be his last time. And the reason for that is to quote a leading business communications: “This war may take us over a fiscal cliff.” That’s a quotation. And let me do the arithmetic that lies behind that, because I believe that’s correct.

The United States long ago decided politically it could never fight the many wars it kept going by taxing the population. That would produce a revolt here. So it has to be borrowed. You have to borrow the money for the wars, and you could do it. You had a world that put its money in the United States, happy to lend to the US Government, considered the safest possible way to hold your wealth. And it paid interest. And if the dollar appreciated, well, then you made even more money, which it often did.

All of that is now over. Mr. Trump inherited deficits exceeding a trillion dollars a year. He inherited the recent decline of the credit rating of the United States from AAA to AA by all three of the major credit agencies — Moody’s, Standard and Poor’s, and Fitch — all of them, not at the same time, but in a short period of time, dropped the credit rating because the United States is too deep into debt.

And Mr. Trump promised as he ran that he would do it. And one of the reasons he adopted his tariff program was that it might generate big money into the government so that at least the deficits would be reduced.

Okay, all of that has been blown apart.

Number one, in order to counter the declining empire problem, you got all this noise about retaking the Panama Canal, taking Greenland, converting Canada into the 51st state, and so forth. And with all of that grandiosity and with the quite determined resistance of all of those entities — they didn’t want this, they’re not for sale, and all the rest — he went to the Congress about a month and a half ago, first quietly, then publicly demanding an increase in the defense — although it’s now called the War Department — budget, from the current $900 billion to $1.5 trillion.

Excuse me for the arithmetic, but it’s needed for the argument to be made. That’s an increase in one year’s budget of $600 billion on a base of $900 billion. In other words, a two-thirds increase in one year of the Defense Department budget, when we spend more on that than the next eight countries combined spend on that, and that includes Russia and China.

So this is a wild announcement of increased spending, but we’re not done. Then he goes to war against Iran and has now asked for an additional $200 billion to fight the war. Okay, so now we’re increasing $800 billion.

The only increase in revenue to deal with that were the tariffs. And the Supreme Court has ruled that those were illegal and unconstitutional. And the companies that paid them — importing companies — have now gone to court and are demanding a refund of that money. And I don’t see how that can be refused. If you’re taxed and the tax is illegal, it has to be returned to them.

So there’s no increase in revenue and an $800 billion increase in military outlays. This is impossible. What this means is that the government will go into the credit markets and try to borrow an additional $800 billion on top of what it was already facing as a deficit. And it will do that at a time when its credit rating is lower than it has been for most of the last century.

Here’s what I expect. It will not be easy to borrow, and for sure it will be necessary — unless something new happens — to pay higher interest rates if you’re going to be able to borrow.

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Trump’s Political Survival and the Domestic Crisis

Because if John Mearsheimer is correct — and I know you have him as a guest and you know him well — then he has said from the beginning there is no way out. Mr. Trump has no way out. And the implication of what Mearsheimer has said all along is: don’t do this, because you won’t have a way out. And Mr. Trump did it anyway. And so now we are living with what it means if he has no way out.

But I’m telling you again, and I would stress it, he will disappear politically anyway when the internal fiscal disaster hits here. If he can’t prevent the election, if he can’t control the election, and if he is defeated — which he will be if he doesn’t prevent it at this point, no question — then the question becomes whether he will go or not. And that’s where we are. Then the issue becomes the American military establishment. Where will they go? Because you will have reached a point in which the country is split 60-40, and the only conceivable control mechanism becomes the military.

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But the very fact that I speak to you in this way about this society already tells you something — that the global understanding of the United States as a place where you can safely keep your money is finished. That’s done. This is a country of turmoil, of illegal activity all over the place, a military whose loyalty is now in play. This is what wealthy people around the world want to hide their money from. They don’t want to go to a place that’s like that.

And I think you’re going to see, as the instability deepens and becomes more visible in daily life, the pressure on Mr. Trump — I don’t see how he survives this. But that’s how grim it is.

And by the way, I’m talking to you from New York City. You can feel it in the population here. There’s a level of — it’s not quite psychological depression, but there is anxiety. There is enormous disaffection from the institutions, almost all of them, a turning in of the population. And when you talk to people and you say, “Is that happening to you?” they nod, because someone has put it into words. I’ve never — and I’m born here and lived and worked here all my life — I’ve never had that feeling that I have now, just in the street among people, over a cup of coffee at a coffee shop and so on. You’re picking up a deep sense that something is terribly wrong and that we have to change dramatically.

And that’s why I think it’s extremely important that we here in New York City — the largest city in the country, the most cosmopolitan, largest percentage of people who are Jewish — voted for a Muslim socialist for mayor. I mean, that’s an index of change. We want somebody completely unlike our traditional politicians. And he won for that reason. And he could have been a communist instead of a socialist, he still would have won. That’s the amazing thing. By people who don’t like socialism, don’t like communism, don’t know very well what it is anyway because of the country’s attitude — but it didn’t make any difference. He was a nice young man with a beard and a socialist and a Muslim. Fine, vote for him.

And the man said that if Benjamin Netanyahu visited New York, he as mayor would have him arrested. He said that as part of his campaign, and the Jewish vote here went for him. I think people should understand — that’s extraordinary. It’s really extraordinary.

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Again, the only way I see it is if you have a groundswell of opposition. And I must tell you, I’m beginning to see it here. I don’t know enough about Europe to be able to say I see it there. I don’t know, for example, how to interpret the municipal elections in France over the weekend when Paris and Lyon and Marseille voted for socialists to be in power. And I understand what the socialists in Europe mostly are, but here in the United States, let me give you some signs.

The Democratic Party is a party that has a conventional, centrist leadership and an active base that is much more progressive than that leadership. That’s an enormous tension inside that party and usually immobilizes it. If they continue the way they have, then they may even lose the election this November because they can’t overcome the tensions inside. But they might overcome it either way. They might hold on so that Hakeem Jeffries and Schumer and the Clintons and that, horrific — for my judgment, horrific — compromise center of the Democratic Party, they may hold on, in which case there’s a good chance they will lose and an even better chance that they will win and change very little. Bring us another Biden who will preside. Things will get worse and the next Trump will emerge four years or eight years later.

But there is a possibility. I didn’t think it was there until the Mamdani election. There is a possibility that the progressive wing of the Democratic Party will become much stronger, much faster. They have the young people, they have the energy, they have huge numbers. Now just think of it this way. In popular opinion polls, the most popular politician is Bernie Sanders. He is that wing of the Democratic Party. There are serious efforts, I know that they’re there, to put forward Alexandria Ocasio-Cortez as a presidential candidate. This is a young, vibrant, Hispanic American candidate and she would be very successful. I think maybe more than others think, but I think she has that mixture of sharpness and likability that we need in this country for our politicians.

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The Uncontrollable Variables of War and Economy

No way to control it. And they can’t — I don’t know how. Obviously I have no knowledge of Mr. Putin or Mr. Xi Jinping, but Iran has two incredible allies, and if they think this might be the beginning of a global conflict, then they are going to line up behind Iran. They’re not going to sell Iran down the river. It would make no sense at all. And the joke that must pass among them is how ironic that what you — the West and America — did to us in Ukraine, we can now do to you in Iran. How could they resist?

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