Dr Peter Morici: America, the Debtor Nation

[highnooner]

The United States is a debtor nation, just like the poorest states in Africa, Latin America and Asia. Since the fourth quarter of last year, U.S. citizens and businesses have paid more dividends, interest and the like to foreigners than they have received from abroad.

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The debt Americans are incurring is massive. Direct investment in U.S. productive assets provides only about 11 percent of the needed funds, and the balance is obtained through the sale of Treasury securities, corporate bonds, bank accounts, and other paper assets. Americans borrow nearly $60 billion each month to consume more than they produce. The total debt will exceed $6 trillion by the end of 2006.

At the same time, our ability to finance this debt is shrinking, and with it our economic security. By running such massive deficits, the United States is shifting resources in record amounts out of export and import-competing industries, like autoparts and software, where worker productivity and investments in R&D are high, into non-trade competing activities, like restaurants and retirement homes. This lowers GDP immediately and cripples future growth.

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Unfortunately, many U.S. multinationals, like GE, Caterpillar and GM are making huge profits in the protected Chinese market, and President Bush is reluctant to disappoint his strongest supporters.

Branding his critics protectionists, instead of the Chinese, the President appeases his domestic allies and foreign powers to the peril of the nation.

http://www.finfacts.com/irelandbusinessnews/publish/article_10007410.shtml