Borrowing from China

Our government issues bonds to pay some of its expenses, but that’s not simply borrowing from China. We don't go to China for a loan as a borrower would. Issuing bonds and taking out a loan have similarities, but they are not the same thing. A critical difference (among several) is that U.S. bonds are sold world-wide on an open financial market, rather than being sought from a potential lender.

China buys U.S. bonds for its own financial security, not to control U.S. fiscal policy. China cannot dictate bond repayment terms and relies on the U.S.’s full faith and credit as do all bond holders. The seller of bonds is in control of the terms, including repayment terms.

Conservatives suggest it’s bad that the U.S. borrows money from China. But the conservatives are wrong about that.  It is good that China buys U.S. bonds, because that increases world-wide competition for the bonds, which lowers the interest rate received.

Mr. Romney and cohorts, please stop saying that our government borrows from China. That’s a good sound bite, but it is not factual. It’s just another lie to mislead the American voter.