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Muddling Through—Until We Don’t

By Walter Donway

September 21, 2026

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“Still muddling, not yet through.”—Charles E. Lindblom

We have developed a reflex. When the numbers become preposterous, assume the country will find one more way to live with them. Debt? We have carried more. Speculation? We have survived worse bubbles and manias. Banking panic? The Federal Reserve will supply liquidity. Recession? Washington will spend. Inflation? The Fed will tighten. Foreign creditors? They will keep buying because where else can they go?

When the numbers become preposterous, assume the country will find one more way to live with them.

By repetition, “muddling through” ceases to describe uncertainty and begins to sound like a system. The most dangerous assumption a civilization can make is that because rescue has happened before, rescue must always happen. But rescue need fail catastrophically only once.

So, this is less an essay about economics than about political psychology. Nations do not become vulnerable simply because debts accumulate or markets become overvalued but because repeated success at evading full consequences changes what citizens, investors, and political leaders expect. And Expectations shape behavior, which ultimately reshapes institutions.

Charles Lindblom never intended “muddling through” to bear such weight. In his celebrated 1959 essay, The Science of Muddling Through, he argued only that policymakers in a complex society cannot proceed from perfect knowledge. They compare limited alternatives, make incremental adjustments, and revise course as experience accumulates. It was an argument for intellectual modesty, not for complacency.

In today’s political rhetoric the phrase has been transformed into an article of faith: Every excess or other distortion can be prolonged, every reckoning cushioned by some combination of monetary expansion, deficit spending, government guarantees, and central-bank intervention. What began as epistemological humility has become a political creed. Its name is the “interventionist/welfare state.”

Citizens, observing one rescue after another, gradually come to accept rescue not as exceptional but as normal.

Businesses assume that liquidity will be “supplied” before temporary illiquidity becomes insolvency. Investors assume that incipient bear markets will trigger intervention before liquidation runs its course. Politicians and bureaucrats re-categorize extraordinary emergency measures as ordinary instruments of governance. Citizens, observing one rescue after another, gradually come to accept rescue not as exceptional but as normal.

America has repeatedly demonstrated that it can rescue itself. Now we should ask if a nation accustomed to rescue can imagine—or more, believe in—the point at which rescue ceases to work. The fire trucks arrive but the hydrant croaks only air.

Nations survive crises because they possess reservoirs of strength—economic, monetary, institutional, demographic, and moral. But reservoirs are never inexhaustible. Other societies also staggered forward for years through improvisation, deferred reform, and confidence that familiar remedies would continue to suffice—until they suddenly discovered that the old remedies no longer worked.

 

America Has Earned Its Confidence

America’s confidence is not groundless. The republic has survived crises that would have broken weaker polities. The financial upheavals following the Panic of 1837 discredited governments without destroying the Union. Civil War printing of “Continentals” stoked 100 percent inflation, straining the nation’s finances without ending the republic. The Panic of 1907 exposed weaknesses in the banking system but ultimately produced the Federal Reserve system.

Government intervention to mitigate crises sets the stage for future, worse crises.

That development is exhibit #1 for the principle that government intervention to mitigate crises sets the stage for future, worse crises. A dollar in 1907 when the Fed was created to “stabilize” the currency and banking system, has lost 97.2% of its purchasing power due solely to cumulative Fed money/credit creation. A dollar in 1907 had the equivalent in buying power to about $35.65 today; by the same token, a dollar today buys roughly 2.8% of what it could buy in 1907.

The stock market crash of 1929, fueled by Fed credit expansion, was followed by banking collapse in the early 1930s and gave rise to deposit insurance and emergency banking legislation. The stock-market crash of 1987, the savings-and-loan crisis, the dot-com collapse, the financial crisis of 2008, and the pandemic shutdowns of 2020 all concluded not with national collapse but with increasingly ambitious government intervention. For example, responding to the government’s own “lockdown” of 2020, Congress spent on a wartime scale and the Fed revived or created emergency facilities across money markets, corporate credit, municipal finance, consumer credit, and small-business support while it more than doubled the nation’s total money supply—100% monetary inflation—and its balance sheet vaulted above $7 trillion. Channeled first into the banking and financial system, this “quantitative easing” resulted in a doubling of leading U.S. stock indices (Dow, S&P 500, Nasdaq). When “easing” hit the world of consumer prices, they surged by some 9%. The Fed vowed to “fight” this inflation (price increases)—as though it had invaded from Mars.

Each successful rescue strengthened expectations of another. Desperate measures became ordinary tools of macroeconomic management.

Each successful rescue strengthened expectations of another. Desperate measures became ordinary tools of macroeconomic management. There are consequences. A society rescued many times begins to mistake crisis-and-rescue for equilibrium. Investors, lenders, businesses, and governments learn to price risk as though severe losses always will be cushioned before they fully unfold. The expectation of rescue morphs into a cause of the next crisis.

 

Today’s Figures Are Extraordinary

That deserves attention because today’s figures are extraordinary by almost any historical standard. The national debt exceeds $40 trillion. The annual interest expense is now a record $1.25 trillion or 18.5% of federal government revenue, also a record. The U.S. fiscal year 2026 national defense budget totals $1 trillion, so just the interest on the debt surpasses it.

The U.S. government had to sell 30-year bonds at a rate of 5.12 percent on August 13, the highest rate since 2001.

The U.S. government had to sell 30-year bonds at a rate of 5.12 percent on August 13, the highest rate since 2001. Federal debt held by the public approaches 100 percent of U.S GDP (some million for each American) and is projected to exceed the previous World War II record during the coming decade—and then far exceed all records. Interest payments consume a growing share of national income.

Financial markets tell a similar story. Margin debt has risen sharply. Equity valuations, measured by Robert Shiller’s cyclically adjusted price-earnings ratio, stand above the levels preceding both the crash of 1929 and the financial crisis of 2008. Warren Buffett’s preferred measure of total market capitalization relative to GDP likewise stands in territory he once warned was “playing with fire.” At the end of August, the net long commitment by bullish retail traders (the public) hit an all-time high of $131 billion, doubling over the last five years. Meanwhile, the Federal Reserve has reduced its balance sheet from its pandemic peak, but it remains many times larger than before the serial crises of the past two decades.

Predictions of American collapse have repeatedly proved mistaken.

Predictions of American collapse have repeatedly proved mistaken. The United States retains strengths unmatched by any other nation. Yet the figures do suggest a political economy increasingly accustomed to stretching every standard of stability in public borrowing, private leverage, monetary intervention, and investor confidence further than previous generations believed prudent.

Economists have suggested the underlying dynamic. Hyman Minsky argued that prolonged stability encourages progressively riskier financial structures until stability itself becomes destabilizing. Friedrich Hayek and Ludwig von Mises warned that sustained credit expansion distorts investment decisions and enlarges the inevitable correction. Different analyses, similar conclusion: repeated intervention changes expectations, and changed expectations alter behavior.

That insight extends beyond financial markets. Reform loses urgency. Debt becomes easier to accumulate. Leverage appears less dangerous. Asset prices drift further from underlying value. Today, there is no significant or growing demand in Congress—no demand in principle—to revitalize the constitutional limits on government eroded by more than a century of the mindset of the interventionist/welfare-state. Indeed, ideology is out of fashion, except for the stirrings of “social democrats.”

History suggests no equation by which financial excess equals inevitable political collapse. Weimar Germany did not succumb to runaway inflation alone. Russia in 1917 did not fall simply because bread lines lengthened. Nationalist China was not defeated by hyperinflation alone, nor did post-First World War Italy abandon liberal government because of a single recession. In every instance, economic weakness interacted with political division, aggressive new ideologies, institutional decay, external pressures, and declining public confidence until regimes that had appeared durable suddenly proved brittle.

 

Pragmatism Erodes Reserves of Trust, Legitimacy, and Self-Confidence

Debt ratios do not produce dictatorships. Instead, prolonged pragmatic improvisation, without any reference to a framework of ideology, ideals, or principles, gradually erodes a nation’s reserves of trust, legitimacy, and self-confidence. Societies can live for years on accumulated strength while quietly consuming it.

Why, then, has America repeatedly muddled through?

First, because its reservoirs of strength remain extraordinary. The United States is still the world’s largest economy, the dollar is the principal reserve currency, and the country has the deepest capital markets, immense taxable capacity, and institutions that continue to command greater confidence than those of any rival. Those are not trivial advantages. They explain why repeated predictions of imminent American collapse have proved mistaken.

No reservoir, however, is inexhaustible. Demographic growth has slowed. Entitlement spending and debt service are projected to consume an increasing share of national income. Foreign demand for Treasury securities remains substantial, but it is declining and cannot be assumed to expand forever. The dollar remains the world’s dominant reserve currency less because arithmetic has been repealed than because no alternative yet combines its liquidity, stability, and legal protections.

America possesses another reservoir that receives less attention but may be more important still. Alone among nations, the United States was founded in the intellectual climate of the Enlightenment. Confidence in reason, individual rights, constitutional government, limitation of political power, and the rule of law created not merely a political system but a distinctive civic character. Those principles have repeatedly renewed the republic through crises that might have overwhelmed less fortunate societies.

And do not overlook the vitality of the private economy. Despite the accumulated burdens of taxation, regulation, and public debt, American enterprise remains remarkably innovative. The revolution now unfolding in artificial intelligence is only the latest demonstration that private creativity continues to generate wealth, productivity, and technological leadership on a scale unmatched elsewhere. That capacity for renewal has repeatedly compensated for political mistakes.

Simple analogies to Weimar Germany or Argentina are unpersuasive. America’s predicament is different precisely because its underlying resources are so much greater.

But that is also why the central question is psychological rather than economic.

The danger is not that the United States suddenly discovers it has become poor. The danger is that repeated reliance upon extraordinary intervention gradually changes what Americans expect from their institutions. Citizens come to believe that every crisis can be deferred, every imbalance financed, every speculative excess cushioned, every recession managed, and every consequence postponed. Expectations formed by repeated success quietly become assumptions about the future.

That is how “muddling through” ceases to describe experience and becomes an ideology.

 

What, Then, Lies Ahead?

Probably not dramatic collapse. More likely is an increasingly enervated version of muddling through: intermittent market rescues, ever-expanding government spending and public debt, persistent financial repression, slower growth, and inflation tolerated often enough to erode the real burden of debt obligations without formally repudiating them. Such an outcome would represent not catastrophe but gradual exhaustion.

Yet civilizations seldom choose the moment when accumulated vulnerabilities are tested. External shocks expose weaknesses that peaceful decades conceal.

Unlike previous adversaries, China is deeply integrated into America’s economy while simultaneously challenging its strategic position.

For the United States, the most plausible shock is prolonged confrontation with Communist China. Unlike previous adversaries, China is deeply integrated into America’s economy while simultaneously challenging its strategic position. Prof. John Mearsheimer, in an interview with Oxford Political Review, said: “China and the United States are now bitter rivals because China has become a peer competitor of the United States, and China is interested in dominating Asia the way the United States dominates the Western hemisphere. This makes perfect sense from China’s perspective, but from America’s perspective this is completely unacceptable. That has caused an intense security competition, which might lead to a hot war down the road.”

Conflict would not merely test military strength; it would strain public finances, disrupt supply chains, unsettle financial markets, and expose decades of accumulated dependence and indebtedness. A nation that has repeatedly relied upon rescue might discover that rescue itself has become more difficult under wartime conditions.

 

Consider the Possible Scenario

It is worth taking a moment to consider the possible scenario. I optimistically voted for Donald Trump, carried away by the tidal wave of reaction sweeping America (“‘Getting’ the MAGA Movement: Think ‘Reaction.’” Belatedly, I realize that he is a man utterly without principle. I mean that “technically.” Philosophically, he is a “pragmatist”—moved by emotion, whim, and his own narcissistic vanity to act on the impulse of the moment. There is nothing “practical” about the unprincipled exercise of power.

The definitive example is Trump’s abrupt pivot to war against Iran. For a decade, he built his movement on an anti-interventionist, “America First” platform, promising an end to “endless wars.” By launching an expensive, high-casualty conflict, he fractured his own base. When loyal MAGA standard-bearers like Tucker Carlson, Megyn Kelly, and Alex Jones criticized the war, he attempted no principled defense. He blasted them on Truth Social as “nut jobs” and “losers.”

His former national security advisor, John Bolton, summed it up: “He has no philosophy. He has no grand strategy. It is all transactional, all a matter of the moment, all driven by a desire for adulation and an inability to accept any limits on his power.”

He could be the President who leads America during the crisis that finally puts into play the future of the American republic.

The greatest danger, then, is not debt alone, inflation alone, or speculation alone. It is the conviction that consequences can always be deferred because they always have been before.

That conviction dulls principled political ambition. It lets governments substitute intervention for reform, investors to mistake liquidity for prosperity, and citizens to confuse resilience with repeated postponement. We cease asking if problems have been solved; we ask only if they have been delayed at acceptable cost.

America’s genius has never been miraculous immunity from consequences. It has been the capacity of a free people to recognize reality, reform institutions, release private energy, and renew the principles that made those reforms possible.

Improvisation is a strength, but not providential.

Civilizations may survive disorder many times while quietly exhausting the very resources that once made recovery possible. They muddle through, and muddle through, and muddle through—until they don’t.

 

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