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Editorial: Donald Trump's reckless remarks on public debt

 
Republican presidential candidate Donald Trump speaks May 7 at a rally in Lynden, Wash.
Republican presidential candidate Donald Trump speaks May 7 at a rally in Lynden, Wash.
Published May 11, 2016

One of this nation's bedrock economic principles is that the federal government will make good on its debt and repay investors in full. Yet Donald Trump suggested last week he might try to have the government pay less than it owes investors. Then the presumptive Republican nominee said he never intended to suggest the United States could default and offered fuzzier ways of repaying debt early at less cost. These reckless musings would have a disastrous effect on the global economy and American families if they came from the president, and they are more evidence that Trump is not prepared to fill the nation's highest office.

The billionaire reality talk show star said on CNBC last week that he is "the king of debt'' and likes borrowing money because loan terms can be adjusted later. Responding to questions, Trump indicated he might want to repay investors in U.S. government debt less than they are owed "if the economy crashed.'' Imagine the repercussions from such a suggestion coming from the White House.

Bonds issued by the Treasury Department are viewed by financial institutions and private investors worldwide as the safest investment available anywhere. To suggest that the United States would repay less than 100 cents on the dollar and not make full payment on its debt would damage its ability to borrow money. It would impact world financial markets. And it could drive up interest rates for American consumers on everything from home loans to credit cards. There is no scenario where a U.S. president proposing that this nation pay less than what it owes on its debts would be a positive.

Even Trump recognized he sent the wrong message, and as he often does when he says something outrageous he tried this week to clarify and elaborate on his remarks. And as often happens, that only raised more questions. Trump said on CNN that he never meant to suggest the United States should default on debt. And he noted the federal government always can print more money to avoid default, although that would cause inflation. But his suggestion that the government could borrow money to buy back bonds early at less than their face value was criticized by economists from the left and the right. Since the federal government runs a deficit, it would have to borrow more money generally at higher interest rates to buy back bonds -— wiping out any savings. What works in the private sector to renegotiate debt or persuade lenders to take a haircut does not work for government.

Trump's tendency to shoot from the lip, then revise and extend his remarks may have been entertaining for a time. It makes for good television ratings, and it brings viewers tuning in to see what outrageous observation he might make next. His supporters try to explain away his insults of women and minorities as jokes or attention-getting shtick that would fade if he is elected president. But words matter, as Trump discovered weeks ago when he said women who seek abortions should face criminal punishment if the procedure is outlawed and changed his position within hours after the public backlash.

Now the stakes are even higher as Trump has become the Republican Party's presumptive nominee. Suggesting the United States would not make good on its debts and pay less than it owes bondholders is worse than reckless, and voters should hold him accountable.