Why Donald Trump's business savvy might not translate to the presidency

Trump's business model might not be so great for the economy.

(Image credit: BRENDAN SMIALOWSKI/AFP/Getty Images)

published 6 May 2016

On Thursday, Donald Trump said that as president, he might seek to reduce the national debt by convincing creditors to accept less than a full payment. "I would borrow, knowing that if the economy crashed, you could make a deal," Trump said, in comments that the The New York Times claimed "have no modern precedent" coming from the mouth of a major presidential candidate. "If the economy was good, it was good. So, therefore, you can't lose," Trump continued.

Experts have dismissed the idea that creditors would accept anything less than 100 cents on the dollar, no matter how good a businessman Trump might be. In fact, it might be because he's a businessman that Trump thinks the scheme could actually work:

Repurchasing debt is a fairly common tactic in the corporate world, but it only works if the debt is trading at a discount. If creditors think they are going to get 80 cents for every dollar they are owed, they may be overjoyed to get 90 cents. Mr. Trump's companies had sometimes been able to retire debt at a discount because creditors feared they might default.But Mr. Trump's statement might show the limits of translating his business acumen into the world of government finance. The United States simply cannot pursue a similar strategy. The government runs an annual deficit, so it must borrow to retire existing debt. Any measures that would reduce the value of the existing debt, making it cheaper to repurchase, would increase the cost of issuing new debt. Such a threat also could undermine the stability of global financial markets. [The New York Times]

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Explore More

Speed Reads

To continue reading this article...

Create a free account

Continue reading this article and get limited website access each month.

Get unlimited website access, exclusive newsletters plus much more.

Cancel or pause at any time.

Already a subscriber to The Week?

Unlimited website access is included with Digital and Print + Digital subscriptions.
with the same email registered to your subscription to unlock access.

Not sure which email you used for your subscription? Contact us

Jeva Lange was the executive editor at TheWeek.com. She formerly served as The Week's deputy editor and culture critic. She is also a contributor to Screen Slate, and her writing has appeared in The New York Daily News, The Awl, Vice, and Gothamist, among other publications. Jeva lives in New York City. Follow her on Twitter.

Subscribe to The Week

Sign up for The Week's Free Newsletters

Sign up for Today's Best Articles in your inbox