Thought this article very interesting.  Especially with information cited coming from notable sources.  This among so many other issues can only leave us wondering how much misinformation we are fed . . . or simply on the face of it, how much we choose to believe.

 

At a conference in Philadelphia last October, a Wharton professor noted that one of the country’s biggest economic problems is a tsunami of misinformation. You can’t have a rational debate when facts are so easily supplanted by overreaching statements, broad generalizations, and misconceptions. And if you can’t have a rational debate, how does anything important get done? As author William Feather once advised, “Beware of the person who can’t be bothered by details.” There seems to be no shortage of those people lately.

Here are three misconceptions that need to be put to rest.

Misconception No. 1: Most of what Americans spend their money on is made in China.

Fact: Just 2.7% of personal consumption expenditures go to Chinese-made goods and services. 88.5% of U.S. consumer spending is on American-made goods and services. I used that statistic in a recent article, and the response from readers was overwhelming: Hogwash. People just didn’t believe it.

 

The figure comes from a Federal Reserve report. You can read it here.

 

The Bureau of Labor Statistics closely tracks how an average American spends their money in an annual report called the Consumer Expenditure Survey. In 2010, the average American spent 34% of their income on housing, 13% on food, 11% on insurance and pensions, 7% on health care, and 2% on education. Those categories alone make up nearly 70% of total spending, and are comprised almost entirely of American-made goods and services (only 7% of food is imported, according to the USDA).
Even when looking at physical goods alone, Chinese imports still account for just a small fraction of U.S. spending. Just 6.4% of nondurable goods — things like food, clothing and toys — purchased in the U.S. are made in China; 76.2% are made in America. For durable goods — things like cars and furniture — 12% are made in China; 66.6% are made in America.

Another way to grasp the value of Chinese-made goods is to look at imports. The U.S. imported $399 billion worth of goods from China last year, which is 2.7% of our $14.5 trillion economy. Is that a lot? Yes. Is it most of what we spend our money on? Not by a long shot.

 

 

Misconception No. 2:We owe most of our debt to China.

Fact: China owns 7.6% of U.S. government debt outstanding.

As of November, China owned $1.13 trillion of Treasuries. Government debt stood at $14.9 trillion that month. That’s 7.6%.

Who owns the rest? The largest holder of U.S. debt is the federal government itself. Various government trust funds like the Social Security trust fund own about $4.4 trillion worth of Treasury securities. The Federal Reserve owns another $1.6 trillion.

Both are unique owners: Interest paid on debt held by federal trust funds is used to cover a portion of federal spending, and the vast majority of interest earned by the Federal Reserve is remitted back to the U.S. Treasury.

The rest of our debt is owned by state and local governments ($700 billion), private domestic investors ($3.1 trillion), and other non-Chinese foreign investors ($3.5 trillion).

Does China own a lot of our debt? Yes, but it’s a qualified yes. Of all Treasury debt held by foreigners, China is indeed the largest owner ($1.13 trillion), followed by Japan $1 trillion) and the U.K. ($429 billion).

Right there, you can see that Japan and the U.K. combined own more U.S. debt than China. Now, how many times have you heard someone say that we borrow an inordinate amount of money from Japan and the U.K.? I never have. But how often do you hear some version of the “China is our banker” line? Too often, I’d say.

Misconception No. 3:We get most of our oil from the Middle East. Fact: Just 9.8% of oil consumed in the U.S. comes from the Middle East.

According the U.S. Energy Information Administration, the U.S. consumes 19.2 million barrels of petroleum products per day. Of that amount, a net 49% is produced domestically. The rest is imported.

Where is it imported from? Only a small fraction comes from the Middle East, and that fraction has been declining in recent years. Last year, imports from the Persian Gulf region — which includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates — made up 9.8% of total petroleum supplied to the U.S. In 2001, that number was 14.1%.

The U.S. imports more than twice as much petroleum from Canada and Mexico than it does from the Middle East. Add in the share produced domestically, and the majority of petroleum consumed in the U.S. comes from North America.

This isn’t to belittle our energy situation. The nation still relies on imports for about half of its oil. That’s bad. But should the Middle East get the attention it does when we talk about oil reliance? In terms of security and geopolitical stability, perhaps. In terms of volume, probably not.