Fact Check: Trump Makes Puzzling Claim That Rising Stock Market Erases Debt

The federal budget deficit increased in the 2017 fiscal year, both in dollar terms and as a share of the economy, the Congressional Budget Office reported this month. Total debt held by the public stands at $20.38 trillion, up from $19.95 trillion when Mr. Trump took office in January.

Major stock market indexes have also steadily soared in that time, but they have not yielded the amount of increased economic growth and federal tax receipts that would be necessary to begin reducing federal debt. Gains in the market, which are pocketed by investors, do not directly reduce the federal debt, which is how much the government owes on its borrowings.

Mr. Trump and his aides have suggested that his tax plan, which still lacks key details but would cut business tax rates sharply and reduce taxes on a wide range of individuals, will spark so much additional economic growth that it will reduce deficits by $1 trillion over the next decade. Under that scenario, the debt would continue to grow, though not as rapidly as previously anticipated. The increase in the federal debt is being driven by a variety of factors, including an aging population that will require additional federal spending on programs such as Social Security and Medicare over the coming decades.

A budget resolution under consideration in the Senate would allow Republicans to pass a tax bill on party lines that would increase deficits by $1.5 trillion over a decade. Some prominent Republicans, including Senator Bob Corker of Tennessee, have said they will not back a plan that would add to deficits, after additional economic growth is taken into account.

Many analysts remain skeptical of the administration’s growth promises, and they expressed frustration at Mr. Trump’s comments conflating stock appreciation with debt reduction.

“There seems to be way too much pivoting away from the basic fact that we will have to make some hard choices to get our unsustainable national debt under control,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, in Washington. “A growing stock market is not going to fix that.”

Jared Bernstein, a former economic adviser to President Barack Obama and Vice President Joseph R. Biden Jr., called Mr. Trump’s comments “one of crazier things I’ve heard this president say.”

“The best I can say on his behalf,” Mr. Bernstein said, “is it’s mindless, wishful thinking, especially as his team is poised to seriously increase the debt through their big, regressive, unpaid-for tax cut.”

As a real estate mogul, Mr. Trump crowned himself the “king of debt,” frequently borrowing heavily to finance major acquisitions or new projects. First as a candidate, and now as president, he has often puzzled observers with his comments on federal borrowing.

Mr. Trump once suggested that “massive trade deficits” are to blame for the national debt, a claim many economists challenge. In the spring of 2016, he told The Washington Post’s Bob Woodward that he could “get rid” of the entire national debt “over a period of eight years.”

Around the same time, he also suggested he would refinance federal debt, telling an interviewer: “I love debt. I love playing with it.”

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Donna T. Mitchell

Author: Donna T. Mitchell

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