America’s Fiscal Irresponsibility Fuels China’s Military Rise

US government debt has swelled to a whopping $16 TRILLION dollars last month in September. That’s $16,000,000,000,000.00 or a sixteen with 12 zeros after it. The number has grown so large so fast that some have difficulty putting a number this big into normal terms.

As President Clinton left office in 2000, the US government had $5.6 trillion in debt. This represents the accumulated deficits of every single year of government operations dating back to the founding of the Republic in 1776. (Some may argue on the date, but the US government established in 1789 recognized all debts incurred by previous governments during the revolution and Articles of Confederation period.)

From 2000 to 2012, the US government added another 10.4 trillion–nearly tripling the size of the debt in 12 years. I explained this to a friend, who said, well things just cost more these days. True but, here’s the score:

224 Years: $5.6 Trillion
12   Years: $10.4 Trillion

Clearly this isn’t possible simply because of price increases in the cost of milk and cookies. And unfortunately the consequences of such poor fiscal management extend beyond future tax increases, having no funds for funding essential government functions, or even funding a reasonable social safety net.

All borrowers have to pay their bills. And in America’s case, we owe A LOT of money. Which means when America pays its bills in the form of interest payments, there are lenders on the receiving end of those payments.

The US Treasury maintains a list of foreign governments who own US debt. As of July 2012, China owned $1.15 trillion in US debt securities or about 11 percent of total publicly held debt. The Treasury Department doesn’t publish exactly what maturities and interest rates each country owns–but a fair estimate would be to assume that 11 percent of debt entitles China to approximately 11 percent of interest paid.  That’s 11 percent of total interest payments on the national debt–$250 billion in 2012–for a total of $27.5 billion.

China has announced a 2012 military budget of approximately $100 billion. At that rate of spending, it can be estimated that US interest payments provide about one-fourth of China’s annual spending on building the world’s 2nd largest military budget.

 

So why point this out at all? Well if you’re part of a group of people concerned about China’s military rise and its commitment to peace in the Pacific, it’s difficult to see how providing one-fourth of the money used for military development via interest payments is a good idea. If you’re not concerned about China’s military rise–maybe we could at least agree on the fact that surely the US could find more productive uses for the $27.5 billion given directly to China if not the total sum of $250 billion spent annually on nothing but interest payments to finance the government’s financial mismanagement.

 

Image courtesy of vichie81 / FreeDigitalPhotos.net