Former President Donald Trump says the country has a debt problem and that the ongoing debt ceiling fight can be “a very strong card to play [where Republicans] can get a lot of what they want.”
In an exclusive interview with Yahoo Finance, Trump said the prospect of a government default, which could plunge the country into a recession, can and should be a Republican lever to stop the Democratic spending efforts, including the multitrillion-dollar package of social spending currently being debated in Congress.
But would that make a default even more likely in the coming weeks? The markets are already spooked by the faceoff between Sen. Chuck Schumer and Sen. Mitch McConnell over how to proceed on the issue.
Senate Minority Leader McConnell has repeatedly said no Republicans will vote for a debt ceiling increase, but he has also calmed the markets some by saying “their unified Democratic government is fully capable of fast-tracking a debt limit increase on their own” (through a second reconciliation with just Democratic votes).
However, the so-called vote-a-rama process built into reconciliation procedures allows senators to offer as many relevant amendments as they want. That could potentially tie up the process for days or even weeks, pushing closer and closer to the Oct. 18 deadline when Treasury Secretary Janet Yellen says the government would likely default.
Trump, who still holds immense sway over many conservative Republican lawmakers, seems to want his allies to at least bring things right to the edge, reasoning, “I think we’re in trouble no matter what.”
“You just look at what’s happening and there are a lot of bad scenarios,” Trump said, arguing that a debt default or a passage of the Democrats’ agenda would be similarly unpleasant outcomes.
Putting the full faith and credit of the government even more on the line is a “very, very powerful card,” Trump said. “Hopefully [the Republicans] won’t have to play it, but I think they will in order to do something” about the Democratic efforts.
What remains to be seen is if Trump will call on his his allies to try and push the complicated reconciliation process off the rails and – in the process – likely ensure a government default.
‘A grave threat’
Also left unmentioned by Trump was his own role in the current debt predicament. The former president’s focus on fighting deficits comes after his 4 years in office when, according to data from the Federal Reserve, the national debt rose by roughly $7.8 trillion.
Trump entered the White House promising to eliminate the U.S. debt in 8 years, but ended up adding about $23,500 in new federal debt for every person in the country.
Trump’s budget proposal for 2020 called the debt – then at about $22 trillion – a “grave threat to our economic and societal prosperity.” By the time he left office, it had grown to about $27.7 trillion and is approaching $29 trillion today.
Much of the increase came from spending on Trump’s key priorities, notably his signature economic accomplishment, the 2017 Tax Cuts and Jobs Act. It is estimated that the bill will end up adding $1 trillion to $2 trillion to the national debt, though Trump and other Republicans promised it would pay for itself. The multiple COVID relief bills signed by Trump also added significantly to the debt.
Since gaining power, Democratic lawmakers have continued to push the debt to even higher levels, starting with President Biden’s first major bill, the $1.9 trillion American Rescue Plan, which was signed into law in March.
The next two major bills on the docket for Biden – if he can get them through Congress – would push the debt even higher, but could also end up costing less than Trump’s tax cuts.
For example, the $1.2 trillion bipartisan infrastructure bill still awaiting a vote in the House has some measures to help pay for the $550 billion in new spending. In the end, the bill would add $256 billion to the deficit over the next decade if enacted, according to the Congressional Budget Office.
Likewise with the $3.5 trillion reconciliation package. That bill, as currently constituted, is estimated to add around $600 billion to the debt, according to the Committee for a Responsible Federal Budget. The bill will almost surely get smaller though in the coming days as crucial swing votes like Sen, Joe Manchin (D., W.V.) and Sen. Kyrsten Sinema (D., Ariz.) have repeatedly said the bill will need to get scaled down to have any chance of winning their votes.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.