The Chinese Bond Meme That Refuses to Die

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Robert Solow had an op-ed in the New York Times yesterday “emphasizing six facts about the debt that many Americans may not be aware of.” For example, half our debt is owned by foreigners; it’s owed in dollars, which is our own currency; and while this debt could spark inflation and soak up private savings that would otherwise go into useful investment, that’s not going to happen in a weak economy like the one we have now. CFR president Richard Haass tweets that Solow isn’t pessimistic enough about rising interest rates and the “ability of a hostile foreign govt to pressure US,” but Dan Drezner thinks that, if anything, Solow is painting too grim a picture:

As for Haass, I’m not exactly sure what “rising rates” he’s talking about, as just about any chart you can throw up shows historically low borrowing rates for the United States government. Indeed, the U.S. Treasury is exploiting this fact by locking in U.S. long-term debt at these rates. As for foreign governments pressuring the United States, the fear of foreign financial statecraft has been overly hyped by the foreign policy community. And by “overly hyped,” I mean “wildly, massively overblown.”

The bias in foreign policy circles and DC punditry is to bemoan staggering levels of U.S. debt. This bias does percolate down into the perceptions of ordinary Americans, which leads to wild misperceptions about the actual state of the U.S. economy and U.S. economic power. I’d like to see a lot more op-eds by Solow et al that puncture these myths more effectively.

This claim that China will be able to blackmail or extort America because of all the U.S. debt it owns is a zombie idea that just won’t die. The truth is that China’s holdings of U.S. treasuries give it no leverage to speak of; pose no danger to America; and China’s recent actions demonstrate pretty conclusively that they know this perfectly well. Hell, China’s share of U.S. debt has gone down for the past two years. This whole meme really needs to die.

HERE ARE THE FACTS:

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ONE MORE QUICK THING:

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As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

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