Super Bowl Fact-Check: Pledging Allegiance to China? Nope.

Last night's NFL Championship game provided many instructional moments for politics. For one, President Barack Obama could learn strategy from Saints' Coach Sean Payton, who turned the game around with his bold play-calling, particularly an on-sides kick to start the second half.

Unfortunately, the political ads were not so enlightening. The controversial anti-choice ad from Tim Tebow and his mother didn't seem as pernicious as we all expected due to vague language and the weird decision to have Tebow fake-tackle his mom. But another ad, run by one of Rick Berman's astroturf shops, the Employment Policies Institute, was a classic debt-scare, featuring children reciting an altered pledge of allegiance: "I pledge allegiance to America's debt, and to the Chinese government that lends us money. And to the interest, for which we pay, compoundable, with higher taxes and lower pay until the day we die."

Oh noes! Except that this is way over-hyped, especially the pledging allegiance to the Chinese government. Shall we go to the chart?

more-vulnerable-question-reserves-v-trade.png

The chart is from this excellent Brad Setser post which explains why we relied more heavily on China in 2006 and 2007 than we did last summer -- basically, because of the recession's effect on trade and the fact that many U.S. bondholders are private. Even though that data is a bit older, right now, the Chinese only own 22 percent of America's public debt. True, China owns the most of any single country, but that also makes sense given they're the third largest national economy in the world (Japan, for instance, holds comparably high U.S. reserves). And as I've written before, China can't do much to hurt us with that debt unless they are willing to hurt themselves.

The deficits needed to get us out of the this recession are pretty easy to finance thanks to low interest rates and the fact that the vast majority of the current deficit was inherited by the current administration. But you didn't hear Rick Berman and the rest of the debt-scare crew complaining about China taking over the country when we were even more in hock three or four years ago.

-- Tim Fernholz

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