Tuesday, February 9, 2010

Jingoism and the Budget Deficit: Using Any Tactic to Advance the Budget Cutting Agenda

The deficit hawks apparently believe that their case is so weak that they must resort to crass jingoism to push their agenda. NBC apparently intends to run a piece on the evening news on Tuesday that talks about the portion of the government debt that is owned foreigners, highlighting the role of China.

This is incredibly dishonest. The extent to which foreigners hold U.S. assets is determined by the trade deficit, not the budget deficit. (Actually, the causation largely goes the other way. The decision of foreign governments and/or investors to buy dollar assets raises the value of the dollar, leading to a larger trade deficit.)

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