January 29, 2024 - 1:00pm

From foreign policy to domestic issues, the political situation in the United States is far more tense than the media would have us believe. Last week the US Supreme Court ruled that US Border Patrol, a federal agency, could clear out the barbed wire being set up by the Texas National Guard at the border between the United States and Mexico. 

Since the Texas National Guard is under the control of Governor Greg Abbott, this sets up a potential stand-off between an agency under the jurisdiction of Washington DC and one under the jurisdiction of the State of Texas. Abbott has dug in, stating that he will not comply with the Supreme Court ruling. Since then, 25 other Republican governors have stood behind Abbott. 

Clearly, Republicans have had enough of the uncontrolled inflows of people at the border. Declarations of a second civil war from some corners of the internet are somewhat exaggerated, but those who say that this is just more of the American political theatre we are so used to are equally wrong. This conflict between 26 states and the US federal government could easily trigger a constitutional crisis if, say, US Border Patrol and the Texas National Guard faced off against one another at the border.

These events, combined with Donald Trump’s decisive victories in the Iowa and New Hampshire primaries this month, are rapidly changing the political landscape in DC. The Wall Street Journal reports that top Senate Republicans are signalling that the current bill being pushed through Congress to secure funding from Ukraine will have a more difficult route of passage than previously thought. 

Republicans who supported funding Ukraine have tied changes to US border law to a package for Ukraine. The idea is that if their more Right-wing colleagues who are sceptical of the Ukraine war want to fix the mess at the border, they will have to concede on the issue of funding Ukraine. But now GOP powerbroker Mitch McConnell is saying that he wants to lay more emphasis on the border issue in the run up to the election — no doubt the Senate Minority Leader is also watching the constitutional chaos in Texas.

This week it is expected that the European Union will announce its funding package for Ukraine. But if this funding is not followed by an infusion from Washington there will not be enough money on the table. The EU is proposing €50 billion to fund Ukraine until the end of 2027, which would mean a total of €12.5 billion per year. The problem is that, according to Ukrainian balance of payments data, the body received around €20.6 billion in 2023 to prop up its ballooning trade deficit. Moving forward, €12.5 billion will simply not cut it.

If the United States does not send more funds, it seems likely that the EU package will disappear into a black hole. For if Ukraine cannot get enough funding to prop up its trade deficit and currency, the hryvnia will likely collapse.

The West is in a very precarious position right now. A war effort that threw a huge amount of resources behind Ukraine is very close to disintegrating. The political situation in the United States is becoming superheated and veering toward a potential constitutional crisis. And all this is taking place with an extremely contentious and destabilising election looming over the country this November. In 2024, we are set to witness multiple points of failure emerge in countries across the West.

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics