Strummer wrote: China holds about $1.3 trillion of US debt (8% of it). The average interest rate is around 2.5%, which would give around 32 billion in interest payments. According to wikipedia, China's military budget is 100 billion. So the US pays for "only" a third of China's military.
The US government has to pay higher interest rates when it issues longer term debts. Your assumption that China is paying a 2.5% interest rate is probably wrong, as China bought much of their portfolio of US treasury holdings prior to the beginning of the period of artificially low interest rates being set by the FED to try to buoy the weak US recovery. In fact, if you look at recent Treasury auctions, China has buying only very small amounts of US debt recently.
The rate on US long term debt held by China is almost certainly significantly higher than the 2.5% that you assume.
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For years China's military spending was roughly equivalent to US debt payments to China. Its certainly possible that continuing growth in Chinese military spending has now surpassed the amount of money it receives from the US to service our huge debt to China. But my point remains 100% valid----China is in a strong position to grow their military spending because their government holds large foreign currency reserves and receives large interest payments from the US government. In contrast, the US government is running huge deficits, is already deeply in debt, and is saddled with making annual debt payments of over 220 BILLION dollars to China and others who hold US debt---making our annual debt payments one of the largest spending categories in the entire federal budget.
US annual debt interest payments exceed 220 BILLION dollars
