A Numbers Game: US Debtor Position at End of 1990
THE United States is not a debtor nation. It has a positive international investment position, says economist Robert Parks.Well, maybe. But maybe not. The latest numbers from the Department of Commerce, released Tuesday, show that at the end of 1990 foreigners had assets in the US which exceeded the assets held abroad by Americans by $412.2 billion or $360.6 billion. Take your choice. Commerce dropped an old measure of the US net debtor position which did not take into account changes in the value of assets after they were purchased. Most experts regarded that old number ($664 billion at the end of 1989) as unrealistic, and Commerce Department economists agree. That's because many US assets abroad - such as land, plant, equipment, and ownership in other companies - were bought decades ago and are thus worth much more today, while the bulk of foreign holdings in the US were purchased i n more recent years. To deal with that problem, Commerce statisticians came up last month with two new measurements that attempt to capture changes in asset values, giving numbers for the years 1982 through 1989. Now Commerce has its estimates for 1990. The first number shows net debt using a current-cost calculation, valuing direct investments and other tangible assets at current prices. It also prices US official gold holdings at their market value at the end of 1990. Because of a change in exchange rates, the $412.1 billion is a decline of $27.5 billion from the 1989 number. The smallest number is derived by what is termed a market-value calculation. It multiplies American investments in foreign companies and subsidiaries by the appreciation in each foreign country's stock market since the investment was made. For small countries without their own well-developed stock markets, an international index of stock markets is used. Because of changes in stock market values, that net debt number increased $92.9 billion from 1989. The US international investment position has deteriorated as it continues to rack up trade deficits each year - buying more goods from abroad than it sells abroad. The deficit in this account and in the tourism balance is financed by the purchase of more assets in the US by foreigners. Mr. Parks, of Robert H. Parks & Associates, makes another calculation taking account of a "statistical discrepancy" that occurs each year in the Commerce Department's measures of international transactions. These are growing and huge - $63.5 billion alone last year. Parks adds these up for the 1980s and 1990, assumes the errors are in favor of the US, subtracts them from the market-value debt position, and concludes the US is not a net debtor. But a Commerce Department expert says he would be "uncomfortable" making that assumption. The discrepancy could be unmeasured inflows of capital into the US, which would worsen the US debtor position. Or it could represent uncounted exports from the US, a positive factor for the US. Or it could result from unrecorded remittances abroad by immigrants into the US, which would be a negative element. Or there could be outflows of cash now deposited in foreign banks and thus a US foreign asset. All this adds up to some uncertainty as to the net investment position of the US. The National Academy of Sciences has a study under way on unrecorded US exports. The Immigration and Naturalization Service is looking into remittances. A budget proposal would finance a Census Bureau study of how to improve balance-of-payments statistics. Basically, the US international payments position has improved as US exports have increased relative to imports. The US current-account deficit - $99 billion last year, down from $110 billion in 1989 is a much smaller concern than it was," says Robert Solomon, a Brookings Institute expert. This year the deficit will again be smaller, if for no other reason because of the payments by the US allies to the cost of the Gulf war, the experts say. "That's a temporary, one-shot, one-year phenomena," Mr. Solomon says. Next year is harder to predict. One positive factor could be Japan's reduction in interest rates this week. It would tend to maintain the Japanese market for imports by strengthening the Japanese economy. But the recent strength of the US dollar does not help US exports.