Donald Trump says many of America’s problems are the result of the past presidents being hapless negotiators. He suggests that although he himself may not have all the answers, his skills as a businessman can make him successful where other presidents have failed.
But Trump has recently demonstrated a distinct lack of surefootedness in this area, failing to appreciate that negotiation is not easily transferrable to government. A businessman can seek favorable terms in a mutually beneficial deal, but that’s very different from the government threatening force to accomplish what market incentives cannot.
Take, for example, Trump’s repeated promise that as president he will keep businesses from leaving the country. Just imagine what would happen to manufacturing job creation if such a thing were attempted. A hint that the feds would infringe the property rights of resident businesses by banning them from moving capital, would immediately discourage businesses from establishing new operations hin America.
Trump’s suggestion that he can negotiate to reduce or eliminate the federal government’s stomach-churning $18 trillion debt is even more troubling. It is true that in 1990, Trump used the threat of business bankruptcy to force his creditors to rescue one of his failing enterprises. But when the federal government threatens to default, the consequences are orders of magnitude more severe.
U.S. debt is a popular investment globally. The government can sell it despite offering relatively low interest precisely because buyers regard the principal as safe. Investors would not voluntarily accept a write-down of that debt and a president who tried to force creditors to accept a “haircut” (as denizens of capital markers call these things) would instantly undermine the dollar as the global reserve currency. Foreign investors would bail out of American markets, triggering worldwide recession or a depression.
Interest rates would surge higher to attract back lost investors who could suddenly see that their principal was unsafe. Government borrowing costs would spiral, choking the economy and adding massively to the accumulating federal debt. As government rolled over and refinanced its debt at prevailing interest rates, financing costs would climb, creating a need to borrow even more money.
Trump then started talking about the government using inflation to dissolve debt. But devaluing the dollar in this way would treble borrowing costs and wipe out the savings of everyone approaching retirement with what they had thought were appropriately conservative — that is, prudent — investment portfolios.
Trump does not stop there with his ruinous economic plans. He also is now talking about the need for higher minimum wages, a line of policy that he hopes will win over socialist supporters of Bernie Sanders in the general election. In an interview Monday, he said he would move his tax plan through Congress by trading “unspecified” policy issues with congressional Democrats. It’s anyone’s guess what this might mean. Voters cannot be certain where Trump is on any issue until he changes his view, which could happen any time, or even several times in the course of a single interview. Trump’s leftward pivot has begun, except that “pivot” implies a discernable direction in the past.
Having just locked up the Republican presidential nomination, Trump would do well to work to assuage conservative fears about his candidacy, rather than stoke them with macro-economic policies made on the fly. Conservative voters are looking for someone to rally around, for they yearn to avoid the disaster of a second President Clinton. They want a nominee they can trust to offer steady leadership.
None of what Trump has recently said on the economy is liable to do that. If he wants to give himself the best chance of winning the presidency, the presumptive GOP nominee must waste not a moment before doing the hard work needed to offer coherence and consistency that can win over his many doubters. To use a term with which he has long been familiar, it is time for him to “close the deal.”
