The $600 weekly unemployment benefit the federal government funded this year was a remarkably effective expansion of the safety net. It helped pay many workers more than their lost wages. It enabled families to spend more than during normal times. It even allowed households to put away savings as the economy was teetering.
Then the money stopped at the end of July. And it's clear, looking back, what happened next: Workers quickly burned through the reserves that the aid had given them. Of the savings many households were able to build up over the course of four months of unusually generous government help, much of it was gone by the end of August.
$600 weekly
supplement expires
Change in Median Checking Account Balance From January
+120%
+100%
Unemployed who
received U.I. benefits
74%
decline
In May, these workers had twice as much money in their checking accounts as they did in January.
+80%
+60%
Employed
+40%
+20%
January
February
March
April
May
June
July
August
Note: End of month balances. The analysis only includes the unemployed who received unemployment insurance benefits through direct deposit. Households with multiple checking accounts are added together. Source: JPMorgan Chase Institute
That picture, using banking data from about 80,000 households receiving unemployment and analyzed by researchers at the JPMorgan Chase Institute and the University of Chicago, shows that unemployed workers steadily built up their checking account balances this summer. The median account had more than twice as much money in it at the end of July as at the start of the year. When the benefits expired, those balances swiftly dropped, wiping out most of the accumulated gains.
Unemployed workers — and the economy at large — were effectively living off the exhaust fumes of the CARES Act heading into the fall, said Peter Ganong, an economist at the University of Chicago who studied the data.
The researchers can't yet tell what happened to these workers' finances in September. But the reality is probably grim. If the $600 checks created something of a life preserver for jobless workers — protecting them for a time from Washington's political dysfunction — that life preserver deflated quickly, Professor Ganong said.
"Perhaps it's entirely deflated now," he said.
Two and a half months after the benefits ended, Congress and the White House have been unable to reach an agreement on a broad stimulus package to revive them. President Trump signaled this week that he wants a big deal, against the wishes of many Senate Republicans, but hopes have dimmed for an agreement before the election.
"It's honestly kind of staggering to me that Congress could leave us in this position," said Daniel Lawson, who has been without a job in New York City since early in the pandemic. He believes he caught the coronavirus while working at a Trader Joe's in March and is still living with its effects: the fatigue, the brain fog, the sense of smell that hasn't returned to normal yet.
He has to find a job he can do remotely because of his lingering health problems, he said. And to do any remote work, he had to replace a computer that stopped working this summer. That took a chunk of his savings. Now, without the extra federal payments, he's receiving just $180 a week from the state of New York.
"Right now I'm in a position where I'm worried about being able to continue paying rent," Mr. Lawson, 32, said. "I'm in a position right now where even grocery shopping is pretty scary."
Faced with dwindling savings and constant bills, most households face a dilemma.
"The choices are to stop spending on regular everyday purchases, or stop making payments like mortgages, student loans, auto loans, credit cards," Professor Ganong said. "That's a terrible choice for a family to have to make. It's a terrible choice for the macro economy."
The analysis found unemployed workers did cut their spending after the $600 supplement ended, but by a relatively small amount in August, on average about $57 a week. Professor Ganong suspects that spending might have fallen much more rapidly in September, based on the dwindling savings workers had left.
$600 weekly
supplement expires
Weekly Spending
$700
$650
Unemployed who
received U.I. benefits
$600
10%
decline
$550
Employed
$500
$450
$400
January
February
March
April
May
June
July
August
Source: Diana Farrell, Peter Ganong, Fiona Greig, Max Liebeskind, Pascal Noel, Daniel Sullivan, Joseph Vavra, JPMorgan Chase Institute
The checking accounts used in the research, which were stripped of identifying information, come from Chase customers in 11 states where unemployment is paid out weekly, including California, New York and Wisconsin. In the data, workers receiving unemployment had those benefits deposited directly into their accounts. Workers who didn't receive such payments were treated as still employed. And there's little sign in account balances that the unemployed were moving large sums in or out of these accounts to other assets like savings accounts, making these checking accounts a good measure of the resources workers built up and drew down.
The unemployed workers in the research don't include those who receive benefits by prepaid debit cards rather than direct deposits. Those workers, who may not have bank accounts at all, probably have lower incomes than the ones captured in this data, and they may have even fewer assets to draw on at this point.
Other research supports the idea that families have been saving a significant share of their unemployment insurance checks. In a survey fielded by the Federal Reserve Bank of New York in June, families reported setting aside nearly a quarter of their unemployment checks as savings. The New York Fed also found that nearly half of unemployment payments went toward paying down pre-existing debt.
Even modest-seeming drops in spending by the unemployed reflect difficult decisions at this stage. Charissa Ward, who lost the well-paying job she'd had for 15 years as a server at Disney World in Florida, has replaced some grocery store runs with trips to a food bank. And the school supplies she would normally buy for her three children were donated by co-workers from Disney instead, when the $600 dried up on the eve of a new school year.
"It's a mental strain on people emotionally, especially for someone like me that has worked since I was 15," said Ms. Ward, who is 37. "I've never been in this situation."
Allegra Troiano, who lives in Milwaukee, believed she was a few years away from retiring from her job preparing foreign students to study at American schools when the pandemic crushed the international education industry. Those students aren't coming anymore, and it's hard to know when they'll be back. Ms Troiano, who is 64, was laid off in May, and for a while over the summer she believed that the extra federal aid would keep her going until she could return to work.
"When they announced that they've cut off the $600, I said 'This is unsustainable,'" she said. Now she fears she may be forced into early retirement, collecting pensions and Social Security earlier than she'd planned.
Those $600 checks, in retrospect, were for a time prolonging her career.
The Consumer Financial Protection Bureau (CFPB) should explicitly re-center its antidiscrimination mandate and address itself squarely to fostering racial and economic equity.
By doing this, CFPB leadership could realize the full Dodd-Frank Act mandate to listen and be responsive to traditionally underserved communities and consumers.
The agency needs to center the voices of marginalized communities as a necessary adjunct to promoting accountability under the statute. The recognition that racial and economic justice are linked and that the pandemic is amplifying and embedding existing racial disparities, demand that we move beyond the generalities of the statutory language. Poor, rural, and immigrant communities, across racial differences, are all both underserved and poorly served by financial institutions. Black people in particular have always been excluded from the financial mainstream in this country.
I am the founder of the Consumer Rights Regulatory Engagement and Advocacy Project, (CRREA Project) and in our series on how the CFPB develops policy, and the inclusion of marginalized communities' perspectives in that policy development, we've talked about the vision as set forth in Dodd-Frank, the reality of how the statutory structure was implemented, and changes to the organizational chart under the Trump administration.
Here are our recommendations for how the agency can focus on racial and economic equity:
Name It: Identify Who is Served by the CFPB's Mission
As a first step to re-dedicating itself to its statutory mission, the CFPB should take a public stance acknowledging the centrality of consumers and traditionally underserved consumers. We should put behind us the fight over the name of the CFPB, and whether "consumer" or "bureau" should come first. Regardless of how often the statute put which one first, Congress was clearly focused on a certain set of concerns in the creation of the CFPB: consumer concerns and particularly those of traditionally underserved communities and consumers. Consumer interests always come first in the Dodd-Frank Act, and so they should in how the CFPB understands its work and presents it to the public, whether through the website, the logo, or consumer education materials.
The CFPB's current strategic plan runs through 2022. In developing the new strategic plan, the CFPB will have the opportunity to revisit its mission and vision statements, as well as the overall goals for its work, including specific measurable goals to be reported on annually. The CFPB should seize this opportunity to center consumers, and a recognition of the CFPB's special responsibility to traditionally underserved communities, in its work.
Lay the Foundation: Regularize Public-Facing Research on Consumer Financial Products and Services and Traditionally Underserved Communities
The Office of Research is the first of the statutorily mandated Dodd-Frank Act offices. Its mandate includes research and reports on risks to consumers, access to credit for traditionally underserved communities, and the experiences of traditionally underserved consumers. It has both world-class economists and access to datasets covering all consumer financial markets, in many cases with only a month's lag time. The CFPB also has the authority, in section 1022(c)(4) of the Dodd-Frank Act, to collect additional information from financial institutions.
Those resources should be focused on foundational work on the role of consumer financial products and services in traditionally underserved communities. When is disclosure effective and for what risks? How do consumers view tradeoffs in access to credit versus risk? How can we untangle when the benefits of credit to traditionally underserved communities outweigh the costs of credit? For example, the subprime lending boom of the early 2000s promoted access to credit and led directly to both the foreclosure crisis and the loss of more than a generation of wealth accumulation for Blacks and Latinx. Credit can open doors and it can close them.
The Office of Research has done significant work in all of these areas and more. The CFPB should follow the precepts of the bipartisan Foundations for Evidence-Based Policymaking Act and adopt a public "learning agenda." A public research agenda, coupled with a regular cadence of reports on issues of importance to traditionally underserved communities, could bring public accountability to this aspect of the CFPB's statutory mandate. For example, researchers look to the CFPB for its annual release of the HMDA data and accompanying reports analyzing that year's data. Changes to the user interface for accessing the data have brought congressional scrutiny. The CFPB could also expand its discussion in its semiannual report to Congress of the "significant problems faced by consumers in shopping for or obtaining consumer financial products or services." That discussion could explicitly center the experiences of marginalized communities in accessing credit on fair and non-discriminatory terms.
Build It: Create a Structure that Reflects the Statute and Makes Visible Traditionally Underserved Communities
The Trump-era CFPB organizational chart has moved four of the Dodd-Frank mandated offices and special units off the public-facing organizational chart. The offices of community affairs, financial education, service members, and older Americans are now all housed inside the consumer education office, itself housed inside a new division of external affairs and consumer education. Offices important enough for Congress to name are important enough to be visible on the public-facing organizational chart. The public should know who leads those offices.
Any new leadership of the CFPB will have to consider the location of the Office of Fair Lending. The move of the fair lending office from its initial home in the same division with supervision and enforcement to the Director's Front Office was meant to refocus the fair lending office's work on "advocacy, coordination, and education" instead of supervision and enforcement. We at CRREA Project believe that leaving the Office of Fair Lending in the Director's Office could be used to signal its cross-cutting importance to the work of the CFPB, if coupled with the necessary formal and transparent decision rights and processes.
For example, the CFPB could publicly commit to a formal role for the Office of Fair Lending in priority setting across the agency. The CFPB could update its written procedures related to decision-making to embark on specific actions that would normally rise to the Director for final decision, such as authorizing specific enforcement actions. Establishing formal and transparent decision rights and processes would provide accountability to Congress and the public. Such actions could provide reassurance that fair lending was a central consideration in supervisory and enforcement actions without disclosing confidential internal CFPB deliberations.
Other steps could include explicit roles for outreach connected to rulemakings to facilitate input from marginalized communities or a designated role for the statutory offices in providing input into policymaking. Clarifying the role of the Community Advisory Board would assist both the CAB and staff in understanding the purpose and nature of their interactions. Other agencies, such as the Environmental Protection Agency have, from time to time, published detailed guidance for staff and guidance for rulewriters about the agency's policy decision processes. This kind of work is foundational to consistent management across administrations and could contribute to the development of a culture and identity for the CFPB that lasts for generations.
Conclusion
Accountability to the underserved and poorly served consumers and communities the statute repeatedly calls out is critical. Public-facing documents, like the strategic plan, a research agenda, or an organizational chart, afford one level of accountability. They explain what the agency intends to do and offer a point of engagement for the public. Future leadership should go further and embrace the statute's emphasis on consumers and traditionally underserved consumers and communities to apply an explicit racial and economic equity lens to decision-making across the agency. Doing so would build a CFPB robust and resilient enough to serve the public well for the years to come.
Tell me I am wrong: Foreign Affairs makes Xi's argument for him. The only case against him appears to by the "imprisonment" of the Muslim Uyghur population in Xinjiang, a charge none of the Muslim countries support, curiously, nor visitors there from other socialist, or non-aligned nations. America must win because of the Uyghurs? When the US has the highest incarceration rate in the world, and cops are shooting down unarmed Black men in the streets? And putting immigrant children in COVID cages? And spewing racist garbage daily from the President's COVID mouth?
The consequences of the presidency of Donald Trump will be debated for decades to come—but for the Chinese leadership, its meaning is already clear. China's rulers believe that the past four years have shown that the United States is rapidly declining and that this deterioration has caused Washington to frantically try to suppress China's rise. Trump's trade war, technology bans, and determination to blame China for his own mishandling of the COVID-19 pandemic have all confirmed the perception of Chinese policy elites that the United States is bent on keeping their country down.
To be sure, the idea that the United States seeks to stymie and contain China was widespread among Chinese officials long before Trump came to power. What many Americans see as disruptive effects attributable only to Trump's presidency are, to China's current rulers, a profound vindication of their darkest earlier assessments of U.S. policy.
But Trump has turned what Beijing perceived as a long-term risk into an immediate crisis that demands the urgent mobilization of the Chinese system. The Trump administration has sought to weaken the grip of the Chinese Communist Party (CCP) on society, force the liberalization of the state-dominated Chinese economic system, and block China's drive to technological supremacy. Nearly four years into this gambit, however, Trump's policies appear to have produced the opposite result in each domain.
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Washington needs a China strategy that not only assesses Chinese capabilities and aims but also takes full account of the way China's leaders understand the United States and have reacted to Trump's presidency. This strategy must also reject the faddish but inaccurate notion that China is somehow an impervious force, advancing on an immutable course and unresponsive to external pressure and incentives. The United States can craft a strategy that much more effectively deters China's most problematic behavior. But to do so, Washington must endeavor to upend Chinese leaders' assumption that the United States is inexorably declining.
"THE WOLF IS COMING"
Chinese leaders and policymakers have believed for decades that U.S. power is waning and that the United States seeks to impede China's rise. Mao Zedong was fond of predicting the decline of the capitalist world led by the United States, comparing it to "a dying person who is sinking fast." He regularly attacked Western attempts to subvert China's communist revolution, denouncing "reactionaries trying to hold back the wheel of history." These ideas outlived Mao, although they were shaken as the CCP embraced market reforms and as the United States emerged as the sole superpower after the collapse of the Soviet Union. But the 2008 financial crisis, which left China relatively unscathed, caused the country's leaders to wonder whether the ruinous decline of capitalism that Mao had predicted had in fact arrived. And with their Marxist-inflected view of historical forces, they expected that this prospect would lead, as night follows day, to the flailing of Mao's hopeless "reactionaries"—American leaders who would try in vain to hold China down.
These ideas shaped the worldview of Chinese President Xi Jinping. When he came to power in 2012, he spoke of historical patterns of conflict between rising and fading hegemonic powers, warned about the U.S. role in hastening the collapse of the Soviet Union, and promoted such figures as Wang Huning, a former law professor and longtime government adviser whose best-known book, America Against America, highlighted how far the United States fell short of its ideals. But Xi and his lieutenants were initially more focused on addressing the political and ideological fragility of the system they inherited; they expected the decay of the United States to be gradual.
Many Chinese elites now think that Trump's presidency has pushed that slow process into a new phase of sharp and irreversible deterioration. They took measure of the president's withdrawal from international agreements and institutions and his disdain for traditional alliances. They saw how U.S. domestic policies were exacerbating inequality and polarization, keeping out immigrants, and cutting federal funding for research and development. Wu Xinbo, the dean of Fudan University's Institute for International Studies, argued in 2018 that the "unwise policies" of the Trump administration were "accelerating and intensifying [U.S.] decline" and "have greatly weakened [the United States'] international status and influence." A commentary in the Beijing-backed newspaper Ta Kung Pao earlier this year held that "America is moving from 'declining' to 'declining faster.'" This belief has become a central premise of China's evolving strategy toward the United States.
Chinese leaders have believed for decades that the United States is a waning power.
CCP leaders connect this rapid American decline to intensified U.S. efforts to contain China; the United States under Trump has gone from being a latent, long-term menace to the source of concerted efforts to, in the favored phrase of Chinese officialdom, "comprehensively suppress" China. In 2018, Trump slapped tariffs on tens of billions of dollars' worth of Chinese goods and issued bans on the Chinese telecommunications firms Huawei and ZTE. (Although Trump eventually reversed his ZTE decision as a favor to Xi, the threat to the company—which relied on the United States for approximately one-quarter of the components in its equipment—was existential; analysts have described more recent measures against Huawei, similarly, as a "death sentence.") The rhetoric of past and present Trump advisers, such as Peter Navarro (whose books include The Coming China Wars and Death by China) and Steve Bannon (who called for "regime change in Beijing"), helps vindicate the darkest, most conspiratorial notions among the Chinese leadership.
Trump's actions and rhetoric have solidified Beijing's assessment that there is now a durable American effort underway to quickly suppress China, and Chinese leaders see that effort as bipartisan, too, with near-unanimous congressional votes on legislation related to China and criticisms of China coming from prominent Democrats, such as House Speaker Nancy Pelosi. An editorial from this past July in the Chinese state-run newspaper Global Times stated, "China must accept the reality that America's attitude toward China has fundamentally changed." The shift in elite opinion in China is clear. According to Wei Jianguo, a former top Chinese trade official, the prevailing view in Beijing is that "the essence of the trade war is that the United States wants to destroy China." Fu Ying, a senior diplomat, declared in June that the United States' goal for China is now clearly "to slow it down through suppression," a fight that the declining superpower "can't afford to lose." The Foreign Ministry's spokesperson, Zhao Lijian, declared in August that the United States is "a far cry from the major power it used to be," with its leaders bent on "working to suppress China because they fear China's growth." These ideas are remarkably widespread in the statements of Chinese officials and experts, the pages of CCP magazines and newspapers, and across Chinese social media.
Chinese leaders have long thought that this confrontation might arrive someday, but it has come much quicker than they expected. "People in the United States and China have for years said the wolf is coming, the wolf is coming, but the wolf hasn't come," Shi Yinhong, a leading international relations scholar, told The New York Times. "This time, the wolf is coming."
EYE OF THE BEHOLDER
With such perceptions entrenched, it should come as no surprise that China has reacted in ways that are leading to further conflict between the already divergent U.S. and Chinese systems. Since Xi's ascent, China's ever more authoritarian and domineering turn has alarmed governments around the world. In 2018, Xi removed term limits on his office. Under his watch, the CCP has more openly embraced its illiberal identity, pairing repression at home—most gruesomely in Xinjiang, where internment camps hold more than one million Uighurs and members of other minority ethnic groups—with loud criticism of democracies abroad. Despite U.S. Secretary of State Mike Pompeo's call to "engage and empower the Chinese people" against the CCP—an appeal widely interpreted in China as a bid for regime change—the party's hold over society remains strong. It rolled out new ideological and political campaigns this past summer. The clampdown that accompanied China's response to the COVID-19 pandemic has further bolstered Beijing's surveillance and social control systems.
Some top U.S. officials have maintained that the goal of Trump's policy is to force the liberalization of China's state-dominated economic system, but from the outset of the trade war in 2018, the Chinese government judged that Trump's goals were mercantilist—he cared only about getting a so-called good deal for the United States. In response, China's rulers have redoubled their reliance on the state sector to deal with the instability resulting from conflict with the United States. Since the early years of Xi's tenure, state-owned enterprises have benefited from increasingly favorable government policies and preferential bank lending, often at the expense of private firms. One economist with strong links to the CCP elite told me that he and many of his colleagues initially believed that Trump's trade war was a positive development because they thought it would reverse this trend and revive market reform. But the trade war has had the opposite effect: Xi has doubled down on building "stronger, better, and larger" state-owned enterprises and rejecting the deeper economic liberalization that officials around the world have long sought in China.
In trade negotiations that reached a limited "Phase 1" agreement in January of this year, Beijing agreed to a series of pledges to buy U.S. goods, rather than to any significant new commitments to reform. Chinese state media reports even floated upgrading the state-dominated economic model to the status of one of China's "core interests"—a sacrosanct category usually reserved for territorial and sovereignty claims. Indeed, the COVID-19 pandemic has underscored to many in China the advantages of this model, with the Xinhua News Agency announcing that state-owned enterprises "have been a vital force and the main force" in responding to the pandemic.
Chinese Vice Premier Liu He and Trump in Washington, D.C., January 2020
Kevin Lamarque / Reuters
Far from curbing China's push for technological supremacy, Trump's actions have encouraged its leaders to accelerate their drive to reduce their country's dependence on the United States. For many years, China has tried to balance between reaping the benefits of interdependence and insulating itself from the risks of being the weaker partner in its relationship with the world's most powerful country. After Xi came to power, he made it a priority to address the dangers of interdependence, including through the "Made in China 2025" initiative, which aims to make China 70 percent self-sufficient in ten core technologies by the year 2025. Xi has proved willing to sacrifice economic growth in the name of national autonomy, and a range of cosmopolitan officials and government-linked experts who once supported greater integration have come to agree with him. Li Qingsi, the executive director of the Center for American Studies at Renmin University of China, wrote that the ZTE case in 2018 "disillusion[ed] those who advocate relying on the United States to develop our own economy" and drove home the lesson that "China must carry forward the tradition of self-reliance and reduce external dependence."
Beijing is finding it hard to speed up its self-sufficiency drive, but the direction is clear. A world in which China truly becomes self-reliant is a world in which the United States has much less leverage over China than it does at present. China is still dependent on foreign firms for many foundational technologies, including the cutting-edge semiconductors needed for everything from personal computers and smartphones to artificial intelligence systems. In 2019, Chinese leaders stopped talking publicly about Made in China 2025 to reduce tensions during negotiations with the United States, but the policy endures in substance, and one anonymous senior official told an American journalist that the CCP "will never give an inch" on the scheme's broader goals. Earlier this year, Xi pledged a further $1.4 trillion to invest in the development and deployment of advanced technological infrastructure such as 5G wireless networks, enhanced sensors and cameras, and automation.
Chinese concerns about dependency on the United States also extend more widely. Tensions have recently become especially high around U.S. dominance of international finance, from the use of the dollar to interbank payment systems. Even internationalist officials, such as the former finance minister Lou Jiwei, have started warning about the risk of a "financial war" and about the United States doing "everything in its power to use bullying measures [and] long-arm jurisdiction" against China.
Leaders in Beijing believe that a declining United States will seek to suppress China's rise.
Chinese elites describe the COVID-19 pandemic as proof that the United States will lash out at China as it plunges into decline. Trump's failure to control the disease, with around six million cases and nearly 200,000 deaths in the United States by the end of August, reflects what Chinese commentators see as the parlous state of the country. They have called the pandemic "Waterloo for America's leadership" and "the end of the American century." They believe that Trump launched his election-season push against China—he has called COVID-19 "the plague from China" and issued new sanctions and other measures targeting Chinese entities—to distract from the failings of his administration. But many leading Chinese voices are convinced that whatever the result of the U.S. presidential election, the trajectory of U.S.-Chinese relations is now set by the inexorable forces of American decline and hostility to China. "Even if Biden wins," Yuan Peng, the influential president of the Ministry of State Security's China Institutes of Contemporary International Relations, recently wrote, ". . . America will have a hard time reassuming its role as a world leader . . . and America's China policy will only get increasingly hyper-sensitive, unyielding, and arrogant as they double down on containment and suppression."
Xi is rolling out new policies that are based on these expectations. Beginning this past spring, he unveiled an agenda for the economy that aims to reorient China's economic development inward, relying much more on China's enormous domestic market and less on the "more unstable and uncertain world." Fostering domestic demand has long been a talking point of Chinese leaders, but Xi has pledged to make achieving greater domestic consumption a centerpiece of the upcoming five-year plan for 2021–25. This shift is clearly driven by the assumption that the United States will continue working against China. As one state media outlet declared pointedly in late July, "No country and no individual can stop the historic pace of the great rejuvenation of the Chinese nation."
To be sure, Xi would like to de-escalate the trade and technology conflicts with the United States to buy time. He also wants China to strengthen and diversify its ties to other economies around the world, including through the Belt and Road Initiative, an international network of infrastructure projects that aims to increase China's geopolitical influence. China is not deglobalizing as much as it is de-Americanizing.
China's conviction that the United States is a diminishing and hostile power has emboldened its leaders to pursue long-standing objectives with new vigor. Their view of U.S. decline makes them see fewer risks in taking highly aggressive positions, and their sense of U.S. hostility, among other factors, increases their willingness to incur international opprobrium: imposing a new national security law on Hong Kong; committing atrocities in Xinjiang; bullying Australia, India, and the Philippines; threatening Taiwan; forging new partnerships with Iran and Russia; and letting Chinese diplomats spread conspiracy theories about the origins of COVID-19. With the United States withdrawing from multilateralism and international institutions, China has tried to reshape global bodies, such as the UN Human Rights Council, in its favor. China's behavior in these areas is often at odds with U.S. interests and a rules-based order, with Beijing flouting rules it dislikes and undermining liberal norms and values.
A BETTER CHINA STRATEGY
How should U.S. strategy toward China grapple with these changes? Given the dismal track record of the past several years, some may be tempted to try to undo these shifts by reassuring Beijing that the United States does not in fact intend to keep China down. This path is highly unlikely to succeed. China's ambitions conflict with U.S. interests in many areas—and with Trump confirming so much of Beijing's view of the United States, no amount of diplomatic reassurance can convince China's leaders to give up their quest for security through strengthening their control over society, shoring up the statist economic system, and reducing China's dependence on the United States. Attempting to persuade them otherwise at this point would seem only to be cheap talk, at odds with their perception of "the wheel of history" turning faster toward American decline. U.S. strategy must seek to move forward, not backward, from the current predicament.
But that does not mean Beijing's entire agenda is immutable. This view is much in vogue today, casting China not as a country that responds to pressure and incentives but as an adamantine force incapable of reacting to external stimuli. Yet it would be wrong to conclude that the unsuccessful policies of the past several years mean that the United States is somehow helpless in the face of a more powerful China, only able to pull up the drawbridge, prepare for conflict, and hope that the CCP collapses. A different approach—neither a nostalgic "reset" nor that fearful and fatalistic vision—is needed.
The best path forward is to craft a strategy premised on a more realistic assessment of both U.S. and Chinese interests. Beijing sees the world in harshly competitive and ideological terms, but Washington can still advance its interests with respect to China. The most ambitious—and most important—aspect of this strategy must be showing China and the rest of the world that the United States remains strong and can reliably revive the sources of its power and leadership. China's rulers have built their strategy on a profound underestimation of the United States. By upending the exaggerated reports of its demise, the United States could change China's calculus and find a way toward sustainable coexistence on favorable terms.
Nothing is as important to competing effectively with China as what the United States does at home, revitalizing its economic fundamentals, technological edge, and democratic system. All these initiatives would be important even in the absence of competition with China, but the rivalry with Beijing adds to their urgency. Policymakers must get the COVID-19 crisis under control, implement economic policies that benefit all Americans, welcome immigrants who enrich U.S. society, pursue racial justice to show the world that U.S. democracy can remain a beacon of freedom and equality, make smart investments in U.S. defense capabilities, and scale up federal funding for research and development. This ambitious agenda for national renewal and resilience would profoundly shake the foundations of the CCP's strategy. U.S. leaders should also not shy away from publicly pointing out authoritarian China's many weaknesses, including the country's aging population, ecological crises, numerous border disputes, and declining international popularity.
Anti-government demonstrators in Hong Kong, December 2019
Navesh Chitrakar / Reuters
The United States must also band together with allies and partners in Asia and Europe to push back against problematic Chinese behavior. That effort should include using joint economic leverage to punish firms and groups that steal intellectual property and engage in other unfair and illegal conduct; strengthening military capabilities and showing increased resolve in the face of Chinese aggression; and sanctioning institutions and officials that are aiding repression in Hong Kong, Tibet, and Xinjiang. They should also work to revitalize the international institutions and those elements of the rules-based order that can limit the competition between states. Playing defense, the United States and its partners need to take steps to maintain their leverage in key areas of international trade while disentangling themselves entirely from supply chains that create unacceptable vulnerabilities to China (such as the production of critical medical supplies) and diversifying away from those for which the danger is less serious. Not all risks are equally significant, however, and the United States and its democratic allies are open societies that still stand to gain from economic, scientific, and people-to-people exchanges with countries around the world, including China, even as they do more to guard against coercion and espionage from foreign rivals.
The United States and China also have important shared interests and should strive to prevent the worst outcomes of their competition. Both countries must confront profound challenges such as climate change, pandemic disease, and nuclear proliferation, which cannot be met without coordination and joint action. U.S. and Chinese leaders should also work to head off foreseeable disasters, such as the looming risk of cyberwar and the prospect of a conflict in the contested South China Sea. In these most volatile and dangerous areas, they should negotiate redlines and effective mechanisms for crisis management and de-escalation. By working with China on these issues when necessary, even in the context of an intensely competitive relationship, the United States would show Beijing that it does not fear or seek to contain a prosperous China that takes on a major global role and plays by the rules. Over time, such steps could also eventually create space for China's leaders to decide that addressing these urgent shared problems is more important than believing their own paranoid visions of the United States.
But all these efforts will pay off fully only if the United States can demonstrate how mistaken the CCP is about the notion of inexorable U.S. decline. Achieving clarity about the task ahead would itself be a reason for optimism. The Chinese leadership's dark view of the prospects for the United States is wrong. The United States is not trapped by old ways of addressing problems or borne along by historical forces beyond its power to shape. Much of what the United States must do to compete effectively with China is within its control—and there is still time to act.
