Monday, October 30, 2017

Donald Trump doesn’t seem to understand the stock market. Or the national debt.

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(CNN)Conservative TV host Sean Hannity opened his interview with President Donald Trump on Wednesday night by touting the various -- and allegedly underplayed -- successes in the economy over the first nine months of Trump's tenure.

But, Hannity's "question" is actually beside the point. What matters is Trump's answer. And here it is:
"The country, we took it over in 20 trillion you know the last eight years they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion. Right? And yet we picked up $5.2 trillion just in the stock market. Possibly picked up the whole thing in terms of the first nine months. In terms of value. So you can say in one sense, we are really increasing values and may be in a sense, we are reducing debt. We are very honored by it and very, very happy by what's happening in Wall Street."
    What Trump is suggesting here is that because of the gains in the stock market -- which have absolutely happened -- the national debt is being reduced.
    That's, um, not how this works. This, from CNN's financial expert Christine Romans, makes that point well:
    "In no sense does the stock market rally wipe out the national debt," said Romans. "In zero sense does a stock market rally, which enriches corporations and investors and shareholders, translate into American taxpayers and the national debt."
    The stock market and the national debt have, quite literally, no direct connection.
    The stock market, broadly speaking, measures wealth being created (or lost) by large corporations and investors in those companies.
    The national debt, which sits at $20 trillion and counting, is the debt owed by the federal government. There are two ways to reduce the debt: Raise taxes or reduce government spending. A bull stock market is not one of those two options.
    Trump seems not to know any of that. (Or at least he didn't seem to know it in his interview with Hannity.) That's concerning, particularly because Trump ran on his business savvy -- and his ability to make America rich because he could work the markets and the financial sector better than anyone.
    He also touted his understanding of debt during the campaign. "I'm the king of debt. I'm great with debt. Nobody knows debt better than me," Trump said on CBS in June 2016. "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."
    Um, OK.

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