Top creditor China delivers unexpected fiscal demands to U.S. after historic credit downgrade
For months now late-night comedians have joked about China being the United States' largest creditor, more than $1.2 trillion in loans held by that country.
"Here's how bad our credit is now," Jay Leno said this week. "President Obama just asked China for another loan. But they won't give it to him unless his mother-in-law co-signs."
No more jokes now.
Following Friday's unprecedented credit downgrade of the federal government by Standard & Poor's (from AAA to AA+ with a negative outlook), China's official voice, the New China News Agency, demanded Saturday that America "learn to live within its means." And it suggested the U.S. might want to reduce its military defense spending further to make timely payments.
The agency's official commentary added:
China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets.
Merit aside, Americans are unaccustomed to such demands by other countries. Any national embarrassment or resentment could take the form of further damage to President Obama's job approval, now in the low forties, Americans' sense that the country is on the wrong track, now 66%, and on the Democrat's reelection chances on Nov. 6, 2012.
No immediate reaction from the White House in the predawn hours of Saturday.
However, in his weekly remarks released minutes ago, the president indicated he may have missed the point of weeks of budget-cutting negotiations, that "while deficit reduction has to be part of our economic strategy, it’s not the only thing we have to do."
Earlier in the week, after he signed the debt ceiling-budget cut plan, the Democrat outlined major new spending programs on infrastructure repairs and clean energy.
After a fundraising trip to Chicago this week and a pair of White House birthday parties for Obama's 50th, the president is spending the weekend at Camp David for a mini-vacation.
Vice President Joe Biden is also taking a few days off. But he is scheduled to depart on a three-nation Asian trip Aug. 16 with stops in Japan, Mongolia and China for meetings with Vice President Xi Jinping, Premier Wen Jiabao and President Hu Jintao.
Perhaps not surprisingly for China, which maintains a running, if sometime unspoken military competition with the United States, the commentary suggested that the giant Asian, loan-holding nation might be right to expect even further major reductions in U.S. defense spending to help pay off its existing debts to China.
The article warned:
If no substantial cuts were made to the U.S. gigantic military expenditure and bloated social welfare costs, the downgrade would prove to be only a prelude to more devastating credit rating cuts, which will further roil the global financial markets.
Let's see if the volatile topic of reducing American military might to suit its Chinese creditors erupts during Thursday's Republican debate in Iowa, in advance of next Saturday's Ames Straw Poll.
-- Andrew Malcolm
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Photo: David Gray / Reuters (Obama greets Chinese Premier Wen Jibao, 2009); Charles Dharapak / Associated Press (Obama poses on China's Great Wall, Nov. 2009).