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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: Continue Reading »

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Amidst our other economic woes, another looms: stagnant growth resulting from our government’s high debt. As more and more debt accumulates, private investment is crowded out, leading to weaker growth.

When debt reaches 90 percent of GDP, economies experience significant growth problems. Heritage Foundation economist Salim Furth explains: Continue Reading »

America will not default on its debt absent a “clean” debt limit increase, Heritage Foundation President-Elect Jim DeMint said Wednesday on Fox News.

Instead, we need to couple a debt limit increase with spending cuts and other reforms that put us on a path to a balanced budget, he said.

“The only way the federal government would default on its debt in the event the debt ceiling remains unchanged is for the Treasury to choose to default—an utterly implausible eventuality,” Heritage expert J.D. Foster explains. Continue Reading »

While lawmakers negotiate ways to avoid the Taxmageddon tax increases and the so-called fiscal cliff, they are ignoring the real issue at hand: runaway entitlement programs and interest payments that account for more than half of federal spending.

Combined with interest payments on the debt, Social Security, Medicare and Medicaid (including Obamacare) are driving the United States toward fiscal collapse.

The Heritage Foundation’s Romina Boccia explains: Continue Reading »

Heritage Foundation experts live-blogged their analyses of last night’s presidential candidates’ debate from Hofstra University.

Here are some highlights:

Emily Goff on Taxes and Spending

President Obama’s approach to spending and debt is hardly balanced.

President Obama’s recycled “balanced approach” mantra surfaced for the umpteenth time this evening—even though Americans know it is far from balanced, never mind mathematically impossible. Raising taxes on wealthier Americans who, in President Obama’s own words, “can afford to pay a little bit more,” would be a direct hit to the very businesses and investors we need to be encouraged, not discouraged from creating jobs. Failing to addressTaxmageddon and inject certainty into the economy is an abysmal failure of Congress and President Obama. It’s already threatening the economy, and causing economic stagnation.

Walter Lohman on China

“Getting tough on China,” something both candidates claimed to aspire to, is good—as long as what is meant by that is ensuring China abides by its international trade commitments. But this is not enough—it is not a trade policy. The U.S. needs to create opportunity with trade, not just manage bad behavior… President Obama said during the debate that he signed three trade deals. Not true…What Obama did was to delay passage of agreements with South Korea, Colombia, and Panama that were already completed. He did so to appease labor unions and others in his political base. During the three years of waiting for the President to submit the U.S.-Korea FTA, the U.S. lost $30 billion in exports.

James Carafano on Libya

What did the Obama administration do about security before the attack on the U.S. consulate in Benghazi, and how did it respond afterward? Continue Reading »

Heritage Foundation economist Alison Fraser offers a summary of the latest “Federal Spending by the Numbers,” a report detailing what Congress is doing with taxpayer money.

• Over the past 20 years, federal spending grew 71 percent faster than inflation.
• Entitlement spending more than doubled over the past 20 years, growing by 110 percent (after adjusting for inflation). Discretionary spending grew by 60 percent.
• Deficits have pushed up the debt each year since 2002 as federal spending exceeded revenue. Fiscal year 2012  marked the fourth consecutive year of $1 trillion deficits.
• Although debt held by the public surged from 33.6 percent of gross domestic product in 2002 to 73 percent in 2012, net interest costs have held below 2 percent of GDP because interest rates have fallen to all-time lows.
• In 1962, defense spending was nearly half the total federal budget (49 percent); Social Security and other mandatory programs were less than one-third of the budget (31 percent). Two major entitlement programs, Medicaid and Medicare, were signed into law by President Johnson in 1965.
•  In 2012 entitlements were nearly 62 percent of total spending, while defense dropped to less than one-fifth (18.7 percent) of the budget.

Read the full report to see a breakdown of where the money goes and how spending on entitlements and interest on the debt is crowding out other spending, including defense spending.

Do you think Congress will ever act to rein in the growth in spending?

Former Massachusetts Gov. Mitt Romney’s  comments in a leaked video about government dependency and the percentage of Americans who do not pay federal income tax has sparked a lot of debate in the past few days.

Romney mentioned that “47 percent” of Americans are “dependent upon government” and “pay no income tax.” While those dependent on government and those that don’t pay income tax and are not necessarily one,  there is a lot of overlap. As recently as 2009, 47 percent of all tax filers paid no federal income taxes.

Heritage Foundation economist Alison Fraser raises a critical question:

So the individual income tax funds the bulk of operations of the federal government, including such core things as national defense, homeland security, and the judicial system. Shouldn’t all Americans have some stake, even if just a nominal one, in funding these government programs? Should nearly 50 percent of Americans really be exempt from funding the most basic constitutional functions of government—along with education, food stamps, energy, welfare, foreign aid, veterans’ benefits, housing, and so forth?

Furthermore, the 2012 Heritage Index of Dependence on Government found that 63.7 million Americans received either welfare benefits, Social Security, or support for higher education—an eight percent increase over the previous year. These same people were very likely to receive other federal benefits such as Medicare or food stamps. Continue Reading »

The national debt crossed the $16 trillion mark today. Unfortunately, this debt will only grow without urgent changes to cut spending and reform runaway entitlement programs.

The Heritage Foundation’s Romina Boccia explains what this milestone means for Americans:

At $16 trillion, every American’s share of the federal debt rises to $37,437. That represents nearly three-quarters of the income of the average American household earning $50,964 in 2012. And these levels are projected to grow even further, to the point where each American’s share of the federal debt will surpass the staggering $100,000 mark in less than 20 years. Current and future generations of taxpayers are on the hook for increasing levels of debt as Washington continues on its spending spree.

A new Heritage Foundation chart shows the scale of the recent debt growth and what happens if we don’t stop spending beyond our means.

What do you think? Will lawmakers ever stop their massive spending spree?

There is something about the local post office that provokes nostalgia. Buying a sheet of stamps, checking your PO Box, or simply chatting with the local postman about the latest gossip all recall an idyllic life.

The post office in Hope, MN epitomizes the small-town charm of the obsolete, politicized, government-run postal system. On a typical business day, the Hope post office sees eight customers, who require a total of seven minutes of service. The USPS could shutter this underused, loss-making post office and ask the town’s 90 residents to journey 10 minutes to the next closest post office. But the closure was appealed.

Small town local post offices are wonderful in theory. But since 80 percent of all U.S. post offices lose money, major reforms are essential.

Heritage Foundation expert James Gattuso explains the gravity of the problem: Continue Reading »

Federal debt and spending are spiraling out of control. America is digging itself deeper and deeper in debt, burdening the next generation and America’s future.

In an effort to better communicate the crippling problem of debt, The Heritage Foundation has updated its “Federal Budget in Pictures” website to demonstrate visually how runaway taxes and spending are hurting America.

The charts are revealing and capture the disastrous effect of our nation’s budget. These charts are particularly telling: Continue Reading »