It's tough to talk about what Donald Trump would want to do as president, because half the time even he doesn't seem to know. He spoke highly of torture and attacking terrorists' families, then "clarified" that he wouldn't order anyone to commit war crimes. He said that if abortion were illegal, women who ended pregnancies should be punished—before everyone got mad at him, and he reversed course. Most recently, he announced that he's more or less abandoning his much-criticized tax plan. But the most confusing topic Trump has waded into lately is the federal deficit.
On Thursday, in an interview with CNBC, the presumptive Republican nominee said things like, "I would borrow, knowing that if the economy crashed, you could make a deal," and suggested the US "can buy back [debt] at discounts. You can do things with discounts." What many people took away from this was that Trump was talking about America renegotiating its national debt—convincing the people, businesses, and foreign governments the country has borrowed money from over the years to accept less than what is owed. In the business world, this isn't entirely uncommon. If someone is in danger of defaulting on a loan, or if a business is about to collapse, creditors might want to take want to take whatever they can get to avoid getting nothing. This is more or less what happens in a bankruptcy––something that Trump's put four companies through since 1991.
But loans to the United States government, which come in the form of treasury bonds, or T-bonds, are much safer and consequential investments than casinos or hotels. In fact, T-bonds are considered so foolproof that they're used as the benchmark against which other investments are judged the world over. If those investments suddenly became anything less than super safe, it would be calamitous for the world economy.
Neil Buchanan, a law professor at George Washington University, has written about why the United States shouldn't pay down its national debt. He says that we should make all principal and interest payments on time, but argues that in a growing economy, it makes sense for debt to increase over time. He calls what Trump wants "insane," joining the chorus of economists and others who piled on Trump in the wake of the CNBC interview.
According to Buchanan, the Treasury would unravel after that policy took hold. No one would lend to the US, except at junk-bond rates. Even if drastic measures successfully reduced the debt, it's unclear who would benefit. Trump hasn't said if the plan is to finance more military spending or tax cuts for the rich. Regardless, interest rates would go through the roof, like they have in countries that have come close to defaulting, such as Cypress and Greece, which would come at a cost to any American who had assets that depending on the Treasury.
"That's not anything like 'the art of a deal,'" Buchanan told me. "It's just theft."
On Monday, presumably responding to the massive outcry from across the political spectrum, Trump amended his comments and called the government's obligations to its debt "absolutely sacred." He said that what he meant (a clarification Trump is often having to make) is that the US should buy back its own debt at a discount if and when the Federal Reserve raises interest rates. He also said that we US would never default, because "you print the money."
As the Wall Street Journal pointed out, buying back old debt would mean taking on new debt, which would be subject to those higher interest rates, so it's unclear how that saves money. And printing more money to decrease the deficit—i.e. intentionally ramping up inflation—is also probably a bad idea for all the reasons inflation can be bad.
Normal politicians get dinged all the time for "flip-flopping" on positions—the implication being that they'll say anything in order to get and stay in power and have no deeply held convictions. But with Trump, who called himself the "king of debt" in that original CNBC interview, it's different—a lot of time he's talking about things that he has no experience in, from the specifics of military history to the deficit, and he is obviously improvising plans in interviews without having given the matter much thought. The important thing is that he's going to Make America Great Again, not the specifics of that process.
Mark Weaver, a Republican political consultant in Ohio, says that every remaining candidate has made similarly ignorant or disingenuous comments that betray a lack of economic knowledge. (For example, witness the recent think tank criticism of Bernie Sanders's economic plan.) Someone like Trump, he says, could say basically anything at this point and change his mind as many times as he wants without devastating consequences.
"Donald Trump does a lot of ridiculous things, and for the people who support him, they're willing to give him a pass on ridiculous things because he's different from anyone that Washington has produced in the past fifty years," he told me. "I don't know why this would cause him problems, although it certainly doesn't make sense that you can print more money to fix a deficit."
Though his statements may not hurt his electability, they're doubtless frustrating for those trying to make sense of what Trump would actually do. When the presumptive GOP candidate for president runs his mouth like a guy at a bar explaining his worldview five beers in, what are we supposed to do but take him seriously?
"A president who was determined to be catastrophically irresponsible could order the Treasury Department not to make payments as they come due," says Buchanan, the George Washington University professor. "That would be unconstitutional, but it is possible to do it––just as it would be possible for a president to violate the First Amendment by having the FBI arrest you for doing your job. Trump [has] somehow found a way to turn the craziness up to eleven."
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