U.S. Becomes the World’s Largest Debtor Country
The United States became the world’s largest debtor country in 1985, the first time America has slipped into the status of a net debtor since the early part of the century, the government confirmed today.
Simply stated, the numbers mean that foreigners now own more U.S. investments than Americans have in foreign investments.
The Commerce Department said the country’s international investment position was a negative $107.4 billion at the end of the year.
This marked a dramatic turnaround from the country’s position at the end of 1984, when the United States enjoyed a surplus on its investments of $4.4 billion. This was a revision from an earlier report that had put the 1984 surplus at $28.2 billion.
According to official government statistics going back to 1919, this situation has never occurred. But a private study cited by the government shows the United States was last a net debtor in 1914, when the debt was a much smaller $2.2 billion.
While officials have been predicting for more than a year that the United States became a net debtor in 1985, today’s report marked the first official confirmation. It also put the actual debt at a higher amount than had earlier estimates.
Last year, the U.S. debt surpassed those of the developing countries of Brazil and Mexico, which each owed about $100 billion.
There is disagreement over just how serious an economic problem is presented by the country’s new debtor status. President Reagan has said the change is not cause for concern, declaring that it shows the strength of the U.S. economy because of the large number of foreigners who want to invest here.
Some private economists, however, call the debt status worrisome. They say that it could reduce Americans’ standard of living as the United States has to send more money overseas to pay interest on foreign investments.
All economists agree that the situation will get worse before it gets better.