Really Bad Reporting that Paints a Not-So-Scary Picture

A story on Yahoo! Finance today (you can read it HERE) struck me as being a particularly shoddy and misleading piece of work.  The author attempts (in a marginally tongue-in-cheek fashion) to associate the amounts of foreign-owned US Government debt that the holders could trade in to "buy" portions of United States as thier settlement.

Okay, so first, not really funny, or a joking matter right off the bat.  Our Debt Addiction is serious business, and the consequences could be severe.

Next, the model the author uses is just plain silly: He asserts that the value of the pieces of the US that would be ficticiously "sold," mostly different states, is equal to exactly 1 times the GDP for the respective state.  That's like saying that you would buy a house for the price of what the residents earn in wages every year! 

So a family earns $90,000 and lives in house with a market value of $250,000 would sell the house for $90,000?  That's just dumb.  How much the people who live in the home earn (their GDP) has no bearing on the intrinsic value of the property.  For instance, if that property happened to be sitting on top of a bunch of oil, or gold, or other land-based valuables that $250,000 house and land could be worth millions, even though the "GDP" of the household is only $90,000.

Finally, a kudo to the author: He actually lists out the specific amounts of US debt purchased by the top 10 foreign government holders.  It turns out that China, whom I would have assumed we would be into for trillions of dollars, actually only holds less than $900 billion of our debt.  That's a HUGE number, to be sure, and it's also less than I had feared.

The number 10 on the list holds a total of $106 billion in US debt.  Again, a huge number but, dare I say, manageable??  I think these could could be paid off!  Our Federal budget is over $3 trillion, so we could pay that back by cutting back less than 3%.  We could do that, right?

So in the end, trying to scare us with ridiculous comparisons that have no basis in any kind of economic reality just to gin up some readers seems to have backfired a bit. You (the story's author) actually removed some of the fear. Even though I know that's not what you intended - THANKS!

Now, the truth is that we are, right now, trying to borrow nearly half of the total federal budget just for this year.  The truth is that until we get to a balanced budget, as painful as that may be in the short term, we have no hope of whittling down one dime of our debt.

And the plain, old truth is that - while the numbers may be astronomincal - we got ourselves into this hole, and we can get ourselves out.  We just need to get started.