Quit trying to blame China for American decline

China didn't do anything but pick up what we dropped

Published March 31, 2010 1:32PM (EDT)

Here's an idea for how the U.S. can finally get a handle on its increasingly fraught relationship with China. Unlike other ideas gaining momentum -- such as pressuring China to revalue its currency upward, as insistently favored by New York Sen. Charles Schumer, New York Times columnist Paul Krugman, and others -- it doesn't involve threatening or cajoling the nascent Asian superpower into doing anything.

The idea is ... stop blaming China.

This is not to imply that China is undeserving of blame on a number of counts. No question, they cheat on currency; they manage their economy to a degree that disadvantages competitors; they have a long way to go on the environment; and they are an unapologetic menace to the Tibetans and Taiwanese. But there is an equally clear truth that American policy makers are much less fond of telling: When it comes to economic competitiveness, there isn't one hot-button issue on the Sino-American agenda that the U.S. could not significantly address all by itself -- if it genuinely felt compelled to do so.

For the moment, let's take at face value the popular notion that Americans find it intolerable that China holds so much U.S. debt. Not to put too fine a point on it, but might the U.S. consider not amassing quite so much? This is easier said than done, especially in the wake of a major recession and big-government bailouts that have exacerbated an already large structural deficit. But the American -- and Faustian -- bargain of combining popular-but-ill-advised spending with popular-but-ill-advised tax cuts predates the current crisis by decades. Politicians and public alike have enjoyed a comfy habit of borrowing their way out of painful choices, no matter who is in the role of creditor. Blasting the Chinese because we owe them a fortune is akin to railing at the casino for having cashed our paycheck and then offered us a seat at the roulette table.

Americans are also said to bristle at the U.S. trade deficit with China. But it is Americans who insist on buying cheap Chinese exports, and Americans who are absolutely free to cease doing so. Shiploads of consumer goods used to be too expensive for middle- and lower-income Americans to buy. If the U.S. wants those goods once again to be unaffordable, that can be arranged.

The worst for many Americans is the intangible yet unmistakable sense that America's best days are behind it – and that the Chinese are gaining the very ground that we are losing, especially in science and technology. But since when is America’s educational system or technological prowess dictated by Beijing? Is it some strange Chinese conspiracy that's caused U.S. schools to stagnate? Or is it a more familiar function of political and cultural complacency?

The U.S. could do a variety of straightforward things to redress imbalances with China. Yet it has never shown any genuine willingness to do so. Why not?

There are two possibilities. First, maybe all the posturing is simply political. Notwithstanding periodic bursts of bluster, American policy makers do not seem to feel any urgency to address the economic threat allegedly posed by China – at least not in a meaningful, disciplined way. What’s more, they'd be sensible not to. The lopsided debtor-creditor relationship, being a problem for both sides, is likely to steady itself. The trade deficit, once one considers factors such as the many products made in China by and for U.S. companies, does not look all that scary. The U.S. national debt does indeed loom large – but almost entirely for reasons that have everything to do with America and nothing to do with China. Meantime, when it comes to human capital, the U.S. faces a fraction of the challenges confronting China in the quest to create a high-skills, modern, flexible workforce. (But could it be that the U.S. also has a fraction of the will necessary to produce such a workforce?)

The second possibility is that the U.S. does, in fact, need to assert its power in dramatic fashion in order to contain China. In that case, perhaps it is time for America to get tough with China. But there’s not much point to that unless America gets tough with itself first.

By Tish Durkin

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China Federal Deficit U.s. Economy