Thursday, July 28, 2016

Trump and Bare-Knuckle Business Practices

by Neil H. Buchanan

It is by now old news that Donald Trump's business practices have, shall we say, raised a few eyebrows.  He not only has a history of suing and being sued beyond anything that has been seen before in U.S. politics, but he is completely unrepentant about the bare-knuckle tactics that he uses.

For example, multiple news sources (for example, here) have reported that Trump has a long track record of signing contracts and then renegotiating after the fact to try to change the terms of the deal, after the other party has already performed as promised.

I recently discussed Trump's approach to contracts in the context of his dispute with Ted Cruz and "the pledge" that all of the Republican presidential candidates signed to endorse the eventual nominee.  Here, I want to discuss the more general question of what Trump's bellicose approach to his business practices suggests about the way that he would govern.

Trump might be saying that it would be good to put someone in charge of writing and enforcing the law who is an expert at breaking the law.  Popular culture is filled with stories (many based in reality) of bad guys who -- after a profitable career on the wrong side of the law -- use their knowledge to detect and punish other people's wrongdoing.  Computer hackers, for example, sometimes cross over to work with law enforcement.  (Usually, however, their change of heart is nudged along by the possibility of imprisonment.)

Is Trump holding himself out as a modern-day Cary Grant from "To Catch a Thief" -- a rogue who can now use his knowledge of the shadowy areas of the law to achieve something other than personal financial gain?

Trump has suggested as much, saying during the primaries that "I have great people" (of course) who allow him to pay as little as possible in taxes.  Trump was characteristically immodest: "Who knows the system, who knows the tax code better than me?"  Actually, he had just said that it is the "great people" whom he hires who know the tax code, so he would have to believe that he can get those people to work for the government to reveal the secrets of tax minimization.

But why would those people be willing to do so?  If, like Trump, they view all transactions as a matter of gaining as much advantage as possible, they would either have to be paid a great deal of money to work for the government, or they would have to have some other self-interested reason to work for a Trump IRS.

If there really are legal geniuses working for Trump who can wring every penny out of the tax system, their market value would be far above federal pay grades.  We know, however, that the last thing the Republicans in Congress are interested in is providing more funding for the Internal Revenue Service, or for tax collection more generally.  So Trump's tax guys are unlikely to be interested in government work.

The only other way to get such people to share their secrets with the government would be to find the ones who might be worried about being prosecuted some day for illegal activity.  Maybe Donald Trump would sign pardons to get those people to work for relative peanuts in a government job, but if that is his plan, he has not said so.

The fundamental problem for Trump is that he wants to claim that there is a bright line between legal and illegal tax strategies, and he (and his great people) know exactly how to find that line, whereas no one else does.  This is a fantasy, and he knows it.

In fact, his stated reason for not releasing his tax returns (as every presidential candidate has done since 1968 -- a year that Trump has now embraced enthusiastically as a "law and order" candidate") is that there are too many gray areas in the tax law.  He claims that, after the audits are over, he will gladly release his returns.  But why wait?  If the law is clear, and he is on the right side of it, then he has nothing to worry about.

Trump believes that he is being treated unfairly by the government.  But if he is right that he has never crossed the line, then he could shame the IRS's auditors by getting ahead of the story and showing the world just how ridiculous their suspicions are.

In reality, Trump is playing the "I've never been caught" game.  (We can leave aside for now the times that he has been caught.)  We would rightly laugh at a person who says, "I've obviously never exceeded the speed limit, because I've never gotten a ticket."  Yet Trump (like Mitt Romney before him) relies on the claim that he uses "every single thing in the book" to "pay as little as possible." He even calls it "the American way."

In other areas of the law beyond taxes, Trump makes similar claims.  He shows no shame about using the bankruptcy courts to leave his investors and former partners with losses, while enriching himself.  Famously, he has hired illegal immigrants to work for him and then refused to pay them.

Now, however, Trump is saying that he should not be judged negatively for any of these things, because he was only doing what any good businessperson would do.  Why not find every angle, and pursue every advantage?  If you do not do so, he says, you are stupid.

After the Supreme Court's ill-conceived decision in 2014's Hobby Lobby case, I asked: "Will There Now Be a Gold Rush of Corporate Religious Claims?"  The idea was similar to what Trump says about his business practices.  If the Court says that sincerely held religious beliefs are a potential avenue to reducing costs (my example was a religious objection to minimum wage laws, which is a claim that has actually been made in court), then why would a company not feel compelled to pursue that route?

Beyond the existing law and how to exploit it as written, of course, Trump's version of the American Way suggests that businesses should do everything possible to change the law to their advantage.  Should they stop just short of outright bribery, under our incredibly porous campaign finance laws?  Why should they?  The risk of breaking the law, being caught, and being punished are in Trump's view just a part of the costs of doing business.  What kind of chump would stop until it was absolutely clear what he could get away with?

Maybe, however, Trump is saying, "I know the weaknesses of the laws.  Let's now pass laws to stop people like me from going over the line on taxes, on bankruptcy, on environmental damage, on exploiting subcontractors and workers."  He suggests that the reason he refused to take campaign contributions (although he actually was taking campaign contributions) was that he wanted to be above the corrupting influences of money.

But because he has flatly refused to guarantee that he will discontinue involvement in his business interests while he occupies the Oval Office, Trump makes it especially difficult to believe that his purpose is to be the former thief who shows the cops how to stop illegal activity.  He believes that it is his duty to be a smart businessman and thus to use every advantage to maximize his wealth.  As president, he would simply have more access to the levers that would create even more profitable advantages.

Even if he did put up a meaningful firewall between his political activities and his personal greed, Trump has done nothing to suggest that he thinks there is anything wrong with what he has done.  He has not said, "You know, I discovered that it's incredibly easy to steal wages from workers, but it makes me feel dirty, so I want to guarantee that that never happens again."

Similarly, Trump has not said that the concept of bankruptcy is a good one in some circumstances but, because the system is being abused by people like him, it should be changed to prevent such abuse.  He has not, in other words, suggested that his goal is to shut down the shady-to-illegal practices that he has engaged in for his entire career.

Trump uses the Business 101 notion of minimizing costs as an all-purpose justification for everything and anything that he has done.  When he has been caught going too far, he has engaged in scorched-earth tactics to prevent the weight of the law from reining him in.  He attacks judges who rule against him, and he threatens to "open up the libel laws" to punish news organizations that bring his activities to light.

These are not the words or actions of a person who has suddenly decided that he is tired of the ugliness of the world and wants to use his skills to make it a better place.  He seems only to be interested in justifying everything he has ever done by insinuating, "Well, you'd be stupid not to do it, too, if you could get away with it."  And that tells us everything that we need to know about how Trump's business "expertise" would inform his thinking, if he is ever allowed anywhere near the White House.

Harry Truman lived by the maxim: "The buck stops here."  Trump would replace that with: "Whatever I can get away with."

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