Remember way back in May, when Donald Trump was still just a bad joke, when we all swore there was no way he would ever get the GOP nomination? Yeah, the good ol’ days. Well, remember what he said regarding the national debt? No? Okay, let me refresh your memory:
“I understand debt better than probably anybody. I know how to deal with debt very well. I love debt — but you know, debt is tricky and it’s dangerous, and you have to be careful and you have to know what you’re doing. First of all, you never have to default because you print the money, I hate to tell you, OK? You know, I’m the king of debt.”
Wow … what a claim to fame … “king of debt”. And “you print the money”??? That is like saying “I can buy anything I want, because I have lots of checks!” Does anybody besides me see a problem with this? If not, please sign up immediately for a course in Economics 101 or Personal Finance!!! Meanwhile, let me just say that the more money that is printed, the lower its value, as there is only a finite amount of resources to back it up. The resource that backs up today’s dollar is the “full faith and credit of the United States,” which won’t go far if we don’t pay our debts. Simple Econ 101 which, I am betting, Donnie never took, else he slept right through it.
Well, the week before he made those comments, he suggested that he might reduce the national debt by persuading creditors to accept something less than full payment. “I would borrow, knowing that if the economy crashed, you could make a deal.”
Donnie-boy apparently is as ignorant of government finances as he is of foreign policy, the Constitution, and most everything else involved in the U.S. government. Fact is that “making a deal” in business is one thing, and in government it is an entirely different thing. Failure to pay government debt on time results in a lowering of the country’s Standard and Poor’s (S&P) rating, meaning other countries will be less eager to lend that country money and will charge higher interest rates (an over-simplification, but you get the gist).
To further clarify, Donnie’s business ‘deals’ weren’t always above-board, as evidenced by his many lawsuits brought by contractors, employees and others who he had shortchanged or failed to pay as agreed. Most of those lawsuits he either lost or settled, so draw your own conclusions.
Why do I bring this up today? Because in the last few days, Trump has settled on Representative Mick Mulvaney of South Carolina to head the Office of Management and Budget (OMB). This Cabinet-level post is responsible for producing the federal budget, overseeing and evaluating executive branch agencies and otherwise advising the president on fiscal matters. The problem? Mulvaney and the president-elect have at least one major thing in common: an alarming openness to defaulting on the federal debt.
For those Trump supporters who would argue that this is no big deal, allow me to remind and explain:
First, Donald Trump, by his own admission (see above) is the “king of debt”. Contrary to what he may believe, this is not a good thing. His companies have filed bankruptcy no less than six times, more than any other U.S. corporation for the past 30 years. He brags, “I have used the laws of this country … the [bankruptcy] chapter laws, to do a great job for my company, for myself, for my employees, for my family.” The employees whom he failed to pay, and they also filed suit against him.
Second, since most Trump supporters are more attuned to their own needs and situations than those of others, think about it this way. If you fail to pay your mortgage, or you try to ‘work a deal’ with your energy provider, what happens? First, you might lose your home, second you may wake up very cold after Con-Ed or Duke Energy turns off your electricity. However, the long-term effect is that your credit score will drop, and when you apply for a Visa card, you may either be declined, or have to pay an exorbitant rate of interest. It works the same when a government defaults on its debt. Only there is one additional consequence of defaulting on government debt: the dollar will be devalued. In simple terms, if that happens, the dollar would lose its status as a global world currency. The devaluation of the U.S. dollar would also raise the cost of doing business because companies would have to pay higher interest rates. And do you know what happens when company’s costs increase? Either they raise the prices to consumers or they cease to exist.
Mick Mulvaney has voted four times against raising the debt ceiling, a move that would have led to exactly the scenario I just outlined. He is certainly not the best choice for a job that has the potential to plunge the U.S. back into a financial crisis along the lines of the one we experienced in 2008 … or worse. But don’t just take my word for it …. do your own research … the facts are pretty easy to find. As I have said more times than I can count, we must hope that Congress has the good sense to deny Trump this nomination.