Remember that when we speak about the $16 trillion dollars we have as national debt, we are not taking into account all of our outstanding unfunded liabilities which put us far above $200 trillion. However, the average American thinks that the bulk of our debt is owed to China. It’s not. In actuality it’s owed to us. It’s the government’s promises to the people through those investing in the United States, Social Security, pension funds and various other social programs.
Thought China is the biggest foreign holder of U.S. debt, it only amounts to less than eight percent of the total debt we have. In fact, they have been getting rid of that debt for quite a while now.
“It is true that China is the largest foreign owner of our debt,” said Josh Gordon, policy director of the Concord Coalition, a Virginia-based nonprofit that advocates getting the nation’s debt under control. “But the vast majority of our debt is held by us.”
Economists differ on when the National Debt actually crested the $16 trillion mark, with some saying it occurred on Friday and others saying it happens on Tuesday. But none doubt that the federal government’s tab is immense and growing. Just under $5 trillion of the national debt is owed to the Social Security Trust Fund and federal pension systems. A little more than $11 trillion is owed to foreign and domestic investors and the Federal Reserve, which buys up treasuries in order to drag down interest rates through quantitative easing.
China has actually decreased its holdings of U.S. debt over the past year, dropping from $1.31 trillion in June 2011 to $1.16 trillion a year later, according to the Treasury Department. Japan holds nearly as much, at $1.12 trillion. Those countries are by far the biggest foreign holders, but dozens of other nations, including Brazil, Russia, Taiwan, Switzerland and the United Kingdom hold trillions more.
Inside the U.S., private investors hold nearly $1 trillion in federal debt, while mutual funds, insurance companies and state and local governments hold nearly double that amount.
Understand that between the last two presidents that our national debt has been growing exponentially. George W. Bush tacked on $5 trillion in his two terms and Barack Obama is looking to push more than that in one term. He chastised Bush in 2008 for taking “out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents … so that we now have over $9 trillion of debt that we are going to have to pay back.”
The problem is he has done the same thing and worse. When he took office in January of 2009, the national debt was $1.06 trillion. Now understand, if you watch those debt tickers they accumulate fast. That is because of interest and interest on higher amounts accumulates much faster than on lower amounts. So far, during the Obama administration he has added $5.4 trillion to the national debt. Yes, his one term has seen more than Bush’s did in two terms.
Mr. Gordon has a theory as to why China gets blamed for its investments in the U.S. and keeping us from actually reckoning our account and rein in spending. “If you look 10 or 15 years back, they probably weren’t in the top five,” Gordon said. “Then you had this very large country whose economy suddenly grew a pace not normally seen, and that came just as we were going into a cycle of massive deficit spending. Honestly, if it had been Great Britain, instead of a country with a record of human rights violations and one that has not been a traditional ally of ours, you might not have heard as much about it.”
One thing is for certain: without real spending cuts and elimination of waste, it will not matter who is in office, Our debt will grow exponentially over the next four years. Congress must take the lead and stop wasteful spending and eliminate government programs and whoever is elected has to take a serious look at eliminating departments of the executive branch. If not, we will continue down the debt road.Facebook and Twitter, and follow our friends at RepublicanLegion.com.