President Donald Trump on Wednesday said that, “in a sense,” gains made by private financial markets reduce the national debt. The claim is incorrect on its face, but it does point to how the president views the economic interplay between the federal government and Wall Street.
“The country — we took it over and owed over $20 trillion,” Trump said in an interview on Fox News, referring to the total national debt, which has hovered near $20 trillion since early 2016.
“As you know, the last eight years, [the federal government] borrowed more than it did in the whole history of our country,” Trump said. “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 could say, in one sense, we’re really increasing values. And maybe in a sense we’re reducing debt. But we’re very honored by it,” Trump said.
While it’s true that U.S. stock market indexes have risen markedly during Trump’s time in office, the current gains are part of a bull market that began in the spring of 2009, when the country began to recover from the Great Recession and the collapse of the housing market.
And it’s absolutely the case that the national debt increased by $9 trillion during President Barack Obama’s time in office, but many were scratching their heads at Trump’s implication the debt was lessening because markets are increasing in value.
For evidence that the two metrics have little to no bearing on one another, look no further than the eight years of the Obama presidency: Between 2009 and 2017, the S&P 500 returned 235 percent while the national debt soared.
And while Trump likes to talk about “reducing debt,” the economic policy proposals he’s unveiled so far, especially his tax reform plan, could easily add another trillion dollars to the debt, according to economists.
A White House spokeswoman did not immediately respond to CNBC’s request for additional information about the president’s comments.
Correction: This article has been updated to accurately reflect Trump’s comments in a televised interview.