No. of Recommendations: 38
In 2003, the foreign ownership that Buffett provincially bemoaned was $2.5Trillion more ownership by foreigners of US debt and equity than American's owned of Foreign debt and equity. In 2025, that difference is more like $25Trillion, amounting to about 1/7 the "Market Cap" of the USA being owned by Foreigners without a countervailing amount of equity owned by American's in the rest of the world.
I guess I am more provincial and protectionist myself in 2025 than Buffett was in 2003. But I would very much like to have it explained to me just why neither Buffett nor I ought to be concerned with, as Buffett put it, selling and/or mortgaging pieces of the country off to support THIS generation's consumption at the cost of some future generation having to pay foreigners rent for living in the USA.
It is entirely reasonable to want to fix this.
But protectionism won't help, nor will tariffs, capital controls, nor building more factories, nor taking over other countries, nor devaluation. They have all been tried in a number of places, over and over, along with other magical fixes.
US individuals and government, together, simply spend more than they make. With only a pinch of simplification, the difference is borrowed from abroad. It's not such a difficult concept.
An increased individual savings rate would help, but there is no simple way to arrange that. However a modest tax rise would fix it all. There is no need to pay off all the debt, as all you need is to get the rate of increase of government debt lower than the trend rate of GDP growth and the problem fades away. Back of the envelope, I estimate a US national VAT of 5-7% on all goods and services (other than the usual like food and rent) would make the debt problem go away. Pretty much right away, too, as observers would see the new direction of travel.
Current policies are burning down the forest to find the gold, but it's not even the right forest.
Jim
* someone with a bit of care for the poorest would make the rate 1.3% higher, and send $600 cheques to every household annually. Back of a different envelope, that would leave the bottom ~15% of households slightly better off, not worse. There might even be a bit of money left over to fund some of the necessary things often being ignored, like repairing bridges, or pensions promised a few years in the future.
