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Down With Economic Nationalism

Baltimore Sun columnist Thomas Schaller favorably quotes Nobel laureate economist Joseph Stiglitz’s concern about debt run up during G.W. Bush’s years in the White House:

Nobel-winning economist Joseph E. Stiglitz points out in the current
Vanity Fair. "Cumulative borrowing from abroad during the six years of
the Bush administration amounts to some $5 trillion," he writes

I’m not sure if Stiglitz is alleging that $5 trillion of Uncle Sam’s debt has been sold over the past half-dozen years to foreigners, or if this figure includes private debt.  Or if Stiglitz’s figure includes also the U.S. trade deficits over these years.

If the latter — if it includes the trade-deficit figures — it’s a bogus number.  The reasons are two: first, because the trade deficit is not synonymous with debt, and (2) if part of it becomes debt by foreigners using their dollars to purchase U.S. Treasury securities, then double-counting is in play if the trade-deficit figures are added to the U.S. budget-deficit figures.

But let’s assume that Stiglitz’s figure refers only to actual borrowing by Americans from foreigners (whether this borrowing be done by government or by private citizens or organizations).  Stiglitz’s concern still is off the mark.  Here’s a letter that I sent this morning to the Baltimore Sun:

Thomas Schaller favorably
quotes economist Joseph Stiglitz’s concern that "Cumulative borrowing
from abroad during the six years of the Bush administration amounts to
some $5 trillion" ("On economy, GOP candidates offer up slogans instead
of solutions," December 5).

Regardless of this debt’s merits or
demerits, what is the relevance of creditors’ nationalities?  Whether
the creditors are in Utah or Ukraine, Baltimore or Beijing, the debt
must be repaid.  And that is the burden of the debt; the nationalities
of creditors are irrelevant.

Donald J. Boudreaux

If you question my claim, ask if Stiglitz would be less critical — or should be less critical — if every cent of these borrowed funds were raised from Americans.  Would the borrowers (chiefly, of course, Uncle Sam) be less irresponsible or less blameworthy had they run up the same amount of debt but only by borrowing from Americans?