US Economy

Icahn: Republicans don’t understand economics and it’s killing the country

Icahn on markets: I'm still cautious
Icahn on markets: I'm still cautious

Republican lawmakers are suffering from a near "pathological" misunderstanding of the national economy, and they may be hurting markets and Americans alike, billionaire investor and Donald Trump supporter Carl Icahn told CNBC on Thursday.

Icahn, who Trump had previously suggested could serve as his Treasury secretary, warned that markets will have a "day of reckoning" without fiscal stimulus, and argued that the U.S. government "certainly could do more spending."

"The Republican Party that I used to be more sympathetic with — I'm right in the middle now, although as you know I'm for Trump — but what I would say is Congress is in this massive gridlock," he said, explaining that the Republican-controlled body is "obsessed with this deficit to a point that I think it's almost pathological."

The result of this gridlock and a lack of fiscal stimulus has been that the Federal Reserve has been forced to keep interest rates low, and that has created "tremendous bubbles" and "the wealth gap."

Carl Icahn
Icahn: Markets will have 'a day of reckoning'

Additionally, worrying about a deficit when there is no significant inflation and the dollar remains the global reserve currency is not a smart way to govern, Icahn said, adding that "a country is not a company."

While a company would go bankrupt if it owed too much money, the same could not be said of the United States anytime soon, Icahn explained, reiterating that he can't "understand this obsession" that many Republican politicians have with the deficit.

"They keep saying we owe all this money to China, but we're really not going to pay it back ever in a normal way," Icahn said. "So China decides 'I want my money back.' OK, well how do you want it back? You want dollar bills, you want Treasurys, what do you want?"

That said, Icahn cautioned that he was not advocating for the government to "go crazy and borrow money and have money floating around and have rampant inflation."

"Everything has equilibrium, everything has a middle ground, and we are so obsessed with that deficit," Icahn said. "And I never thought I'd agree completely with guys like (economist Paul) Krugman, but in this sense he's sort of right: I mean, you absolutely need fiscal stimulus in this economy."

Despite those comments disparaging one of the key arguments of many Republican politicians, Icahn had come out in support of the party's presidential front-runner.

Of fellow billionaire Trump, Icahn said the "right-wing establishment" doesn't like him in part because he's a pragmatist.

"He's going to do for this economy what should be done," Icahn said.

GOP front-runner Donald Trump, his wife Melania Trump, and billionaire investor Carl Icahn on the night of the New York Republican primary. Credit: Scott Wapner.

Icahn was on hand earlier this month to celebrate Trump's massive New York GOP primary win, and the real estate magnate even called out to Icahn during his victory speech.

When asked about the relationship between the two titans of business, Trump said, "We just like each other." And for his part, Icahn declared that "Trump is the only candidate who can stop the terrible gridlock in Washington and make Congress work again."