China lends money to the U.S., where does the U.S. spend it?

Paul Kung Chinese Australian scholar, formerly with the Shanghai Academy of Social Sciences

 

 

Introduction:It cannot be denied that China's large holdings of United States debt securities are in fact a form of assistance to the United States Government and the United States economy. A quick look at the current structure of the United States Government's real spending will make it clear where China's money is being spent by the United States Government.

 

 

　　No one can deny that China's large holdings of United States Government bonds are in fact a form of assistance to the United States Government and the United States economy. So where does the United States spend China's aid to the United States? This is a matter of great concern. So far few Chinese economists have analyzed it in detail.

　　It should be admitted that the United States Government has not so far made a special and direct detailed explanation of the use of the United States Government bonds purchased by China, but it cannot be denied that the issuance of all kinds of bonds by the United States Federal Government, including Treasury bills, Treasury promissory notes and Federal Government bonds, like the issuance of bonds by the Governments of all countries, is in essence an economic means of solving the problem of imbalance in the balance of payment of the financial resources. Therefore, as long as we have an overview of the current actual spending structure of the United States Government, we can understand where the money that China has assisted the United States has been used by the United States Government.

　　Since World War II, social security (including pensions, health care, etc.), education and defense are the largest items in the U.S. government's financial expenditures, especially social security, has now exceeded the U.S. government expenditures of 50%. 2010, for example, according to the U.S. government released data, the U.S. federal, state, and local government finances 6,532 billion U.S. dollars at the three levels of government spending, which is roughly the following situation Health care, accounting for 17% of total spending; education and security, accounting for 16% of total spending; old age security, accounting for 15% of total spending; defense spending, accounting for 14% of total spending; social welfare, accounting for 11% of total spending; interest on the government debt of 257.7 billion U.S. dollars, accounting for 4% of total spending; and other items, such as transportation, government administration, etc., accounted for about 231 TP3T of total expenditures.

　　It should be noted that among the above expenditures, medical care, retirement protection, social welfare, etc. are in fact social security. It should also be noted that there are other expenditures that should be classified as social security because they are also social security, but under different names, such as labor security, and so on, which are in fact social security. If these are also counted as social security, the expenditure on social security and education far exceeds 60%.

　　The only conclusion that can be drawn from this is that 581 TP3T of the reason why the U.S. government needs to borrow heavily is for Social Security. If the interest on the national debt is also included, it is upwards of $60%. In theory, if Social Security were not such a drain on U.S. government revenues, the U.S. government debt would be reduced by $60% (or even not incurring the debt at all, as a practical matter).

　　In other words, in theory at least, we could say that, in the aggregate, China's holdings of U.S. government debt securities are actually 60% in aid of U.S. social security and education.