THE U.S. FOREIGN DEBT PROBLEM: RESTRUCTURING THE BALANCE OF PAYMENTS
BARRY HERMANAND STANLEY J. LAWSON
The United States became a net foreign debtor in 1985 for the first time since systematic compilation of the data began in 1919, and its net foreign debt is likely to grow rapidly for at least the next few years. As a contribution to policy-related discussions of this situation, we raise some issues about the U.S. case, and make some estimates, applying a heuristic that is more commonly used in analyses of the developing countries. In doing so, we are not making light of the serious economic and social difficulties that have been the lot lately of many high-debt countries. Rather, since a body of analysis has been built up on developing country debt problems, it seemed potentially fruitful to try to apply aspects of that analysis to the case of the United States.
Measures of external debt such as the commonly quoted $97 billion for Mexico at the end of 1985 refer to the gross disbursed and outstanding debt, short-term and long-term, owed to all foreign creditors. The comparable figure for the United States is $751 billion, not the oft-cited $107 billion as of the end of 1985. The latter, the "net international investment position" of the United States, is a measure of foreign debt and other claims such as direct investment, net of foreign assets.
In analyses of developing country debt, attention generally focuses on gross debt instead of the net investment position, because developments in the latter are not necessarily indicative of whether a country's external payments