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THE YEAR 1973 was pivotal for America’s army. The force was battered and broken from Vietnam. In January the defence secretary announced the end of conscription; two months later the last combat troops left Vietnam. But the Arab-Israeli war which broke out on Yom Kippur in October planted the seeds of renewal. The lessons of that war, absorbed by American officers sent to Israel, helped reshape America’s army into the modern and professional force which would vanquish Iraq in 1991.
Today’s generals, who came of age during that transformation, are keenly aware of the resonance. “There’s a loose analogy between the early 1970s and the army of Desert Storm,” says General James Rainey, who leads the army’s Future Command, “and the army which invaded Iraq in the early 2000s and where we need to be in 2040.” Two decades of war in Afghanistan and Iraq wore out troops, equipment and ideas. A recruitment shortage remains unresolved. Now the rise of China and the lessons from the war in Ukraine have prompted introspection, renewal and reform.
Among army civilian and military leaders there are three big unsettled questions, according to people familiar with those debates. One is whether profound shifts in the character of war, some evident in Ukraine, might render ground forces less important, if not irrelevant.
A second is how to balance resources between Asia and Europe (Asia being the Pentagon’s priority, and Europe where Russia is rearming fast). The army can prepare for conflicts in both places, but it cannot actually wage those wars at the same time—and it is no longer asked to do so. The 2018 National Defence Strategy ended the “two war” standard, a change accepted by the Biden administration.
That leads to a third question, and the most existential for the army. What, beyond the provision of logistics and air defence, would be the role of a ground force in a future war in the Pacific?
When General Randy George, the army’s chief of staff, was recently asked for book recommendations, he cited “The Arms of the Future” by Jack Watling, a young British analyst. The book describes how in recent rounds of Warfighter, a big annual exercise led by America, combat brigades facing increasingly good sensors and longer-range and deadlier munitions took huge losses, emerging with 20% combat effectiveness. Artillery devastates infantry and armour well before they can get within sight of the enemy.
The war in Ukraine has reinforced those findings. Some argue that America’s army, better trained and armed than Ukraine’s, and with air cover, would fare better. General Rainey assumes the worst. “We’re going to fight under constant observation,” he says, “and in constant contact of some form. There is no break. There is no sanctuary.” He says American “lessons learned” teams were in place three days before the invasion to collect observations. They will have had some nasty surprises. American-made GPS-guided shells and rockets at first worked well; more recently, they have struggled against Russian jamming.
The army recognises that whereas it could once patiently muster its forces before launching a large offensive—as it did against Iraq in 1991 and 2003—it now has to prioritise dispersal, mobility and concealment. The drone attack which killed three soldiers in Jordan on January 28th was the first successful attack on American troops by aircraft since the Korean war. Katie Crombe, an army officer, and John Nagl, of the US Army War College in Pennsylvania, note in a recent paper that Ukraine’s battalion command posts comprise seven soldiers who dig into the ground and move twice daily. “That standard”, they warn, pointing to stubborn habits of more static command posts, “will be hard for the US Army to achieve.”
The commanders of battalions (about 1,000 soldiers) and brigades (a few thousand), the core units of combat in Afghanistan and Iraq, would be consumed by this intense fighting in a way they were not during counterinsurgency missions. The army is thus reorganising so that more of the burden of planning, logistics, command and control, and long-range firepower falls on divisions—larger formations typically led by two-star generals which stand farther back from the front lines and have more time and space to orchestrate the frenetic battles of the future.
What remains unsettled, says Billy Fabian, a former infantry officer and Pentagon planner, is how, precisely, the army’s combat forces should be organised for future wars: the balance between firepower on the one hand, dominant in Ukraine, and so-called manoeuvre elements, such as infantry and armour, on the other. “Fighting land wars is the army’s raison d’être,” he says, “and Ukraine raises tough questions that challenge deeply ingrained elements core to the army’s self-conception.”
Army dreamers
Hanging over these reforms is the larger question of where the army will be asked to fight. National defence strategies published by the Trump and Biden administrations instruct the Pentagon to focus on China. Yet the army increased its footprint in Europe after Russia’s first invasion of Ukraine in 2014. It has since reinforced the continent with a corps and division headquarters, an infantry and armour brigade, a rocket artillery battalion and numerous other support forces. In contrast, relatively few new forces have flowed into Asia.
For years the army’s principal role in the Pacific was to guard bases, provide air defence and handle logistics. To the extent it was a “manoeuvre” force, in military parlance, it was focused on North Korea. Other services have looked down their noses at it. “The navy has a stranglehold on the leadership of Indo-Pacific Command,” says Stacie Pettyjohn of the Centre for a New American Security, a think-tank in Washington. “They see the army only in a supporting role in a maritime theatre.”
Chart: The Economist
General Charles Flynn, the commander of the US Army Pacific, vigorously rebuts such ideas. “Humans have this unique tendency to live on land,” he says. “At the end of the day, decisions are going to be made by the pointy end of a gun.” The primacy of land is as true in Asia as it is in Europe, he argues, not least because the region’s largest countries, like India and Indonesia, have military forces dominated by armies. By building ties to them in peacetime, the army can position itself to project military power westward.
The growing pace of exercises (more than 40 take place annually) is a core part of that. General Flynn points to the examples of Talisman Sabre in Australia and Garuda Shield in Indonesia. Both were once relatively modest army-to-army exercises. They have grown and now involve the navy and air force. Both also involved the army’s Joint Pacific Multinational Readiness Centre, in essence physical and virtual training equipment that can be deployed around the region to do things which could only have been done at a large base in Louisiana. Such drills are morphing into a near-permanent presence: the army is deployed in the region for eight months of the year.
Alongside that is a reimagining of how the army would fight. The premise is that China has optimised its forces to attack American satellites, ships and air bases. “What it’s not designed against”, says General Bernard Harrington, “is to find, fix and finish land formations that are distributed, mobile and networked.” That has prompted the creation of three experimental “multi-domain task forces”, or MDTFs, the first of which is focused on Asia and commanded by General Harrington.
Each MDTF has four battalions which can deploy small units along the first island chain which runs from Japan to the Philippines. The idea is that these can fight not just on land—soldier v soldier, tank v tank—but across domains. Imagine that America needs to target a Chinese ship. The MDTF’s “effects” battalion might jam the vessel’s radar and hack its networks; if that does not neutralise the ship, it makes it more likely that anti-ship missiles launched by a “fires” battalion will get through. The force’s long-range hypersonic missiles, which arrived last year, have a range of nearly 3,000km—enough to reach from Japan to Taiwan, or from the Philippines to the South China Sea.
Initial experiments with the MDTFs have shown promise, though some are sceptical that this high-tech vision of war would survive contact with reality. Two MDTFs are currently devoted to Asia, with a third for Europe. The original plan envisioned a total of five, with an additional one in the Arctic and one for global tasks.
All this would seem to offer a definitive answer to the army’s identity crisis: Asia first. Inside the Department of the Army, nestled within the Pentagon, there are doubts, though. One question is whether its own plans mesh with those of the armed services as a whole. “The army still feels marginalised in the Pacific,” says Ms Pettyjohn. Another is whether the army itself has pivoted ruthlessly enough. Its fleet of water craft has shrunk dramatically in recent years, for instance. “Water craft are an absolute indicator of true commitment to the Pacific,” says J.P. Clark, another Army War College professor. “They are quite expensive, only really useful for that theatre, and absolutely essential.”
Hard choices ahead
The MDTFs themselves remain “niche” formations, argues Mr Fabian. The largest allocated to the region is the 25th Infantry Division in Hawaii, he points out, a light-infantry division. “It seems like the army is trying to have it both ways,” he says. “Talk about fires and air defence for the Pacific, but stay a combined-arms force organised for close combat like it’s always been.” The army hedges its bets, says an insider, because it rarely wages the war it expects.
Trade-offs abound. Short-range artillery is vital for Europe; less so in Asia. “I just don’t know what you’d fire a 155-round at out in the Pacific other than the water,” quipped a top Pentagon official recently. The army will have to make firm choices in the next year or two, say officials. In part that is because it is creating more units than it can reliably man. The army expected to finish last year short of 10,000 recruits, a 15% shortfall and the second consecutive year of under-enlistment. Much of that is the result of America’s tight labour market, but it also reflects waning enthusiasm for military service, and for combat arms in particular.
The fall in the size of the “individual ready reserve”—reservists not allocated to a unit—from 450,000 in 1994 to 76,000 in 2018 worsens the problem. Ukraine shows how intense wars tend to chew up regular armies, requiring an infusion of citizens with military experience. Today’s shortage of combat soldiers is tomorrow’s shortage of reservists. Ms Crombe and Mr Nagl are among those who have floated the notion of “partial conscription”, an idea backed by just 20% of Americans. Now, as in the pivotal moments of the mid-1970s, the army finds itself wrestling with profound questions over its size, shape and purpose: questions that will eventually touch, as they did back then, its relationship to American society. ■
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Wall Street is warning that the U.S. Department of Education’s crack down on student loan repayments may take billions of dollars out of consumers’ pockets and hit low income Americans particularly hard.
The department has restarted collections on defaulted student loans under President Donald Trump this month. For first time in around five years, borrowers who haven’t kept up with their bills could see their wages taken or face other punishments.
Using a range of interest rates and lengths of repayment plans, JPMorgan estimated that disposable personal income could be collectively cut by between $3.1 billion and $8.5 billion every month due to collections, according to Murat Tasci, senior U.S. economist at the bank and a Cleveland Federal Reserve alum.
If that all surfaced in one quarter, collections on defaulted and seriously delinquent loans alone would slash between 0.7% and 1.8% from disposable personal income year-over-year, he said.
This policy change may strain consumers who are already stressed out by Trump’s tariff plan and high prices from years of runaway inflation. These factors can help explain why closely followed consumer sentiment data compiled by the University of Michigan has been hitting some of its lowest levels in its seven-decade history in the past two months.
“You have a number of these pressure points rising,” said Jeffrey Roach, chief economist at LPL Financial. “Perhaps in aggregate, it’s enough to quash some of these spending numbers.”
Bank of America said this push to collect could particularly weigh on groups that are on more precarious financial footing. “We believe resumption of student loan payments will have knock-on effects on broader consumer finances, most especially for the subprime consumer segment,” Bank of America analyst Mihir Bhatia wrote to clients.
Economic impact
Student loans account for just 9% of all outstanding consumer debt, according to Bank of America. But when excluding mortgages, that share shoots up to 30%.
Total outstanding student loan debt sat at $1.6 trillion at the end of March, an increase of half a trillion dollars in the last decade.
The New York Fed estimates that nearly one of every four borrowers required to make payments are currently behind. When the federal government began reporting loans as delinquent in the first quarter of this year, the share of debt holders in this boat jumped up to 8% from around 0.5% in the prior three-month period.
To be sure, delinquency is not the same thing as default. Delinquency refers to any loan with a past-due payment, while defaulting is more specific and tied to not making a delayed payment with a period of time set by the provider. The latter is considered more serious and carries consequences such as wage garnishment. If seriously delinquent borrowers also defaulted, JPMorgan projected that almost 25% of all student loans would be in the latter category.
JPMorgan’s Tasci pointed out that not all borrowers have wages or Social Security earnings to take, which can mitigate the firm’s total estimates. Some borrowers may resume payments with collections beginning, though Tasci noted that would likely also eat into discretionary spending.
Trump’s promise to reduce taxes on overtime and tips, if successful, could also help erase some effects of wage garnishment on poorer Americans.
Still, the expected hit to discretionary income is worrisome as Wall Street wonders if the economy can skirt a recession. Much hope has been placed on the ability of consumers to keep spending even if higher tariffs push product prices higher or if the labor market weakens.
LPL’s Roach sees this as less of an issue. He said the postpandemic economy has largely been propped up by high-income earners, who have done the bulk of the spending. This means the tide-change for student loan holders may not hurt the macroeconomic picture too much, he said.
“It’s hard to say if there’s a consensus view on this yet,” Roach said. “But I would say the student loan story is not as important as perhaps some of the other stories, just because those who hold student loans are not necessarily the drivers of the overall economy.”
A woman walks in an aisle of a Walmart supermarket in Houston, Texas, on May 15, 2025.
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U.S. consumers are becoming increasingly worried that tariffs will lead to higher inflation, according to a University of Michigan survey released Friday.
The index of consumer sentiment dropped to 50.8, down from 52.2 in April, in the preliminary reading for May. That is the second-lowest reading on record, behind June 2022.
The outlook for price changes also moved in the wrong direction. Year-ahead inflation expectations rose to 7.3% from 6.5% last month, while long-term inflation expectations ticked up to 4.6% from 4.4%.
However, the majority of the survey was completed before the U.S. and China announced a 90-day pause on most tariffs between the two countries. The trade situation appears to be a key factor weighing on consumer sentiment.
“Tariffs were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April; uncertainty over trade policy continues to dominate consumers’ thinking about the economy,” Surveys of Consumers director Joanne Hsu said in the release.
Inflation expectations are closely watched by investors and policymakers. Federal Reserve Chair Jerome Powell has said the central bank wants to make sure long-term inflation expectations do not rise because of tariffs before resuming rate cuts.
A final consumer sentiment index for the month is slated to be released on May 30, and will likely be closely watched to see if the tariff pause led to an improvement in sentiment.
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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., speaks during the 2025 National Retirement Summit in Washington, DC, US, on Wednesday, March 12, 2025.
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Wall Street titan Jamie Dimon said Thursday that a recession is still a serious possibility for the United States, even after the recent rollback of tariffs on China.
“If there’s a recession, I don’t know how big it will be or how long it will last. Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” the JPMorgan Chase CEO said in an interview with Bloomberg Television.
Specifically, Dimon said he would defer to his bank’s economists, who put recession odds at close to a toss-up. Michael Feroli, the firm’s chief U.S. economist, said in a note to clients on Tuesday that the recession outlook is “still elevated, but now below 50%.”
Dimon’s comments come less than a week after the U.S. and China announced that they were sharply reducing tariffs on one another for 90 days. The U.S. has also implemented a 90-day pause for many tariffs on other nations.
Thursday’s comments mark a change for Dimon, who said last month before the China truce that a recession was likely.
He also said there is still “uncertainty” on the tariff front but the pauses are a positive for the economy and market.
“I think the right thing to do is to back off some of that stuff and engage in conversation,” Dimon said.
However, even with the tariff pauses, the import taxes on goods entering the United States are now sharply higher than they were last year and could cause economic damage, according to Dimon.
“Even at this level, you see people holding back on investment and thinking through what they want to do,” Dimon said.