Imagine that you are a wealthy, successful individual in the middle years of a lengthy career. You make a large annual income through a broad spectrum of financial assets and you are looking to build yourself an even more lucrative future. You, like everyone else, have acquired debt as a means for personal advancement, but you have managed your debt well and have paid every payment on time. As a result, your credit score is through the roof and interest on your debt is miniscule.
You are the United States government.
Today you are looking for a financial adviser to help you better manage your existing and future debts. You’ve had some loss in income in recent years that has caused your debt to rise above the level you feel comfortable with. Your future economic outlook is promising though and should be capable of removing some of this debt burden. All you need is a sound financial mind to guide you forward.
In walks a potential advisor with a noted reputation for boom-or-bust financial ventures. He is personally wealthy and has guided others to enormous success, but he has also guided his clients into bankruptcy on more occasions than any other advisor in his line of business.
You decide to hear him out. Let’s see what he advises.
He first advises you to significantly lower your cash-one-hand by keeping more of your revenue locked into your investments. This will, he argues ambiguously, spur growth in these investments and offer you more revenue over the long term.
He then advises you to begin bargaining down your debt with your lenders. He uses alarmist warnings to try to convince you that your debt, which you have never failed to successfully repay, is completely out of your control. Even with the very high risk of a perceived default or increased interest payments, this advisor suggests that you should not pay back your debt in its full amount.
At this point, you would probably point out that you have always prided yourself on having outstanding credit, and that most of your borrowing history has been built on your creditors’ faith in your ability to repay them. You would, if you value your credit score even remotely, remove bargaining down your debt as an option unless it was an absolute last resort.
Here the advisor recognizes that he has gone too far and attempts to take a step back. What he really means, he says, is that you should buyback your debt at lower costs. Once you hold your own debt, you can afford to be far more forgiving. You’ll just need to, once again, bargain with your creditors and convince them to except less money than they are owed.
You pause for a moment. Something does not add up here. How are you supposed to buyback your debt if you have less cash-on-hand after his first piece of advice?
Your advisor coughs into his sleeve, which sounds an awful lot like “Borrow-more!”
You are starting to get irritated. You recognize the ridiculousness of acquiring new debt in order to buyback debt at the risk of faith in your credit, of which you have historically been flawless in the management thereof.
You also realize that, because your credit history has been flawless, your creditors are going to either perceive your buyback request as a sign of an extraordinary financial crisis or they are going to refuse the request all together. They know that they do not have to accept any less from you than a full payment.
I would be very surprised if you would have made it this far without kicking this advisor out the door.
Yet somehow, this very advisor is leading in some polls to become the next executive of the American economy.
In the past year, Donald Trump has suggested that the United States government decrease its cash-on-hand by up to $25 trillion in tax cuts, decrease its credit rating through significant debt bargaining, and buyback its debt from investors at cheaper amounts (which not only would be ridiculous for any creditor to agree to, but would also require that we increase our debt by borrowing the very cash we would need to buyback!).
This is nonsense. Donald Trump is used to manipulating debt to save his company. But that has only worked for him because his company was not founded on the principal that its full faith and credit could be depended upon. The full faith and credit of the United States government, however, has been the cornerstone of our nation’s economic strength for two centuries.
He either has no idea what he is talking about, or he is knowingly lying to us because he realizes that there is no realistic proposal he could possibly offer to fulfill his claim that he will eliminate the national debt.
This guy is a conman, and he’s not even a very good one. The flaws in his plan are laughably obvious. Seriously, read through our sources and see how literally everyone agrees it is complete and utter garbage. Trump is just fortunate to have found an audience that is scared enough to choose nonsense over rationality.