Our College Students Now Owe Our Government and Banks about the Same Amount That Our Government Owes China

At the end of the 2013-2014 academic year, total outstanding student debt in the United States is estimated to be $1.08 trillion.

About.com, which is quoting information provided in U.S. Treasury reports [http://usgovinfo.about.com/od/moneymatters/ss/How-Much-US-Debt-Does-China-Own.htm], provides the following overview of who holds U.S. government debt:

“About 32 cents for every dollar of U.S. debt, or $4.6 trillion, is owned by the federal government in trust funds, for Social Security and other programs such as retirement accounts, according to the U.S. Department of the Treasury.

“The largest portion of U.S. debt, 68 cents for every dollar or about $10 trillion, is owned by individual investors, corporations, state and local governments and, yes, even foreign governments such as China that hold Treasury bills, notes and bonds.

“Foreign governments hold about 46 percent of all U.S. debt held by the public, more than $4.5 trillion. The largest foreign holder of U.S. debt is China, which owns more about $1.2 trillion in bills, notes and bonds, according to the Treasury.

“In total, China owns about 8 percent of publicly held U.S. debt. Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund’s holdings of nearly $3 trillion and the Federal Reserve’s nearly $2 trillion holdings in Treasury investments, purchased as part of its quantitative easing program to boost the economy.”

Forbes recently ran an article questioning whether the student debt crisis—in particular, the rising default rate on student loan repayments—is actually a crisis.

Most politicians and commentators on the Far Right do not wish to provide public funding for public education, including higher education, and prefer to re-frame the student debt crisis as a crisis of “rising college costs.” In their view, it is a crisis that can be solved by paying professors less and making them do more work, by largely eliminating programs in the humanities and social sciences and transforming universities into STEM colleges and advanced vocational schools, and by acclimating students to the idea that paying for such an education over the course of their working lives is “normal.”

In contrast, for these same politicians and commentators, the public debt held by China is a looming crisis of major proportions—an unprecedented threat to our economic and political future. It is, in fact, one of the major reasons why we need to cut all government spending, outside of defense and agricultural and corporate subsidies. For instance, FOXBusiness recently ran a piece titled, rhetorically, “U.S. Economy at China’s Mercy?” [http://video.foxbusiness.com/v/3064098373001/us-economy-at-chinas-mercy/#sp=show-clips].

But, because China holds significant U.S. public debt, it has an investment whose value depends on the continued solvency of the U.S. government and the continued robustness of the U.S. economy. Whatever the Chinese government or individual investors might do to undermine the stability of either our government or our economy would have a direct and proportionate impact on the value of on their own investments and, by extension, on their own economic and political stability. I am not arguing that either our national debt or the amount of that debt held by China are good things or things that don’t warrant concern. But I don’t think that either issue is such a crisis of the moment that it requires the draconian measures that Paul Ryan has proposed repeatedly in his budgets.

On the other hand, if the Far Right is going to argue that the public debt needs to be addressed immediately because it is a problem that will compound over time, then the same logic should apply to student debt, which is certainly compounding very rapidly—which, according to FICO, has increased by 58% over the last seven years, from $17,233 per student to $27,253 per student and is now increasing, in total, by $150-$200 million per year.

Moreover, that same logic should apply to the equally and very obviously rapidly compounding crises in income inequality, upward mobility, economic opportunity, and political influence. But, according to the politicians and commentators on the Far Right, all of those problems are not really problems at all because they will ultimately resolve themselves if only we demonstrate enough patience with a system that, if it is sufficiently deregulated, will regulate itself to everyone’s benefit.

 

 

2 thoughts on “Our College Students Now Owe Our Government and Banks about the Same Amount That Our Government Owes China

  1. Pingback: 2014 Through the Academe Blog: May | The Academe Blog

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