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3 Common Economic Myths

The counterintuitive reality of America’s debt, trade deficits, and more

June 2023

Script

A lot of what we think we know about America’s role in the global economy … may not be true.

For instance, there’s a common notion that much of America’s national debt is held by China. The reality? Not so much.

In truth, most of the federal government’s debt (about 70%) is held by Americans.i China only holds a little over 4% of our debt — and isn’t even the leading country on that front.ii

The country that holds the most American debt: Japan.iii (Though even they only have about 5.5%.)

Another mistaken belief: America is dependent on Middle Eastern oil. In fact, the country from which America imports by far the most petroleum is Canada.iv

Our neighbors to the north provided 51% of our petroleum imports in 2021. Saudi Arabia, by contrast, provided 3%.

Perhaps the most confusing economic issue: trade deficits.

A trade deficit occurs when a country imports more goods than it exports. There’s a common belief that if the U.S. is running trade deficits, we must be getting poorer.

In reality, however, the U.S. has run trade deficits through the majority of its history.v

And trade deficits are often higher when the economy is strong.vi

As a result, most economists say trade deficits don’t tell us much about the strength of the economy.vii

 

WHAT YOU NEED TO KNOW:

  1. China only holds a little over 4% of America’s national debt.
  2. The United States imports vastly more petroleum from Canada than it does from Saudi Arabia.
  3. Most economists think trade deficits don’t actually tell us much about the health of the economy.

Source(s)

  1. The Federal Government Has Borrowed Trillions, but Who Owns All That Debt? — Peter G. Peterson Foundation
  2. "2022 Chart Book Examines Spending, Taxes, and Deficits" (Brian Riedl) — Manhattan Institute, p. 20
  3. Ibid.
  4. Oil and Petroleum Products Explained — U.S. Energy Information Administration
  5. "Historical U.S. Trade Deficits" (Brian Reinbold, Yi Wen) — Federal Reserve Bank of St. Louis
  6. "The U.S. Trade Deficit: How Much Does It Matter?" (James McBride, Andrew Chatzky) — Council on Foreign Relations
  7. "Trump Hates the Trade Deficit. Most Economists Don’t." (Jim Tankersley) — New York Times

Shownotes

SOUND: "Don’t Come Around" (Erik Vargas)

FOOTAGE:  Madison Kaminski (Unsplash) // CITED SOURCES AND NEWS OUTLETS ARE NOT AFFILIATED WITH AND HAVE NOT ENDORSED OR SPONSORED ANY PORTION OF THIS PRODUCTION.

Sources

  1. Peter G. Peterson Foundation
    The Federal Government Has Borrowed Trillions, but Who Owns All That Debt?
  2. Manhattan Institute
    "2022 Chart Book Examines Spending, Taxes, and Deficits" (Brian Riedl), p. 20
  3. U.S. Energy Information Administration
    Oil and Petroleum Products Explained
  4. Federal Reserve Bank of St. Louis
    "Historical U.S. Trade Deficits" (Brian Reinbold, Yi Wen)
  5. Council on Foreign Relations
    "The U.S. Trade Deficit: How Much Does It Matter?" (James McBride, Andrew Chatzky)
  6. New York Times
    "Trump Hates the Trade Deficit. Most Economists Don’t." (Jim Tankersley)

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