Debt

Trump Has Always Been the 'King of Debt,' but Now He's Sticking Taxpayers With the Tab

Trump planned to borrow heavily to fund his still unreleased infrastructure plan, even while the Republicans in Congress were making the deficit worse.

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Jose Luis Gonzalez/REUTERS/Newscom

President Donald Trump planned to borrow heavily to finance his long-awaited infrastructure plan.

"Donald Trump wants to rebuild America's infrastructure the same way he built his buildings: debt, debt and more debt," Jonathan Swan writes at Axios. According to Swan's reporting, Trump's then-economic advisor Gary Cohn was preparing a $200 billion federal infrastructure plan that was supposed to be leveraged into a $1.5 trillion spending package, with the private sector and state or local governments picking up the rest.

"Think about when you're putting up a building, you put down $50 million of your own money to leverage several hundred million," Cohn told Trump last year, according to Swan.

Trump reportedly wasn't impressed. The president told Cohn he would never put his own money down for a building project. "He'd borrow the first installment from one bank and borrow the rest from another bank," Swan writes.

That conversation has not been previously reported, but it fits perfectly with Trump's opinion of himself as the "king of debt."

"I'm the king of debt. I'm great with debt. Nobody knows debt better than me," Trump told CBS during the 2016 campaign. "I've made a fortune by using debt, and if things don't work out I renegotiate the debt. I mean, that's a smart thing, not a stupid thing."

Indeed, most of Trump's alleged business success was built on the back of debt. He borrowed heavily to finance hotel and casino projects, then stiffed contractors and shortchanged investors when things didn't work out. Whether Trump's multiple bankruptcies reflect a failed businessman who took advantage of the system or a brilliant schemer who used the system to his advantage depends on your point of view, but there's no denying that Trump is quite comfortable taking risks with other people's money.

When things go bad, "you go back and you say, hey guess what, the economy just crashed. I'm going to give you back half," Trump told CBS in that same 2016 interview.

That's a workable strategy in the private sector, where all those transactions are taking place voluntarily. It may even be a wise one, as long as you can keep finding suckers to lend you money. Banks didn't have to bet on Donald Trump, and other developers didn't have to put their own skin in the game to back his projects. When private-sector mistakes are made with debt, bankruptcy court sorts out the fairest way to settle the matter; and as Trump well knows, getting bad debt out of the system is important.

Public debt is a different matter. Every time a presidential administration and Congress team up to add to the national debt, they are promising to raise taxes on future Americans in order to avoid raising taxes on present Americans. The "other people" that Trump wants to borrow from are, quite literally, all Americans both present and future—and we do not get to turn down the request. There is no bankruptcy court to erase these mistakes when it all goes wrong.

Trump either does not understand this all-important distinction—much like he misunderstands the trade deficit—because he's never been involved in public policy before, or he simply does not care.

Either way, it's difficult to imagine a worse time for the Republicans in Congress to have completely lost their fiscal backbones. Between last year's tax cuts and this year's spending hikes, the budget deficit has jumped 32 percent during the current fiscal year. A new Congressional Budget Office projection predicts a $1 trillion deficit during the fiscal year that begins on October 1, and yet no one is taking the deficit seriously—including, it seems, the president.

Much like other members of his party, Trump talked a good game on the budget deficit. In that 2016 CBS interview, Trump was clear to differentiate between private debt and public debt. "I like debt for my company, but I don't like debt for the country," he said. "It's going to be very soon $21 trillion—not billion. I will tell you, we are sitting on a time bomb."

Trump seems to have abandoned those concerns now that he's in office. In fact, if Democrats win control of Congress in November, some Republicans worry that Trump seems willing to cut a deal that would prioritize federal spending—and borrowing—in his infrastructure plan, according to Swan.

Republicans' abdication of fiscal conservatism over the past two years has already made the budget situation worse—the country now faces a $1 trillion deficit next year. If it ends up emboldening Democrats and Trump to splurge even more—as Reason's Peter Suderman predicts it will—the president's previous bankruptcies may pale in comparison.