The United States will begin to pay the national debt, which currently exceeds $ 21.5 trillion. This was announced by US President Donald Trump, speaking at a meeting with American workers in the White House.
“We will start paying our debt. We have accumulated a lot of debt, but we have incredible potential. The previous administrations aggravated the situation because of their incompetence - they concluded deals that could not be made to take. Everyone knew that these were bad trading conditions, but they did not change them at all. But we will change everything very quickly, ”said Trump, answering a question about the economy and international trade.
According to the American president, as a result of unprofessional actions of previous administrations, huge funds were withdrawn from the American economy to other countries.
Trump has repeatedly raised the issue of US public debt, including during his 2016 presidential campaign. Then he promised voters that he would completely get rid of the US public debt during the eight years of his presidency, hinting at his inevitable re-election.
At the same time, since Trump took office as president, the US national debt has increased by another $ 1.7 trillion. The fiscal deficit in the fiscal year 2018 also grew by 17%, reaching $ 782 billion, and in 2019, according to the White House, it will exceed $ 1 trillion.
In order to reduce public debt, Trump is seeking to increase GDP growth rates, which should be 3% per year. This, according to the president, will lead to an increase in tax revenues. But in order to achieve these values, Trump cut corporate taxes from 35% to 21%.
Cut to the living
In addition to increasing GDP growth, Trump proposes to significantly reduce spending on all government programs, except for defense, including health care, education, and the allocation of international assistance. For this, the President and the Republican Party were criticized by the Democrats, who said that such measures would provoke a budget deficit.
“Republicans in Congress are promoting their plan to destroy Medicare, Medicaid, and social insurance health insurance programs, which retirees and their families live by. All this happens a few months after they increased the deficit by another $ 2 trillion of their tax frauds in favor of the rich, ”says The Hill’s publication of Democratic Congress leader Nancy Pelosi.
The representative of the responsible federal budget committee, Tyler Evilsizer, noted that in order to start paying off the state debt it is necessary to create a surplus of the federal budget. This will require a radical change in policy that Trump will be very difficult to do in the remaining two years as president.
“Next year, the budget deficit could be from $ 973 billion to $ 1.085 trillion. Balancing the budget will require reducing spending by 22–24% or increasing profitability by 28–32%. Such global changes can hardly be accommodated in two years, ”the Fiscal Times portal quotes the expert.
Elegant solution
Opponents of Trump argue that, in addition to reducing social and health insurance programs, the 45th President of the United States also offered more non-trivial ways to reduce US government debt.
For example, in his book Trump: Fear in the White House, famous American journalist Bob Woodward argues that during one of the meetings on debt issues, the president allegedly offered his economic adviser Gary Coon to pay the debt by creating a new money supply.
“Just turn on the printing presses and type the money,” according to Woodward, Trump put forward the proposal.
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“This is not done. We have huge deficits in our hands that need to be taken into account. The government does not close the balance in this way, ”replied, according to the journalist, Gary Cohn, who was allegedly“ struck by a lack of common sense. ”
In addition, the book argues that Trump offered to use for the payment of debt income from higher interest rates on loans.
"We just take a lot of money, hold it, and then sell it for profit," suggested Trump.
Later, Gary Cohn said that the dialogue described in the book is fictional, and he himself supports Trump's economic policies. In turn, the president called the Woodward book "a fraud, full of fictional stories."
State balance
From the point of view of the theory, it is possible to reduce the state debt, but for this it is necessary first of all to reduce the state budget deficit, said Yury Rogulev, director of the Roosevelt Foundation of the USA at Moscow State University, in a conversation with RT.
“He should start with this, promise exactly that he will achieve a budget surplus. When the surplus appears, the state debt will begin to decline. Of course, he will not be able to pay it, but theoretically it can be reduced if there were high growth rates, large profits in the treasury and overcoming the deficit. Without this, no reduction of debt is impossible, ”the expert explained.
Trump's statement is impractical because the first task — cutting government spending — has still not been resolved, Rogulev added.
“All this is not happening instantly. It is good if the growth rate of the economy increases, but it should not be just the growth of GDP. Such rapid acceleration, up to 4%, can lead to overheating of the economy, followed by a recession and an economic crisis. He wants to unleash the flywheel of the economy with job creation, but this is not a task for one or two years. Whether this will lead to a budget surplus is a big question, ”he said.
Risk factor
Trump's statement was made because of the upcoming congressional elections, said political analyst Sergei Mikheyev. However, it is good that he already recognizes the existence of public debt as a problem for the United States, the expert believes.
“This is indeed a very big problem for the American economy. Sometimes you can hear the opinion that this is all complete nonsense, but in fact the US national debt does not have any negative impact on the economy and for America it is not a problem, since they print dollars themselves, ”Mikheev explained.
Nevertheless, according to the expert, Trump’s own recognition of the existence of such a problem is an interesting moment for domestic political discourse in the United States.
“This is a risk factor, and Trump sees this as a risk factor. But at the same time it is clear that he will not succeed in simply taking and getting rid of public debt with all the desire. You can reduce or stop it, but the fact that in the remaining presidential term he will be able to pay the entire national debt seems fantastic, ”says Mikheev.
“The growth of public debt is associated with a fully conscious economic policy that has been pursued in the United States for quite a long time. Debt is not just picked up and grown. This long time was a way to solve various problems for the US government and the economic elite. Such gigantic numbers did not appear in four years, or even eight, the debt grew for many years, and this growth was in itself a part of US policy. Now, in order to annul it, they need to change many traditional approaches, change this policy. But so far, despite all the revolutionary statements made by Trump, this is not happening, ”the expert concluded.