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 Responding to a question about the national debt, the likely
Republican presidential nominee said in an interview on CNBC on
Thursday he would "borrow knowing that if the economy crashed you
could make a deal."
When asked if that meant he had taken a page from his own playbook
as a businessman and try to get U.S. creditors to accept less than
the full value of the bonds they hold, he said "No," but added: "I
could see long-term renegotiations where we borrow long-term at very
low rates."
The reaction to his words on Friday offered the first-time political
candidate a taste of how delicate the prospect of discussing
economic and fiscal policy can be. It also highlighted a danger for
Trump as his campaign moves from a crowded, personality-fueled
contest for the Republican nomination to a general election
competition where the media and members of the public expect more
policy details from the candidates.
"Such remarks by a major presidential candidate have no modern
precedent," the New York Times wrote in a story saying Trump's plan
implied he would "negotiate a partial repayment" of U.S. debt.
 "It's beyond ludicrous and irresponsible unless you're, say, an
emerging market country," wrote the U.S. debt analyst David Ader,
the head of rates strategy at CRT Capital, in a note to clients
early Friday morning.
A senior campaign adviser said Trump had not meant to suggest he
would demur on any U.S. debt payments.
"Mr. Trump was clear in saying that he was not going to renegotiate
U.S. debt, despite being asked multiple times, and that he would not
default on U.S. debt, despite being asked multiple times," said the
adviser, who did not want to be identified because he was not
authorized to speak publicly.
"All he said is that he believes that long term low interest
Treasuries would be a better deal for the U.S. taxpayer." Still,
four Trump companies have been through bankruptcies in which his
creditors were forced to accept far less than the more than $4
billion he owed them, and in the CNBC interview he spoke of loving
to "play with" debt.
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"The United States is nowhere near debt distress," said Charles
Seville, an analyst at Fitch Ratings Inc. who focuses on government
debt.
Seville said if the U.S. government were to choose not to repay
creditors, it would "undermine faith in the United States's ability
to borrow at low rates which is the underpinning of its high credit
rating," adding, "there's no quick way of reducing the debt burden.
It's something that would be a product of fiscal consolidation or
faster growth."
Moreover, given that U.S. Treasuries are viewed as the
safest-of-safe securities globally, underpinning the dollar's status
as the world's preferred reserve currency, any damage to that
reputation would likely unleash far-flung ructions in financial
markets worldwide.
The U.S. government regularly issues Treasury bills, notes and bonds
maturing in a range of between four weeks and 30 years. Currently,
interest rates on U.S. government debt are near historically low
levels, meaning the government is able to borrow cheaply. The
Treasury Department has been gradually moving more of its
obligations into longer-term debt to take advantage of the low
rates.
(Reporting By Emily Flitter; Editing by Dan Burns and Chizu
Nomiyama)
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