The Chinese official was perplexed.
“It seems clear that taxes have to go up as a share of GDP and spending has to go down. When is that going to happen?”
We were in a seminar room at the Chinese Executive Leadership Academy in Shanghai. It’s kind of an executive MBA center where rising Communist Party leaders come for training. I was there two weeks ago speaking about the future of capitalism. Since China holds more than $1.1 trillion of U.S. debt, the group was keen to learn when they could expect the United States to get its fiscal house in order.
I gave them the answer I generally give these days when asked that same question at home. Given Republicans’ denial about the need for taxes to rise as we double the number of seniors on Social Security and Medicare, and Democrats’ denial about the need to slow the growth of these huge programs as part of an overall fix, I explained, “We probably won’t get serious about taking these steps until our Chinese creditors tell us we have to.”
They laughed. But after the laugh you could tell my hosts also felt empowered. They have reason to feel that way. Yet from the American point of view, it’s not only not funny, it’s surreal.
According to the IMF, China’s GDP per capita is about $8,400. The United States’ is about $48,000. How can it be that a country nearly six times richer is relying on a country so poor to help finance its current consumption?
Maybe supercommittee members can answer that one as a bonus take-home essay now that they’ve flunked the in-class test.
Related surreal question: What does it say when Europe, where most nations have per-capita incomes ranging from $35,000 to $45,000, is also passing the tin cup to much poorer China in an attempt to backstop its recklessly leveraged banks and governments?
What more proof do we need of the decadence of the Western governing class?
You try sitting in Shanghai and listening to these questions and see if you don’t feel the same dawning sense that we’re squandering a precious inheritance.
“Is our money safe?”
“Is the Fed going to inflate so much that China gets back worthless dollars?”
“What do you think about moving beyond the dollar as the major reserve currency?”
You can see where this is headed.
I felt like I was in that brilliant “Saturday Night Live” sketch from November 2010, which lampooned President Obama’s joint press conference with Chinese president Hu Jintao. Obama starts by mentioning the many topics he raised with Hu, including China’s need to revalue its currency and address human rights, in a tone roughly similar to the one the real Obama sounded last week on his Asian tour, when he said China needed to “pick up the pace” of reform and “act like a grown-up.”
“President Obama is absolutely correct. In our meeting, we spoke candidly about a wide array of issues, everything under the sun,” Hu says through a translator. “The only thing we didn’t talk about is the matter of your country owing China a great deal of money. . . . I kept waiting for you to bring it up, and when you didn’t, I thought to myself, Did they already pay us back and I just forgot? Or perhaps the money arrived after I left for this conference. But I checked with my office and they haven’t received it.”
Obama repeatedly tries to reassure the Chinese leader.
“The U.S. fully intends to honor its debts.”
“So, did you bring the check?” Hu asks.
“I promise you, you’re going to get your money.”
“All right,” Hu says equably, “then that’s good enough for me. But say, do you mind if we turn off the lights. . . . I like to have the lights off when someone is doing sex to me!”
And there I was in Shanghai saying, “Your money is safe, not to worry, it’s all going to work out.” Life imitates “Saturday Night Live.”
The Chinese long believed that, however suspect we American capitalists might be, we certainly knew how to run a productive economy. Now, while they still admire much about our innovative energy and dynamism, they’ve become convinced since the 2008 meltdown that we plainly don’t know how to run a sound financial or banking system. And now it appears we can’t manage a budget, either.
China’s leaders, for all their flaws, are out to reclaim a great civilization’s place as a cultural and economic pacesetter. The way they see it, the Chinese were waylaid on a 200-year detour as the West surged ahead, but they’re coming back to their rightful place.
China’s governing class has its eye on history. Ours has its eye on the next election and next quarter’s earnings. If the time horizons remain this different, and the stewardship gap this huge, who’s a better bet to come out stronger in the decades ahead?
Matt Miller is a senior fellow at the Center for American Progress and co-host of public radio’s “Left, Right & Center.” He writes a weekly online column for The Post.