Many (most?) “deficit hawks” invoke China as a reason to reduce government debt. The hawks say something like this: “China holds a lot of our debt and, presumably, will buy more of it, which means that ‘we’ are beholden to China.”

By that logic, China is beholden to “us” because China’s purchases of U.S. government debt are financed by Americans’ purchases of Chinese products. Moreover, there is not (as far as I know) a provision in U.S. securities that enables the holder to demand payment before the securities mature.

The real “threat” is that U.S. securities will become unattractive to China (and others), and so China (and others) will quit buying them. But that possibility has nothing to do with China (or any other foreign nation), and everything to do with prospective debt-buyers’ views about the soundness of U.S. government securities. A case in point is PIMCO, a huge investment company. Bloomberg News reports:

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits.

The economic threat to the U.S. doesn’t come from China, it comes from the U.S. government.