Wednesday, December 7, 2016

Thinking Trump and China Through

Earlier this week I heard a very rational person speaking on a panel on one of the news programs.  She was talking about the dust-up regarding President-elect Trump taking a congratulatory call from the new president of Taiwan, and how the stuffy folks over at the State Department were horrified and, more to what she was saying, how the Chinese might retaliate.

Now, let's get a few things on the table.

First, given the performance of those entrenched types over at State the past forty years in positioning the USA, and the fact that at this moment our friends don't trust us and our enemies don't fear us, I'd say they don't have a lot of standing to determine what works and what doesn't.

Second, I would add that the Trump approach is to speak first, as a negotiating tactic, and then go back and forth and achieve an agreement.  That's how he has always operated, and why his Twitter feed is an extension of himself and his approach.  That, however, is a bit fragile as he becomes president, where the words of the president of the United States are policy, or at least are taken as policy by the rest of the world.  He will not like that, and we need to remember that.

Still, neither is the point of this piece.

The commentator made the point that the Red Chinese are puffing out their cheeks at the fact that our president-elect would ever take a call from the president of Taiwan, whom they think is a province of Red China, same as they regard big chunks of the navigable South China Sea as a province of Red China, and the way they must see this column as a province of Red China (since, for reasons that escape me, this column is actually read often by readers with Chinese IP addresses.  Yes, I am quite aware of that; they must like me.  So are the Russians, who read this column regularly, also for reasons that elude me).

This is the point.  The commentator stated that the Red Chinese (I have to call them that since this column is also about the "free" Chinese on Taiwan) had a few ways that they could get back at "us" for taking a phone call from the Taiwanese president.

One of those ways would be for them to sell of lots of the U.S. Treasury bonds that they hold.  And that, friends, triggered a whole lot of collateral thinking, at least in this office.

You see, here are all the State Department types getting all twitchy about Trump's phone call, when none of them is asking how we got there in the first place, i.e., how we got to a point that we have so much debt to China that they could threaten to sell it.  And that's what I'm concerned about.  We borrow a lot of money from China, and the only reason that a staggering 7.2% of the $20 trillion we owe is held by them (and anyone else) is because we're borrowing too frigging much.

We are borrowing that "too frigging much" because the U.S. Government does not live within its means, meaning that we spend more every year, by far, than we take in.  We are not paying down the principal on that debt.  Congresses past and present have simply created budgets that require us to borrow rather than determining how much tax revenue we can take in without crashing the economy, and spending only that.

I don't have to tell you why we got into that tar pit, but we're in it and we need to get out of it.  And the idea that Red China can actually attack us with T-bonds rather than bombs is so appalling, that instead of worrying if we're ticking them off by taking phone calls from Taiwan, we ought to be worrying about how we can get out from under debt that allows Red China to threaten us simply by their potential to sell our bonds.

Debt is a weapon.  It's a weapon that is loaded and pointed straight at us.  And we sold them the weapon.

Please, Mr. Trump.  Get us to a balanced budget and get us out of debt.  We can only produce about $3.5 trillion in tax revenue, about $500 billion less than the current budget.  We desperately need to cut spending, to create a Federal budget that is under $3.5 trillion so we can start to pay it down.

The risk is too great, and the threat of economic warfare too high.

Copyright 2016 by Robert Sutton
Like what you read here?  There's a new post from Bob at www.uberthoughtsUSA.com at 10am Eastern time, every weekday, giving new meaning to "prolific essayist."  Sponsorship and interview inquiries cheerfully welcomed at bsutton@alum.mit.edu or on Twitter at @rmosutton.

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