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A Project of The Annenberg Public Policy Center

Biden Bungles Talking Point on Debt

Joe Biden mistakenly claimed Americans own 85 percent of U.S. Treasury securities during his visit to China. Americans own 54 percent of the U.S. public debt — that is, the amount of debt held by the public. They own 69 percent of the total debt, which includes money the U.S. government owes itself.

At several stops in China, Vice President Biden sought to reassure the Chinese that their investments in U.S. treasuries are safe. Biden's reassurances — including his mistaken claim about how much of the treasuries are owned by Americans — had been widely reported, including by ABC News, Bloomberg News and the Washington Post.

At a press conference, Biden told Chinese Premier Wen Jiabao that the U.S. has good reason to "take care" of its debt.

Biden, Aug. 19: And I’m anxious to talk to you about both our economies and how we can work together. But I point out U.S. treasuries, we’re going to — we’re going to take care of very closely not merely because China owns 8 percent of them, but because the Americans own 85 percent.

We asked Biden's office for an explanation, and a spokeswoman acknowledged that he transposed some numbers. His office told us that Americans hold 87 percent of all U.S. financial assets — including stocks, bonds and bank loans — and that Biden was thinking of that number. But the vice president offered his reassurances about U.S. treasuries, not stock holdings and bank loans, in response to the recent downgrade of the country's credit rating.

Biden was right when he said the Chinese hold 8 percent of U.S. treasuries — nearly $1.2 trillion — measured as a percentage of the $14.3 trillion total debt (as of the end of June, the most recent time for which we have figures for foreign holdings of U.S. treasuries). But the total debt includes $4.6 trillion that the federal government owes itself. The most relevant standard for comparison here is the debt held by the public, which was $9.7 trillion. That's the total amount of Treasury securities owned by banks, pension funds, individuals and others outside the U.S. government. Of the public debt, China owns 12 percent. Overall, foreigners own $4.5 trillion, or about 46 percent, of the public debt, which means Americans own 54 percent of it — substantially less than Biden told his Chinese hosts.

After we contacted the vice president's office, Biden got it right on the last stop of his four-day trip to China during a speech to students at Sichuan University.

Biden, Aug. 21: Please understand that no one cares more about this than we do, since Americans own 87 percent of all our financial assets and 69 percent of all our Treasury bonds, while China owns 1 percent of our financial assets and 8 percent of our Treasury bills, respectively.

Even so, later in that same speech, the vice president once again bungled his talking point:

Biden, Aug. 21: In order for us not to make good on China’s debt, we would have to disappoint tens of millions of Americans who own 85 percent of that debt. And just in pure political terms, no politician wants to do that. You're safe.

— Eugene Kiely