Talking by telephone to CNN’s “New Day” with Chris Cuomo, 69-year-old GOP presumptive nominee and real estate mogul Donald Trump indicated he was open to renegotiating the national debt, currently running at $19 trillion. By the time wires got crossed, Trump’s remarks were interpreted as giving “haircuts” to Treasury Bond holders, something he never said or implied. Trump responded to a question of how he’d handle the growing national debt, something raising the specter of default. “So here’s the story, just to have it corrected. If we have an opportunity where interest rates go up and you can buy debt back at a discount,” said Trump, it’s something businesses do when they restructure debt to banks. What Trump didn’t say, what makes perfect sense, is why can’t the Federal Reserve Board forgive some U.S. debt that dates back to the Revolutionary War?
Responding to questions about paying the interest on the national debt, Trump said the government would never default because it prints money. “If we are liquid enough as a country we should do that,” Trump said, regarding repurchasing Treasury Bonds. At the peak of the 2008 financial crisis, there were concerns about a default by the U.S. Treasury. Former Federal Reserve Board Chairman Ben Benrnake worked with former President George W. Bush and President Barack Obama on two bailouts totaling more that $1.5 trillion. No one complained then about the Fed ordering the Treasury to print money to bail out major U.S. banks that ran out of cash. Bernanke took draconic steps to keep the economy liquid, printing trillions in cash, dropping interest rates to zero and eventually buying back Treasuries in what was known as QE1, QE2 and QE3 of “quantitative easting.”
Bernake bought $600 billion in 2008 and 1.75 Trillion in 2009, leaving $2.1 trillion on the Fed’s balance sheet by 2010. Bernanke continued printing money, with two other rounds of bond buys called QE2 and QE3 in 2011 and 2012, totally about $85 billion a month or another $2 trillion through 2014, when new Federal Reserve Board Chairman Janet Yellen ended QE3 Oct. 29, 2014. Between the bailouts and QE1, QE2 and QE3, the Fed ordered the Treasury to print more than $5 trillion. “This is the United States government. First of all, you never have to default because you print the money. I hate to tell you, OK? So there’s never a default, said Trump, responding hypothetically to questions about a debt default. Trump’s critics came from all corners accusing the real estate tycoon of backing policies that could cause hyper-inflation and debase the value of the U.S. currency.
When Wall Street’s Leman Brothers went broke Sept. 15, 2008, Bernanke acted too slowly, allowing 148-year-old investment bank to go under. Bernanke didn’t yet realize the domino effect, causing other Wall Street firms to go under, including Bear Stearns.that received a Fed bailout March 14, 2008. When Trump speaks of the Fed printing money, he’s referring to the trillions printed to bailout U.S. financial institutions that ran out of cash. Attacking Trump since winning the GOP nomination after a landslide win in the May 3 Indiana primary, what’s left of the “Stop Trump” movement, led by former GOP candidates Florida Gov. Jeb Bush, Sen. Lindsey Graham (R-S.C), Wisconsin Gov. Scott Walker and 2012 GOP nominee Mitt Romney, can’t yet accept Trump as the GOP’s 2016 standard bearer. Conservatives can’t accept GOP primary voters want change in 2016.
Trump’s landslide victory over remaining rivals Sen. Ted Cruz (R-Texas) and Ohio Gov. John Kasich effectively reshaped the Republican Party heading into the July Republican National Convention. When 46-year-old House Speaker Paul Ryan (R-Wis.) told CNN’s Jake Tapper May 4 he wasn’t ready to back Trump, it signaled war with House conservatives, especially Rep. Jim Jordan’s (R-Ohio) Freedom Caucus that put Ryan in House Speaker Oct. 29, 2015. Neither Ryan nor the Freedom Caucus accepts that Trump’s growing GOP coalition rejects the House’s bitter ideological politics. Trump’s primary voters want to end the partisan gridlock and ideological bickering. Only diehard Tea Party and Freedom Caucus conservatives want to maintain their stranglehold on the Republican Party and Washington politics. Attacking Trump’s views on the Fed, national debt, border wall, etc., keep hope alive.
Asking to meet with Trump on the Hill Thursday, May 12 Ryan hopes to resolve lingering doubts about Trump representing the GOP. Ryan and his Tea Party and Freedom Caucus friends represent a minute fraction today of GOP voters. Trump’s not going to engage Ryan in a sophomoric debate over the role of the president or limited government. He’s going to tell Ryan that the most basic Constitutional duty of honoring voters has been fulfilled. Ryan hasn’t yet accepted that voters want Trump’s more practical GOP approach, not the Tea Party or Freedom Caucus’s ideological battles. Ryan seems more worried about disappointing his conservative friends than following the will of GOP primary voters. Ryan’s future as House Speaker rides on accepting the sea change in voter preferences, not beating a dead horse over what he once thought were true conservative principles.
