Deborah Porter, Foreign Policy Contributor
As I write this article, the current US national public debt is $14,347,300,479,594.63. While I will leave it to my fiscal policy counterparts to bemoan the absurdity of that amount, the relevance to foreign policy is that $6.281 trillion of the $14 trillion is held by foreign governments and investors. This affects our negotiations with foreign governments, and also our ability to refuse to pay the debt.
Let’s consider a hypothetical situation, in which the US wants to make some improvements on national security by working with South Korea on joint military exercises. Unfortunately, these are “loud” or irritating fights and disturb the neighboring nations of North Korea, China, Russia, and Japan. North Korea has no say in the matter, because it owns no US public debt, and the US is not an ally. Their response can only consist of launching another rocket or making a ominous threat. However, altogether China, Japan, and Russia hold $2.467 trillion of the public debt by themselves; they also play a role as trading partners with our nation. They can, and will negotiate against the practice of war games from a position of power, and this introduces a dangerous factor of manipulation through money. The US undoubtedly has the best military in the world, but the military can’t fix the debt crisis.
The continuation of thought would then be, why can’t we just fight the nations that hold our debt, since we have the most powerful military in the world? Moving past the morality of that choice as well as the feasibility of attacking two of the Big Five nations, China is also the top manufacturer in the world. That means if we decimated China alone, the United States would enter a period of weakness, in which we would need to rebuild our manufacturing sector to keep up with societal demands, or even military equipment production. During this time, the US would have achieved some independence, but that independence would be at a high cost.
The other consideration would be that the United States would never be able to sell debt to foreign entities again, for fear that the US would similarly attack them. That alone should be an incentive to legally bring down the debt, as the US must be able to borrow in times of need. However, the US long since abandoned borrowing only in times of “need,” and frequently raises the debt ceiling. Unfortunately, the US has no incentive to stop taking debt, as it benefits from the AAA bond rating and can sell the debt easily on the foreign market. However, as the debt becomes uncontrolled, the credit rating will be downgraded further to a point in which our creditors will start demanding payment. The national security risk of this, both of nations attacking the US to demand payment and the loss of international footing, poses one of the greatest risks to American society.
If you think that perhaps my hypothetical situation is not very accurate, consider the situation with Saudi Arabia. The Saudis own $116.8 billion of our debt, giving them a negotiation platform that may be higher than desired. Congress recently overrode Obama’s veto on Saudi Arabia, which may have been the right thing to do, but clearly shows the difficult position President Obama was placed in. Many political pundits say he opposed the bipartisan bill that passed the Senate 97-1 because of the Saudis’ pressure on him. If this pressure was simultaneously applied to senators and representatives, the bill might not have passed.
The solution, although simple, has never been successfully enacted. In matters of national security, the foreign debt size must be reduced. This can be narrowed down through three options: the debt is shifted onto the American people, we increase our manufacturing capabilities, or we start paying back the debt. Most people can agree that options one and two pose a dangerous risk to society, either from inability to sell debt to disillusioned citizens or loss of foreign markets. The last option, paying back the debt, is both morally right and the most logical option. Still, Congress and the president have yet to take any steps in the right direction.
Many have proposed a “balanced budget amendment” similar to states, in which the government would have to balance its budget. President Trump, in his new budget plan, made severe cuts to governmental programs in order to prevent the increase of spending while still increasing military spending. Unfortunately, programs like Obamacare still remain in place, and healthcare draws over a third of our mandatory spending, for a total of over a fourth of the overall budget. These government programs no longer just affect our fiscal policy; they also endanger our international footing and national security. It is imperative that President Trump propose a balanced budget with the potential to pay back our debt, and that our representatives stop raising the debt ceiling and start writing and implementing a balanced budget amendment to curb government spending.
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