By Dartagnun on May 10, 2016 in the DailyKos
attribution: Elaine Benson
Asked on Thursday whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.”
He added, “And if the economy was good, it was good. So, therefore, you can’t lose.”
Paul Krugman isn’t under any illusions that calling Donald Trump an ignoramus is going to move the dial one whit in this election. He assumes that readers of his column in the New York Times, whether they agree or disagree with his conclusions, are at least likely to give a fair hearing to the opinions of a Nobel-winning economist on subjects like, you know, the economy.
But anyone who’s decided that, for whatever reason, Donald Trump would make a real swell President isn’t going to be reading Krugman’s columns. The core of Trump’s appeal is its deliberate abandonment of critical thought, its encouragement to gleefully toss away the lessons of hard experience. Thinking critically is bothersome, hard work. And it’s so much easier when someone else has all the answers, or makes a good show of pretending to. It’s easier to strike an attitude than to actually solve a problem.
Trump’s appeal depends on folks ignoring reality and placing their trust wholly in the warm, fuzzy embrace of whatever preconceptions and biases they already have about why the world is the way it is. Trump offers up whatever “policies” or “values” he has (actually none) simply to allow people to project those preconceptions and prejudices, whatever they are, to convince themselves that somebody else will do the heavy lifting of sorting out the complexities for them.
Immigration? Just ignore the fact that entire state economies in the Southwestern United States would evaporate in a minute without cheap undocumented labor, and that corporations want it, need it, and will continue to get it regardless. Instead, we’ll build a “big wall.” Tired of foreign competition/companies outsourcing, corporate “inversions,” and offshoring? Impose huge tariffs on imports goods, threaten China with a trade war and “talk sense” to those corporate CEO’s. Just “cut a deal” and they’ll all magically fall in line. Beautiful, simplistic, feel-good stuff, and ultimately utter nonsense, perfectly crafted for an electorate attuned to soundbites:
Truly, Donald Trump knows nothing. He is more ignorant about policy than you can possibly imagine, even when you take into account the fact that he is more ignorant than you can possibly imagine. But his ignorance isn’t as unique as it may seem: In many ways, he’s just doing a clumsy job of channeling nonsense widely popular in his party, and to some extent in the chattering classes more generally.
Krugman’s point here really isn’t that Trump has demonstrated himself stupefyingly ignorant of how the country actually operates economically. His point is that the ground was laid a long time ago for a good half of the American public to be suckered, the same half who thought Sarah Palin belonged a heartbeat away from the Presidency in 2008, when we were looking straight down the abyss of the worst economic crisis in 75 years.
So when Trump proposed last week that the totality of his economic policy revolved around making a “deal” with the nation’s creditors to avoid the cataclysm of default on the nation’s debts, he was on familiar turf, surfing the same crevasses the Republican Party has tried for decades to carve into the public’s mind. His “approach” to the economy is the same sort of fantasy peddled by the Republican-controlled House when it balked at raising the debt ceiling in 2014: the idea that our country’s debt could be “prioritized” like a family tallying through its past due bill statements. It made no difference that the finances of a nation were not in any fathomable way similar to the finances of a household. We were all fed the notion—by Republicans and some “blue dog” Democrats– that we had to “get our fiscal house in order” because of the huge, horrible looming debt. It was suggested we needed to “balance our budgets”and that the failure to do so was some mortal sin. But it was never suggested we do so by adjusting the same tax system that had created massive inequality in the first place.
This was the mantra of the Republican Party throughout the entire Obama Administration. And it was a very nice con job, with an ulterior motive of gutting the role of government to benefit the wealthiest among us:
A lots of supposedly serious people have been hyping the alleged threat posed by federal debt for years. For example, Paul Ryan, the speaker of the House, has warned repeatedly about a “looming debt crisis.” Indeed, until not long ago the whole Beltway elite seemed to be in the grip of BowlesSimpsonism, with its assertion that debt was the greatest threat facing the nation.
A lot of this debt hysteria was really about trying to bully us into cutting Social Security and Medicare, which is why so many self-proclaimed fiscal hawks were also eager to cut taxes on the rich.
This is what actually happens in real-world terms if the US defaults on its debts:
[T]he government would lack the cash on hand to fully meet its myriad financial obligations, which include interest payments to government bond holders, tax refunds, payments to Medicare doctors and hospitals, veterans, active duty troops, private contractors, Social Security recipients and many others. The Treasury makes around 80 million separate payments per month.
In the real world that exists outside of Trumpville, nations do not get to “choose” what debts to “default’ on, what debts to “pay,” and what debts to try to “cut a deal.” When nations try to do that, bad things happen:
[E]ven flirting with default has negative impacts on consumer confidence, business optimism, stock market prices and volatility, and more expensively, Treasury yields.
But those are all fairly abstract concepts. They require the heavy lifting of thought and Trump does not do heavy lifting. To put it in more simple terms, you could go to your bank or ATM tomorrow and it might just be closed, because the bank relies on short-term treasuries as collateral for cash. But the most profound effect would be on US interest rates, which would go through the roof, constraining the ability of the country to refinance its debt at a lower rate later, effectively creating a vicious circle of debt, piling on debt, piling on more debt:
Rate increases would not only hike future borrowing costs of the federal government, but would also raise capital costs for struggling U.S. businesses and cash-strapped homebuyers. In addition, rising rates could divert future taxpayer money away from much-needed federal investments in such areas as infrastructure, education, and health care.
If it did not precipitate a full-blown Financial crisis (which it almost certainly would), defaulting on the debt would plunge the country straight back into a recession, one that all the tough talk and bluster in the world would do absolutely nothing to salvage, as countries accustomed to relying on the stability of the American dollar suddenly bolted for the exits. Stocks, Americans’ toehold in this corporate-skewed economy through their 401k’s, would tank. Retirement plans would dissolve. Families’ hopes for their kids educations would be squandered.
“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,” Trump said.
Trump’s problem is that the US economy isn’t like one of his casinos. It isn’t something we can just “walk away from” if he and a willing Republican Congress decide to fuck it up to try to prove some ideological point. It’s not subject to a careful judicial “wind-down” or “liquidation.” The only thing liquidated by a national default on its debts is the future of ordinary Americans.
None of this should be taken as an excuse for Mr. Trump. He really is frighteningly uninformed; worse, he doesn’t appear to know what he doesn’t know. The point, instead, is that his blithe lack of knowledge largely follows from the know-nothing attitudes of the party he now leads.
Trump’s plan in this election is to shape-shift, counting on Americans’ short attention spans and a constant barrage of media soundbites to obscure the fact that he has no real plans or policies beyond the desire to temporarily accommodate enough people’s biases and prejudices to get himself elected. We can only hope that Americans recognize that hiring an ignoramus to manage this country’s economy will not end well for anyone.