Dal­las law­maker gen­er­ally cor­rect on debt own­er­ship

Austin American-Statesman - - METRO&STATE - By W. Gardner Selby

Speak­ing July 8 in Ter­rell, east of Dal­las, U.S. Rep. Jeb Hen­sar­ling was concerned about the fed­eral debt, es­pe­cially debt owed to for­eign coun­tries.

“To­day, al­most half of our debt is owned by for­eign­ers,” Hen­sar­ling, R-Dal­las, said, ac­cord­ing to The Ter­rell Tribune. “There is an old say­ing that who­ever owns your debt may one day own you.”

We won­dered whether Hen­sar­ling got the level of for­eign own­er­ship right. Some per­spec­tive: The level of for­eign own­er­ship of U.S. govern­ment debt started inch­ing up decades ago. Ac­cord­ing to a Forbes mag­a­zine ar­ti­cle pub­lished in March, un­til the early 1970s for­eign­ers owned less than 5 per­cent of the na­tional debt. This started to change, colum­nist-econ­o­mist Bruce Bartlett wrote, “af­ter the big run-up in oil prices.”

“As oil ex­porters sud­denly acquired vast fi­nan­cial re­sources, they found it con­ve­nient to park them in Trea­sury se­cu­ri­ties, which pro­vided liq­uid­ity and safety,” Bartlett wrote. “By 1975 the for­eign share of the na­tional debt

rose to 17 per­cent, where it stayed through the 1990s, when China be­gan buy­ing large amounts of Trea­sury bills. … At the end of last year, for­eign­ers owned close to half of the pub­licly held na­tional debt.”

Hen­sar­ling’s of­fice pointed us to a U.S. Trea­sury web­site stat­ing that by June, more than 30 other coun­tries — with China top­ping the list — owned nearly $4 tril­lion in U.S. debt.

Ac­cord­ing to an­other Trea­sury site, the fed­eral govern­ment’s to­tal debt as of June 1 was nearly $8.6 tril­lion — mak­ing the share owned by for­eign­ers about 46 per­cent.

We en­coun­tered a wrin­kle, though. That $8.6 tril­lion in debt didn’t count nearly $4.5 tril­lion in “in­tragov­ern­men­tal hold­ings.” The govern­ment de­fines in­tragov­ern­men­tal hold­ings as Govern­ment Ac­count Se­ries se­cu­ri­ties held by govern­ment trust funds, re­volv­ing funds and spe­cial funds; and Fed­eral Fi­nanc­ing Bank se­cu­ri­ties, in­clud­ing money owed to So­cial Se­cu­rity.

Debt is debt, re­gard­less of who’s owed, no? So we won­dered whether it makes sense to con­sider the en­tire fed­eral debt be­fore cal­cu­lat­ing how much has been snapped up by for­eign­ers.

Hen­sar­ling spokesman Ge­orge Rasley con­ceded that Hen­sar­ling didn’t take into ac­count all the govern­ment’s debt be­fore mak­ing his state­ment.

Rasley pointed out, though, that it wasn’t the Texan’s idea to sep­a­rate in­tragov­ern­men­tal hold­ings from pub­licly held debt; that’s the govern­ment’s ap­proach. Rasley spec­u­lated in an e-mail: “I as­sume that it is (sep­a­rated that way) be­cause the govern­ment dif­fer­en­ti­ates be­tween debt we SELL to in­vestors,” debt pur­chased by mem­bers of the pub­lic as well as for­eign na­tions, “and debt the govern­ment owes it­self be­tween ac­counts … which are owed by one arm of the fed­eral govern­ment to an­other arm of the fed­eral govern­ment.”

Sandy Leeds, a se­nior lec­turer in the depart­ment of fi­nance at the Uni­ver­sity of Texas, fre­quently delves into fed­eral spend­ing is­sues. Leeds echoed Rasley, telling us that govern­ment of­fi­cials like Trea­sury Sec­re­tary Ti­mothy Gei­th­ner and Fed­eral Re­serve Chair­man Ben Ber­nanke al­most al­ways ig­nore in­tragov­ern­men­tal debt in their ref­er­ences to U.S. pub­licly held debt.

“There are two rea­son­able ways to ap­proach this,” Leeds said. “One, we’ve got $8.6 tril­lion of debt, and we also have no money for So­cial Se­cu­rity other than what we take in each year. Or you could say we have got $13 tril­lion of debt,” in­clud­ing in­tragov­ern­men­tal debt.

“I re­ally couldn’t ar­gue that one is right and one is wrong,” Leeds said.

“There is cer­tainly noth­ing mis­lead­ing” about Hen­sar­ling’s state­ment, Leeds said.

Leeds added in an e-mail: “Di­vid­ing the for­eign debt by the pub­licly held debt is fair. One way of think­ing about this is to think of all of the debt that we had to go to the out­side mar­kets to fi­nance. For­eign­ers fi­nanced 50 per­cent.”

We rate Hen­sar­ling’s state­ment True.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.