Most economic security debates are stuck in a binary trap: either total isolation or blind interdependence. Jordan Schneider cuts through this noise by proposing a third way—a "Latency Fund" that treats economic resilience not as a permanent state of production, but as a strategic capability to surge on demand. This is not just another call for more subsidies; it is a sophisticated application of Cold War nuclear theory to modern supply chains, arguing that the U.S. can deter coercion by proving it doesn't need to be self-sufficient today to be safe tomorrow.
The Nuclear Analogy
Schneider's central thesis borrows heavily from the concept of "nuclear latency"—the ability of a nation to build a weapon quickly without actually possessing one. He argues that the U.S. has been over-indexing on either blunt sanctions or expensive, permanent reshoring, missing a crucial middle ground. "The Cold War sparked an entire academic and policy discipline on nuclear deterrence and statecraft," Schneider writes, "It is time that the sphere of economic security received its fair share of attention." This framing is powerful because it shifts the conversation from panic-driven autarky to calculated strategic readiness.
The author suggests that the current policy toolkit is dangerously incomplete. "Most U.S. economic security tools are either negative instruments — sanctions, tariffs, export controls — or vital but blunt supply-side interventions aimed at a narrow set of indispensable ('Tier 1') capabilities such as chip fabrication." By focusing only on the extremes, the administration risks either wasting billions on industries that don't need permanent support or leaving critical gaps in the supply chain that adversaries can exploit. Schneider's insight here is that economic coercion works by imposing pain faster than a target can adapt; the goal, therefore, is to shrink that adaptation time.
"The point is not autarky but time. Economic coercion works when it can impose politically salient pain faster than the target can adapt."
This argument holds up well against the backdrop of recent semiconductor policies. Just as Japan and South Korea debated maintaining the industrial capacity to build nuclear weapons without actually crossing the threshold, the U.S. should maintain the capacity to scale production without the fiscal burden of full-time operation. Critics might note that maintaining "latent" capacity still requires significant upfront investment and political will, which can be difficult to sustain when the immediate crisis has passed. However, Schneider's distinction between permanent investment and standby readiness offers a more fiscally sustainable path than the current trend of blanket re-shoring.
A Tiered Approach to Security
To make this work, Schneider proposes a disciplined hierarchy that moves beyond the vague label of "critical sector." He categorizes capabilities into three tiers: Tier 1 for existential threats requiring permanent domestic control, Tier 3 for areas where market forces suffice, and the crucial Tier 2 for "Latent Capability." "The missing gap is what to do about the wide middle: supply-chain bottlenecks that are strategically consequential, vulnerable to coercion, yet not important enough to justify full-scale CHIPS Act-scale reshoring," he explains.
This tiered approach is the piece's most practical contribution. It forces policymakers to ask harder questions: "is this a bottleneck where dependence is both high and hard to substitute, and where latent capacity would materially change the coercive calculus?" Instead of subsidizing every industry that faces competition, the proposed $20-30 billion fund would target specific nodes where the replacement ratio is low and import dependence is high. This precision is vital. As Schneider notes, "Attempting to insure against every vulnerability produces familiar pathologies: blanket 're-shoring' agendas, misallocated capital, political capture, and opportunity costs in other areas."
The operational details are equally thoughtful. The fund would utilize "contingent 'latency contracts' that pay firms to maintain standby production lines, tooling, workforce capacity, and stockpiles." This is a shift from building factories to paying for readiness. It mirrors the logic of Goodhart's law, where a metric becomes a target and loses its value; by focusing on the capacity to surge rather than the volume of output, the policy avoids distorting market dynamics while still ensuring security. However, a counterargument worth considering is the difficulty of defining the "triggers" for activation. If the thresholds for activating these contracts are too clear, adversaries might simply find new ways to squeeze the system; if they are too vague, the deterrent effect is lost.
The Strategic Wager
Ultimately, Schneider's proposal is a bet on the efficiency of deterrence by denial. "The core wager is this: disciplined latency can deliver a higher deterrence-per-dollar ratio than either blanket reshoring or reliance on coercive tools alone, while preserving the very interdependence that makes the United States powerful in the first place." This is a bold claim, but it aligns with the reality that the U.S. derives its power from network dominance, not isolation.
The author envisions a future where the U.S. and its allies, such as Australia and Canada, could form an "international 'latency pool'" for resources like copper, sharing the burden of maintaining surge capacity. This moves the conversation from a zero-sum game of protectionism to a collaborative strategy of resilience. "The strategic task is therefore to preserve the United States' strategic gains from interdependence, while reducing the most coercible points of dependence," Schneider concludes. This reframing is essential for a globalized economy that cannot simply be walled off.
"The strategic task is therefore to preserve the United States' strategic gains from interdependence, while reducing the most coercible points of dependence — and, crucially, to do so efficiently."
Bottom Line
Jordan Schneider's "Latency Fund" is a sophisticated, necessary evolution of economic security policy that avoids the pitfalls of both isolationism and naive globalization. Its greatest strength is the pragmatic tiered framework that distinguishes between existential threats and manageable vulnerabilities, offering a fiscally responsible path to resilience. The biggest risk lies in the execution: defining clear triggers for activation without tipping off adversaries, and maintaining political discipline to prevent the fund from bloating into a catch-all subsidy program. Policymakers should watch for how the executive branch defines "Tier 2" bottlenecks in the coming months, as that definition will determine whether this strategy succeeds or becomes just another layer of bureaucratic bloat.