I know this might sound unlikely, given how much Trump fancies himself an expert whiz on economics from Wharton (undergraduate, not the more-acclaimed graduate school) – though given, too, that since this is Trump, very little concerning him sounds unlikely, unless it’s about empathy for others – it’s become my observation that Trump has no concept about how deficits work. I say this as someone who is not remotely an expert whiz on economics and the closest I come to Wharton undergrad is my oft-mentioned friend Myles Berkowitz, but Trump regularly misses what seem to be incredibly basic, easy concepts on oh-so-many things.
To be clear, saying that Trump appears to have no concept on deficits has nothing to do with him saying he was going to bring the budget deficit down, but instead, during his 1-1/2 terms, has increased it by almost $12 trillion and ballooned the deficit past $40 trillion – which means that Trump alone is responsible for increasing the U.S. budget deficit (spanning the 250-year history of the country) by around 45%, all by himself, in less than six years. That’s a totally separate issue and just a bonus when considering Trump’s economic incompetence. As is Trump’s companies having had six bankruptcies, which is generally six more than most people.
No, this is about two other, basic budget issues that Trump seems wholly unfamiliar with.
The first of these is that when Trump brought in Elon Musk and his Merry Band of DOGE Boys to bulldoze the U.S. budget and make cuts that have devastated many departments and caused great harm to the public, he (and Musk) didn’t grasp the concept that, sometimes, debt is actually a good thing. I heard the concept of beneficial debt explained clearly – and simply – by Pulitzer Prize-winning tax expert David Cay Johnston several years ago.
The way he explained it was to consider someone who was broke and out of work. But then, this person gets a job offer he’s anxious to take. However, the job is a very long commute with no convenient public transportation, and he would have no way of getting to work. So, he has to turn it down and stay unemployed. Or – he could go into debt, and buy a used car. It might cost $10,000, money he doesn’t have, but with the new job, his salary will allow him to pay off the car, eliminate his debt for it, and then get into personal profit.
So, the concept of deficit financing is not to necessarily eliminate all debt, but to understand what debt is valuable and what is waste. And not take a hatchet to your budget and just cut money because you don’t see an immediate return on it. It might have far-greater benefits in other ways that aren’t immediately apparent on the surface.
But it’s the second way that makes much more apparent how Trump doesn’t understand deficits. And it makes it much more apparent because it’s on a subject he talks about over and over and over again, and states bluntly that it’s something he has always cared about. And therefore one would assume he knows how it works well, inside and out. But he doesn't, not even in the slightest. And that’s tariffs.
Over and over and over again, we hear Trump complain about the trade deficits we have with pretty much every country in the world. How unfair it supposedly is. And so, he imposes his tariffs on everyone – including a 10% tariff on Heard Island and McDonald Islands, which is an uninhabited territory of Australia that’s near Antarctica whose population is literally penguins and seals.
This is only the action of someone who not only doesn’t understand tariffs (which, of course, he claims wrongly are taxes on the countries, but in reality – a land Trump doesn’t have a passport for and therefore can't visit – is a tax on those purchasing the tariffed products) – but also doesn’t understand trade deficits. And this is an even easier one to explain.
As I heard an economist explain sardonically after Trump raised new tariffs on Canada – “I have a trade deficit with Kroger. I pay them several thousand dollars a year, and they buy nothing from me in return. All I get from them are groceries.”
Other economists explain different aspects of trade deficits just as clearly: Sometimes we have a trade deficit with a small country because they make a product or grow a food that we don’t in the U.S. – and we have a need of. And so, obviously, we buy from them, but they’re too poor or have no need of anything to buy from us. As a result, we have a trade deficit with them -- because we are getting something we need. They’re not treating the U.S. “unfairly” at all, as Trump seems to obsessively believe. Rather, the relationship is actually, literally beneficial to the United States because they’re selling us something important that we can’t get from anywhere else. We give them money, they give us what we need.
This, too, is not a hard concept to grasp.
Even though it’s not shocking that Trump doesn’t understand such incredibly easy, basic principles – whether on general principle, or because of his dementia which is degenerative – it’s nonetheless stunning that he doesn’t and, further, that no one on his staff or no MAGOPs in Congress care to explain it to him.
But then, that’s business as usual in the Trump administration and MAGOP World. And the end result is that the country gets screwed – but, in return, Trump gets a 32% approval (and dropping) and pummeled. Along with his whole party.
The country will eventually recover and turn things around – unfortunately, it will likely take a long while, but that’s what happens with unqualified incompetence when put in charge. But Trump and the MAGOP will be in highly-deserved disgrace. And he and many of its officials will be out of office. Indeed, some in prison.
And that's not the worst trade. As far balance of trades go…
