Saturday, November 24, 2012

That pesky national debt thing….

China ain't the problem, folks.

It's more or less guaranteed. When someone starts to talk about the U.S. national debt that pesky bugbear China will be mentioned along with some version of "China owns our national debt, China owns us."

Now, I'm not trying in any way to whitewash the issue of the national debt. We owe too much and it's getting bigger every day. We don't want to keep adding to the national debt for the next 100 years….

But China's ownership of U.S. government securities, and thus, a piece of our national debt, isn't really the problem. China owns about 10% of our national debt, Japan owns a little less than that.

I bet this surprises you: Americans and American financial institutions like banks and mutual funds and the Social Security Trust Fund own most of the national debt. Yup, "we' own about 75% of the national debt.

Of course we need to stop spending a whole lot more than we're taking in, as soon as the economy gets rolling again. In the meantime, government stimulus is still a pretty good idea, and the only short term way to make sure that we start creating a lot more jobs now.

In the short run, the only good way to tackle the issue of the national debt is to raise taxes so we all start to actually pay for the goods and services we bought on credit in the past.

..more on the national debt

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