CNN’s Romans: Financial Experts Think Trump's Debt Plans Are "Reckless, Dangerous, Clueless," And "Chaotic"
Christine Romans: "For A Republican Presidential Candidate" To Float Reneging On Debt Obligations Is "Alarming"
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From the May 10 edition of CNN's Early Start:
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CHRISTINE ROMANS (CO-HOST): Donald Trump's evolving comments on his economic policies, specifically America's debt, they are getting a lot of attention, as we've told you this morning. Here is what economic experts and sources in the bond market are calling Trump: "reckless," "dangerous," "clueless," "chaotic." American debt, of course, [is] the gold standard investment coveted around the world. When the U.S. borrows money, it's word is it's bond. Now, last month Trump proposed he could wipe out all $19 trillion of federal debt in just eight years. One right-leaning economist calls that "widely implausible at best," especially if you're giving tax cuts all over the place. Last week, Trump told CNBC the country could borrow more money now and negotiate payment terms later if the economy crashed. This may work with struggling businesses, it doesn't -- that's not how it works with the government.
One analyst's take; Trump, quote, "doesn't have a coherent idea of what he is talking about." Others warn it would amount to a default on debt and call into question the full faith and credit of the U.S. government. Donald Trump, late yesterday saying, "No, no, no. U.S. debt is sacred." He is not calling for a default. Then yesterday on New Day, he clarified his stance, saying the country wouldn't default because it could just print more money and buy back the debt at a discounted rate. Experts say that would be disastrous for the economy; rapid inflation, high interest rates, it could hurt Americans who hold government bonds as savings. Another point, a minor point I guess, the president doesn't actually hold those powers, the printing money powers, it’s the Federal Reserve that sets monetary policy. The president appoints the Fed chief.
Romans expanded on the numerous critiques of Trump's plan on the May 10 edition of CNN's New Day:
JOHN BERMAN (CO-HOST): Why did this concern economists and analysts so much?
ROMANS: That and the bond market, and pretty much a lot of people who invest in the United States, because the United States doesn't "make a deal" on its debt. It's just not something that the U.S. has ever done, and that's why the world invests in the United States; a big, strong, dynamic, safe economy.
But negotiating the terms of an IOU is just not something that anyone would ever posit. It just is not something that gets thrown out there, and for a Republican presidential candidate to say that is something that really was pretty alarming. And here's one of the reasons why. Because when you have countries that renegotiate their obligations with investors, you're Greece, you are Argentina, you're a country that is in distress. And for Donald Trump to be talking about the almighty American economy being in distress was something that really got people unnerved. And you look, it's a global issue. All of these countries own U.S. debt. A lot of foreign governments, sovereign wealth funds, foreign investors own U.S. debt. And this has been basically the basis of the U.S. economy for some time.
BERMAN: And what analysts are also saying is, when you renegotiate your debt, when you go to your creditors and say "I want to renegotiate," that's tantamount to default. And Donald Trump putting fuel on the fire by saying, "No, no, no, no, no." Listen to this:
DONALD TRUMP: This is the United States government. First of all, you never have to default because you print the money. I hate to tell you, OK? So there's never a default.
BERMAN: So here's the thing on this. Technically, he's right. The U.S. can print more money and probably would before it went into default, but --
ROMANS: But if you print more money you have more dollars. And what happens when you have more dollars? When you print money and have more dollars, the dollars you have already out there are worth less. So you have inflation. Sometimes hyperinflation. The things that we buy go up. Interest rates then go up. It's harder to borrow money or more expensive to borrow money. And by the way, then the united States is paying more for the money that it's borrowing as well, and it can really hurt the stock market and the economy overall. There are all these negative connotations of that. Now, the Federal Reserve is who would print this money with the help of Bureau of Engraving and Printing, but the president of the United States -- a President Trump -- couldn't just arbitrarily make that decision anyway.
So, the allure of the Donald Trump candidacy is that he's a deal maker, a negotiator, a businessman who can take hotels, and who can take casinos, and he can borrow money and then maybe that's how he makes his money -- renegotiates his deals with his investors in the end and makes more money. The United States government doesn't work that way, it just doesn't. And so you have a lot of folks asking, "does Donald Trump -- is he musing about what he thinks about the American economy? Does he not understand, or are these real policies?" Just a lot of confusion about deciphering what exactly he means.