1.This Act may be cited as the
Foreign-Held Debt Transparency and
Threat Assessment Act
.
2.Congress makes the following
findings:
(1)On March 16, 2006,
the United States Senate debated and then narrowly passed legislation, H. J.
Res. 47 (109th Congress), to increase the statutory limit on the public debt of
the United States. In a statement published in the Congressional Record,
then-Senator Barack Obama opposed the legislation and stated, The fact
that we are here today to debate raising America’s debt limit is a sign of
leadership failure. It is a sign that the U.S. Government can’t pay its own
bills. It is a sign that we now depend on ongoing financial assistance from
foreign countries to finance our Government’s reckless fiscal
policies.
. Then-Senator Obama went on to say that Increasing
America’s debt weakens us domestically and internationally. Leadership means
that the buck stops here
. Instead, Washington is shifting the
burden of bad choices today onto the backs of our children and grandchildren.
America has a debt problem and a failure of leadership. Americans deserve
better.
.
(2)On February 25,
2010, United States Secretary of State, Hillary Rodham Clinton, urged members
of Congress to address the Federal budget deficit: We have to address
this deficit and the debt of the United States as a matter of national security
not only as a matter of economics. I do not like to be in a position where the
United States is a debtor nation to the extent that we are.
. The
Secretary went on to say that reliance on foreign creditors has hit the United
States ability to protect our security, to manage difficult problems and
to show the leadership that we deserve.
.
(3)The Department of
the Treasury borrows from the private economy by selling securities, including
Treasury bills, notes, and bonds, in order to finance the Federal budget
deficit. This additional borrowing to finance the deficit adds to the Federal
debt.
(4)The Federal debt
stands at more than $12,863,000,000,000.
(5)According to a
report issued by the Department of the Treasury on April 15, 2010, entitled
Major Foreign Holders of Treasury Securities
, foreign holdings
of United States Treasury securities stood at more than $3,750,000,000,000 at
the end of February 2010. China was the single largest holder with holdings of
more than $877,000,000,000.
(6)Despite efforts by
the Department of the Treasury to identify the nationality of the ultimate
holders of United States securities, including United States Treasury
securities, data pertaining to foreign holders of these securities may still
fail to reflect the true nationality of the foreign entities involved. For
example, another Department of the Treasury report, issued on February 26,
2010, entitled Preliminary Report on Foreign Holdings of U.S. Securities
At End—June 2009
, assigns nearly $650,000,000,000 worth of United
States securities to the Cayman Islands, a British overseas territory with a
population of only 55,000 people. The Cayman Islands is not itself a large
investor in United States securities; rather, it is a major international
financial center and is routinely used as a place to invest funds from
elsewhere.
(7)Despite efforts by
the Department of the Treasury to provide more timely information, the data
that the Department releases is typically outdated. For example, the latest
figures in the February 26, 2010, report on all United States securities were 8
months old.
(8)On February 25,
2010, Simon Johnson, an economics professor at the Massachusetts Institute of
Technology and a former chief economist for the International Monetary Fund,
testified before the U.S.-China Economic and Security Review Commission that
United States Treasury data understate Chinese holdings of United States
Government debt and do not reveal the ultimate country of ownership when
[debt] instruments are held through an intermediary in another
jurisdiction.
. He stated that a great deal
of the United
Kingdom’s increase in United States Treasury securities last year may be
due to China placing offshore dollars in London-based banks
, which are
then used to purchase United States Treasury securities.
(9)On February 25,
2010, Dr. Eswar Prasad, an economist at Cornell University, testified before
the U.S.-China Economic and Security Review Commission that the amount of
United States debt held by the People’s Republic of China is much higher than
United States Treasury data indicate. In his revised testimony, Dr. Prasad went
on to explain that China is probably currently holding more than
$1,300,000,000,000 in United States Treasury securities.
(10)According to a
February 3, 2009, report by the Heritage Foundation, entitled Chinese
Foreign Investment: Insist on Transparency
, the State Administration of
Foreign Exchange (SAFE) of the People’s Republic of China, the government body
that purchases foreign securities, is the single largest global investor and
the largest foreign investor in the United States.
(11)According to the
February 3, 2009, report, although the People’s Republic of China has embraced
the Generally Accepted Principles and Practices for Sovereign Wealth guided by
the International Monetary Fund, China's actual outward-investment practices
are far from transparent.
(12)On March 13,
2009, Chinese Premier Wen Jiabao demanded that the Obama Administration
guarantee the safety
of American bonds, stating, We have
lent a huge amount of money to the U.S.
.
(13)According to the
Department of Defense’s 2009 report to Congress entitled, Military Power
of the People’s Republic of China
, the leaders and strategists of the
People’s Liberation Army (PLA) often consider China’s strategy in terms of
building comprehensive national power
. The report contends that
China’s growing regional and global economic stature will result in a
more active external posture in which it [China] demonstrates a willingness to
assert its interests …
.
(14)Additionally, the
Department of Defense report states that, China’s sustained economic
growth … has enabled China to focus greater resources on building, equipping,
and training the PLA without overwhelming the economy.
. Though the
PLA’s official budget has more than doubled from $27,900,000,000 in 2000 to
$60,100,000,000 in 2008, the report states that the official budget does
not capture the totality of military expenditure.
. The report maintains
that, Continued economic development, central to China’s emergence as a
regional and global power, remains the foundation of the [Chinese Communist]
Party’s popular legitimacy and underwrites its military power.
.
(15)On January 29,
2010, the Department of Defense notified Congress of its intent to sell various
defensive arms, valued at $6,400,000,000, under the Foreign Military Sales
program to Taiwan in accordance with the Taiwan Relations Act (22 U.S.C. 3301
et seq.).
(16)On February 2,
2010, at a semiweekly media briefing, Ma Zhaoxu, spokesman of China’s foreign
ministry, criticized these pending arms sales to Taiwan, threatening sanctions
against United States companies involved in the sales.
(17)PLA officials
have publicized the potential use of United States Treasury securities as a
means of influencing United States policy and deterring specific United States
actions. On February 8, 2010, retired PLA Major General Luo Yuan, from the PLA
Academy of Military Science, stated in an interview with state-controlled media
that China could attack the United States by oblique means and stealthy
feints
, in retaliation for United States arms sales to Taiwan. He went
on to say, Our retaliation should not be restricted to merely military
matters, and we should adopt a strategic package of counterpunches covering
politics, military affairs, diplomacy and economics to treat both the symptoms
and root cause of this disease. For example, we could sanction them using
economic means, such as dumping some U.S. government bonds.
.
(18)The PLA has also
referenced the concept of nonmilitary aspects of deterrence in written
statements. As a PLA textbook, The Science of Military Strategy
,
observes, there are various forms of deterrence, including economic and
technological, all of which need to be developed and consciously strengthened
in order to maximize effect. These forms will only work with the
determination and volition of employment of the force, and by dangling the word
of deterrence over the rival’s head in case of necessity.
.
3.In this Act:
(1)Appropriate
congressional committeesThe term appropriate congressional
committees means the following:
(A)The Committee on
Armed Services, the Committee on Foreign Relations, the Committee on Finance,
and the Committee on the Budget of the Senate.
(B)The Committee on
Armed Services, the Committee on Foreign Affairs, the Committee on Ways and
Means, and the Committee on the Budget of the House of Representatives.
(2)Debt instruments
of the United StatesThe term
debt instruments of the United States means all bills, notes, and
bonds issued or guaranteed by the United States or by an entity of the United
States Government, including any Government-sponsored enterprise.
4.It is the sense of
Congress that—
(1)the growing
Federal debt of the United States has the potential to jeopardize the national
security and economic stability of the United States;
(2)the increasing
dependence of the United States on foreign creditors has the potential to make
the United States vulnerable to undue influence by certain foreign creditors in
national security and economic policymaking;
(3)the People’s
Republic of China is the largest foreign creditor of the United States, in
terms of its overall holdings of debt instruments of the United States;
(4)the current level
of transparency in the scope and extent of foreign holdings of debt instruments
of the United States is inadequate and needs to be improved, particularly
regarding the holdings of the People’s Republic of China;
(5)through the
People’s Republic of China's large holdings of debt instruments of the United
States, China has become a super creditor of the United States;
(6)under certain
circumstances, the holdings of the People’s Republic of China could give China
a tool with which China can try to manipulate the domestic and foreign
policymaking of the United States, including the United States relationship
with Taiwan;
(7)under certain
circumstances, if the People’s Republic of China were to be displeased with a
given United States policy or action, China could attempt to destabilize the
United States economy by rapidly divesting large portions of China’s holdings
of debt instruments of the United States; and
(8)the People’s
Republic of China’s expansive holdings of such debt instruments of the United
States could potentially pose a direct threat to the United States economy and
to United States national security. This potential threat is a significant
issue that warrants further analysis and evaluation.
5.Quarterly report
on risks posed by foreign holdings of debt instruments of the United
States
(a)Not later than March 31, June 30, September 30, and
December 31 of each year, the President shall submit to the appropriate
congressional committees a report on the risks posed by foreign holdings of
debt instruments of the United States, in both classified and unclassified
form.
(b)Each report submitted under this section shall include
the following:
(1)The most recent
data available on foreign holdings of debt instruments of the United States,
which data shall not be older than the date that is 7 months preceding the date
of the report.
(2)The country of
domicile of all foreign creditors who hold debt instruments of the United
States.
(3)The total amount
of debt instruments of the United States that are held by the foreign
creditors, broken out by the creditors’ country of domicile and by public,
quasi-public, and private creditors.
(4)For each foreign
country listed in paragraph (3)—
(A)an analysis of the
country’s purpose in holding debt instruments of the United States and
long-term intentions with regard to such debt instruments;
(B)an analysis of the
current and foreseeable risks to the long-term national security and economic
stability of the United States posed by each country’s holdings of debt
instruments of the United States; and
(C)a specific
determination of whether the level of risk identified under subparagraph (B) is
acceptable or unacceptable.
(c)The President shall make each report required by
subsection (a) available, in its unclassified form, to the public by posting it
on the Internet in a conspicuous manner and location.
6.Annual report on
risks posed by the Federal debt of the United States
(a)Not later than December 31 of each year, the Comptroller
General of the United States shall submit to the appropriate congressional
committees a report on the risks to the United States posed by the Federal debt
of the United States.
(b)Each report submitted under this section shall include the
following:
(1)An analysis of the
current and foreseeable risks to the long-term national security and economic
stability of the United States posed by the Federal debt of the United
States.
(2)A
specific determination of whether the levels of risk identified under paragraph
(1) are sustainable.
(3)If the
determination under paragraph (2) is that the levels of risk are unsustainable,
specific recommendations for reducing the levels of risk to sustainable levels,
in a manner that results in a reduction in Federal spending.
7.Corrective action
to address unacceptable and unsustainable risks to United States national
security and economic stabilityIn any case in which the President
determines under section 5(b)(4)(C) that a foreign country’s holdings of debt
instruments of the United States pose an unacceptable risk to the long-term
national security or economic stability of the United States, or the
Comptroller General of the United States makes a determination under section
6(b)(3), the President shall, within 30 days of the determination—
(1)formulate a plan
of action to reduce the risk level to an acceptable and sustainable level, in a
manner that results in a reduction in Federal spending;
(2)submit to the
appropriate congressional committees a report on the plan of action that
includes a time line for the implementation of the plan and recommendations for
any legislative action that would be required to fully implement the plan;
and
(3)move expeditiously
to implement the plan in order to protect the long-term national security and
economic stability of the United States.