Here’s the exchange between Trump and Andrew Ross Sorkin on CNBC Thursday:
"I am the king of debt. I do love debt. I love debt. I love playing with it." Trump said.
"Do you believe that we, in terms of the United States need to pay a hundred cents on the dollar, or do you think that there's actually ways that we can renegotiate that debt?" CNBC's Andrew Ross Sorkin asked him.
"Yeah, I think -- look, I have borrowed, knowing that you can pay back with discounts. And I have done very well," 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.”
Binyamin Applebaum covers the economy for the New York Times. Of Trump’s idea that the U.S. could simply renegotiate our country’s national debt, Applebaum noted: “Such remarks by a major presidential candidate have no modern precedent.” That’s a polite way of saying: holy fucking shit.
Applebaum got a response from Lou Crandall, chief economist at Wrightson ICAP: “No one on the other side would pick up the phone if the secretary of the U.S. Treasury tried to make that call. Why should they? They have a contract [requiring full payment].” Applebaum offered a primer that further explained the point in such a gentle way that one can almost see him patting the Donald on his hair.
But Mr. Trump’s statement might show the limits of translating his business acumen into the world of government finance. The United States simply cannot pursue a similar strategy. The government runs an annual deficit, so it must borrow to retire existing debt. Any measures that would reduce the value of the existing debt, making it cheaper to repurchase, would increase the cost of issuing new debt. Such a threat also could undermine the stability of global financial markets.
More experts weighed in. David Ader, CRT Capital’s chief Treasury strategist, asked: “Imagine the most risk-free asset suddenly becoming not a risk-free asset. By the way, S&P and Moody's would have to downgrade it if you could renegotiate the value of the debt you hold or try to force it down. What are we, Argentina?” If you listen closely, you can actually hear the facepalm.
And what are conservative economists saying? Douglas Holtz-Eakin, John McCain’s economic guru in 2008, said that Trump’s idea would make us “Puerto Rico,” and added “that’s not a good thing.” Michael Strain of the conservative American Enterprise Institute also chimed in: “That would be an outrageous thing to do … It could introduce chaos.”
About 24 hours before the aforementioned CNBC interview, Trump told America: “I’m not running for president to make things unstable for the country.” Whether or not that’s his intent is one thing. Either way, the experts are clear that massive instability would be the result of his election.
