Congress Responsible for the National Debt

September 2, 2012 | By | Add a Comment

Republican presidential nominee Mitt Romney, in his acceptance speech at the Republican National Convention last week, explicitly mentioned the trillion dollars in U.S. government debt held by the Chinese as a clear indicator of the decline of America. You’d think a former financier would know better!

Despite Romney’s criticism, the current debt market actually functions perfectly well, as Rick Newman's article in U.S. News & World Report points out. For starters, Chinese entities—both private and governmental—hold only about 7.3% ($1.2 trillion) of U.S. debt. That number is actually declining, and the Chinese are far from being in exclusive company. (Newman notes, for instance, that “Japan holds nearly as much U.S. debt as China does, but nobody ever complains about Americans being in hock to the Japanese.” Clearly Mr. Newman doesn’t remember the ’80s!)

Moreover, the fact that anyone wants to buy our government debt is a good thing. Such a state of affairs…

  • keeps our interest rates low, at the consumer and government levels
  • lowers our (current) tax burden and/or allows government to provide more vital services
  • allows Washington to function on a daily basis

As Newman notes:

The size of America’s national debt is itself a problem, because Washington depends on borrowed money for too much of its everyday expenditures. But that’s the borrower’s fault, not the lender’s. “The whole thing is silly,” says [author and George Mason University economics professor Donald] Boudreaux. “Blaming the Chinese lets the people creating the debt off the hook. And that’s Congress [emphasis mine].”

We all know that the current level of national debt is potentially dangerous and an albatross around our necks. And (deep down, at least) we all know that something needs to be done about it. Rather than relying on Paul Ryan’s ridiculous budget “plan,” however, we need to have an honest, balanced approach to dealing with the situation. Encourage your representatives in Washington to effect meaningful change regarding the budget and our national debt—and don’t be afraid to let them know that if they’re unable to get the job done, you might know someone else who can!

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