Third, foreigners today own only about 23 percent of U.S. government debt. The bulk of this debt, in other words, is owned by Americans. If, therefore (and contrary to fact), the U.S. government’s fiscal incontinence is rightly to be blamed on people’s willingness to buy U.S. Treasuries, most of this blame would fall on Americans. Yet I’ve never heard any protectionist demand that the government obstruct Americans’ commerce with each other in order to reduce the profitability of that commerce and, in turn, diminish Americans’ willingness to lend to the U.S. government.
Before moving on, it’s worthwhile to make one further observation about protectionists who point to foreign purchases of U.S. Treasuries as evidence that U.S. trade deficits are a problem. In doing so, these protectionists portray the U.S. government as mindlessly borrowing money from foreigners that it shouldn’t borrow and spend. Yet to prevent this reckless borrowing and spending, protectionists propose giving that very same government more power to obstruct Americans’ freedom to trade. What miracle do protectionists have in mind that would transform a government that can’t be trusted to make sound decisions about how to spend its citizens’ tax dollars into a government that can be trusted to make sound decisions about how to obstruct those citizens’ decisions about how to spend their own dollars?
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