Following Passage of Critical Amendment Senator Asks Secretary to Recognize the Dangers
WASHINGTON Shortly after the U.S. Senate passed Senator John Cornyns (R-Texas) amendment to mandate risk assessments regarding U.S. debt held by foreign governments he pressed Treasury Secretary Timothy Geithner on the issue during todays Senate Finance Committee hearing entitled U.S.China Economic Relationship: A New Approach for A New China."
My amendment will help ensure that Congress and the American people are kept fully informed on the economic and national security risks posed by Chinas and other nations enormous holdings of U.S. debt" Senator Cornyn said. Reckless deficit spending represents not only a fiscal crisis but also a growing threat to national security. My hope is that this legislation will make our nation safer and provide a reality check for those intent on continuing to ignore Americans who want us to rein in out of control Washington spending."
The U.S. federal governments deficit spending has exacerbated the dependence of the U.S. on foreign creditors. Currently China is the single largest holder of U.S. Treasury securities which are sold to finance the federal budget deficit. Chinas reported holdings are over $895 billion. However the true level of Chinese holdings of U.S. debt is unknown due to poor transparency regarding the nationality of the ultimate holders of U.S. Government securities. Some estimates on Chinas true level of holdings put it close to $1.3 trillion.
Some Chinese government officials have suggested that China could use its massive U.S. debt holdings to retaliate against U.S. policies they oppose. In response to a recent U.S. sale of defensive weapons systems to Taiwan an official of Chinas Peoples Liberation Army warned that China might sanction the U.S. by dumping" U.S. government bonds. A rapid Chinese divestment of U.S. debt holdings would have a destabilizing effect on the U.S. economy and national security.
Senator Cornyns amendment (S.A.4302) which passed the Senate last night aims to equip U.S. policymakers with clear information on emerging U.S. deficit policy concerns. The amendment requires the President to provide regular analysis of the national security and economic implications of foreign holdings of U.S. Government bonds notes and Treasury bills.
It also mandates a new annual report by the Government Accountability Office assessing the economic and security risks posed to our nation by the ballooning national debt. After the Senate majoritys attempt to table the amendment failed by a bipartisan majority vote of 38-61 the amendment passed overwhelmingly on a voice vote. It amends the tax extenders bill the American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213).
