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‘If anybody tells you that Americans work for China now…’

“If anybody tells you that Americans work for China now, since they hold all our T-notes and can yank our fiscal chain, tell them that’s an exaggeration.
By Eric Black, but really by the Christian Science Monitor but really, really by the Congres

The headline comes from a Christian Science Monitor piece which in turn comes from the Congressonal Budget Office of who owns the U.S. government bonds that make up our national debt. The full quote, which seemed too long for a headline, goes:

“If anybody tells you that Americans work for China now, since they hold all our T-notes and can yank our fiscal chain, tell them that’s an exaggeration.”

CBO reports that about 53 of the total U.S. debt is owed to American citizens and other U.S.-based entities ranging from the Fed, to mutual funds. Of the 47 percent that’s owned by foreign interests (including foreign governments, corporations and individual investors) China is the biggest, but owns only 9.8 percent of US debt, followed by Japan (9.6 percent), and Britain (5.1).

I’m not wise enough to know how much mischief for the U.S. economy China could make, if it wanted to, with this much leverage. But the numbers certainly undermine a certain line of demagoguery about China’s control over us through the debt.

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Listen, I’m still a debt and deficit hawk. We need a balanced long-term program of tax increases and spending restraint, hopefully assisted by economic growth, to get the U.S. national debt down to a more sustainable level, as a percentage of GDP. To continue to pay only lip service to the debt/deficit issue, which is what both parties currently do, leaves the economy vulnerable to crisis, and unfortunately no one knows the level of debt or the particular shock that sets off the crisis. But I’m glad to learn that the scare-talk  about Chinese control over our debt is hype.