“Hello China? Can we Borrow a Trillion to Buy more Bombs to Drop on You?”
Strange as it may seem, these ridiculous words describe current American fiscal and defense policy
The title above is designed to get your attention, but is no joke. Though no one wants to say it, the federal deficit, dependence on Chinese manufacturing and credit, together with the increased hostilities between our two nations, are pointed directly to this ridiculous query. Blame globalists Bill Clinton and Barrack Obama if you will, but this pattern of over-borrowing and foreign dependence goes well beyond them and is perhaps an inevitability of our capitalist system. Furthermore, it may not be too late to prevent this eventuality.
It is popular for people to think that China owns most of our debt. For the record, the national debt (which currently stands at a staggering $21 trillion and counting) is held by approximately 1/3 US Citizens (through government bonds), 1/3 Federal Reserve and the US Government, and 1/3 foreign investors. Of the amount held by foreigners, approximately 1/6 is held by Chinese investors, for a total of about 5% of the debt. (Amadeo & Anderson, 2020) In addition, the U.S. imports over 20% of their manufactured goods (by value) from China, as of 2019. (USTR, 2018) These numbers may not sound like much, but when you consider that we import so many critical items from China (including rare earth metals, used in electronics and weaponry), telecommunications and consumer goods, and that China is both stealing tech and dumping their cheap tech in a plot to disable the future of our tech industries, red flags are raised. The national debt is of a magnitude that even 5% is still a staggering sum (1 trillion) and if a whiff of default is sensed, China and other foreign investors en masse may pull out or in effect start dictating U.S. fiscal policy (like what Germany did to Greece a few years back). Not a great position for the world’s greatest power, and currently unthinkable, but stranger things have happened.
Britain was the world’s greatest power prior to WW II, and her struggle to maintain her vast Empire forced her to borrow heavily, just as her territories were invaded (mostly by the Japanese). One way or another, this eventually forced Britain to cede power in her Colonies. No one talks about this, since the U.S. more or less became a British proxy (and helped Britain save face into secondary status), but it happened nevertheless. Now China has colonial designs and payback issues that remind one of Japan in the 30s. “Cooperation” with the West, is a thin veneer for stealing tech and takeover of critical industries. Britain was forced into the “lend/lease” deal with the US, which saved the country but left it in heavy debt. The U.S. may be facing a similar crisis in a few years, when China tries to gobble up Taiwan, SE Asia, and Japan. It will need to borrow more heavily from foreign investors, and may find those investors tied up in China’s hegemonies.
The answer? The U.S. must learn to both rely less heavily on Chinese tech (for security purposes), while still doing business with China (for peaceful purposes). One would think that the U.S. would need to secure its share of critical materials (rare earths for instance, domestic rare earth mines used to exist but shut down for economic/environmental purposes…they need to be reopened) and tech (especially telecommunications), agricultural and energy technology.
China seems to aspire to the role of “benign” world leader (the role played for the last 75 years by the US) while quietly expanding her borders and oppressing her people. The “Belt and Road” initiative, a seeming outreach to other nations, may be nothing more than an attempt to get other countries hooked on Chinese investment while they are forced to turn a blind eye to China’s misdeeds. Meanwhile, China and other nations appear to be trying to destabilize the US, borrowing from the Russian playbook (divisive social media posts and hacking attacks). Unfortunately, these tactics have proven to be frightfully easy thus far, taking away the traditional US advantages of unity and diversity (indeed, the US is one of the few countries that can rapidly deploy production from such an adaptable group of diverse faiths and ethnicities, as they did in World War II). The US will regroup from these attacks, but they must learn to retool their technologies and better manage their debt, or they will be a paper tiger on the world stage.
The debt situation is almost a runaway problem, and yet it could be “slowed” a number of ways. First, entitlements could be trimmed without doing enormous damage to citizens, by better indexing of Social Security for longer lives, and increasing the Social Security income tax limit (essentially a tax on the rich). There could be a Medicare option for all, but with very basic coverages, plus many other loopholes closed. More importantly, the US defense system could be leaner and meaner, largely favoring emerging tech (better satellite defense systems, missiles and missile defense systems, subs, drones, and planes) while scrapping some of the older more vulnerable systems (they say that China could take out most of our ships with their missile systems, and there is currently little we could do to stop them, except having our subs lob nuclear missiles back at them). Sonic weapons are scary but China has them, and we need to either negotiate them away, or build them ourselves. Of course a booming economy (presumably with cleaner more efficient tech, the way Silicon Valley revolutionized our country) is the ultimate debt cleanser.
Ultimately, the United States is historically resilient, although recent events have not advertised this fact. The Japanese and Germans thought we were soft, and learned that they greatly underestimated our resolve. History has shown that like the M.A.S.H. doctors, we are loose and “off task” until the bullets fly and the wounded come in, which is when we get down to business. If we can “awake the sleeping giant” once more, crank up the productive machinery and manage our debt, there is no country in the world that can beat us.
More Vern Scott stories on the U.S.-China:
