Barack Obama and Hillary Clinton each said something smart about the budget deficit last week. Let's hope Americans were listening.
While in Beijing, Clinton thanked the Chinese for buying our debt. At first glance, that wouldn't seem like a very big deal; US officials have been presumably thanking them behind closed doors for years. But Clinton did it publicly, which means that it wasn't just China's leaders who heard her, but average Americans as well. That's important because most Americans still don't think of China as our bank: the country whose willingness to purchase US Treasury bonds allows us to run up massive deficits without short-term pain. When people in Congress or on TV talk about US policy toward China, they often conveniently ignore that. They propose that we pressure China to improve its human-rights policy, or to get tougher on Iran, or to devalue its currency. What Clinton was telling Americans--in an indirect way--was that we can't pressure China to do squat. Yes, they need us: We're a big market for their goods and we're still a good place to invest. But they can find other places to invest more easily than we can find other investors. It's better to be a global creditor than a global borrower, as Americans knew back in the 1920s when our investments propped up the economies of World War I-ravaged Europe.