Donald Trump is going full Bernie Sanders, again! While a lot of people are focusing on his comments calling President Barack Obama the founder of ISIS, Trump also told CNBC yesterday how he believes government spending will solve the nation’s economic issues. Transcript via The Washington Post:
WILFRED FROST: In your businesses, you’ve used leverage in the past. When you look at the shape of the yield curve for U.S. Treasury debt at the moment, how low interest rates are, is this a moment for the U.S. To borrow and spend in order to stimulate growth that you spoke about infrastructure spending? Are you happy to boost the balance sheets it were of the U.S. economy at the moment?
TRUMP: Well, I’ve always loved leverage. As Becky can tell you. I’ve always, you know, respected leverage but I’ve always loved it. But a country is a different thing. However, with that being said, the interest rates are so low, I mean, the numbers are so low, that yes this is a time to borrow and borrow long-term. So that we have the money and rebuild our infrastructure. We could have the money – we have things we have no choice.
What does Trump want to use the money for? Rebuilding the military AND infrastructure. Again, via WaPost:
We have to fix our military. We have to take care of our vets. It’s a disaster what’s going on with our vets. And the veterans administration. We have to fix our infrastructure. Our country’s infrastructure is in horrible condition. Worst condition it’s ever been in. Bridges are in — I mean, in dangerous shape. I think 50% of the bridges are actually in dangerous shape. When you think of that, that’s incredible. Where they could fall. Roads, tunnels, hospitals. I mean, everything. We have to fix the airports. Our airports are like third world countries. You go into some of these beautiful airports, you go into Dubai and you go into different places throughout the world and you see airports that are unbelievable. That we’ve never had in this country. And then you fly into La Guardia or you fly into LAX. Or you fly into Kennedy, any of them. You fly into these airports, it’s like a third world country. So we have to fix our airports and our transportation system and our trains which are, you know, a hundred years old. We have trains from a hundred years ago. Those are the good ones. And you go to China and you go to these other places and you see the bullet trains. They go hundred miles an hour .
For comparison, here’s what Bernie Sanders has said about roads, bridges, and airports.
Our nation’s infrastructure is collapsing, and the American people know it. Every day, they drive on roads with unforgiving potholes and over bridges that are in disrepair. They wait in traffic jams and ride in railroads and subways that are overcrowded. They see airports bursting at the seams.
For too many years, we have dramatically underfunded the physical infrastructure that our economy depends on. That is why I have proposed the Rebuild America Act, to invest $1 trillion over five years to modernize our infrastructure. It would be paid for by closing loopholes that allow profitable corporations to avoid paying taxes by, among other things, shifting their profits to the Cayman Islands and other offshore tax havens.
Importantly, the Rebuild America Act will support more than thirteen million good-paying jobs – jobs that our economy desperately needs.
This isn’t fiscal conservatism, it’s the ridiculous notion the government has to spend to get its way out of a sluggish economy. Does anyone remember the phrase, “shovel ready,” the Obama Administration used when pushing the stimulus in 2009? The White House had to admit those “shovel ready’ projects didn’t work because bureaucratic red tape kept things from getting started. The Financial Times even put up a graphic in 2013 showing how much of a failure Obama’s infrastructure stimulus plan was.
So if the government failed to spend money on infrastructure (after saying it would), how is Trump going to make sure the cash gets spent if he’s in office? If it’s all local bureaucratic red tape, is he going to threaten municipalities to get things done? Wouldn’t that be considered an overreach of the federal government? This is something the people involved in the 2010 Tea Party protests would have revolted over, saying there’s no point in spending money the U.S. doesn’t have. Now? Hardly a peep over the entire thing!
Trump is talking about spending $500B on infrastructure (Hillary Clinton wants to spend a paltry $250B), with almost all of it being federal cash. That’s not going to work, at all. What’s even worse is Trump isn’t even interested in talking about what that might do to the gross domestic product.
(CNBC’s Becky) QUICK: How do we pay for that? And is it going to be public money? Is it private money? And as Wilfred just asked, what level of debt to GDP would you feel comfortable with?
TRUMP: Well, you could have combinations of private money you can even privatize certain things. Basically you’re going out and borrowing money on the United States to rebuild your infrastructure. It would be infrastructure money and maybe there’s ways of giving additional, you know, credits to people that buy these bonds. Frankly the interest rate would be so low.
It’s great Trump is talking about privatizing some things, but he’s not saying what or how. Instead, it looks like Trump wants to do some sort of “Liberty Bond” for roads, maybe under the guise of “economic patriotism.” The problem is Liberty Bonds were only partially successful during World War I, and there’s no guarantee Americans would be up for doing it again. If Trump wanted to invest his own money into fixing up infrastructure (without a government repayment), then that’s fine. But he’s not talking about that, he’s talking about spending government cash. This is absolutely ridiculous and not conservative at all.
What the government is going to have to do is be willing to cut things, including military spending, before it can decide to randomly start spending money again. The budget is going to have to be balanced (or at a net positive in income vs. expenditures) before it can consider any new projects. The government could even consider selling public land, departments (especially the post office), or (gasp) roads to make a buck or five billion to balance the debt. Here’s what Veronique de Rugy suggests on road privatization at Reason:
Leaving aside the question of how reliable these estimates really are, the CBO tells us that “productive federal investment has an average annual rate of return of about 5 percent, or half of the agency’s estimate of the average rate of return on private investment.” In other words, private-sector investments generate more return than those made by the government…
One important policy implication of the CBO’s finding (that the returns from private investments tend to be higher than for government investments) is that to boost economic growth, policymakers should reduce hurdles to private investment in infrastructure—for example, airports. Policymakers should cut marginal tax rates and allow for capital expensing to increase returns for infrastructure investment. They should end federal subsidies to state governments for infrastructure to spur state privatization. They should cut federal regulations that raise costs for building state infrastructure, such as the Davis-Bacon labor rules, and they should cut regulations that restrict state privatization.
This is what the “national conversation” should be about, not one on how many billions of dollars the country should spend on infrastructure. Is it any wonder why four of Trump’s companies have filed for bankruptcy? All he wants to do is spend more cash he doesn’t have under the hope of it turning into a profit. The problem is, Trump isn’t running a business, he wants to run the government. And the government needs to make cuts to keep the debt from spiraling even further. Neither Trump or Clinton are interested in doing it, which means we should look elsewhere for a president.