How Does Our Debt Affect America's Foreign Policy?

Oct 15, 2012

During the final debates, it's up to us to pay attention to how our presidential candidates’ plans could impact America's future. While the budget and economy were already major topics, the upcoming debates will highlight national security and a range of other issues — both foreign and domestic — that also have implications for our long-term fiscal health.

Admiral Mike Mullen has called America's unsustainable long-term debt "the single, biggest threat to our national security." The former Chairman of the Joint Chiefs of Staff points out that an economically weakened U.S. is more vulnerable to national security threats and may not have the resources necessary to counter them. Will the candidates strengthen our economy by addressing America's long-term fiscal challenges, thereby taking a necessary step to keep America safe?

It’s important to think strategically about our national security needs and spend appropriately to counter the threats of today and tomorrow, not the threats of the past. The United States currently spends more on defense than the next 13 countries combined. Will it be necessary to maintain spending at that level to keep America secure in the future? And if Congress and the President decide to reduce defense spending, what is the best way to do that? The upcoming spending cuts set to be implemented as part of the fiscal cliff could take a sizable bite out of defense spending — but without any regard for national security strategy or priorities.

THE U.S. SPENT MORE ON DEFENSE IN 2011 THAN DID THE COUNTRIES WITH THE NEXT 13 HIGHEST DEFENSE BUDGETS COMBINED

SOURCE: Data from Stockholm International Peace Research Institute, SIPRI Military Expenditure Database. Compiled by PGPF.
NOTE: Dollar figures are in billions of 2011 constant U.S. dollars.

Here are some additional facts to help understand the interplay between our debt and foreign policy. Consider the implications and these questions as you listen to the candidates debate.

FACT: Defense spending currently accounts for about 20% of all federal spending — nearly as much as Social Security.
What priority do the candidates place on defense relative to other national needs?

FACT: Nearly half of U.S. debt is owned by foreign lenders. Our dependence on foreign lenders to finance the public debt has risen sharply since 1970, when it was 5%.
Could this give other countries leverage over our policy choices in the future?

FACT: Contrary to many people’s assumptions, foreign aid comprises about 1% of the total federal budget and is not a major driver of our long-term structural deficits.
What are the candidates' views on foreign aid?

U.S. DEPENDENCY ON FOREIGN LENDERS TO FINANCE THE PUBLIC DEBT HAS RISEN SHARPLY

SOURCES: Data from the Office of Management and Budget, The Budget of the United States Government, Fiscal Year 2013, Analytical Perspectives, February 2012. Compiled by PGPF.

We cannot effectively address our long-term fiscal challenges without examining all aspects of our budget. America’s role in global affairs is a major factor for policymakers to consider in devising a comprehensive approach to long-term economic strength and fiscal sustainability. How the candidates view issues of security and diplomacy are a key part of how they plan to address the country’s broader economic issues. We need fiscal and economic security in order to have real national security and a standing in the world.

Join PGPF on Facebook to discuss these and other issues impacting America’s fiscal health.

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