Views: 9411|Replies: 17

How China helps pay for Medicare, U.S. aircraft carriers [Copy link] 中文

Rank: 4

Post time 2014-1-17 23:46:51 |Display all floors
How China helps pay for Medicare, U.S. aircraft carriers
By Rick Newman
18 hours ago
The Exchange


Chinese holdings of U.S. federal debt hit a new record high toward the end of 2013. We should probably be grateful.

At the end of November (the latest data available), China held $1,317,000,000,000 in U.S. Treasury securities. If all those zeroes make your head swim, that’s about $1.32 trillion, which exceeds the prior record, from 2011. China has been the largest foreign holder of U.S. debt since 2008, when it overtook Japan, which is now No. 2.  

Chinese holdings of U.S. debt strike some people as a national-security vulnerability, but that’s largely a myth fed by fear-mongering xenophobes. For one thing, the debt held by China only amounts to about 7.6% of the entire $17.2 trillion in U.S. debt. About two-thirds of the national debt is held in the United States, with roughly 45% of that held by government trust funds and other federal agencies, much of it taxpayer money slated to be spent on Social Security and other entitlements. Overall, Uncle Sam’s portfolio of creditors is pretty well diversified.

Borrowing from all sources, including China, also helps Washington pay for more programs than Americans finance on their own through taxes. A trenchant irony of China’s lending to the United States is it helps pay for aircraft carriers, fighter jets, missiles and other military hardware that would menace China if there were ever a standoff between the two nations.

"One big pot of cash"

Funds from China also help pay for Medicare, highways, education grants, prisons, food stamps and most other things the federal government spends money on. A few programs — most notably, Social Security — have a dedicated source of funding. Medicare is partly funded that way, but money for some parts of the popular healthcare program for seniors comes from the Treasury Department’s general fund. For the most part, money from taxes and borrowing goes into the same pool at the Treasury, with no distinctions on how dollars from different sources are spent. “Whether the payments are derived from debt or taxes, it’s all one big pot of cash,” says Deborah Lucas, a finance professor at MIT’s Sloan School of Management.

China’s holdings of U.S. debt may actually be a bigger worry for China than for America. “When people ask ‘how bad would it be for the United States if China withdrew its money,’ the answer is, 'how bad would it be for China if the United States went bankrupt?'” says Richard Kogan of the Center for Budget and Policy Priorities. “China has a big stake in the solvency of the United States. They want us to pay all their principal and interest and keep buying the stuff they make.”

There’s little or no evidence, in fact, that China’s foreign-debt holdings have ever been used for political purposes. China mostly invests its reserves the way any nation seeking financial stability would.

The vast scale of borrowing by the U.S. government is a different story altogether and a legitimate worry. Washington has made halting progress on its debt recently, with the annual deficit dropping from $1.1 trillion in 2012 to $680 billion in 2013. That should fall to about $560 billion this year, according to the Congressional Budget Office, and perhaps lower if the economy exceeds expectations and tax revenues rise.

There’s still no plan, however, for addressing federal budget gaps that are expected to explode starting around 2020, as spending on retiring baby boomers skyrockets. With luck, China will still have a lot of money to invest by then — and remain in an accommodating mood.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.

Use magic tools Report

Post time 2014-1-18 07:48:06 |Display all floors
Reminder: Author is prohibited or removed, and content is automatically blocked

Use magic tools Report

Rank: 4

Post time 2014-1-18 20:30:42 |Display all floors
LaughsatYou Post time: 2014-1-18 07:48
This has already been addressed, the answer is that there will be no gaps.

The aging baby boomer  ...

Immigration is indeed helpful to the silver tsunami issues. By rough estimate, need  making up 4% of working forces lost due to aging around 2020.

China is facing similar or even worse aging issues. Recently, a flurry of new proposals emerged to postpone the retirement age, especially among university staffs and researchers.

Use magic tools Report

Rank: 8Rank: 8

Post time 2014-1-18 21:48:39 |Display all floors
The people who need reminding .....this article, I mean......


Resides mainly in America and have political affiliations opposed to Obama.


And Ron Paul, the mad man has a lot of Internet followers.




I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

Use magic tools Report

Rank: 8Rank: 8

Post time 2014-1-18 21:53:05 |Display all floors
This post was edited by Revolutionar at 2014-1-18 21:53

As for the future of America.......it has never looked so bright in my life time.


There is no deficit worry America cannot fix if they truly consider it a problem.


The one problem they cannot fix.....and because it is a world wide problem.....is the problem on the limits on resources and the abuses this planet can endure.



I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

Use magic tools Report

Rank: 8Rank: 8

Post time 2014-1-18 21:58:23 |Display all floors
The model on exploiting resources for prosperity and easy life is gone.


What to replace it?


How to solve the problem if America is not committed 100% to solving it?




I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

Use magic tools Report

Rank: 8Rank: 8

Post time 2014-1-18 22:02:15 |Display all floors
This post was edited by Revolutionar at 2014-1-18 22:02

Nobody can trust the Chinese to change the model from resources consumption to resources innovations and resources exporters.


It's a dead for everyone within 10 years if this goes on.






I've made my living, Mr. Thompson, in large part as a gambler. Some days I make twenty bets, some days I make none. There are weeks, sometimes months, in fact, when I don't make any bet at all because ...

Use magic tools Report

You can't reply post until you log in Log in | register

BACK TO THE TOP
Contact us:Tel: (86)010-84883548, Email: blog@chinadaily.com.cn
Blog announcement:| We reserve the right, and you authorize us, to use content, including words, photos and videos, which you provide to our blog
platform, for non-profit purposes on China Daily media, comprising newspaper, website, iPad and other social media accounts.