Three Dangerous Myths.

I think someone said this a long time ago, but for some reason Andy Rooney gets credit for it, “People will generally accept facts as truth only if the facts agree with what they already believe.”

Somehow, the American public has gotten three “facts” into their brains and they have become the bedrock on which way too many decisions, fear, paranoia, political beliefs and prejudices are based.

Those “facts” are:

1)      Most of America’s oil comes from the Middle East. Therefore, we are held hostage by rich Arabs.

2)      Most of what consumers buy is made in China. We buy nothing made in America anymore.

3)      China owns most of America’s debt. They bought it on purpose to control us.

Now, I know the following actual facts are going to surprise those who are reasonable, anger those who are not, and confound and confuse those who distrust government statistics, but nonetheless, here they are:

1)      Only 9.2% of oil consumed in America comes from the Middle East.

Fact: The U.S. consumes 19.2 million barrels of petroleum products per day (USEIA). 49% of those 19.2 million barrels (9.4 million) is produced domestically. The rest is imported. Where from? The Persian Gulf region has created and imported 9.2% of the total petroleum supplied to the U.S. in 2011. Back in 2001, that number was 14.1%. So, we are less dependent on Middle Eastern oil every year.

The U.S. imports more than twice as much petroleum from Canada and Mexico than it does from the Middle East. But, this is still not good – it means we are dependent on other countries for over half our oil. Just not the Arabs, whom everyone seems to think controls our oil supply. But, I have never heard anyone curse the damned Mexicans or Canadians for holding us hostage to their oil.

Second inconvenient, yet actual fact:

2)      Only 2.7% of what we personally consume are goods made in China. Almost 90% of US Consumer spending goes to goods made in America.

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. Now, of course, no one believes this as they can plainly see that almost everything in Wal-Mart is made in China. Remember that Wal-Mart generates $260 Billion in US revenue annually, but our total spending is close to $14.5 Trillion.

The Bureau of Labor Statistics tracks average American consumer spending 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 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). Want more proof? The U.S. is on track to import $340 Billion worth of goods from China in 2012, which is 2.3% of our $14.5 trillion economy.  That’s it.

And while we are on the subject, most of the skeptics will point to this equally wrong-headed notion that America’s manufacturing sector has been in steep decline. Another inconvenient fact is that America’s real manufacturing output is at an all-time high. What IS in decline is the number of manufacturing jobs required to create that output. Because we have figured out how to use technology, we now produce far more stuff with far fewer workers than we have done in the past. Sixty years ago, it took 30,000 people to produce 6 million tons of steel. It now takes 5,000 to produce 7.5 million.

All those jobs that have disappeared overseas? It seems they have disappeared in the exhaust of technology instead.

Third inconvenient actual fact:

3)      China only owns 7.8% of U.S. government debt. We own almost all the rest.

Fact: As of August of 2011, China owned $1.14 trillion of Treasuries. Government debt stood at $14.6 trillion that month. That’s 7.8%.

The largest holder of U.S. debt is the federal government itself. Various government trusts 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. In other words it is free debt.

The rest is owned by state and local governments ($700 billion), private domestic investors ($3.1 trillion), and other non-Chinese foreign investors ($3.5 trillion). In fact, the combined holdings of Japan and the UK are bigger than China’s holdings. I have never heard anyone say that we are owned by Japan or the UK, have you?


About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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