President Trump birthed a meme in an interview published Thursday morning when he claimed to have coined the phrase “prime the pump.”
He didn't. Progressive journalist William Hard used the phrase — which refers to using government deficit spending to stimulate the economy — 101 years ago in an article in the now-defunct Everybody's Magazine. (“When the waters of business are stagnant, gentlemen, it becomes necessary, if I may say so, to 'prime the pump,'" Hard wrote.)
The phrase has since been used so much that it has become a cliche. But with the focus on Trump's specious claim, it is easy to miss the fact that in Trump's interview with the Economist, he and Treasury Secretary Steven Mnuchin also gave several new details about their plans to rewrite the tax and trade rules of the world's largest economy.
1. Adding to the deficit
Trump said that it would be worth adding to the national debt to stimulate the economy. That position is at odds with the approach that House Republicans have advocated, including the speaker, Rep. Paul D. Ryan (R-Wis.). Trump and Mnuchin dismissed a couple of crucial provisions in the House tax plan that would bring in more revenue. With that money, according to the House plan, lawmakers could reduce overall tax rates without forcing the government to borrow more to make up the difference.
Mnuchin said the administration prefers to continue allowing corporations to write off any interest they pay on loans, reducing their taxes. Ryan and his GOP colleagues have proposed ending that break. And Trump brushed off another provision of Ryan's plan, a change to how the United States taxes imports and exports, known as a border adjustment.
“It's not really what I'm considering,” Trump said.
Implementing the border adjustment or taxing corporations' interest payments would raise money for the government, limiting the effect of changes in the tax code on the federal debt, but the administration has insisted that finding a way to pay for a tax cut is not necessary. Trump and his advisers have argued that reducing taxes will encourage Americans to work and invest, accelerating economic activity.
“We have to prime the pump,” Trump said in the interview.
Economists are skeptical of this reasoning. Priming the pump, they say, can be effective when the economy is doing badly. Today, though, the unemployment rate is just 4.4 percent, and additional federal borrowing risks burdening the economy by increasing the national debt.
2. Repatriating money from overseas
Trump said he supports allowing multinational corporations to bring home the profits they have earned overseas after paying a low, 10 percent tax. Morgan Stanley has estimated that big firms have stockpiled about $2.5 trillion overseas to avoid paying U.S. taxes, about $1 trillion of it in cash and the rest in other assets and securities, Bloomberg reported.
A big break for multinational firms on their foreign earnings has always been a part of Trump's plan on taxes — but, previously, Trump's senior economic advisers had not said just how big of a break. When the White House released a short memo on Trump's priorities for tax reform, the document did not specify the amount of tax that firms would have to pay on their profits abroad before repatriating them. At the time, officials declined to clarify.
3. A value-added tax
Trump said in the interview that he likes the idea of a value-added tax — a type of tax that is popular in other rich countries but that Republicans oppose.
“The concept of a VAT I really like,” he said. “I like a VAT. I don't think it can be sold in this country. I think it's too much of a shock to this system.”
A value-added tax is similar to a sales tax in that is a tax on consumers' purchases -- but a value-added tax is also paid by businesses on their purchases of raw materials and services from vendors. Many economists believe that value-added taxes are a more efficient way of raising money for the government, because taxpayers are not penalized on their earnings from working or the gains from their investments.
Last month, administration officials told The Washington Post that Trump and his advisers were considering a value-added tax, just hours before the White House formally disavowed the idea.
Regarding his own tax bill, Trump said in the interview published Thursday that he would not release his personal tax returns as part of a deal to win Democratic support in Congress for his proposals, although he could release his returns once his tenure in office ends. “Oh, at some point I'll release them,” he told the Economist. “I might release them after I'm out of office.”
Trump's answer to that question suggests an insight that, some might say, is truly novel. In the long run, we are all dead.