Yahoo Finance What Does Biden’s Withdrawal Mean for Ukraine Aid — and Your Wallet?
President Joe Biden announced he was stepping down from his reelection campaign in a letter posted on X (formerly Twitter) on Sunday, July 21, endorsing Vice President Kamala Harris.
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While the situation is still fluid, albeit moving fast due to the Democratic National Convention on August 19-22- it is transforming the campaign and making domestic and international issues even more salient. One of them is the aid to Ukraine, on which opinions have been split for months. In turn, this could also have potential impacts on the U.S. economy and, therefore, on consumers.
To put this in context, as of July 11, the Department of State said that the U.S. has provided “approximately $53.7 billion in military assistance since Russia launched its full-scale invasion of Ukraine on February 24, 2022, and approximately $54.4 billion in military assistance since Russia’s initial invasion of Ukraine in 2014.”
Now, the total aid the country has spent amounts to $175 billion, which has helped “institutions, including refugees, law enforcement, and independent radio broadcasters,” according to the Council on Foreign Relations (CFR)
It’s important to note that a portion of the money is actually spent in the United States, “paying for American factories and workers to produce the various weapons that are either shipped to Ukraine or that replenish the U.S. weapons stocks the Pentagon has drawn on during the war,” according to the CFR.
Meanwhile, Republicans are split about continuing to aid Ukraine, and divisions around said aid center around the fact that some — such as Republican vice presidential nominee J.D. Vance — have repeatedly argued that it is not the responsibility of the country to pay for a “never-ending war,” and that the country should instead focus on its domestic agenda. In essence, the argument of these opponents is that taxpayers’ dollars should not be used abroad, and the country should stop writing “blank checks.”
“I do not think that it is in America’s interest to continue to fund an effectively never-ending war in Ukraine,” Vance said in a May speech at the Quincy Institute. “We’ve done more than our fair share.”
In April, ABC News reported that Vance also voted against a foreign aid package “that included nearly $61 billion for Ukraine.”
Former president and Republican nominee Donald Trump spoke with Ukrainian President Volodymyr Zelensky following the assassination attempt. In terms of where Trump stands, he has been very vocal about his “America First” stance, saying, for instance, at a Detroit rally in June that Zelensky was the “greatest salesman of any politician that’s ever lived.”
“He just left four days ago with $60 billion, and he gets home, and he announces that he needs another $60 billion. It never ends,” Trump said in the speech. “I will have that settled prior to taking the White House as president-elect.”
So now, with Biden stepping down, what does this mean going forward — and how could this affect the economy and Americans’ wallets?
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No Impact on Consumer Sentiment and Spending
Timothy Holland, CFA, Chief Investment Officer, Orion, noted that while the $175 billion in aid since March of 2022 is a very meaningful amount of money, over the past two years, the U.S. Federal Budget has totaled approximately $12.5 trillion.
“So, as aid to Ukraine has represented less than 2% of federal spending, I can’t imagine it has proven to be that stimulative to U.S economic growth — even if much of the money appropriated for Ukraine is going to fund the production of weapons at U.S.-based manufacturing facilities,” he said.
In essence, Holland argued that the decision to no longer support Ukraine on a go-forward basis should not have much of an impact on the U.S. economy, including consumer sentiment and consumer spending.
“Also, I don’t think President Biden’s decision not to seek reelection should have any impact on funding for Ukraine short-term, as Congress has appropriated the $61 billion in aid it approved in April of this year,” he added.
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No Change — No Impact on Consumers
It’s also important to note that President Biden is expected to remain in office until the end of his term — as such, there won’t be any policy changes on the matter.
Demetrius A. Floudas, regulatory policy lead of the global trade program at the U.K. Foreign, Commonwealth & Development Office and senior advisor to the Cambridge Existential Risks Initiative (CERI), University of Cambridge, argued that the ongoing support to Ukraine would not change, at least until the end of this year.
“The allocated funds are a small fraction of the overall federal budget,” he said. “The economic effects of this aid are largely absorbed by the government, with minimal trickle-down to individual consumers.”
He has also noted that a large part of these outflows is redirected toward domestic arms producers, which, if anything, boosts U.S. economic indicators.
The European Union, by contrast, sends most of its aid as direct financial support, and in so doing, it has depleted its coffers significantly, added Floudas.
“It is worth noting that support to Ukraine is a crucial component of the United States’ foreign policy, for now,” he said. “The day of reckoning for Kyiv will come in November, but until then, nothing will change.”
“Wary of Spending Taxpayers’ Dollars”
According to the conservative think tank spearheading Project 2025, as GOBankingRates previously reported, the total aid is “as much as the Army’s annual budget and about $1,300 per American household.”
“Not a single U.S. taxpayer dollar should be going to Ukraine until our own borders are secure,” Kevin Roberts, The Heritage Foundation president, wrote in a statement. “The American people know they deserve better and expect policies and leaders that put their country first.
According to a survey from The Heritage Foundation, “a vast majority of moderate Americans in key swing states oppose proposals that send more funding to Ukraine.”
Yet, as William Ruger, president of the American Institute for Economic Research, noted, Ukraine still has many supporters in Congress, and there is no indication that a lame-duck President Biden or President Harris would change course.
“However, Americans are increasingly wary of sending more taxpayer dollars overseas for another war that doesn’t look like it is going to end quickly,” said Ruger. “So they worry about how much they are going to be on the hook for funding Ukraine’s war effort and reconstruction, especially as other countries are thinking about reducing their financial commitments.”
According to him, the Democratic nominee, no matter who that is, could also feel some heat from a Trump-Vance ticket that appeals to American voters by rethinking our foreign policy, especially over Ukraine.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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