U.S. Foreign Debt $368 Billion in ’87 : Nation Lengthens Lead as Largest Debtor Country

America’s foreign debt soared to $368.2 billion in 1987 as the country lengthened its lead as the world’s largest debtor nation, the government said today.

The Commerce Department said the new debt burden was 36.8% higher than a revised $269.2-billion debt to foreigners that the United States was carrying at the end of 1986.

The deterioration means that the country has a debt load greater than the total debt being carried by Brazil, Mexico and Argentina combined, the Third World countries with the largest debt burdens.

Simply put, the U.S. debt means that foreigners now own more in U.S. assets than Americans own abroad.

Increase of 14.6%

For 1987, the government reported that foreign holdings in the United States increased 14.6% to $1.54 trillion. This contrasted with a 9% rise in American investments overseas, which totaled $1.17 trillion at the end of 1987.

The difference between foreign investments in this country and American holdings overseas represents the $368.2-billion debt burden the country is carrying.

As recently as 1982, the United States was the world’s largest creditor nation with an investment surplus of $136.9 billion. But America’s investment surplus evaporated as the country ran up huge merchandise trade deficits during the 1980s, transferring billions of dollars into the hands of foreigners to pay for color televisions, stereo equipment and automobiles.

These dollars, now in foreign hands, have been reinvested in the United States in everything from U.S. government bonds to Los Angeles real estate. The country became a net debtor for the first time in 71 years in 1985 with an investment deficit of $110.7 billion.

Fuel for Election Debate

The new figures showing the country’s debt burden widening had been widely anticipated, but they were certain to heighten the debate in this presidential election year over what Democratic critics charge is one of the greatest failures of the Reagan presidency.

The rise in foreign investment in this country has sounded alarm bells and prompted calls in Congress for curbs on foreign purchases of U.S. companies and American real estate.

But President Reagan has maintained that the country’s debtor status is a sign of strength, showing the eagerness with which foreigners want to invest in America.

The Administration notes that the United States was a net debtor for most of the 19th Century with no bad effects as European capital helped to build railroads and factories.

Marked Difference Seen

But many private economists say there is a marked difference between the 19th-Century net debtor period and the present. In the last century, America was a developing country and needed foreign capital to become an industrial power. But during the 1980s, much of the foreign money has gone to finance a borrowing binge on the part of the federal government and consumers rather than being put into investments that would boost American productivity.

In another report today, the Commerce Department said orders to U.S. factories for manufactured goods suffered their steepest decline in nine months during May. But analysts said there is little cause for concern.

The agency said orders for both durable and non-durable goods fell 0.6%, or $1.36 billion, to a seasonally adjusted $217.97 billion in May. This followed gains of 1.5% in April and 1.6% in March.

Analysts said they are not worried because the weakness in May was confined to the volatile aircraft sector. Without this weakness, orders would have climbed a healthy 1% during the month.