And So here we are…

And now the Republican’s own it. What ever happens, whether their doing or not, the Republicans own what ever happens on their watch. It is filled with opportunity to turn our country away from an ever growing government rule over our personal lives back to greater personal freedom with a limited government safety net rather than an ever more extensive rulebook of what we can and cannot do. Donald Trump has demonstrated over his life that he ruthlessly pursues what benefits him with little to no regard for those he tramples on and little hesitation to use the powers of government for his personal gain. This history is set out in the attached article that I wrote thinking we were saying good-bye to Trump.

Hopefully some of Trump’s promises (deporting 11 million illegal aliens, blocking entry to Muslim’s, high tariffs on China—all of which would be devastating to our economy as well as illegal) will simply be forgotten. Some other promises (respectable Supreme Court appointments, reducing corporate income tax rate and other badly needed tax reforms, a more restrained foreign policy) would be very beneficial and should be adopted. Many promises were contradictory. David Ignatius reported in today’s Washington Post that: “A Trump foreign policy, based on his statements, will bring an intense “realist” focus on U.S. national interests and a rejection of costly U.S. engagements abroad…. Trump also promised repeatedly that he would step up the U.S. military campaign against the Islamic State and replace U.S. generals who were insufficiently combative. But he has been vague about what he plans to do in Iraq and Syria.” Let’s hope that we get the first Trump rather than the second one.

My hope (I am always inclined by nature to be hopeful) is that Congress—a Republican controlled Congress—will reassert its proper constitutional role and roll back the extensions of executive power we have suffered under George W and Obama. Trump’s “strong man, leave it to me” impulses risk abuses of executive authority every bit as much as Obama has or Hillary might have. My other hope is that Trump’s transition team, with sound thinking people like Ed Feulner, will staff Trump’s administrative departments with good people with good ideas. Trump is smart but ignorant of most conservative thinking about economic policy issues. Hopefully he rejects his earlier claim that he is his own advisor and listens to his government as well as David Ignatius’s admonition that: “Undoing globalization isn’t possible. But undermining America’s leadership in that system would be all too easy.”

Hillary Clinton’s beautiful concession speech could have been given by Ronald Reagan. http://www.usatoday.com/story/news/politics/elections/2016/2016/11/09/watch-live-hillary-clinton-addresses-supporters-after-defeat/93532872/. She said nothing that President Trump should disagree with and I wish him and his future administration the very best.

The Ugly Face of Capitalism

Capitalism is an economic system in which people, individually or in groups, can keep the fruits of their labor and in so doing can invest and deploy what they save from it to increase their output and thus income. In short, capitalists create value– things other people want– in order to improve their own incomes. The absolutely amazing accomplishment of capitalism can be glimpsed from the following, which I wrote two years ago: “World per capita income didn’t change much from the time of Christ to the founding of the United States ($444 to $650 in 1990 dollars), a period of 1,790 years. But in the following 320 years it jumped to $8,080. And about half of that jump came over the last 50 years.” https://wcoats.wordpress.com/2014/12/18/free-markets-uber-alles/

Capitalism involves relationships between people that we might call win-win. You make money when you produce something others want and will pay you for. Donald Trump presents another face of capitalism. Rather than a value creator, Trump prides himself on being a great bargainer. He was often playing a zero sum game. Rather than increasing the pie, he focused on increasing his share of the pie, thus reducing someone else’s share. As Andrew Sullivan put it: “[Trump] has no concept of a non-zero-sum engagement, in which a deal can be beneficial for both sides. A win-win scenario is intolerable to him, because mastery of others is the only moment when he is psychically at peace. (This is one reason why he cannot understand the entire idea of free trade or, indeed, NATO, or the separation of powers.)” http://nymag.com/daily/intelligencer/2016/11/andrew-sullivan-trump-america-and-the-abyss.html

But Trump has not just bargained for better deals for himself, he has also often stolen them. It is not unusual, nor even necessarily a black mark, to fail in business and then to pick up and try again. Trump has many failures under his belt: Trump Shuttle, Trump: The Game, Trump Magazine, GoTrump.com, Trump Mortgages, Trump Steaks, Trump Super Premium Vodka, Trump University (over which he is being sued for fraud) and several Trump Casinos. Four Trump owned casinos in Atlantic City filed for bankruptcy: Trump Taj Mahal, 1991; Trump Castle Associates, 1992; Trump Hotel & Casino Resorts, 2004; and Trump Entertainment Resorts, 2009. But Trump was clever enough to generally lose other people’s investments rather than his own. He even claimed to make charitable contributions that were actually other people’s money and spent other people’s charitable contributions on himself. He probably has not paid federal income taxes for many years, but we cannot know for sure because he has not released his federal income tax returns.

More disturbing to the property rights foundation of capitalism is Trump’s use of the government’s right to seize property for “public” use under its eminent domain powers. When he was unable to convince private owners of property to sell it to him, he did not hesitate to turn to government to force them to: See the excellent article by Cato’s David Boaz: https://www.theguardian.com/commentisfree/2015/aug/19/donald-trumps-eminent-domain-nearly-cost-widow-house as well as the article by John R. Lott, Jr. in the National Review: http://www.nationalreview.com/article/431005/trump-eminent-domain.

According to USA Today: “Donald Trump often portrays himself as a savior of the working class who will ‘protect your job.’ But a USA TODAY NETWORK analysis found he has been involved in more than 3,500 lawsuits over the past three decades — and a large number of those involve ordinary Americans.

“At least 60 lawsuits, along with hundreds of liens, judgments, and other government filings reviewed by the USA TODAY NETWORK, document people who have accused Trump and his businesses of failing to pay them for their work. Among them: a dishwasher in Florida. A glass company in New Jersey.  A carpet company. A plumber. Painters. Forty-eight waiters. Dozens of bartenders and other hourly workers at his resorts and clubs, coast to coast. Real estate brokers who sold his properties. And, ironically, several law firms that once represented him in these suits and others.

“Trump’s companies have also been cited for 24 violations of the Fair Labor Standards Act since 2005 for failing to pay overtime or minimum wage, according to U.S. Department of Labor data. That includes 21 citations against the defunct Trump Plaza in Atlantic City and three against the also out-of-business Trump Mortgage LLC in New York.  Both cases were resolved by the companies agreeing to pay back wages.

“In addition to the lawsuits, the review found more than 200 mechanic’s liens — filed by contractors and employees against Trump, his companies or his properties claiming they were owed money for their work — since the 1980s.  The liens range from a $75,000 claim by a Plainview, N.Y., air conditioning and heating company to a $1 million claim from the president of a New York City real estate banking firm. On just one project, Trump’s Taj Mahal casino in Atlantic City, records released by the New Jersey Casino Control Commission in 1990 show that at least 253 subcontractors weren’t paid in full or on time, including workers who installed walls, chandeliers and plumbing….

Trump’s comment on his unpaid bills was that: “If a company or worker he hires isn’t paid fully it’s because The Trump Organization was unhappy with the work.”[1]

That Donald Trump received the Republic nomination for President and a large number of American votes despite his immoral behavior, rude comments about women, Hispanic, Muslims, threats of torture, and bombing the families of terrorists, etc., has damaged the United State’s image abroad. But he has damaged the image of capitalism as well. Trump’s business activities have been bullyish and exploitive and have not added value to the world as the counterpart to his wealth in the normal and laudable tradition of capitalism. The damage from Trump’s campaign is wide indeed.

[1] Steve Reilly, USA Today, 06/09/2016 http://www.usatoday.com/story/news/politics/elections/2016/06/09/donald-trump-unpaid-bills-republican-president-laswuits/85297274/

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About wcoats

Dr. Warren L. Coats specializes in advising central banks on monetary policy, and in the development of their capacity to formulate and implement monetary policy. He is retired from the International Monetary Fund, where, as Assistant Director of the Monetary and Financial Systems Department, he led missions to over twenty countries. Before then, he served as Visiting Economist to the Board of Governors of the Federal Reserve System, and to the World Bank, and was Assistant Prof of Economics at the Univ. of Virginia from 1970-75. Most recently he was Senior Monetary Policy Advisor to the Central Bank of Iraq; an IMF consultant to the central banks of Afghanistan, Kenya and Zimbabwe; and a Deloitte/USAID advisor to the Government of South Sudan. He is currently a member of the Editorial Board of the Cayman Financial Review and until the end of 2013 was a member of the IMF program team for Afghanistan. His most recent book is entitled "One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina."
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One Response to And So here we are…

  1. Joe Cobb says:

    The populist revolt that seems to have elected Pres. Trump has not given
    Americans, nor the world watching, any idea of foreign policy shifts. Those can
    dominate a presidency in unexpected ways.

    In spite of campaign promises, we do not know what to expect from domestic
    economic stimulus (tax cuts) and international contraction (trade barriers).
    Elections may be domestic, but consequences are worldwide.

    We might hope Pres. Trump would adopt the House Republicans’ “Better Path,” but
    nobody can expect that, unless the new President himself realizes he did not
    bring a coherent economic strategy to office. If the exchange rate of the US
    Dollar starts to fall like the UK Pound, we will see some adverse macroeconomic
    effects that might swamp a Trump presidency. The trade contractions alone would
    assure that outcome over the next 4 years.

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