China has faced no small degree of scrutiny for its handling of the COVID-19 pandemic—the way it has stifled press freedom and tried to silence medical professionals who spoke out early on, the way it has engaged in propaganda and tried to deflect blame—and it’s unquestionably deserved. But one response peddled by populist conservatives in the United States would have disastrous ramifications, economists warn.
Some Republicans have let their frustration with the Chinese Communist Party push them into embracing fringe policies such as “cancelling” the $1.09 trillion debt our government owes to China. “If the U.S. did anything to impair the liquidity of treasuries and have them stop being the gold standard of the financial system, it would make this crisis look like chicken feed. It would be a collapse of the global financial system, the onset of something worse than the Great Depression” said Douglas Holtz-Eakin, an economist who is president of the American Action Forum.
So how did the idea come about and who’s pushing it?
Back in April, Sen. Lindsey Graham of South Carolina floated it in numerous television interviews. “China needs to pay,” he said on Fox News. He argued that it’s time to start “canceling some debt that we owe to China, because they should be paying us, not us paying China.”