Trump faces his own wall on economy: debt

DONALD

Trump has an economic “to do” list — tax cuts, spending increases, paying for The Wall, renegotiating trading deals and creating jobs.

I believe he’s going to have trouble accomplishing all these things. Here’s why. The US is already $20 trillion in debt, and last year’s deficit grew that staggering total by nearly $600 billion — those are the irrefutable and inconvenient facts.

That makes traditional cures for the economic blahs, like spending more and lowering interest rates, unable to be properly administered. You can’t spend more and lower rates when you are already broke and borrowing costs are already ultra-low.

Even if President-elect Trump doesn’t spend another nickel and doesn’t reduce government revenue with tax cuts, there’s another problem with the 2017 budget — interest rates are rising.

Since Trump was elected a few weeks ago, borrowing costs have soared. And by Dec. 31, the Federal Reserve will finally start to catch up with financial reality by increasing the rate it controls.

And that will have an added impact. Consumer and corporate borrowing rates will rise some more, costing everyone more. That will mean fewer homes will be built and sold, fewer businesses will expand and, in the end, the economy will slow down, even though it never really sped up to normal growth.

Washington will be in the same boat as all other borrowers. Any new money it seeks will come at higher rates; any old loans that mature will have to be replaced with ones that cost more.

So even before Trump increases the federal budget by a single nickel, our debt costs will be higher.

If Trump goes ahead with his plans to increase spending and cut taxes, the US could be headed for a crisis. I said “could” only to be nice and optimistic. “Will” go into a crisis probably is a better way to put it.

So what should the president-elect do on this vitally important issue? Well, he should start looking for money buried in the country’s couch cushions, so to speak. The cushions I pointed to years ago are the private retirement accounts of million of Americans.

Hidden behind these cushions — OK, these accounts — are trillions of dollars that can be “recovered” and used to stimulate the economy and create jobs.

And it won’t cost Uncle Sam a dime.

In fact, my plan will increase revenue to the government.

Here’s the plan: With some restrictions, allow people to withdraw some of the more than $20 trillion they have amassed in 401(k) plans, Individual Retirement Accounts and Keoghs. For argument’s sake, let’s say 10 percent over a certain threshold.

This money, which would be taxed at some level but not subject to an early withdrawal penalty, could be used to invest in real estate.

The problem right now is that much of the nation’s wealth for the past decade has been building in these retirement accounts. And while these rising account balances may make people feel better about their upcoming golden years, the saving is forcing them to be stingy today.

You’ve heard of how some people are house rich but cash poor — meaning that on paper they are wealthy, but in reality don’t have much spare cash.

Well, many Americans today are retirement rich but cash poor.

And while there is a way to deal with the first problem — home equity loans — there are few weapons to deal with the second problem. Retirement plans are restricted to a very limited array of investments: stocks, bonds and sometimes real estate trusts.

New purchases of physical real estate — a condo in Boca, a house on Long Island, a desert property in Arizona — could be just as good in a retirement portfolio. Plus America would get an economic stimulus without pressuring the federal deficit.

And I’m not suggesting that we allow people to gut their retirement accounts. Most people in this country have too little saved for retirement. But there are many — as the $20 trillion in retirement savings would suggest — who have plenty.

So let them use it. This plan will allow them to enjoy their riches now and, if trickle- down economics really works, the benefits will seep down to the rest of us.

Why do it this way? Because, as Willie Sutton once said when asked why he robbed banks: “It’s where the money is.”

I should mention a couple more things.

Obviously, nobody will be forced to use their retirement money. So they will do so only if the incentives are good enough, and it makes sense for them. And withdrawals shouldn’t be allowed to pay off things already purchased. Like, no paying off the mortgage of your family home.

There have been accusations that Trump’s tax proposals will help the wealthy, and that may be true. What I’m proposing should also be attractive to the well-off, since they are the ones who will have an excess amount of money in retirement plans.p The difference is that my idea will let the wealthy benefit from their own money. They won’t benefit through tax cuts that hurt the Treasury and, therefore, everyone else. I’m going to get in touch with President-elect Trump soon to make sure he hears out my idea. Too many experts and economists exist in the swamp and Trump needs to drain that profession of antiquated ideas.