March 5, 2013

Photo: Newscom

There’s a lot of talk in the media about China “owning America” because they buy up so much of our government’s debt. This borrowing from China is often presented as an economic problem.

But Heritage expert Derek Scissors says these claims are overstated:

China has fallen behind Japan as the largest foreign holder of U.S. securities. The Department of the Treasury’s new numbers are good only through June 30, 2012, but it puts Japan at $1.84 trillion and China at $1.59 trillion.

There are lots of things to say about this, but one stands out: The loose talk about China “owning” America never made any sense and perhaps now can finally end.

In fact, he says, our problem isn’t China buying our debt but rather our own elected officials who create that debt in the first place:

They hold only about 8 percent of our government debt—that’s right: only 8 percent. They own a very small portion of American financial assets, and it doesn’t matter when they sell. Our problem is ourselves: We borrow because we lack the political courage to set priorities, and it is more and more of our money, not China’s, that is tied up in zero-return bonds that exist only so the federal government doesn’t have to pay much in interest.

The U.S. has a spending problem and we need to deal with it. The good news is that we still have time to cut spending and rein in government. Heritage outlines how in our “Saving the American Dream” plan.

Are you concerned about the U.S. borrowing money from China?