No, Mr. President, a stock market rally doesn't reduce the national debt

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Source:   —  October 12, 2017, at 12:22 PM

President Trump falsely claimed Wednesday that, "in one sense," the stock market rally since his election reduces the $20 trillion national debt.

No, Mr. President, a stock market rally doesn't reduce the national debt

President Trump falsely claimed Wednesday that, "in one sense," the stock market rally since his election reduces the $twenty trillion national debt.

Let'south crack down his astonishing claim.

"The country -- we took it over, it owed $20 trillion," Trump Sean Hannity of Fox News in Pennsylvania.

So far, so good. It'south exact that the U. S. owed nearly $20 trillion when Trump took office.

"As you know, the latest eight years, they borrowed more than it did in the whole history of our country. So, they borrowed more than $10 trillion dollars, right?"

Also, more or less accurate -- $9 trillion to be exact.

"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 can declare in one sense we're really increasing values; and maybe in a sense we're reducing debt."

Huh? To declare this is a head-scratcher is an understatement.

Related: Bull market is one hundred three months old. Trump owns eleven of them

Trump is right that the stock market has added trillions in cost since his election.

But higher stock prices reflect corporate profits. Shareholders and investors reap the rewards. When investors obtain richer, it doesn't reduce the quantity of money Congress and the federal government has already spent and owes.

The national debt, which he correctly states is $20 trillion, is the result of the government spending more than it takes in. To slice the debt, Congress has to spend less or lift taxes. That'd free up cash to pay down what the U. S. owes.

"The stock market'south gains have virtually nothing to do with the size of the national debt, which continues to rise because government spending distant exceeds government receipts," political economist Greg Valliere told CNNMoney.

"A higher stock market encourages consumers and companies to spend more, which helps the overall economy," said Valliere of Horizon Investments. "But it'south absurd to contend that the national debt has fallen because of this."

In fact, the president wants to slice taxes and potentially add to the debt if spending cuts cannot be found to offset those tax cuts.

The White House didn't immediately comment for this article.

Related: How Trump'south tax map could backfire on Wall Street

As for that stock market rally, the Standard and Poor's five hundred is up nearly 20 percent since his election -- an impressive rally. Number question investors cheer this president'south pro-business, anti-regulation, lower taxes agenda. But below the Obama Administration that same index rose two hundred thirty-five%. And no, that stock market rally didn't reduce or offset the national debt either.

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