Opinion
Trump’s Debt, His Future and Ours
The president — our chief law enforcement and national
security official — could be facing huge liabilities. That’s chilling.
By Paul
Krugman
Opinion
Columnist
Sept. 28,
2020
The bombshell
New York Times report on Donald Trump’s tax returns is a remarkable feat of
journalism. The team deserves special praise for making their findings
comprehensible to general readers, and not getting lost in the details.
Yet like
many other revelations in the Trump era, the tax news falls into the category
of “shocking but not surprising.” Many observers had already surmised that
Trump paid little or no taxes, that his claims of brilliant business success
were a fiction, and that he is deep in debt. Now all of that is virtually
confirmed. But what does it mean for America’s future?
Everyone
will come at this question from their own angle. When I read the Times report,
I quickly found myself thinking about … the theory of business capital
structure. No, really.
For many
people, no doubt, the main takeaway from the tax revelations will be “$750?
Really?” The fact that Trump paid less in taxes than tens of millions of
hard-working Americans struggling to make ends meet is an outrage. It’s also
easy to explain in a few seconds, which is why it’s the theme of a quickly
released ad from the Biden campaign.
From a
substantive point of view, however, Trump’s tax avoidance is less important
than the confirmation of what many already suspected: His carefully cultivated
image of being a hugely successful businessman is, as he would say, fake news.
In fact, he has done a terrible job of running his businesses.
Why does
this matter? Voters often seem to believe that effective business leaders have
the skills and knowledge to lead the nation as a whole. They’re wrong about
that. Even genuinely great businesspeople — people like, say, Herbert Hoover —
are often very bad at public policy, including economic policy, because the
skills needed to run a business and those required to steer a nation are very
different.
In Trump’s
case, however, the old joke is true: He isn’t a great businessman, he just
played one on TV. It should come as no surprise, then, that he has been
consistently hapless at devising policy. On just about every front, from
diplomacy to infrastructure to trade wars to fighting a pandemic, he has been Midas
in reverse.
How much
will the revelation that he has always been a fraud hurt him? Many of his
supporters will probably refuse to acknowledge the truth, perhaps because they
won’t admit to themselves how completely they were scammed. But assuming that
the news will have no effect at all is probably too cynical. And remember,
Trump is running behind Biden, so he has to do more than keep his base — and
this may not do much to win over undecided voters.
The most
important revelation from the Times report, however, is its confirmation of
another thing many observers already suspected: Trump has hundreds of millions
in personal debt. It’s unclear whether he has the resources to repay it.
Personal
financial trouble has always been a red flag when it comes to filling sensitive
government positions, because it’s an open invitation to corruption.
So the
confirmation that the nation’s chief law enforcement and national security
official — whose business empire already offers many opportunities for undue
influence — is drowning in debt is chilling.
Beyond
that, analysts of business finance — I told you I’d get there — have long known
that high levels of debt, enough to pose a substantial risk of bankruptcy,
create destructive incentives. Instead of investing in the future, the owners
of highly indebted businesses are tempted to engage in asset stripping, getting
the money out before the creditors stake their claims. This is, by the way, the
charge being leveled at Eddie Lampert, the former chief executive of Sears (and
Steven Mnuchin, the secretary of the Treasury).
Owners of
debt-hobbled businesses are also tempted to take big risks, even at bad odds,
because if they get lucky, they might save themselves; if they don’t, it’s
someone else’s problem. Heads they win, tails the creditors lose.
So now we
have a deeply indebted business owner with every incentive to engage in
malfeasance — except that in addition to running his business, he’s running the
United States of America.
But he may
be about to lose that special position, and whatever financial defense it may
provide.
Think about
that. Also think about the fact that Trump constantly complains about almost
nonexistent voter fraud — he has never accepted the fact that he lost the
popular vote four years ago — and that he has repeatedly refused to say that he
will accept election results if he loses. And tell me that you aren’t terrified
about what the next few weeks may hold.
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