Thursday, August 15, 2019

Donald Trump and the National Debt - It's Not Easy to Fix

With projections showing at $4 trillion addition to the national debt over the next decade thanks to the Trump Administration's deficit-financed legislation as shown here:

...a look back to what Donald Trump had to say about the national debt prior to his tenure as president is an interesting exercise.  Here is an interview with candidate Trump on Fox News from February 5, 2016:

When Bill O'Reilly mentions that one of the biggest problems facing the United States is the national debt but that the topic rarely comes up during election campaigns, here's what Donald Trump had to say when asked why a $19 trillion debt is important to "the folks" (and please excuse the fact that my transcript of the interview is missing sections because the two men were talking over each other):

"Well, it's really $21 trillion because the new budget deal lifts it up by at least $2 trillion so the national debt in a very short period of time is going to be $21 trillion.  We are mortgaging our future, we're mortgaging our children's future..."

When asked how that's going to "hurt the kids" here's what Donald Trump had to say:

"Because we are going to have to pay this money back at some point and at some point it's going to be impossible. You know, I've always heard and read a lot on it and understand it and went to Wharton and all that stuff.  I've always heard that at $24 trillion we become Greece and to a certain extent we're getting to be a large scale version of Greece.  We never do cutting, we never do anything.  You know, I saw a statistic the other day - we are the biggest purchaser of drugs in the world, drugs, to make people better for Medicare etcetera.  We buy drugs.   We  spend the same practically as if you're going to go and buy drugs from a counter.  We spend the same.   We could have saved $300 billion a year if we did the right job with the purchasing just of drugs.  You know why this is?  Because the drug companies have all of the politicians taken care of.   They're all supporting all of these politicians.  They're not supporting me because I'm self funding, okay?

When asked again how he was going to bring down the debt in light of the payments for both Medicare and Social Security, here's what Donald Trump said:

 "We have a country with no growth, last quarter practically zero growth which is almost unheard of...we're going to create a dynamic economy again.  We're going to bring the jobs back from China, from Mexico, from Japan, from Vietnam...because the country is going to start growing and we'll be put to four and even five percent.  And, when we do that, we can pay it back so easily.  It's easy to pay it back...essentially, if you look at the country like a profit-making corporation or a losing corporation,d right now we're a losing corporation, we're going to make it a profit-making corporation...the problem we have is our taxes are so high that everybody is choking... the politicians have caused this problem over years.... we are going to make our country dynamic again...we are going to create a dynamic economy where real jobs are going to be pouring into the country and we'll have a country that is sustainable."

Please watch Bill O'Reilly's response at the 6 minute and 57 second mark! 

Let's look at what has happened to the debt since Donald Trump took office onn January 20, 2017.  According to the Treasury's Debt to the Penny website, the debt is as follows:

January 20, 2017

Debt held by the public - $14.404 trillion
Intragovernmental debt - $5.544 trillion
Total public debt - $19.947 trillion 

July 31, 2019

Debt held by the public - $16.211 trillion
Intragovernmental debt - $5.811 trillion
Total public debt - $22.022 trillion 

That works out to an increase in the federal debt of $2.075 trillion over the two and a half years.

It is an informal rule of thumb that governments take on debt during economic contractions and reduce that debt (or at least reduce the rate of accrual of that debt) during economic expansions.  With the current economic expansion starting in the third quarter of 2009, we are now ten years into the latest cycle.  Since the beginning of the third quarter of 2009, the federal debt has risen from $11.518 trillion as shown on this graphic:

This is an increase of $10.504 trillion or an increase of 91.2 percent, a near doubling of the debt over the past decade.

Here is a graphic showing the monthly deficit or surplus data since the beginning of the latest economic expansion in June 2009:

Over the 119 months since the economy began to expand at the end of the Great Recession, there have only been 26 months where there has been a budgetary surplus.  Since Donald Trump took office, there have only been budgetary surpluses in 7 out of 29 months or 24 percent of the time.

Apparently, paying back (or balancing the budget for that matter) is turning out to be far less easy than candidate Trump thought it would be back in 2016.

1 comment:

  1. Questioning the whole "Trump Economy" may seem in poor taste to those who have benefited so much but it is something we should do. What is being ignored is the structural issues that haunt America's competitiveness and far outweigh the benefits of lower taxes.

    The Trump economy is based on huge deficit spending. We must also face the fact that deficit spending can only take the economy so far and carries with it a fair amount of negatives. The article below explores Trumponomics in all its glory and why this won't end well.