The Economics of Trump's NATO remarks

In case you missed it, recently former President Donald Trump stated that if he were in office once again he would "encourage" Russia to invade members of NATO who are, by his estimation, not paying enough for their security. The chart below shows the percentage of GDP each NATO member pays toward NATO defense. While there has been a stated expectation that each nation pays 2% of its GDP towards the protection of this organization, most nations fall a bit short. To Trump, this means they are not paying their bills and thus, should be left unprotected should a future invasion take place.

I would like to offer Donald Trump two thoughts. First, if, for example, Russia took you up on this and invaded Germany while you were President, the other NATO members would be obliged to come to Germany's defense. Think for a moment what this would mean for the global economy. Surely, exports from the U.S. to NATO nations would collapse during this quasi-World War. This means less money for the U.S. and a shrinking U.S. economy. Moreover, this invasion would lead to far fewer goods coming from NATO to the U.S., triggering a drop in our aggregate supply and higher inflation. Meanwhile, this global recession would cause tax revenues to plumment, social welfare spending to rise and by the time the dust settled the U.S. would lose far more money from leaving NATO to fend for itself than we are currently losing by subsidizing the nations that fall short of the 2% goal. In short, Trump's remarks reflect horrible economic policy. The second thought is this. Consider why NATO was formed to begin with. Allowing rogue states like Russia and an increasingly militarized China to view the United States as a potential bystander is an invitation to World War III. Plus, his bluster most likely has many NATO members thinking (rationally so), "O.K., fine. See who comes to help the United States if you get into a war in the future." One can only hope that there are a few adults in the Trump room who can convince him of the idiocy of making his recent comments the official stance of the United States.