The Debt Shall Freeze at $20 Trillion

Has Trump Reduced the National Debt?

President Trump was sworn into the Presidency with $19,947,304,555,212.49. I’m no mathematician but, that’s not far from $20 trillion. So ever since his inauguration, I had been eagerly waiting for news that US debt had crossed the BIG 20 Tril; some claimed it would happen during Trump’s very first month. “The debt will move past $20 trillion on Tuesday” one very specific pundit predicted. But it turns out that the federal government has actually reduced the debt since Trump came to office. The Treasury Department calculated a reduction of $34 billion during his first month in office; it has further reduced since then to a total reduction of $68.8 billion from January 20 to March 3 (the most recent data available from the Treasury website). This might not be significant- most federal spending is already in place years or months in advance- but it is a change of direction compared to former President Obama’s first month in office: an increase of $212.6 billion.

Nevertheless, don’t be too excited by the reduction in Total Public Debt Outstanding. Trump wants to increase military spending by $56 billion and spend $1 trillion on infrastructure. And the spending is already in place over the next 10 years for the US government to increase the debt by 50% above what it is currently. President Reagan’s former Budget Director David Stockman has noted that the real US debt is $30 trillion because an additional $10 trillion over the next few years has already been solidified. You can count on it. The money is as good as spent.

And Stockman disagrees with the official Treasury debt calculations when you consider cash on hand. After calling the President “totally misinformed and unprepared about the debt,” Stockman offered a different measurement: “Actually, in the first 35 days the net debt was up $187 billion. He had $382 billion in cash on the day he was sworn in and now it is down to $178 billion now. They’ve burned through nearly $200 billion of cash in the first month.”

Relax DC Plutocrats: Trump Promises More Spending…

During his Joint Sessions speech to Congress, Trump made a maelstrom of promises to America’s hungry factions:

Dying industries will come roaring back to life. Heroic veterans will get the care they so desperately need. Our military will be given the resources its brave warriors so richly deserve. Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land.

Stockman was not so impressed from the perspective of paying down the national debt. “That speech was the most fiscally irresponsible speech given to the Congress since LBJ’s “guns and butter.” He’s going to raise defense, borders, education, medical credits and on top of that a massive tax cut for the middle class… The numbers don’t even come close to adding up.”

March 15, 2017: The Big Freeze

The peculiar debt reduction seems to be actually meaningless in light of Trump’s spending proposals and massive spending increases that are already in place. So how can one be optimistic about keeping the debt to $20 trillion? Enter The Big Freeze.

No, I’m not talking about the Heat Death and end of the universe, although some DC politicians might take it that way. I mean the deal made by Congress and Obama in  October 2015 to again “suspend” the federal debt-ceiling until March 17, 2017.

In his most recent interview on the subject, David Stockman told Greg Hunter to forget about all Trump’s great spending promises because the debt will be frozen at $20 Trillion on March 15, 2017.

 “I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

 

Note: Comparison of first month in office calculated as Jan 20 – Feb 23

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