Lindsey Graham echoes Tucker Carlson, proposes repudiating Treasury debt owed to China

Sen. Lindsey Graham (R-SC) appeared Thursday night on Fox News’ Hannity and proposed a stark measure against the Chinese government: refusing to pay U.S. national debt held by China “because they should be paying us” instead as a result of the coronavirus pandemic.

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Citation From the April 9, 2020, edition of Fox News’ Hannity

Graham’s proposal, if congressional Republicans and the Trump administration actually tried to carry it out, would seriously damage America’s standing in international finance — and potentially the entire world economy — and it’s arguably unconstitutional, too.

So where did Graham get this idea? One potential source is Fox News.

On the Monday night edition of Tucker Carlson Tonight, the eponymous host began a segment with author Gordon Chang, a frequent Fox guest and senior fellow at the right-wing and anti-Muslim Gatestone Institute, by claiming, “This pandemic is the direct fault of the government of China,” and stating that “China, of course, should foot the bill for” damages to the United States. (The Fox prime-time host also continued to push the conspiracy theory that  “there is some evidence” the COVID-19 pandemic originated in an infectious disease research facility in Wuhan — “accidentally,” as Carlson put it.

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Citation From the April 6, 2020, edition of Fox News’ Tucker Carlson Tonight

TUCKER CARLSON (HOST): So you mentioned that they hold over a trillion dollars in Treasurys, in our debt. Why wouldn't we just unilaterally forgive our own debt?

GORDON CHANG (SENIOR FELLOW, GATESTONE INSTITUTE): Well, if we were to do that, and we could easily do it, China would do a couple things. First of all, it would say that it was a repudiation of debt, and then they would bash us. They would say that we're not a responsible member of the global financial system. They would then try to dethrone the dollar. Now, I understand what you're thinking. But the point is that we can sort of avoid those types of charges if we work with the issuers of the other major currencies, and then China is left with no arguments in that regard.


CHANG: It sounds hard to do that, but nonetheless, when we see what's happening in England right now, especially to the prime minister, I think that the anger there is enough so that we could actually build that coalition to actually get the other issuers to work with us.

CARLSON: Boy, I think that sounds absolutely worth doing.

The potentially disastrous effects of any U.S. debt default — both to the U.S. economy and to markets around the world — have been explored before, during fights between then-President Barack Obama and House Republicans over the debt ceiling. Furthermore, it has long been argued — even in right-wing circles — that repudiating national debt is unconstitutional under the 14th Amendment, which declares that the “validity” of the federal debt “shall not be questioned.”

And as Vox’s Matt Yglesias points out, there might not even be any conceivable mechanism to just default on government bonds selectively held by a single entity, in this case the Chinese government. After all, China could simply sell the bonds back out on the open market at the first hint of such a policy coming forward in any serious manner.

So even if this scheme was attempted, it would likely not work to its desired end of punishing China. But at the same time, America’s economic health and standing in the world could still be seriously damaged just by the attempt to implement Fox News’ bluster.