In April this year, Donald Trump was proposing to pay off the US national debt of $19 trillion over two presidential terms.
He laid out his initial proposals in an interview with Bob Woodward of the Washington Post, suggesting that he could pay off the national debt by renegotiating trade deals.
As the Washington Post explained, eliminating a trade deficit does not mean the money ends up in government coffers. The post goes on to explain that before the debt can be reduced the current budget deficit needs to be tackled. So the task is not $19 trillion, but nearly $26 trillion over eight years.
By May, Trump was backtracking on the idea of paying off the debt over 8 years and was promulgating a new plan. The New York Times reported that this new plan was based on persuading creditors to accept something less than full payment. The Times goes on to recall the consequences of a potential default scare back in 2011, when federal borrowing costs climbed as congressional Republicans refused for a time to increase the federal government’s statutory borrowing limit, raising doubts about the government’s ability to repay its debts. The Bipartisan Policy Center calculated that the resulting higher rates cost taxpayers about $19 billion.
Neither of these proposals had any credibility, but I was reminded of a time when Mr. Trump was proposing a far more Liberal approach to debt reduction. In 1999, as a prospective candidate for the Reform Party presidential nomination, he was advocating a one-time “net worth tax” on individuals and trusts worth $10 million or more. CNN reported that Trump had a plan to pay off the national debt, grant a middle class a tax cut, and keep Social Security afloat.
According to Trump’s calculations, a 14.25% levy on the net worth (excluding the value of an individual’s principal home) of the 1% of Americans who control 90% of the wealth of the country would have raised £5.7 trillion in 1999 eliminating the federal debt in one swoop and the accompanying $200 billion of annual interest payments.
Trump said “Personally this plan would cost me hundreds of millions of dollars, but in all honesty, it’s worth it.” He predicted his debt elimination combined with middle-class tax cuts would trigger a 35 to 40 percent boost in economic activity, with more business start-ups, more jobs, and more prosperity. “It is a win-win for the American people, an idea no conventional politician would have the guts to put forward” he said.
Perhaps, if Mr. Trump had revived his 1999 plan for a one-time levy on the massive wealth accumulated by the richest 1% of American citizens, he might have been taken more seriously by economists and the media in this presidential race.
* Joe Bourke is an accountant and university lecturer, Chair of ALTER, and Chair of Hounslow Liberal Democrats.
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9 Comments
His statements that US companies have substantial assets outside the USA contains some simplistic truth, but he insults the intelligence of the average American citizen and voter. They have seen what happened to the US economy under Reagan-Bush, Reagan-Bush, Bush-Quayle and Bush-Cheney. The ‘J-curve’ is a fallacy, ‘trickle down’ is spin.
Even if Donald Trump’s policies were implemented it does not follow that overseas assets would be brought into the USA. Enabling is not enforcement. Since 1945 US governments and businesses have wanted to stimulate the economies of Western Europe, Japan and others and, more recently, China.
It is also the case that relaxing inconvenient regulations will lead inevitably to increased pollution. “They,ve got smog and sewage and mud. Turn on your taps and get hot and cold running crud.” http://www.lyricsfreak.com/t/tom+lehrer/pollution_20138396.html
@Richard Underhill
“His statements that US companies have substantial assets outside the USA contains some simplistic truth, but he insults the intelligence of the average American citizen and voter.“
But are you sure that is possible to do?
Its on the right lines, we have a world economy based on escalating debt and everyone understands that long term such a situation is unsustainable. But on the other hand, it has already been going on for decades, so the calculation is always whether it is better just to continue and hope the crash never arrives, or to tackle it. The crash can almost certainly be staved off for more than 5 years, so no legislature is concerned about something which will not happen before the next administration, or the one after. It may utterly destroy the world economy one day, but probably not today.
Which means no one is even interested in reversing the trend, because that implies a reversal of the good effects of borrowing and spending without thought how to repay.
The only solution is a formal transfer of wealth from those with assets to those with debts. Those with assets arent generally keen.
Trump has himself avoided paying taxes by being “smart” (in his own words) – the other billionaires will presumambly do the same when faced with an additional 14.25% levy. Also, people who invest in American bonds may not want all their money back in such a short space of time. Pension funds invest in public debt because it is safe and secure: getting your pension pot back in a lump sum of cash will only mean you have to find somewhere else to invest it – probably leading to less safe investment vehicles, Ponzi schemes and impoverished pensioners.
I have absolutely no idea, why, at least here in the UK, we don’t have a national website showing the current deficit, and inviting voluntary donations. Everyone could do their bit, and enjoy watching the bar slowly reduce, =). [Or go up again with government spending, lol…]
Donald Trump “but in all honesty, it’s worth it.”
Does Trump know what honesty is ?
It just isn’t possible to even reduce the deficit in the USA never mind repay the debt! We need to understand what the US National debt really means. It really isn’t the same as a debt that you and I would incur to buy a house or car.
Let’s just do a simple thought experiment. Lets assume we have a small island community of 1000 individuals which has so far got by with barter economy. The Government now decides to introduce a currency called the Crown.
The Government requires everyone to do a simple task to earn a wage of 10 crowns each to get the ball rolling. Once they have paid the wages, the National Debt is 10, 000 crown. The financial assets of the population is 10,000 crowns too. So the assets of the population has to equal the liabilities or debts of the government. If the government were to “pay off” its National Debt by taxing away those assets there wouldn’t be any left in the economy!
And that’s really not going to do much to get anyone re-elected in the future!
Every country needs its National Debt. Even Germany has one of about 3 trillion euros.
@Andrew M
‘I have absolutely no idea, why, at least here in the UK, we don’t have a national website showing the current deficit, and inviting voluntary donations. ‘
Stanley Baldwin, who did so much to ensure the dominance of the Tories in the 1920s and 1930s, gave an appreciable part of his personal fortune to the National Debt post-First World War.
Not a man that Liberals would like generally, but a shining example in this respect.
If only we had paid as much attention to Europe as we do to the USA…