The bipartisan budget deal approved by Congress before the August recess will result in trillion-dollar deficits for the first time since fiscal years 2009-2012, and an increase in the national debt of $1.7 trillion over 10 years. That means more Treasury securities will need to be sold to finance the debt, and more opportunity for other countries to “own” a piece of the U.S. government.
Interest on the debt is already the third highest expenditure in the federal budget, and that will get worse under the budget agreement. No family or business could survive for long if interest on credit cards is their third-highest expenditure. The debt would never be paid off, and the interest payments would squeeze out necessary spending.
Washington can get away with its profligate spending and borrowing because it has, so far, willing partners that buy Treasury securities with the understanding and belief that the interest will be paid. One of the most willing purchasers of that debt is China.
In October 2010, the “Chinese Professor” ad warned about the potential consequences of the accumulation of debt by China. It is a semi-apocalyptic tale of how America’s overspending and debt led to its financial ruin, similar to the fall of the Greek, Roman, and British Empires. In the end, the Chinese professor and his students laugh about how easy it was for their country to take control of the U.S. and its finances sometime before 2030.
Before July 2010, China held $843 billion in U.S. debt. Every year since then, China has held more than $1 trillion of U.S. debt. The $1.11 trillion it currently holds, at 27% of the foreign held $4.1 trillion in Treasury bills, notes, and bonds, is the largest amount held by a foreign country.
The “Chinese Professor” is of course an allegory of what could happen to the U.S., not what will happen. If it is not China, it could be another country; or America could simply go broke and no one will be willing to pick up the pieces.
While the outcome may differ from the ad, the policies to which it refers are not imaginary. Indeed, current tax, spending, and regulatory proposals would be far more financially devastating than those being considered when the ad was produced.
There are references in the ad to expensive policies like Obamacare and stimulus spending, along with expanded government power through the takeover of private industries. Proposals like “Medicare for all,” the Green New Deal, free childcare, free college, canceling all student debt, guaranteed broadband access, new taxes, and increased regulations dwarf in size and scope anything that was being considered in 2010. Indeed, the $320 billion in additional spending and the $1.7 trillion in new debt under the Bipartisan Budget Act of 2019 exclude the tens of trillions of dollars that would be spent if these ideas are enacted into law.
Spending America into oblivion is not an optimal outcome.
At the very least, taxpayers should ensure that matters do not get worse through job- and economy-killing proposals being pushed by those who would like the government to be bigger and more intrusive. At best, Washington should be taking a serious look at eliminating the billions of dollars in waste that has been identified in numerous reports both inside and outside of the federal government.
The “Chinese Professor” ad is not about China. It is about the United States and what might happen if our country continues on its profligate path.
Thomas Schatz (@tomschatzcagw) is president of Citizens Against Government Waste.
