The presumptive Republican nominee Donald J. Trump appears to be thinking of the United States as his biggest piece of real estate, his own skyscraper in the sky. But the billionaire doesn’t seem to grasp the US economy. We can only hope that, should he become president, he won’t take the country into bankruptcy four times, as he has in his own past financial maneuverings.
In a television interview with CNBC Thursday, Trump said that his grand idea for managing our double-digit billion dollar debt is to persuade our creditors to accept less than the full amount we owe them. The man who wrote the book, “Trump: The Art Of The Deal” thinks this is the perfect way to reduce the national debt.
When CNBC asked him whether the country needs to pay its debts in full, or whether a partial repayment deal could be negotiated, Trump said:
‘I would borrow, knowing that if the economy crashed, you could make a deal. And if the economy was good, it was good. So, therefore, you can’t lose.’
Good to know that the man the Republicans have sent forth to lead the nation thinks our complex and intricate economy can be handled so simply. What Trump fails to consider, or possibly understand, is that the reason we are able to borrow at such low-interest rates, is that other countries consider our Treasury securities a safe investment.
But when the possible, but hopefully not likely, leader of the free world talks like this, it causes tremors in the foundation of our thus-far unshakeable economy. Lord knows what this bizarre candidate’s language is doing to our credibility throughout the globe, though.
If those tremors cause even the smallest cracks in the confidence of the countries that invest in us, in our Treasury securities, it will cost the whole country big time.
So what do the experts say? They say that Trump’s general proposal is “fanciful,” because our creditors have no cause to accept anything less than full value on their money. It doesn’t matter how many books Trumps writes on the art of the deal, his idea is flawed, if only for its vagueness.
As a businessman, Trump should know that higher interest rates on our national debt is a killer. The billionaire said:
‘We’re paying a very low interest rate. What happens if that interest rate goes two, three, four points up? We don’t have a country. I mean, if you look at the numbers, they’re staggering.’
The Congressional Budget Office projects the interest payments on the national debt to reach $500 billion in 2020, approximately twice what they are today, and that is a significant piece of the whole economy pie.
When interviewers pressed Trump to explain further, he said he wasn’t recommending that the country default on its loan. What he meant was the government could “repurchase its debt for less than the face value of the securities.”
President of the Committee for a Responsible Federal Budget Maya MacGuineas said she shared Trump’s issues with the size of the federal debt in the overall budget. But she disagreed with his approach to the problem. Instead, she recommends some combination of bringing in more income and spending less:
‘It’s a policy problem, not a debt-management problem. When it comes to fiscal responsibility, people are always looking for the easiest of answers. If there were low-hanging fruit here, the Treasury Department would already be on it.’
It seems everyone has misjudged the real estate mogul from the time he entered the presidential race. There seems to be the idea that Trump will trip himself up at some point and falter. That concrete thinking seems to still be alive, since Democrats and Republicans sincerely doubt his ability to win, that he will not get his hands on our economy.
They could be wrong.
Check out CNBC’s interview below: