Insights | From system imbalance, debt crisis to social division: A panoramic view of America’s deep-seated crises

Source: ECNS

By Chen Tianhao

Update: Oct 17, 2025, 11.59AM

Editor’s note: Prominent American scholar Peter Walker recently visited the Chongyang Institute for Financial Studies at Renmin University of China and delivered a public lecture titled “Reflections on China-U.S. Relations”, exploring the profound transformations unfolding in American society. Below is a compilation of the lecture’s key points:

The amount of change that’s going on in the U.S. is really unprecedented. And the change is taking many different forms, and the one that is most visible is the direct challenge to the core principles of democracy.

What are the core principles? One is free, fair and open elections. If you go back to the election of 2020 to this day, Trump and his supporters would say that he had the election stolen from him, and that Biden should not have been the president. It was an “illegal election”, even though there were over 60 court cases where people who claimed that the election was stolen were asked by courts to come up with evidence. They never had any evidence because there really wasn’t any. So fair elections, I think, are getting challenged.

January 6th was another where we had basically the insurrection at the Capitol and where we had 1,600 people convicted of criminal activity because they were basically beating up on law enforcement officials.

The third basic change on election in the U.S. is the diminution of the balance of power. A very fundamental principle in the U.S. is there are three equal branches of government and they all have checks and balances against each other. Anytime when you look at changes that people have tried to make in the democratic model, you have challenges that come from one of those branches that will basically neutralize what another branch is trying to do.

What’s happening now is you have a Congress that is, by a very small margin, Republican, instead of having real debates and people arguing back and forth, you have almost bloc voting. If you look at the passage of what Trump calls the Big Beautiful Bill, I think all Republicans but two voted for that. Every single Democrat voted against it. The whole notion of people bringing independent views, having dialogues and reaching compromise decisions, has really been replaced almost by a “bloc” notion.

The other thing that’s enabled the balance of power to be undermined are executive orders. There are a lot of unilateral decisions that the courts are increasingly ruling as not legal, but because the court procedure takes a long period of time, a lot of these things are actually enacted and implemented for a period of time before they’re undone. The challenge to democracy is really the most dramatic change that’s taking place.

The second is the polarization. It really goes back to something that is quite understandable. Look at blue-collar workers including electricians, plumbers, and drivers, who are not college-educated, they have lived the American Dream. And the American Dream is very simple. Everyone will have a higher standard of living than their parents did. But for this group, that is no longer true.

So there’s a lot of resentment among them, and when you look at wages of blue-collar workers, they have been flat. They look like this real wages over many decades, and for the rest of the population, the wages are increasing at a reasonable rate. So you’ve got a very angry group. They live very local lives, basically revolving around the economy. Are they able to take their family on vacations? Can they afford to the grocery store and buy the things they want? Can they get reasonable cost of housing? And those things used to always be taken for granted and they can’t be taken for granted today. That really is the heart of the polarization, because they have felt very much being disrespected by what they call the elites: the highly-educated people, the legal professions...

A third big change is tariffs. If you look back in time, the average tariffs were measured in low single digits, 2%, 3%, very modest numbers. If you look at the tariffs that are being proposed today and implemented off and on, we’re talking about minimum 10% and in some cases as high as 50%. When tariffs are far out of whack with history, you really don’t understand what the effects are going to be.

One of the things that the U.S. government has been saying to defend its tariff policies is, “Well, tariffs are not getting paid by the American people, but are being paid by foreign governments”. Tariffs are not paid by governments. Tariffs are paid by companies that are importing goods and services from overseas. And then the question is, how much of the tariff do they pass on to consumers? Tariffs are having unknown effect yet, but it will become clear within the next couple of months that they could add significantly to inflation. But the reality is for a retailer with very thin margins, you can’t take those tariffs and find a way to save enough money to fund them. So inevitably, a lot of it is going to get passed on to the consumer.

Another big change in the financial area apart from tariffs is the debt crisis. The U.S., as a reserve currency country, has the luxury whenever it spends more than it takes in, it just prints more money. It’s the only country in the world that can do that because the dollar is the global reserve currency. Now, the U.S. debt has reached a level that the amount of interest paid by the U.S. government is higher than the defense budget. And interest rates, which are controlled by the Federal Reserve, are basically going to stay relatively high. So the government is basically saying to the Federal Reserve to bring interest rates ideally down to 1%. It’s not going to happen because it oversteps its authority to interfere with central bank independence.

The next change is about social fairness. The U.S. has always been positioned globally as a country that cares about people who are not well-off financially. But if you look at the Big Beautiful Bill, it’s very regressive in the sense that the economic benefit is being given largely to upper-income people. And so the pressure was on the Congress to say, how can we afford to give tax cuts to the wealthiest people? So what they’re doing to fund it basically is cutting benefits to people in the lowest category. A lot of people are driven off of Medicaid, which is the health care plan that’s provided for the people with the least amount of income. So the situations are: parents who have counted on the government to take care of their kids who have diabetes or other illnesses that require drugs are going to be told, you can’t get it anymore. So the number of deaths that are expected from that is likely to increase significantly.

And then the final change taking place is the world order. The U.S. has always relied on allies, starting with NATO, but also a lot of other countries where the U.S. has built up friendships over time and could count on them. But what the U.S. has done is basically walk away from a lot of the global institutions, such as the World Health Organization, the World Trade Organization, and the United Nations. The U.S. is both imposing unilaterally significant tariffs on foreign countries, at the same time they’re reducing their involvement with global institutions.

The question is, how is that going to affect the standing of the United States which historically has been a very visible global leader? And it certainly opens the door wide for China to come in to serve as the leading trading country in the world, to go into each country to offer better deals as the U.S. leaves after having left behind significant tariffs. So the change in the world order could be fairly significant with much more influence going to China because of the opportunity that the U.S. has left through its approach to tariffs.

Whether it’s the attack on democracy, whether it’s polarization, whether it’s tariffs, whether it’s the debt, whether it’s the regression of social programs and the standing in the world order, all of those changes are huge and they’re all happening at the same time. You have a U.S. government that is very mercurial in its decision-making, so it changes its mind on a regular basis. 

If you ask people where this is going to lead, nobody knows.