Trump was too poor to divest
According to tax returns obtained by the New York Times, Trump is insolvent
Citizens for Responsibility and Ethics in Washington (CREW) has set up a conflict of interest tracker on their website. According to their calculations, Trump has amassed a historic number of conflicts: 3406 at last count.
Generally speaking, presidents and other elected officials seek to avoid conflicts of interest. When we elect people to office, we hope that they are looking out for our interests, not their own or those of others. Divesting themselves of business interests, or at least putting them in blind trusts, are ways to ensure that presidents can put all their focus on serving Americans, not on serving themselves or their creditors.
Trump, of course, has refused to either divest himself of his businesses or to put them in blind trusts. A blind trust means that you have no control over the assets, and don’t even have the ability to see the financials. As former Congressman John Dingell pointed out, Jimmy Carter, upon his election to the presidency, had to put his peanut farm into a blind trust. One might think there would be few conflicts between the interests of the United States and a Georgia peanut farm, but he did it anyway. And as proof that a blind trust means BLIND, when Carter left the White House, his peanut farm, the one he had built up with his own hard work, was insolvent, deeply in debt and approaching bankruptcy. That is what sacrifice for the public good looks like.
As far as Trump is concerned, Carter’s concern for the public good must have made him a loser and a sucker. It’s hard to see how Carter personally benefited from his time in government. But despite his many flaws, he always tried to do the right thing. It’s called morality, something lacking from our current president.
During the 2016 campaign, Trump and his attorneys held a press conference in which they detailed how he was putting his businesses into a trust. His trustees would be his sons. Yet this trust is anything but blind. Trump still makes money off his properties, and he frequently promotes his businesses and directs government spending to them.
For those who think the question about conflicts of interest is purely academic, consider Trump’s signature accomplishment: his tax give-away to the rich. There were specific parts of that legislation that would personally benefit the president and his family. But yet Trump claimed that he would not personally benefit from this legislation. If it’s OK for him to personally benefit from his legislative proposals, why would he argue that his tax legislation would harm him? It’s because we expect our elected officials to put our interests ahead of their own.
That tax legislation, by the way, remains extremely unpopular. And it has been singularly responsible for our ballooning national debt. But Trump and his family made out like a bandit. That’s why conflicts of interest matter.
There are other examples. Consider the CARES Act passed to address the coronavirus economic crisis. Provisions were tucked into that bill that personally benefit the Trumps and Kushners. But yet for most of us, our $1200 has run out, and the expanded unemployment compensation has ended.
The point is that conflicts of interest are not harmless. Trump seems to laugh it off when people criticize him promoting his golf clubs. After all, who is really hurt by that? Well, we were certainly hurt by these tax provisions that personally benefited Trump, despite his claims to the contrary.
And if you don’t believe Trump knew what he was doing when he pushed that tax legislation, I have a bridge in Brooklyn to sell you. A massive expose by the New York Times reveals that in 11 of the last 18 years, Trump paid no federal income taxes, and he used a loophole to get a $72.9 million tax refund. That refund, by the way, is now the source of litigation by the IRS.
So if there is anything Trump, or his accountants, know, it is tax law and how to make the most of it.
The New York Times expose pointed out one unexpected fact about Trump’s businesses, however. Trump is so deeply in debt, according to his tax returns, that he is likely insolvent. Much is being made about the $410 million in debt Trump owes.
This amount, however, is simply the amount of debt he personally guaranteed. That means he likely has hundreds of millions, perhaps even billions, of dollars more debt that he businesses owe that he did not personally guarantee. Indeed, after he experienced a severe financial crisis in the 1980s, Trump pledged that he would never again personally guarantee debt. So if there is so much debt personally guaranteed, then you know there is far more owed by the businesses themselves.
According to the reports, other than Trump Tower in New York, his licensing deals, and The Apprentice, all of Trump’s businesses were losing money big time. Hundreds of millions of dollars. At some point, you need to find the money to make up for the losses. His financial disclosures make it clear that he had already sold off most of his stocks and bonds. He no longer has his father around to prop up his businesses. The money from The Apprentice is drying up. The only place to get the additional needed money, then, is from taking on more debt.
This, then, brings us to the legal concept of insolvency. Insolvency occurs when the debtor’s liabilities exceed its assets or when the debtor cannot pay its debts as they come due. Based upon the reports, Trump likely qualifies under both definitions. He probably owes more money than his assets are worth, and he won’t be able to pay the $300 million balloon payment coming up in the next four years.
The upshot of this revelation is that even if Trump wanted to divest himself of his businesses, he likely couldn’t. To sell off his businesses while he owes so much debt, Trump would have had to pay buyers to take them off his hands. It’s like when somebody owes more on their house than it’s worth. Trump is under water. Indeed, it is likely that his ability to monetize his presidency has allowed him to stave off financial catastrophe.
One can see, then, why Trump is so desperate to stay in office. Without the protection his position gives him, he will be unable to generate revenues for his businesses from the federal government. He will lose the bully pulpit from which he has promoted his businesses. And he will lose the protection from lawsuits and foreclosure that his position grants him. Not to mention any potential criminal liability from which he is protected.
Under such circumstances, you can understand why Trump will do anything he can to stay in office. We should all be scared.