On Thursday, Donald Trump’s tweet about tacos was only the second-most alarming message he sent to potential voters. Less open to humorous interpretation was his threat to default on U.S. debt in the event of a recession.
“I’ve borrowed knowing that you can pay back with discounts,” he told CNBC. “I would borrow knowing that if the economy crashed, you could make a deal.”
This policy would be so disastrous that even its suggestion is dangerous. In the event of a recession, Trump would treat the full faith and credit of the United States to a capricious hair cut. As Josh Barro explained, this wouldn’t just represent a historic default, putting the U.S. in the position of a country like Greece or Argentina; it could also spark an international financial crisis, as “investors would cease to see Treasuries as a safe asset and demand higher interest rates in exchange for risk.”
Trump has promised to make America great again. But a closer look his policy proposals, such as they are, suggests that within his first few years as president, he would more likely make American recessionary again.
The problem begins with his outspoken approach to Mexican immigration. His “plan” to deport 11 million undocumented immigrants would shrink the economy by about 2 percent, according to American Action Forum (AAF), a conservative and pro-business think tank. The sudden subtraction of 7 million workers would cause an immediate shock to thousands of businesses, triggering a GDP collapse ranging from $400 billion to $600 billion in production, AAF’s analysis found, with the worst of the slump occurring in industries like construction and hospitality. “The things Donald Trump has said are utterly unworkable,” Douglas Holtz-Eakin, an economic adviser to Senator John McCain’s 2008 presidential campaign and the forum's president, told Reuters.
Trump’s plan for a border wall could cost several billion dollars more. But as a financial matter, the wall is one of the least troubling aspects of his policy fantasies. By contrast, his tax plan would cut federal revenue by almost $10 trillion in the next decade, according to the Tax Policy Center. Meanwhile, he has no plans to cut spending on Medicare, Medicaid, benefits for veterans, defense, or Social Security, which, along with mandatory payments on the debt, collectively account for more than two-thirds of government spending. In fact, several of his proposals suggest he would raise spending on some of these measures, such as Social Security and veterans benefits. The deficit would, in short order, reach unprecedented peacetime, non-recession levels. (That’s not counting the revenue collapse from manufacturing a recession with mass deportations.)
Here is Trumponomics, in a sentence: Create an unnecessary economic downturn by deporting 7 million workers while cutting taxes for the rich and requiring the United States to borrow trillions of dollars from creditors, whom Trump has now threatened to stiff, if he feels like it. It would be the greatest, dumbest recession in American history.
Trump’s abandonment of economic common sense is, like so much of his appeal, not an outlier position in the GOP so much as an extrapolation of his party’s recent commitment to fiscal insanity. Republicans elites have responded to widening income inequality by proposing a series of escalating tax cuts for the rich. Paul Ryan, nominally the adult-elect of the party, rose to fame with tax-cut promises and draconian proposals to shrink the safety net. When interest rates were historically low and infrastructure spending was attractive, Republicans called for deficit reductions. When the recovery was still fragile, they played chicken with the debt ceiling by threatening a default until the president caved to their budget demands.
Trump’s economic ideas are so haphazard that, by their own merits, they scarcely deserve to be taken seriously or considered alongside each other. But given that he has managed to become the presumptive GOP presidential nominee, the media doesn’t have a choice. Like so much of his candidacy, those ideas are a joke—one that the country is civically obligated to take seriously.
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