During President Barack Obama’s first term, there was a massive spike in the annual deficits run up by the federal government.
In fiscal 2008, which ended a little more than a month before Obama was elected, the annual federal deficit was $458.55 billion, according to the White House Office of Management and Budget.
In fiscal 2009, the year Obama was inaugurated, it spiked to $1.4 trillion.
In December 2007, according to the National Bureau of Economic Research, the American economy had started into a recession that would not end until June 2009. In October 2008, the month before Obama was elected (and the first month of fiscal 2009), Congress enacted the Troubled Asset Relief Program to respond to that recession. According to the Treasury, it cost $475 billion.
Yet, trillion-dollar deficits persisted for three more fiscal years.
In fiscal 2010, the federal deficit was $1.294 trillion, according to OMB. In fiscal 2011, it was $1.299 trillion; and in fiscal 2012, it was $1.076 trillion. In fiscal 2013, the first fiscal year of Obama’s second term, it dropped to $679.77 billion.
On Jan. 20, 2009, the day Obama took the oath of office, the total federal debt was $10.626 trillion. This included $6.307 trillion in debt held by the public (primarily publicly traded Treasuries securities) and $4.319 trillion in “intragovernmental” debt (which includes surplus revenues the Treasury has borrowed from other government programs such as Social Security).
On Aug. 2, 2011, Obama signed the Budget Control Act of 2011, which increased the statutory limit on the federal debt. By Jan. 18, 2013, the last business day before Obama’s second inauguration, the total federal debt had climbed to $16.432 trillion—an increase of approximately $5.8 trillion from his first inauguration.
The portion of the federal debt held by the public had increased by approximately $5.265 trillion to a total of $11.573 trillion.
As our government was running these massive deficits, the People’s Republic of China was significantly increasing its ownership of U.S. Treasury securities.
In January 2009, according to the Treasury, China owned $744.2 billion in U.S. Treasury securities. By January 2013, it owned $1.2142 trillion. That was an increase of $470 billion—or 63%.
In August 2011, after Obama signed the law increasing the debt limit, Vice President Joe Biden visited the People’s Republic of China.
Then as now, the PRC was governed by a communist regime that routinely violated the rights of its people.
The State Department’s 2011 Country Report on Human Rights in China stated that the PRC was “an authoritarian state in which the Chinese Communist Party (CCP) constitutionally is the paramount authority.”
“CCP members,” said the report, “hold almost all top government, police, and military positions.” Chinese human rights problems cited in the State Department’s 2011 report included, among others, “extrajudicial killings,” “use of forced labor,” and “a coercive birth limitation policy that in some cases resulted in forced abortion or forced sterilization.”
During his August 2011 trip to China, Biden met with Xi Jinping, who was then China’s vice president. He also met with Wen Jiabao, who was China’s premier. In reporting on these meetings, The Washington Post published a story with this headline: “Biden assures China on its U.S. investments.”
“After another day of turmoil in world financial markets, Vice President Biden sought Friday to assure China, the United States’ largest foreign creditor, that its investments in U.S. Treasury securities are safe,” said the first paragraph of the Post’s story.
In a joint appearance with Biden on Aug. 19, 2011, Xi explained that Biden had talked to him about how the United States was going to handle the debt problem.
“Yesterday in my discussion with Vice President Biden, he briefed me about efforts of the U.S. government in spurring growth and jobs, cutting the budget deficit, properly handling the debt problem, and preserving the confidence of global investors,” Xi said, according to a transcript posted by the White House.
“The U.S. economy is highly resilient and has a strong capacity for self-repairment,” said Xi. “We believe that the U.S. economy will achieve even better development as it rises to challenges.”
When Biden and Wen made a joint appearance that day, Wen congratulated Biden for the debt-limit deal Obama had made with Congress.
“I know that in the past weeks and months, you have put in a large amount of effort to assisting the president in securing an agreement with the Congress about raising the U.S. debt ceiling, cutting U.S. deficit and stabilizing the U.S. economy,” said Wen. “You have played a vital role in this process.”
“It’s particularly important that you sent a very clear message to the Chinese people that the United States will keep its word or—and its obligations with regard to its government debt,” Wen said. “It will preserve the safety, liquidity, and value of U.S. treasuries.”
Biden then thanked this communist leader for China’s help in funding our federal government.
“But I point out U.S. treasuries, we’re going to … we’re going to take care of very closely, not merely because China owns 8% of them, but because the Americans own 85%,” said Biden.
“We appreciate and welcome your concluding that the United States is such a safe haven because we appreciate your investment in U.S. treasuries,” Biden told the PRC’s premier. “And very sincerely, I want to make clear that you have nothing to worry about in terms of their—their viability.”
Since the day that Biden thanked the PRC for helping fund the U.S. government by buying our debt, what has happened on America’s fiscal front?
In each of the past three years, the annual federal deficit has far exceeded $1 trillion. In fiscal 2020, the pandemic year, it hit $3.132 trillion. In fiscal 2021, it was $2.775 trillion. And in fiscal 2022, it was $1.375 trillion.
Meanwhile, the federal debt held by the public has increased to $24.627 trillion—and China has begun divesting from it.
In April 2022, according to U.S. Treasury Department data, China’s holdings of U.S. Treasury securities dropped below a trillion to $976 billion. In each of the past seven months on record—August 2022 to February 2023—China’s holdings of U.S. Treasury securities have declined.
In February, they dropped to $848.8 billion.
Americans apparently can no longer rely on Communist China to help fund the deficit spending of our federal government.
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