Category: Policy Novice

Trump Tries to Backtrack His Defaulting on Debt Comments

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Donald Trump declared Monday the U.S. never has to default on debt “because you print the money,” while trying to clarify his strategy for managing the national debt.

Trump insisted that he never said the U.S. should default or attempt to renegotiate with creditors, as had been reported. Trump told CNN’s Chris Cuomo on “New Day”:

People said I want to go and buy debt and default on debt, and I mean, these people are crazy. 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?

The presumptive Republican presidential nominee explained he would center his approach on debt buybacks if and when interest rates go up.

I said if we can buy back government debt at a discount, in other words, if interest rates go up and we can buy bonds back at a discount — if we are liquid enough as a country, we should do that. In other words, we can buy back debt at a discount.

He also repeated his claim that he is “the king of debt.”

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.

(h/t CNN)

Reality

Trump lied. In an interview with CNBC on 5/6/16 that we cataloged here along with video, Trump was asked if the U.S. needs to pay its debt in full or if it could negotiate a partial repayment, Trump said:

I would borrow, knowing that if the economy crashed, you could make a deal.

Also during his CNBC interview, Trump had said that interest rates should be kept low — contradicting his remarks on CNN Monday — because a rate jump could trigger a catastrophic increase the cost of borrowing.

We’re paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points? We don’t have a country.

Furthermore, whether through debt buyback or restructuring, neither of Trump’s debt-reduction proposals from the past week square with his party’s core approach on the issue — deep spending cuts and entitlement program reform.

The Republican Party’s official platform argues the U.S.’s looming “debt explosion” should be averted through “immediate reductions in federal spending, as a down payment on the much larger task of long-range fiscal control.”

These cuts “must be accompanied by major structural reforms,” according to the platform, and pointing to programs such as Medicare, Medicaid, and Social Security, the GOP argues that “we must restructure the twentieth century entitlement state.”

Media

Links

http://video.cnbc.com/gallery/?video=3000515269

http://www.politico.com/story/2016/05/trump-debt-bankruptcy-wall-street-222976

New York Times article that Trump claimed misrepresented him. They didn’t.

Donald Trump Just Threatened to Cause an Unprecedented Global Financial Crisis

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In an interview on CNBC, Donald Trump broke with tired clichés about the evils of federal debt accumulation. “I am the king of debt,” he said. “I love debt. I love playing with it.”

But he replaced fearmongering about debt with an even more alarming notion — a bankruptcy of the United States federal government that would incinerate the world economy.

“I would borrow, knowing that if the economy crashed, you could make a deal,” Trump said. “And if the economy was good, it was good. So therefore, you can’t lose.”

With his statement, Trump not only revealed a dangerous ignorance about the operation of the national monetary system and the global economic order, but also offered a brilliant case study in the profound risks of attempting to apply the logic of a private business enterprise to the task of running the United States of America.

Trump’s business logic makes sense

Trump is a businessman, and in terms of thinking like a businessman his idea makes sense.

The interest rate that investors currently charge the United States in order to borrow money is very low. A smart business strategy under those circumstances would be to borrow a bunch of money and undertake a bunch of big investment projects that are somewhat risky but judged to possibly have a huge payoff.

You now have two possible scenarios.

In one scenario, the investments work out and you make a ton of money. In that case, you can easily pay back the loan and everyone wins.

In another scenario, the investments don’t work out and you don’t make much money. In that case, you objectively can’t pay back the loan. You either work out a deal with the people you owe money to in which they accept less than 100 percent of what you owe them (this is called a “haircut”) or else you go to bankruptcy court and a judge will force them to accept less than 100 percent.

This is how businesspeople think — especially those who work in capital-intensive industries like real estate. And for good reason. This is the right way to run a real estate company.

Applying this idea to the United States would destroy the economy

The United States of America, however, is not a real estate development company. If a real estate company defaults on its debts and its creditors lose money, that’s their problem. If a bank fails as a result, then it’s the FDIC’s responsibility to clean it up.
The government doesn’t work like that. Right now, people and companies all around the world treat US government bonds as the least risky financial asset in the universe. If the government defaults and banks fail as a result, the government needs to clean up the mess. And if risk-free federal bonds turn out to be risky, then every other financial assetbecomes riskier. The interest rate charged on state and local government debt, on corporate debt, and on home loans will spike. Savings will evaporate, and liquidity will vanish as everyone tries to hold on to their cash until they can figure out what’s going on.

Every assessment of risk in the financial system is based on the idea that the least risky thing is lending money to the federal government. If that turns out to be much riskier than previously thought, then everything else becomes much riskier too. Business investment will collapse, state and local finances will be crushed, and shockwaves will emanate to a whole range of foreign countries that borrow dollars.

Remember 2008, when the markets went from thinking housing debt was low-risk to thinking it was high-risk, and a global financial crisis was the result? This would be like that, but much worse — US government debt is the very foundation of low-risk investments.

What’s especially troubling about Trump’s proposal is that there is genuinely no conceivable circumstance under which this kind of default would be necessary. The debt of the federal government consists entirely of obligations to pay US dollars to various individuals and institutions. US dollars are, conveniently, something the US government can create instantly and in infinite quantities at any time.

Of course, it might be undesirable to finance debts by printing money rather than raising taxes or cutting spending. In particular, that kind of money printing could lead to inflation, and even though inflation is very low right now there’s no guarantee that it will always be low.

But a little bit of inflation is always going to be strictly preferable to destroying the whole American economy, especially because a debt default would cause a crash in the value of the dollar and spark inflation anyway.

Trump doesn’t know what he’s talking about

This is the second time this week that Trump has revealed a profound ignorance of an issue related to government debts.

The early instance in which he kept proposing that Puerto Rico declare bankruptcy even though doing so is illegal was on a question that’s very important to Puerto Ricans but not so important to everyone else. It is, however, important to pay attention to how presidential candidates approach issues across the board — and what we saw with Puerto Rico is that Trump approached the issue by simplistically applying business logic without bothering to check whether it applies to the actual situation.

Now in the CNBC interview he’s done the exact same thing on a matter of more consequence —not the debts of Puerto Rico but the debts of the United States of America. It’s understandable that a real estate developer might assume that what works in real estate would work in economic policy, but it’s not true. And Trump hasn’t bothered to check or ask anyone about it.

(h/t CNBC)

Reality

What Donald Trump is proposing to pay off the national debt (which is money that we are obligated to pay creditors and for services) is to borrow large sums of money at a lower rate. In other words robbing Peter to pay Paul.  Should the economy be healthy then we can pay back that borrowed money no problem. However should the economy crash, and the United States is unable to meet the legal obligation of debt repayment (‘defaulting‘) then Trump proposed to renegotiate that new debt at a lower rate.

While Trump did not say the word ‘default’ he explained the exact definition of the word default in his proposal.

This raised eyebrows by suggesting an unorthodox approach towards cutting the national debt… not paying it then renegotiate terms. Such a renegotiation risks creating financial turmoil because U.S. Treasuries are considered the safest assets on the planet and a major benchmark for valuing other securities. Calling into question their safety could cause borrowing rates to rise and create confusion in the markets.

Confusion in the markets is a very bad thing. Wall Street and businesses need to know what the rules are in order to subvert play them.

Media

http://video.cnbc.com/gallery/?video=3000515269

Trump says he wouldn’t take use of nuclear weapons ‘off the table’

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Donald Trump discusses arresting women who get an abortion.

Donald Trump refused to take the use of nuclear weapons off the table in any situation, including in Europe or the Middle East, during a wide-ranging town hall on MSNBC.

The GOP presidential front-runner said he would consider using a nuclear weapon if the U.S. were attacked by the Islamic State in Iraq and Syria, according to an MSNBC transcript of the interview released Wednesday afternoon.

“Somebody hits us within ISIS, you wouldn’t fight back with a nuke?” he said.

When host Chris Matthews asked if the real estate mogul could definitively say he wouldn’t use nuclear weapons, he responded: “I would never say that. I would never take any of my cards off the table.”

Matthews pressed him, asking if he would consider using nuclear weapons in Europe.

“No, I don’t think so,” Trump said, but he again said he wouldn’t definitively write off the option.

In a New York Times interview published over the weekend, Trump stressed the importance of unpredictability in his foreign policy. He told Matthews Wednesday that “you’d be a bad negotiator” for taking any strategy off the table.

He called nuclear weapons “sort of like the end of the ball game.”

“I’m not going to use nuclear, but I’m not taking any cards off the table,” he said.

Reality

The world freaked the fuck out upon hearing a candidate for the President of the United States was willing to use nuclear weapons against them should terrorists be found on their soil.

  • Japan, a country with a pacific constitution and knows first hand the power of nuclear weapons, was so concerned, Prime Minister Shinzo Abe felt the need to respond publicly, saying, “whoever will become the next president of the United States, the Japan-U.S. alliance is the cornerstone of Japan’s diplomacy.”
  • South Korea, a country technically at war with the nuclear state North Korea, just had to deal with an H-bomb test by North Korea just a few weeks prior. This would not be the best time to threaten to pull out troops. The South Korean government reaction has been more focused on Trump’s assertion that South Korea is not paying its way. Furthermore Daniel Pinkston of Troy University said it would play into North Korea’s hands. “The hardliners in Pyongyang would just love such an outcome because if that were to occur, it would completely justify their nuclear status … and validate Kim Jong Un’s policy line as absolutely brilliant and absolutely correct.”

For the record, Japan spends more than $2 billion a year for the privilege of hosting U.S. forces, while South Korea pays close to $900 million, meaning it’s cheaper to the U.S. to keep our forces there than bring them home.

Media

Links

http://thehill.com/policy/defense/274730-trump-says-he-would-not-take-nuclear-off-the-table-in-any-situation

Donald Trump: Sure, I Might Use Nuclear Weapons In Europe.

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Donald Trump has refused to rule out dropping a nuclear bomb on Europe, saying he is not willing to “take any cards off the table”.

In an MSNBC interview which has already made headline for Mr Trump’s comments on punishing women for having abortions, the presidential candidate said if the US wasn’t willing to use its nuclear weapons, “why are we making them?”

Mr Trump did say he “would be the last one to use the nuclear weapons” and added his now-familiar line that he was “against Iraq” – which is not strictly the case.

“I would be very, very slow to pull that trigger,” Mr Trump said. “[But] if someone hits us with a nuke, you wouldn’t fight back with a nuke?”

Here’s the exchange with Chris Matthews in full:

Donald Trump: “First of all, you don’t want to say take everything off the table because you would be a bad negotiator if you do that.

 

Chris Matthews: “Just nuclear?”

 

DT: “Look, nuclear should be off the table, but would there be a time that it could be used? Possibly.”

 

CM: “The problem is when you say that, the whole world heard that. David Cameron heard that in Britain, the Japanese where we bombed them in ’45 heard it. They are hearing a guy running for President of the United States talking about maybe using nuclear weapons. Nobody wants to hear that about an American president.”

 

DT: “Then why are we are making them? Why do we make them?”
Which countries have nuclear weapons?

 

CM: “Because of the old mutually assured destruction, which Reagan hated and tried to get rid of.”

 

DT: “I was against Iraq, I would be the last one to use the nuclear weapons because that’s sort of like the end of the ball game.”

 

CM: “Can you tell the Middle East we’re not using nuclear weapons?”

 

DT: “I would never say that. I would never take any of my cards off the table.”

 

CM: “How about Europe? We won’t use in Europe?”

 

DT: “I’m not going to take it off the table for anybody.”

 

CM: “You’re going to use it in Europe?”

 

DT: “No! I don’t think so. But…”

 

CM: “Just say it, say ‘I’m not going to use a nuclear weapon in Europe’.”

 

DT: “I am not taking cards off the table. I’m not going to use nukes – but I’m not taking any cards off the table.”

 

CM: “The trouble is, the sane people hear you, and the insane people are not affected by your threats. The real fanatics say good, keep it up.”

 

DT: “I think they are more affected than you think.”

Earlier this week, Mr Trump struggled with another question on the nuclear issue when he was asked by right-wing radio host Hugh Hewitt which of the US’s “triad” of weapons – by land, by sea or by air – was in most urgent need of an upgrade.

The candidate appeared not to understand the question, even when it was repeated, eventually responding: “I think – I think, for me, nuclear is just the power, the devastation is very important to me.”

David Cameron has previously said he would be willing to use nuclear bombs if an attack was “justified”, describing them as “the ultimate insurance policy”.

He was speaking in October last year, after opposition leader Jeremy Corbyn said he could conceive of no circumstances in which he would order the use of a nuclear weapon.

(h/t Independent.uk)

Reality

Let’s just let this sink in for a moment. A leading candidate for the Presidency of the United States of America said that using a nuclear weapon in Europe is not off the table. That immediately put our allies in Europe on edge.

Media

 

Trump Fails at Foreign Policy With The New York Times

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It’s a tradition for The New York Times to have a 1-on-1 interview with a presidential candidate to dig deep into their foreign policy positions so the public can come away with a better understanding. This usually happens much later in the race but this year however is not usual as the front-runner for the Republican candidacy for the President of the United States, Donald J. Trump, has little-to-none public foreign policy positions. So the Times reached out to Trump to get some info out of him and what we got was a rambling mess and some really bad ideas.

Some highlights of the conversation include:

  • Trump would use nuclear weapons in the fight against ISIS.
  • Trump had no idea who the head of China is.
  • He is willing to pull troops from Japan and South Korea.
  • He believes it is okay for Japan and South Korea to develop their own nuclear weapons.
  • He is totally cool with Saudi Arabia collapsing if they don’t join the fight with ISIS.

Reality

Stop The Donald Trump is reading the transcript of the conversation and working on an analysis, which will be coming soon.

If you don’t have an opportunity to read the transcript allow us to sum up the conversation: Trump is asked a direct question, he rambles about nothing for 200 words, then The Times reporter asks if he can please answer the question, repeat.

 

Trump got many details just plain wrong. For example:

Trump had no idea who the head of China is.

That would be President Xi Jinping

 

Some of the ideas that Trump put forward are just outright stupid and dangerous. For example:

He is willing to pull troops from Japan and South Korea.

And then what? China and North Korea become stronger which would destabilize Asia.

He believes it is okay for Japan and South Korea to develop their own nuclear weapons.

And then what? Now we have an arms race in Asia, exactly what we’ve been trying to avoid for the past 50 years.

He is totally cool with Saudi Arabia collapsing if they don’t join the fight with ISIS.

And then what? With no Saudi Arabia to balance the region, Iran becomes stronger.

Links

http://www.nytimes.com/2016/03/27/us/politics/donald-trump-transcript.html

Trump Consults Himself On Foreign Policy, ‘Because I Have a Very Good Brain’

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Donald Trump finally shared the name of someone he consults on foreign policy: himself. Asked on MSNBC’s “Morning Joe” who he talks with consistently about foreign policy, Trump responded:

“I’m speaking with myself, number one, because I have a very good brain and I’ve said a lot of things.”

“I know what I’m doing and I listen to a lot of people, I talk to a lot of people and at the appropriate time I’ll tell you who the people are,” Trump said. “But my primary consultant is myself and I have a good instinct for this stuff.”

The New York real estate mogul has kept mum on his foreign policy team, despite promising in early February to release a list of his advisers in “about two weeks.”

Trump was also asked on Wednesday morning if his foreign policy was “neoisolationist,” to which he responded “I wouldn’t say that at all.”

Reality

As evidence, Trump claimed he had predicted the rise of Osama bin Laden, a statement which was a total absolute lie.

Media

Links

http://www.washingtontimes.com/news/2016/mar/17/donald-trump-i-consult-myself-on-foreign-policy-be/

http://www.politico.com/blogs/2016-gop-primary-live-updates-and-results/2016/03/trump-foreign-policy-adviser-220853

Trump Bombs on Foreign Policy Question

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Donald Trump stumbled when asked about the heads of major terrorist organizations on Thursday and then lashed out at what he called a “gotcha question.”

Trump, the front-runner for the GOP nomination, blasted conservative radio host Hugh Hewitt in an interview and said it is “ridiculous” to be questioned about who leads Hamas, Hezbollah, al-Nusra and ISIS.

“I think it’s ridiculous. I’ll have, I’m a delegator. I find great people. I find absolutely great people, and I’ll find them in our armed services, and I find absolutely great people,” Trump said.

Trump sought to downplay the importance of knowing who controls the terror groups. He suggested that those leaders — some of whom have led their groups for years — would likely no longer be in power by the time he would reach the White House.

“As far as the individual players, of course I don’t know them. I’ve never met them. I haven’t been, you know, in a position to meet them. If, if they’re still there, which is unlikely in many cases, but if they’re still there, I will know them better than I know you,” Trump told Hewitt.

During the interview, Hewitt said he didn’t mean to be asking Trump “gotcha questions” – but the front-running Republican candidate was having none of it.

“Well, that is a gotcha question, you know, when you’re asking me whose running this, this, this,” Trump said.

Reality

Clearly not knowing simple details about the middle east shows how unprepared and inexperienced Donald Trump is for the Presidency.

Media

Links

http://www.cnn.com/2015/09/03/politics/donald-trump-gotcha-question-terrorist-leaders-hugh-hewitt/

Trump Misstates Part of the Iran Deal

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In criticizing the Iran deal as one of the “worst contracts” he would have to inherit as president, Trump has also incorrectly said that the agreement includes a stipulation that the United States would have to fight Israel in defense of the Iranians.

But there is a clause in there that people are not even talking about that we’re supposed to essentially come to their defense, the Iranian’s defense, and if Israel attacks, you know, where are we? Well, believe me, that will never happen. But how do they agree to things like this? We have a horrible contract. But we do have a contract.

Reality

The State Department disputed Trump’s characterization of the deal’s Section 10 of Annex III.

“This provision of the [agreement] is designed to help bring Iran’s nuclear security and safety practices in line with those used by other nuclear programs around the world,” said Marie Harf, Secretary of State John Kerry’s senior communications adviser, during a CNN fact check.

“The IAEA provides this kind of training routinely, as it is in the interest of all countries that nuclear material be safeguarded from theft and terrorist attacks — the types of ‘sabotage’ in question. This would be the focus of any such assistance by the P5+1 or other states,” she noted. “Nevertheless, this provision does not commit any country to engage in this kind of routine nuclear security cooperation, and it is absurd to suggest it [commits] anyone to ‘defend’ Iran’s nuclear facilities.”

Links

http://www.politico.eu/article/donald-trumps-11-worst-foreign-policy-gaffes-us-election-syria-mexico-iraq/

http://www.realclearpolitics.com/video/2015/09/04/donald_trump_slams_third_rate_radio_announcer_hugh_hewitt_after_bombing_mideast_quiz.html

Trump Gets Foreign Policy Advice From TV Shows

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Donal Trump on Meet the Press

In an August 16 appearance on NBC’s “Meet the Press,” Chuck Todd grilled Trump on who he turned to for foreign policy advice.

“Well I really watch the shows. You really see a lot of great, you know, when you watch your show and all of the other shows, and you have the generals and you have certain people that you like,” Trump said.

“But is there somebody — a go-to for you?” Todd pressed. That’s when Trump made his next mistake…

“Probably there are two or three. Yeah, probably there are two or three I mean, I like [former U.N. Ambassador John] Bolton. I think he’s, you know, tough cookie, knows what he’s talking about. [Ret. Col. Jack] Jacobs is a good guy… and I see him on occasion,”

In an interview with Mother Jones later that week, retired colonel Jack Jacobs said that while knew Trump, the two had never discussed military policy.

“He may have said the first person who came to mind,” Jacobs said. “I know him. But I’m not a consultant. I’m not certain if he has a national security group of people. I don’t know if he does or if he doesn’t. If he does, I’m not one of them.”

Links

http://www.nbcnews.com/meet-the-press/video/full-interview-trump-on-immigration-hillary-clinton-and-his-controversial-campaign-505901123767

http://www.politico.eu/article/donald-trumps-11-worst-foreign-policy-gaffes-us-election-syria-mexico-iraq/

 

Trump’s ISIS Foreign Policy Isn’t All That Great

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Chuck Todd

Donald Trump on MSNBC’s Meet the Press answered questions about his foreign policy.

Well, I want to take away their wealth. And, as you know, for years I’ve been saying, “Don’t go into Iraq.” They went into Iraq. They destabilized the Middle East. It was a big mistake. Okay, now we’re there. And you have ISIS. And I said this was going to happen. I said, “Iran will take over Iraq,” which is happening as sure as you’re sitting there. And ISIS is taking over a lot of the oil and certain areas of Iraq. And I said you take away their wealth, that you go and knock the hell out of the oil, take back the oil. We take over the oil, which we should have done in the first place.

Reality

Dumbing a complex situation like ISIS down into a simple catchphrase may play well to a riled up crowd, but we will never know how effective it will be until Trump becomes President and can take action. Except the military already analyzed his plan and found it to be just plain bad. Whoops!

Links

https://www.washingtonpost.com/news/the-fix/wp/2015/08/17/donald-trump-on-meet-the-press-annotated/

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