So let's get this straight...Sarah Palin believes that the United States' $17 trillion dollar debt is the moral equivalent of slavery? It is, in her mind, the equivalent of one person being able to own another and deny him/her basic human rights. It gives our 'foreign masters' the right to whip us at will, sell us to any other party, or kill us without repercussion? Is that what you're saying, Sarah? I just want to make sure I understand before I proceed.
Okay, so what's wrong with Palin's analogy? So much that I don't know where to begin. I guess the beginning is as good a place as any. Palin says,
"Our free stuff today is being paid for by taking money from our children and borrowing from China..."What 'free stuff' would that be? Government services aren't free and they never have been. Fighting two wars in the middle east wasn't free. Building a 21st century infrastructure of roads, bridges, rail networks, and schools is not free. Caring for the weakest among us is not free. Keeping 25% of the world's prison population locked up is not free. All this 'stuff' costs money. We, as a society, have chosen together to do these things, regardless of what you and your merry band of naysayers want to believe. You and people of your ilk have engaged in obstruction, refused to allow the appropriate level of taxation to pay for the things WE have chosen to do together, leading us to the $17 trillion in debt we have racked up...most of which accumulated under Republican leadership. The following graph shows the change in the debt as a percentage of GDP since WWII.
What we see in the above graph is that debt began to grow during the Reagan Administration and but for a few short years during the Clinton Administration has continued to grow ever since. There are several reasons for that, including repeated tax cuts, increased spending commitments, and slow economic growth (except 1997-2000) when compared to the period from 1945-1980. Another way to look at it is in terms of total dollars added to the debt, as the chart below shows.
Using this scenario, both President George W. Bush and President Obama have added a lot to our debt, though Reagan is still the debt king in terms of the percentage by which the debt increased while Clinton and Obama have increased it by the smallest percentages. Perhaps this is due to Republicans rediscovering their fiscal conservatism whenever a Democrat is in the White House?
What about Palin's primary claim that we are 'taking money from our children and borrowing from China'? Is this true? Yes and no. We aren't literally robbing our children's piggy banks any more than a parent who buys his/her kids' Christmas presents with a credit card is taking money from them. Only, we are not buying presents, we are investing in our future as a nation. Yes, someone has to pay for that, whether it is the current generation, the next generation, or the one after that. Unless economic growth returns to the 4-5% annual rate it was in the 1950's we won't have the money to pay for all our commitments without substantial tax increases. I would, of course, argue that some tax increases are in order as we are currently paying the lowest rate of federal taxes in over 60 years and nearly half of all Americans pay no income tax at all (I'd rather abolish the income tax but that is for another day). To move those individuals into tax paying status requires economic growth that includes substantial growth in wages for lower middle class workers, which have been stagnant for 35 years.
Okay, so what about our 'foreign masters'? Does China really own us? Not really. It is a fundamental misunderstanding on the part of lazy people like Sarah Palin to believe that. Here are the facts:
The United States is currently a little over $17 trillion in debt, though that is somewhat misleading since we have $200 trillion in assets (oil, gas, land, buildings, etc...). Of that debt, about 1/3 is owned by government agencies. The single largest creditor for the U.S. government? The Social Security Administration (SSA). As of August 30, 2013 the SSA owns $2.764 trillion in government treasuries. This is because for nearly 80 years Social Security has collected more in revenue than it has paid out in benefits. The excess money is invested in US treasury bills, allowing the SSA to collect interest on the excess. Someday, those T-bills will come due and the government will either have to raise taxes to pay them off or issue more T-bills and pay the old ones off with the proceeds from the sale of the new T-bills. That is essentially what the government has been doing for 35 years. The rest of this part of the debt is held by pension funds for the government, FDIC, and some other federal agencies.
What about the other 2/3 of the debt? Isn't that owned by China? Well, no. About $12 trillion of our national debt is what we call 'debt held by the public', which includes foreign held debt. As of March 2013 almost half of the debt held by the public was held by the central banks of foreign governments. Why? Because America pays her bills and is viewed as a solid investment. Or at least we were until Sarah Palin and the Tea Party started threatening to default on the debt. Overall, $5.7 trillion of our public debt is held by foreigners. China is the largest single holder of that debt at $1.27 trillion (August 2013), or roughly 10% of the total of public debt. Japan's central bank is second at about $1.1 trillion. But the largest holder of U.S. public debt? The Federal Reserve Bank of the United States ($1.74 trillion).
The fact is, most of our debt is money we owe not to China or other foreign interests but to ourselves. We're in no danger of being whipped or hogtied by our 'foreign masters' because of the national debt. The debt is concerning for other reasons but fear of being a slave to our Chinese masters is not one of them.
Full details on the debt can be found here.