Treasury Loses Track of Debt Owed to China, While Democrats Assign Blame Over Spending Spree

July 6, 2011

Democrats Point Fingers While Demanding More Borrowing from China to Pay For Yet More Spending

According to revelations out last week, China may own more U.S. debt than previously thought, heightening growing security concerns over foreign ownership of U.S. debt and adding urgency to the need to cut spending in ongoing debt ceiling negotiations.
Instead of taking responsibility for their spending spree and making government live within its means by cutting spending, Democrats are trying to assign blame for the current debt crisis.
The fact is, both House Democrats and the White House are to blame for an agenda that increased the national debt by $3.6 trillion while paying for that spending with money borrowed from China. When will Democrats end their spending spree and work with Republicans to make government live within its means?

BACKGROUND:

Revelations out late last week uncovered that the Chinese government may be buying more U.S. government debt than previously thought, in possible violation of international agreements and at potential risk to U.S. national security. U.S. officials aren’t even sure how much of the national debt China owns anymore:

CHINA “CAUGHT” WHILE “BUYING MORE [U.S.] DEBT THAN DISCLOSED”: “When the Treasury Department revamped its rules for participating in government bond auctions two years ago, officials said they were simply modernizing outdated procedures.

“The real reason for the change, a Reuters investigation has found, was more serious: The Treasury had concluded that China was buying much more in U.S. government debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open – all without ruffling feathers in Beijing. …

“The incident calls into question just how clear a handle the Treasury has had on who is buying U.S. debt.Chinese entities hold at least $1.115 trillion in U.S. government debt, and are thought to account for roughly 26 percent of the paper issued by Washington, according to U.S. government data released on June 15.” (Emily Flitter, “U.S. Caught China Buying More Debt than Disclosed,” Reuters, 6/30/2011)

REVELATIONS RAISE SECURITY CONCERNS: “China’s vast Treasury holdings are both a lifeline and a vulnerability for Washington – if the Chinese sold their Treasuries all at once, it could undermine U.S. markets and the economy by driving interest rates higher very quickly. Scenarios of this sort have been discussed in Washington defense-policy circles for at least a year now. Not knowing the full extent of these holdings would make it even more difficult to assess China’s political leverage over U.S. finances.

“The Treasury has long said that it has a diversified base of investors and isn’t overly reliant on any single buyer to digest new U.S. Treasury issuance. Evidence that China was actually buying more than disclosed would cast doubt on those assurances.” (Emily Flitter, “U.S. Caught China Buying More Debt than Disclosed,” Reuters, 6/30/2011)

The report adds urgency to the need to cut government spending and pay down the national debt in ongoing negotiations over raising the U.S. debt ceiling. But instead of taking responsibility for their spending spree during their two year reign of unchecked power, Democrats are trying to assign blame for the current debt crisis. President Obama and his top aides are accusing House Democrats of spending the U.S. into its current debt crisis:

PRESIDENT OBAMA: “These are bills that Congress ran up. … They took the vacation. They bought the car. And now they’re saying maybe we don’t have to pay, or we don’t have to pay as fast as we said we were going to, or — that’s not how responsible families act.” (Remarks from President Obama, “Press Conference by the President,” The White House, 6/29/2011)

WHITE HOUSE CHIEF OF STAFF BILL DALEY: “After all, Daley said, it was Congress that ‘passed all the legislation that created the deficit that we are in and they must solve this problem and the president is, has been and continues to be the force of trying to bring people together.’ ” (George Stephanopoulos, “White House Chief of Staff on Debt Ceiling: No Veto Threat But GOP Can’t Worry About ‘Feelings’,” ABC News, 6/30/2011)

WHITE HOUSE COMMUNICATIONS DIRECTOR DAN PFIEFFER:“It’s sort of an irrelevant question because what we have here is the fact — is that Congress has run up a significant number of bills on thecongressional credit card. Those bills come due in August and we have to pay them.” (Remarks from Dan Pfeiffer, MSNBC’s “The Daily Rundown,” 6/30/11)

The fact is, both House Democrats and the White House are to blame for an agenda that increased the national debt by $3.6 trillion while paying for that spending with money borrowed from countries like China. And now they’re calling for even more spending. When will Democrats take responsibility for their spending spree and start working with Republicans to cut spending, rather than continuing to borrow from countries like China?:

DEMOCRATS INCREASED SPENDING BY $3.6 TRILLION IN TWO YEARS: “In January 2009, the national debt stood at $10.6 trillion. Fueled by the so-called stimulus, this debt grew by $3.6 trillion in just two years. The magnitude of this amount is difficult to grasp without a comparison. Under Mr. Obama, government has been borrowing $4.6 billion each and every day. That’s more than it cost to construct the world’s tallest building, Dubai’s Burj Khalifa. In other words, the amount of future productivity being sapped from the American economy would be sufficient to construct a new 160-story skyscraper every day of the year.” (Editorial, “Obama Spending Hits New Records,” The Washington Times, 3/8/2011)
AND NOW, “DEMOCRATS PUSH [A] NEW STIMULUS”: “Senate Democrats kicked off their new drive for a jobs agenda by demanding that new stimulus measures be included in the bipartisan deficit reduction talks led by Vice President Joseph Biden.” (Steven T. Dennis, “Senate Democrats Push New Stimulus,” Roll Call, 6/22/2011)

WHILE OBAMA IS STILL PUSHING NEW “INVESTMENT” AS A CURE TO ECONOMIC ILLS: “Cantor said the president pushed them on his theme of investment in the future, but Cantor said ‘to a lot of us that’s code for more Washington spending, and that’s something we can’t afford right now.'” (Russell Berman, Sam Youngman, and Molly K. Hooper, “Ryan to Obama: Leadership Should Come from the Top,” The Hill, 6/1/2011)

RANKING DEMOCRAT ON HOUSE APPROPRIATIONS: WE NEEDANOTHER STIMULUS! “One Democrat on Thursday even called for a reprise of government stimulus. ‘We need a stimulus,’ Rep. Norm Dicks (Wash.), senior Democrat on the House Appropriations Committee, said during a subcommittee hearing. ‘We need to put people back to work.'” (Sam Youngman & Mike Lillis, “Obama, Democrats Talk Jobs As Impasse Over Cuts Hardens,” The Hill, 6/2/2011)

IN OTHER WORDS, DEMOCRATS’ PLAN TO REDUCE SPENDING IS TO SPEND MORE? ” ‘This is a stimulus program,’ said Sen. Charles Schumer (D-N.Y.), the No. 3 Democrat, adding that a package would be paid for in the long run as part of the deficit reduction package.” (Steven T. Dennis, “Senate Democrats Push New Stimulus,” Roll Call, 6/22/2011)