There is increasing public discussion today, in the US and globally, about the trajectory of the American Empire.
The discussion frequently cites the American Empire’s increasingly apparent unwinnable wars in Iran and Ukraine; the Empire’s failure to check the rise of China economically, politically and technologically; the challenge to American global economic hegemony by the BRICS; growing splits in the NATO alliance between Europe and the US; the fracturing of long term economic and political relations with historically closest ally Canada; and the Empire’s resort to aggressive military and economic action within the western hemisphere—to name but the more obvious.
A large part of the commentary pointing to these and other developments argues, correctly, they are signs of America’s imperial decline. Some extrapolate and hyperbolically argue—incorrectly—that the developments are signs of Empire collapse.
But ‘signs’ aren’t necessarily causal explanations of decline and certainly not of collapse. More often the ‘signs’ are symptoms of more fundamental, underlying causal forces responsible for the increasingly obvious trajectory of American imperial decline—while extrapolations concluding collapse are impressionistic and distorted by wishful thinking.
Empires do not decline because they lose wars, are abandoned by allies and client states, or are increasingly opposed by state challengers to their hegemony.
Empires decline because they can no longer afford the expanding costs of maintaining their hegemony: the accelerating costs of waging constant wars of expansion and/or containment, the demands of financing a bloated expanding military bureaucracy, the inability to afford or develop new generations of weaponry, the necessity of supporting weakened and increasingly economically dependent allies, the costs of bribing foreign elites to continue to accept Empire leadership and rules, and the inability to maintain dominance over global goods and money asset flows.
Empires are expensive to maintain and defend. That’s been true historically. It’s no less true of the American Empire today.
The costs of the American Empire have been rising steadily since 2001. They accelerated after 2021, intensified further 2025-26 under the Trump regime. And promise to grow even faster the next two fiscal years, 2027-28.
But accelerating costs is only half of the problem of imperial finance. Empire costs can rise and even accelerate so long as revenues continue to rise sufficiently to fund Empire institutions, its military and geopolitical practices.
When revenues no longer rise proportionately to the rising costs—a Funding Gap necessarily arises. Insufficient revenue generation required in order to pay for the accelerating costs of Empire together create the Funding Gap.
And the American Empire today is experiencing a sharply expanding Funding Gap, as its costs accelerate faster than its ability to generate sufficient revenue to cover the accelerating costs.
In the 1990s decade there was no Funding gap. Rising expenses of Empire were financed by nearly 4% annual GDP growth and tax revenues from that growth. The transformation to a professional army, and the consequent reduction of 500,000 troops, also released significant cost savings. There was no resort to debt financing. In the latter three years of the decade the US actually ran a budget surplus. The decade represented the era of high ‘unipolarity’ of the American Empire.
The situation began to change after 2000. Costs of Empire accelerated as US neocons launched ‘forever wars’. Economic growth annually slowed by nearly half. Simultaneously, American imperial elites embarked on a massive tax cutting experiment that would eventually delete $20 trillion from the US Treasury over the next quarter century. A Funding Gap began to emerge, relatively slowly at first. And the Empire began resorting to debt financing of that gap.
The cost acceleration slowed in the first half of the second decade of the 21st century, as government finances in general were diverted to the economic bailout in the wake of the great recession and banking crash of 2008-09. By the end of that decade, however, Empire costs began to rise more rapidly once again. Economic growth recovered slowly and weakly, as did revenues from taxation which were further impacted negatively by Trump’s 2017 $4 trillion tax cuts.
Then came the Covid crash of 2020-21 and further bailouts even more costly than 2008-09. Overlaid on this was a renewed acceleration in Empire costs at the fastest rate yet, as wars in the Middle East, Ukraine, and military buildup for planned war in Taiwan accelerated defense spending once again.
The spending on war and defense accelerated further in 2025-26 as Trump launched no fewer than eight imperial offensives in 2025. The cost side of Empire promises to accelerate still further as Trump proposed to add hundreds of billions of dollars more to Pentagon and defense spending in 2027-28.
While the costs of Empire continued to accelerate out of control, the revenue side of Empire began experiencing severe problems as well.
Revenues to fund imperial activity may come from tax revenues from robust general economic growth. Or from debt sources as the Empire resorts to borrowing to cover its costs. Or some combination of revenues from both taxation and borrowing.
But as costs of Empire have accelerated in the 21st century, tax sources have struggled to fill the emerging cost acceleration. Despite a $10 trillion fiscal-monetary stimulus in 2020-22, economic growth only modestly rose above 2% annually after 2021. A Trump second $5 trillion tax cut mostly on capital incomes in 2025 exacerbated the pressure on tax revenues as a funding source. The consequence was an even greater resort to debt financing of the rising costs and Funding Gap. Annual budget deficits exceeded $2 trillion on average after 2021, driving the national debt from $29.6 trillion in 2021 to more than $40.1 trillion in 2026. That’s an average of more than $2 trillion rise in national debt per year. The rise in deficits and debt in turn resulted in interest payments on the debt escalating from $562 billion in 2021 to $1.36 trillion in 2026.
In other words, debt financing of the accelerating costs of Empire is fast approaching its limits—just as tepid economic growth and continued massive tax cutting further reduces tax revenues as a source of funding.
Debt financing occurs primarily via the federal US government sale of US Treasury securities annually to foreign and domestic US buyers. The former constitute 32% of total Treasury holdings; the latter the remaining 68%.
As costs of Empire accelerated rapidly in the past five years, debt financing was able to continue to fund the slack and cover the chronic multi-trillion annual deficits and national debt. However, events in 2026 indicate debt financing through Treasury sales may have entered a crisis period as well.
Treasuries sales managed to continue to rise after 2021 as costs of Empire accelerated—even as China and other foreign buyers of US Treasuries reduced their purchases. China alone reduced its holdings of Treasuries from $1.2 trillion by half to $.6 trillion over the five year period.
The empire’s closest ally, Japan, continued to purchase Treasuries, however, maintaining more than $1 trillion in total Treasury holdings. Meanwhile, Empire European allies accelerated their Treasury purchasing. Many EU countries (and Canada) doubled their purchases of Treasuries from 2021 to 2025.
In short, the Empire’s closest ‘core’ allies largely funded the accelerating costs of Empire from 2021 through 2025. But this may be coming to an end in 2026, raising the specter the Empire can no long debt finance its runaway costs of Empire.
In 2026 Japan began shifting from buying more US Treasuries to buying more of its own government bonds—as what is called the Yen ‘carrying trade’ collapsed and US Treasury Dept. intervention failed to restore the carrying trade. Simultaneously, the Empire’s European allies appear to have begun reducing their massive purchasing and holdings of US Treasuries—as their costs of funding their support for their Ukraine war required new bond issuance of $90 billion with a purported additional $177 billion in EU bond issuance to follow. In addition, Europe plans to fund a $1 trillion rise in European military production promises to add more to their bond debt load. With these developments, continued Europe (and Canada) buying of US Treasuries is highly unlikely—putting pressure on the Empire generating more Treasury sales from domestic US buyers.
The Trump administration has tried to supplement Treasury sales with Tariff revenues. In 2024 total US revenue from tariffs was $88 billion. This initially rose to $288 billion in 2025 due to Trump’s initial tariff wars. But US Supreme Court decisions in 2026 required the return of $145 billion of that $288 billion. Trump tariff policies have therefore failed as a significant new revenue generating source to offset the slowing and possibly even decline of debt revenue from Treasury sales to foreign buyers.
Foreign sales of Treasuries remain the primary source of funding of Empire costs, however. With purchases by China, Japan and Europe growing more uncertain, the Empire must sell even more Treasuries to domestic US buyers (banks, businesses, wealthy investors, etc.).
But that source of debt financing too may be confronting a separate set of concurrent problems of its own.
The bubble in the Artificial Intelligence financial markets has been ‘sucking up’ money capital in 2026 at an astounding rate. The big 7 tech companies alone project the need to raise $1 trillion in 2026 (and another $1 trillion in 2027) in order to fund investments in data centers, chips, AI agents, etc. The big Tech companies have largely committed their former mass of cash holdings and even resorted to raising equity (new stock) to generate additional revenues to invest in AI.
They have also begun borrowing at a level as never before. Some estimates are that $200-$300 billion is being borrowed from private capital sources to fund the AI boom. If so, that amount will likely ‘crowd out’ and discourage further private US domestic purchases of US Treasuries in 2026-27.
That development will further exacerbate the problem of debt financing of the Empire via Treasury sales, as costs of Empire continue to accelerate further under Trump, 2027-28.
In other words, just as the costs of Empire accelerated after 2021, rose faster in 2025-26 and are projected to accelerate still faster in 2027-28, the ability of the Empire to finance its rising costs from traditional Treasury sales (foreign and domestic) is becoming increasingly problematic!
The American Empire’s current Funding Gap is therefore likely to grow—as costs continue to accelerate and the primary (Treasury sales) and even secondary (tariff revenues) sources prove insufficient to keep up!
In this writer’s just released new book, ‘The Twilight of American Imperialism’, Clarity Press, September 2026, the data on costs of Empire and revenue sources—i.e. the Funding Gap of Empire—is provided in detail, with sources, for the period 1992 through 2026 (with projections beyond).
The following Table 5.1 is from Chapter Five, ‘The Crisis of Imperial Finance’, of the book. It summarizes the accelerating total costs of Empire since 2019.
Together, the trends in Empire costs vs. revenues reveal the American Empire’s Funding Gap is about to become unsustainable. The book further concludes, the Empire will subsequently have to cut costs by retreating to the western hemisphere and Central Pacific; or raise more revenue from taxation; or divert revenues from social programs to Empire expenditures. Or likely some combination of all the above.
Like Empires before it—from the Roman to the British—it is the crisis in imperial finance which is ultimately driving the decline of the American Empire. The military failures, failed regime change operations, fracturing geopolitical alliances and geoeconomic developments are but symptoms and ‘signs’ of Empire decline. The Empire’s deteriorating financial base, reflected in its growing Funding Gap, is the underlying fundamental driver and determinant of the decline of Empire now emerging.
[1] BEA.gov, GDP Table 1.1.5. Fred, https://St.louisfed.org/series/FDEFX. Defense NIPA & Defense Fred estimates both assume for 2026 the same average annual rate of increase in spending equal to the prior average for the 3 years 2022-25, plus the $200 Hegseth request in spring 2026 for supplemental spending for Iran-Venezuela military actions and weapons replacement. DoD spending for 2027 is from Trump’s initial budget requests calling for a $400 billion Pentagon increase over baseline 2026, supplemented by $100B for OCO costs for continuing war in Ukraine and Iran in 2027. For Veterans and other categories for 2026 sources and calculation methods are as indicated in footnote for Tables 3.1 and 4.1 in prior chapters; that is spending enacted and authorized by Congress. Estimates for defense spending share of debt interest payments are based on assumption Fed rates on US Treasuries sales remain in 4% to 6% range.
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