President Donald Trump appears to understand the challenge of entitlement programs better than almost any of the experts or the media covering them.

And he appears to understand that the only way we are going to “fix” entitlements is to keep American prosperity thriving.

This is so far outside the way many corporate media reporters and pundits have been taught to think about entitlements that they regularly assume that Trump is secretly plotting to cut Social Security and Medicare–even though he has said he would not. On Wednesday, for example, the Washington Post declared in a headline that “Trump appears open to overhauling Social Security and Medicare, in break from 2016 campaign pledge.”

That makes it sound like Trump is planning to cut Social Security and Medicare. After all, that is what he promised not to do.

The Associated Press was even worse. “President Donald Trump appeared to suggest in a television interview Wednesday that he’s willing to consider entitlement cuts in the future, a move that would mark a tectonic shift from his stance during his 2016 run for the White House.”

Fortunately, that’s not true. The actual Washington Post story admits that the Post just did not understand Trump. Here’s the story (emphasis added):

“At the right time, we will take a look at that. You know, that’s actually the easiest of all things, if you look,” Trump said. He later added when asked about entitlements: “Well, we’re going — we’re going to look. We also have assets that we’ve never had. I mean we’ve never had growth like this It was unclear what Trump was referring to when he mentioned unprecedented growth. The economy is growing but not as fast as it has in the past, though the stock market is at record levels. Adding to the confusion are private remarks Trump recently made that appeared to dismiss the importance of the budget deficit, which has ballooned to about $1 trillion a year under his administration.

None of this is actually unclear and Trump’s deficit remarks actually clarify rather than add to the confusion. Trump does not think the government is running out of money, he does not think we need to cut entitlements or raise taxes. But what he does think about these things is so far outside the Washington, D.C. orthodoxy that he might as well be speaking a foreign language.

So what does Trump think? “Who the hell cares about the budget? We’re going to have a country,” Trump said recently about the budget deficit. In other words, he thinks the budget deficit is not a problem–so long as the U.S. economy grows fast enough and worker productivity rises. And that’s also what he thinks about entitlements.

The United States does have looming entitlement challenge but it is nothing like what most economists and policy experts describe. The challenge is not about impending budget shortfalls for Social Security and Medicare. It’s not a matter of the government not collecting enough in payroll taxes or paying out too much money to the elderly or ill.

And it will not be fixed by raising taxes, cutting benefits, or requiring people to work for a few more years before they can collect Social Security or sign on to Medicare.

The problem is simpler and yet less visible. As our population ages, the balance of workers to retirees is shifting, raising the so-called “aged dependency ratio.” The challenge we face is to make sure the economy is producing enough goods and services to provide for all our retirees when their numbers grow dramatically in proportion to the workers.

Back in 1950, there were about 16 Social Security beneficiaries for every 100 workers, meaning there were around 5.1 workers supporting each beneficiary. In 2017, there were 35 beneficiaries for every 100 workers, or 2.8 workers for each beneficiary. By 2050, that number will climb to 46 beneficiaries per 100 workers, or 2.2 workers for each beneficiary.

The real problem here has very little to do with dollars and everything to do with productivity and assets. We need to make sure that the people working are productive enough to produce enough goods and services to supply the entire population. If we do not, we will face shortages and the quality of life of Americans will decline as many people are forced to consume less.

Cutting Social Security spending does not change the situation one bit. All that accomplishes is making sure that the consumption of many retirees will be forced to be lower than it would have been. It may not even do that since many people might actually pull back on current consumption to save more for their retirement in anticipation of lower Social Security payments. In which case, the original problem of shortages remains.

In the same way, raising Social Security taxes is beside the point. That will deprive workers of spending power, shifting demand relative to workers and retirees, but will not solve the deeper problem of production created by a rising aged dependency ratio. It could even make the problem worse because raising marginal taxes will discourage workers from seeking higher incomes through more productive jobs.

Raising the retirement age seems a little better until you give it a moment’s thought. It would force workers to work for longer but in our economy productivity of elderly workers declines rapidly and this problem will grow worse as the acquisitions of new skills and knowledge becomes increasingly important. You are not going to solve the production problem by forcing grandma to work until she’s 72.

So what’s left? We need an economy that is geared around raising worker productivity and growing the economy so that we have abundant enough resources to avoid any shortages as the aged dependency ratios rises. That means cutting regulation, reducing taxes, encouraging investment, and improving education. We could also ameliorate the growth of the dependency ratio by adopting more family-friendly policies that make family formation affordable and reward U.S. citizens for having more children.

The goal of public policy should be to make work more rewarding by raising wages and make sure workers and businesses have all the capital goods, software, technology, and supportive infrastructure needed to raise production and therefore economic growth far beyond what is currently projected. We need to reduce our dependence on imports and eliminate trade deficits that discourage production in the U.S. We need to make the growth of the American economy great again.

Donald Trump gets this. Here is the transcript of his interview on CNBC: