Monday, February 4, 2019

Does Trump Have Any Understanding of How the Budget Deficit Functions as Part of the Economy?

 Philip Bump reports at The Washington Post:
[O]n Thursday, President Trump made comments that conveyed a remarkable lack of familiarity with basic aspects of the American economy.

It began with remarks he made to reporters during an event in the Oval Office.

“You mentioned all the economic indicators are going up,” a reporter asked. “Why, then, is the — are U.S. deficits and the financial debt increasing at a time when the economy —”

Trump jumped in.

“Well, the trade deals won’t kick in for a while,” he said. “You know, number one, the USMCA” — the revised version of NAFTA that Trump’s administration negotiated with Canada and Mexico — “hasn’t even been approved yet. It has to go before Congress and get approved. Now, it should get approved quickly.”...

You probably noticed that Trump took a question that’s obviously about the federal budget deficit and gave an answer that dealt with the country’s trade deficits. Both are deficits, sure, but they relate to each other in about the same way that a tuning fork relates to a dinner fork...
Years ago, Murray Rothbard warned about this very type of confusion:

But it is even more insane with Trump. Here's Bump again:
All of this is admittedly better than the really bizarre comment Trump made during an interview with Fox News’s Sean Hannity in October 2017. Hannity tossed up a softball about the economy, and Trump took a swing.

“The country — we took it over and owed over $20 trillion,” Trump said, referring to the national debt. “As you know, the last eight years, they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion, right? And yet we picked up $5.2 trillion just in the stock market. Possibly picked up the whole thing in terms of the first nine months, in terms of value. So you could say, in one sense, we’re really increasing values. And maybe, in a sense, we’re reducing debt.”

There is no sense in which rising stock market valuations reduces the federal debt. The way the federal debt is reduced is either by cutting federal spending or increasing federal revenue, including through raising taxes. As president, Trump has made overtures at the former and rejected the latter, meaning that the nearly $20 trillion debt Trump inherited has now topped $21.5 trillion.

1 comment:

  1. --- “Well, the trade deals won’t kick in for a while,” he said. “You know, number one, the USMCA” ---

    Maybe it's wilfull ignorance, but perhaps the president (you know, the undefeated 47th dimensional chess champion per his supporters) has in his sleeve what he views as the perfect explanation to give to his gullible admirers as to why the deficit balooned on his watch while it was coming down during the last 2 years of Obummer, without the advqntage of the (yet unratified) USMCS&MM&Ms...whatever. It's all Congress' fault for not being economically nationalist, sufficiently Juche enough.