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U.S. Is World's Biggest Net Debtor, Government Says

June 25, 1986|MICHAEL WINES | Times Staff Writer

WASHINGTON — The United States, long the world's wealthiest nation, also became its biggest net debtor last year, with foreigners holding $107.4 billion more in American assets than U.S. investors held abroad, the Commerce Department reported Tuesday.

The massive debt--bigger even than the estimated $100-billion obligations of Mexico and Brazil--was amassed entirely after March, 1985, when the United States' international balance sheet edged into the red for the first time since World War I.

Commerce Department officials said the latest figures show the continuation of a "substantial decline" in the U.S. investment position over the last several years, but other economic experts likened it to a plunge.

Only four years ago, net U.S. investments worldwide were a positive $136.2 billion.

Economists Divided

In theory, an uncontrolled deficit could lower U.S. living standards by forcing the United States to raise money to pay off the debt--by exporting more goods at lower prices, cutting government spending and decreasing the value of the dollar.

But economists were divided Tuesday on whether the United States' new title of world champion debtor threatens to place it in a position similar to developing nations such as Mexico, where the national economy is all but overwhelmed by past-due bills abroad.

"The speed of the deterioration is breathtaking, and that's a major cause for alarm," said C. Fred Bergsten, president of the Institute for International Economics, a Washington think tank.

He forecast that the net debt would rise to at least $500 billion before leveling off late in this decade and could approach a crushing $1 trillion by the early 1990s if current economic conditions are unchanged.

Larger Economy

Robert Solomon, an international economist at the Brookings Institution in Washington, another think tank, was less pessimistic.

"It's true our debt is larger than Mexico's and Brazil's, but our economy is a lot larger, too," he said.

In 1985, the Commerce Department said, American holdings abroad totaled $952.4 billion--up 6% in a year. But foreign investment in the United States totaled $1.0598 trillion, an increase of 18.6%.

Total foreign assets in the United States rose $166 billion in 1985. About $127 billion of that stemmed from new cash investments here, and most of the rest came from increases in the value of existing assets such as stocks.

Of the $127 billion in new foreign capital pumped into the United States last year, most went into corporate and government bonds.

Foreign purchases of Treasury bills and notes, which are sold to finance the federal deficit, jumped by $20.5 billion to $83.8 billion.

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