Friday, May 22, 2009

'We Are Sending $50 Billion of US Taxpayer Money to China Every Year?'

This New York Times headline on May 21 got my attention: "China Grows More Picky About Debt" [1]

The article by Keith Bradsher goes on to say, "China now earns more than $50 billion a year in interest from the United States, Mr. (Brad W.) Setser at the Council on Foreign Relations calculated".

Excuse me? The amount of US federal taxpayer money and borrowed debt from others like our kids in the future that is being sent to the Chinese government is over $50 billion per year?

That is more than we spend each year on each of the following programs in FY 2007 numbers:

$43.5 billion - Administration of Justice
$33.1 billion - Natural Resources and Environment
$32.5 billion - Foreign Affairs
$27.0 billion - Agriculture
$26.8 billion - Community and Regional Development
$25.0 billion - Science and Technology
$20.5 billion - Energy
$20.1 billion - General Government

Because of the enormous amount of debt we now have outstanding, paying interest to the Chinese government takes a higher priority in terms of amounts spent each year than what we spend on putting criminals in jail; protecting our environment; diplomacy and foreign aid; supporting our food chain; helping small communities grow; scientific research; energy independence and running our own federal government.

No wonder we are so screwed up nowadays...our priorities are all topsy-turvy.

This spring we heard these not-so-comforting words about the state of the US dollar and economy from Wen Jiabao, Prime Minister of China: "We have lent a huge amount of money to the U.S. Of course, we are concerned about the safety of our assets. To be honest, I am definitely a little worried." (2)

Talk about losing control of the nation's future. Not only have we shipped off a tremendous number of manufacturing jobs to China, now the great United States of America is having to dance delicately around the safety and soundness of US federal debt to our largest investor, the Chinese government.

I am reading an excellent new book about the founding of our democratic republic by Richard Beeman that I whole-heartedly recommend, "Plain, Honest Men: The Making of the American Constitution".

'Plain, Honest Men' sounds like a dream nowadays but he goes on to say that in addition to the powerful intellects like Madison and the behind-the-scenes workers like Franklin, there were several miscreants who contributed mightily to the final product despite their frequently inebriated state of mind. Democracy has never been pretty, it seems.

Right off the bat, he explains that the Constitutional Convention was needed in the first place to address the collapse of the continental dollar since it was 'not worth a continental', a popular phrase at the time.(3)

Who was going to loan any money to the new independent country if there was no confidence or reassurance that it was ever going to be paid back? We didn't have a central point of power that could impose and enforce any tax laws on the 13 various states and the IRS was but a distant dream for future advocates of strong federal government control.

So our problems with national debt are nothing new...the United States has faced many other periods of distress concerning foreign debt, it seems.

But don't you think we would have learned our lesson over the past 220 years?

The shame here is that we could have simply avoided our current problem had we been more fiscally prudent and wise over the past 8 years. I would say that we spent too much money on expanding federal programs like drunken sailors except that would be such an insult to drunken sailors around the world.

And raising taxes won't fix the problem either. We have got to put a yoke on our spending before we are forced to hold another Constitutional Convention to deal with the ramifications of what we are doing right now to our dollar and economy, just like the 'Plain Honest Men' did in 1787.

(1) NY Times, 5/21/09
(2) same article by Keith Bradsher
(3) "Plain Honest Men" by Richard Beeman, page 9

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