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“Economic Food Poisoning”: The Bankrupt Delusions Of Donald Trump, The ‘King Of Debt’

According to Donald Trump, at $19 trillion the federal government has too much debt. Or so little debt that we could pay it off in eight years.

He says we could buy back federal debt at a discount by raising interest rates. But if interest rates rise by a couple of percentage points, he said last week that the United States of America would cease to exist.

As for taxes, we need to raise them on the rich. No, we need to lower them. Or raise them.

And American workers? Their wages are too high. No, too many earn nothing because foreign workers make so much less. Then again, maybe the minimum wage is too low.

If all his contradictory comments seem confusing, the fact is that they are. They are also difficult to square with Trump touting his economics degree from an Ivy League school, the University of Pennsylvania, where he claims he was a top student.

What reality-show hosts say is of no consequence. But every public word presidents speak gets scrutinized worldwide. Candidate Trump’s wildly inaccurate and ahistorical statements are of no official consequence, but were he president they would have serious and damaging effects on the United States.

Consider what Trump said on May 5 to CNN’s Wolf Blitzer about the cost of servicing federal debt: “If interest rates go up 1%, that’s devastating. What happens if that interest rate goes up 2, 3, 4 points? We don’t have a country.”

By Trump’s reckoning America should have ceased to be a country long ago. Back in 1982 the 10-year bond paid 14.6%. Uncle Sam’s average interest cost on all federal debt was 6.6% when George W. Bush took office. Last month it was just 2.3% even though the debt is 17 times the level of 34 years ago.

Trump talked about buying back debt at a discount and cited his own success in taking out loans, but not paying them back in full. “I’m the king of debt,” he said, in one of his frequent tangential comments focusing not on how a Trump administration would govern, but reminding us of his self-proclaimed greatness.

When journalists try to parse Trump’s words—no easy task because transcripts show jumbled thoughts galore—his response is to accuse them of misquoting him. So, whom to believe: Trump or that lying videotape?

On CNBC, Trump implied that when he took out some loans, he never intended to repay them in full.

“I’ve borrowed knowing that you can pay back with discounts,” he said on CNBC. “And I’ve done very well with debt. Now, of course, I was swashbuckling, and it did well for me, and it was good for me, and all that. And you know debt was sort of always interesting to me. Now, we are in a different situation with a country, but I would borrow knowing that if the economy crashed you could make a deal.”

That last sentence might send shivers down the spines of those who buy federal debt, as it could be read to say he would crash the economy as president just to make the market price of Treasury debt fall. I read his remarks as another example of his lack of articulation, but others could reasonably read into those remarks a plan to submarine the economy.

When challenged about his words, Trump revised his comments saying he was thinking only in terms of renegotiating the federal debt—88% of which matures in 10 years or less—to longer terms. What Trump didn’t mention is that Treasury bonds with maturities of up to 30 years pay on average 4.5% interest, more than double the average federal interest rate. The contradiction here is obvious: By Trump’s own words switching to longer-term Treasury bonds would result in interest expenses so high that America would cease to exist.

The Politics of Winging It

How and why “we wouldn’t have a country” were interest rates to rise is just one of the many observations that Trump has never been asked to explain.

When Trump’s comments drew widespread criticism as reckless, he turned the tables on those who reported what he said. He claimed that others put words in his mouth and distorted his intent.

So how do we make sense of the following: “If we can buy bonds back at a discount,” he said, “we should do that.” He also said that there would be no reason for holders of federal debt to ask the government to buy their bonds back at a discount. If that is so—and it is—then why say any of this?

The explanation is that Trump is winging it, making it up as he goes along just as he has through his career, which I have covered on and off for 27 years.

To those who understand economics, public finance and taxes, listening to Donald Trump talk about these issues is like listening to Sarah Palin talk about anything. The contradictions, the baseless assumptions, the meandering sentences that veer off into nowhere belong more in the fictional world of “Alice in Wonderland” where, as the Cheshire cat advised, “it really doesn’t matter which way you go” in search of the White Rabbit, but you could ask the Mad Hatter or the equally mad March Hare.

You might think that after decades of planning a run for the White House—after all, he did run in 2000 as a Reform Party candidate—Trump would have developed a clear set of views on economics. You might think he would have devoured policy papers, retained top experts and tested out ideas in speeches heard by few. You might think he would have polished and logical lines by now.

But that would require treating these issues as matters deserving of serious study. Absent such study, it is no surprise that much of what Trump says confounds those who have spent their lives studying economics, public finance, taxes and history.

Whatever Trump may have learned in college, his flip-flopping and wavering suggest that Trump saw no need to prepare to be president. It’s as if a chef decided he didn’t need to learn how to cook before pulling off a White House State Dinner.

Trump just tosses concepts into a pot. He starts with made-up numbers (our China trade deficit is $338 billion, not Trump’s $500 billion); adds some brazen conspiracy theories (Obama was not born an American citizen); mixes them with irreconcilable vagaries (taxes should go down, but so should budget deficits); tosses in some populist myths (thousands in North Jersey celebrated as the Twin Towers burned) and rotten ideas (the President telling Carrier, Ford and Nabisco where to build factories)—and finishes it all off with a bucket of rhetorical nonsense.

Trump is superb at one aspect of this. His economic stew would induce economic food poisoning, but he sells it with an appealing name: Make America Great Again.

 

By: David Cay Johnston, The Daily Beast, May 10, 2016

May 12, 2016 Posted by | Donald Trump, Economic Policy, Federal Debt | , , , , , , , , | Leave a comment

“It’s All Benghazi”: Many In The Media Consider It Uncouth To Acknowledge The Fraudulence Of Political Posturing

So Representative Kevin McCarthy, who was supposed to succeed John Boehner as speaker of the House, won’t be pursuing the job after all. He would have faced a rough ride both winning the post and handling it under the best of circumstances, thanks to the doomsday caucus — the fairly large bloc of Republicans demanding that the party cut off funds to Planned Parenthood, or kill Obamacare, or anyway damage something liberals like, by shutting down the government and forcing it into default.

Still, he finished off his chances by admitting — boasting, actually — that the endless House hearings on Benghazi had nothing to do with national security, that they were all about inflicting political damage on Hillary Clinton.

But we all knew that, didn’t we?

I often wonder about commentators who write about things like those hearings as if there were some real issue involved, who keep going on about the Clinton email controversy as if all these months of scrutiny had produced any evidence of wrongdoing, as opposed to sloppiness.

Surely they have to know better, whether they admit it to themselves or not. And surely the long history of Clinton nonscandals and retracted allegations — remember, there never was anything to the Whitewater accusations — should serve as a cautionary tale.

Somehow, though, politicians who pretend to be concerned about issues, but are obviously just milking those issues for political gain, keep getting a free pass. And it’s not just a Clinton story.

Consider the example of an issue that might seem completely different, one that dominated much of our political discourse just a few years ago: federal debt.

Many prominent politicians made warnings about the dangers posed by U.S. debt, especially debt owned by China, a central part of their political image. Paul Ryan, when he was chairman of the House Budget Committee, portrayed himself as a heroic crusader against deficits. Mitt Romney made denunciations of borrowing from China a centerpiece of his campaign for president. And by and large, commentators treated this posturing as if it were serious. But it wasn’t.

I don’t mean that it was bad economics, although it was. Remember all the dire warnings about what would happen if China stopped buying our debt, or worse yet, started selling it? Remember how interest rates would soar and America would find itself in crisis?

Well, don’t tell anyone, but the much feared event has happened: China is no longer buying our debt, and is in fact selling tens of billions of dollars in U.S. debt every month as it tries to support its troubled currency. And what has happened is what serious economic analysis always told us would happen: nothing. It was always a false alarm.

Beyond that, however, it was a fake alarm.

If you looked at all closely at the plans and proposals released by politicians who claimed to be deeply worried about deficits, it soon became obvious that they were just pretending to care about fiscal responsibility. People who really worry about government debt don’t propose huge tax cuts for the rich, only partly offset by savage cuts in aid to the poor and middle class, and base all claims of debt reduction on unspecified savings to be announced on some future occasion.

Debt, it seems, only matters when there’s a Democrat in the White House. Or more accurately, all the talk about debt wasn’t about fiscal prudence; it was about trying to inflict political damage on President Obama, and it stopped when the tactic lost effectiveness.

Again, none of this should come as news to anyone who follows politics and policy even moderately closely. But I’m not sure that normal people, who have jobs to do and families to raise, are getting the message. After all, who will tell them?

Sometimes I have the impression that many people in the media consider it uncouth to acknowledge, even to themselves, the fraudulence of much political posturing. The done thing, it seems, is to pretend that we’re having real debates about national security or economics even when it’s both obvious and easy to show that nothing of the kind is actually taking place.

But turning our eyes away from political fakery, pretending that we’re having a serious discussion when we aren’t, is itself a kind of fraudulence. Mr. McCarthy inadvertently did the nation a big favor with his ill-advised honesty, but telling the public what’s really going on shouldn’t depend on politicians with loose lips.

Sometimes — all too often — there’s no substance under the shouting. And then we need to tell the truth, and say that it’s all Benghazi.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, October 9, 2015

October 12, 2015 Posted by | Benghazi, Federal Debt, Political Media | , , , , , , , | 2 Comments

   

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