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.
Paul Krugman has been an Opinion columnist
since 2000 and is also a Distinguished Professor at the City University of New
York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences
for his work on international trade and economic geography. @PaulKrugman
