I usually don’t write political posts. I don’t think I wrote one in the first 8 years of Lazy Man and Money. I’ve probably averaged one every couple of years since. This article is a frank talk about the United States economy though, and it’s a discussion that is worth having whichever side of the political spectrum you are on.
I’ve been planning this article for over a month now. Unfortunately, every time I try to sit down to write it either life interferes or the nature of this article changes.
Fortunately, we have almost completed our 1031 exchange (expect a larger update around the end of the month). I can’t wait for the political news cycle to take a break for a day or two, so I’ll just have to go with it. It’s 2020, so we know the next catastrophe is just around the corner.
I had almost published this before the first Presidential debate. I shelved it for a couple of days so that everyone could focus on finding the best way to move to Canada.
In any case, when I started this, there was one area where Trump had the slimmest of advantages in the polling – the economy. Voters felt that Trump was the best for the economy. Going back to Thanksgiving last year, my mother felt this way too. She seemed surprised that I was a democrat. I think her reasoning was that I write about personal finance and economy, so I must be for Trump. I do like value fiscal responsibility (as we’ll find out), but there are other things to take into account when voting for President of the United States.
Those non-financial things are important, but they are outside the scope of this article. That means that I won’t cover Trump caging children, tear-gassing peaceful Americans, bragging about sexually assaulting women, being credibly accused of sexual assault dozens of times, inability to understand second-grade science, aligning with our enemies of Russia and North Korea, nepotism, violation of the emoluments clause, impeachment for trying to get a foreign country to attack Americans, racism, supporting white supremacists, telling members of US Congress to go back to their country, misinformation/disinformation/”alternative facts”, voter suppression, calling our war heroes losers, or trying to end health care for millions and millions of Americans during a pandemic.
I may have missed a few things, but I think you get the idea.
Before I get into the economic case to vote for Joe Biden, we have to recognize that we have a two-party system. We can’t simply say, “Well, I like Mark Cuban, because he would be the best candidate and vote for him.” I suppose you may be able to write his name on the ballot, but it is just as useful not to vote at all at that point. When you only have two choices, it’s completely valid to vote for the lesser of the two evils. Maybe you don’t like eating liver and lima bean soup, but it becomes attractive when compared to dog poop soup. Thus, it is just as useful to point out why Trump is bad for the economy as it is to point out why Joe Biden is good. You don’t want to get stuck eating dog poop soup for four years, do you?
I don’t want to suggest Joe Biden is bad for the economy. He’s actually put together a lot of policies that will help many low-income Americans. That alone would create and increase business opportunities for even more wealthy Americans.
Let’s get started:
Trump and Unemployment
Trump seems to measure the economy in two ways. The most common one is the performance of the stock market. Another way he does it is by measuring unemployment. First, let’s look at the stock market.
Trump and Stock Market Performance
The stock market has done well under Trump. I don’t think anyone can argue that. However, it’s important to note that the stock market had been doing very well for six years before Trump. In fact, there have been a number of monetary policies from both parties to juice the stock market and economy in general. You may remember a series of quantitative easing and “Cash for Clunkers.”
The Trump version of those two stimulus programs was the Tax Cuts and Jobs Act of 2018. It managed to cut taxes for corporations and those in the top tax brackets the most. People in lower tax brackets also saved on taxes, but not as much. It has been widely reported that many public companies used the tax savings to buy back shares of stock. This has the effect of making the owners of corporate stock wealthier.
While surely jobs were created, unemployment was already very low at the time. One could argue that a more effective policy would have been to raise the minimum wage. While that may have helped out many Americans it would have likely hurt the stock performance of companies that rely on that cheaper labor.
That naturally brings us to…
The Economy is more than the Stock Market
Here’s how Joe Biden describes the economy:
“Throughout this [COVID] crisis, Donald Trump has been almost singularly focused on the stock market, the Dow and Nasdaq. Not you. Not your families. If I am fortunate enough to be elected president, I’ll be laser-focused on working families, the middle-class families I came from here in Scranton. Not the wealthy investor class. They don’t need me.”
Admittedly, here at Lazy Man, I am mostly focused on the stock market economy. That’s what allows me to make my money work for me (creating the whole “Lazy” brand). However, I do recognize that there are millions and millions of Americans who are left behind by the stock market economy. As my friend Jim Wang of Wallet Hacks concludes in his stock ownership analysis: “When the stock market goes up, 75% of the Americans don’t participate in any meaningful way.”
Joe Biden wants to undo most of Trump’s tax cuts. That may seem unpopular because most people like low taxes. Unfortunately, sometimes the unpopular choice is the best choice.
The problem with Trump’s lower taxes is that the government has to do more with less money. Predictably services get cut. In 2018, the government decided to disband the “Directorate for Global Health Security and Biodefense” team, which would have certainly been useful against the COVID-19 pandemic we are experiencing today. To pick another example, Trump proposed eliminating funding for PBS. Is it important to you that Jeff Bezos makes a few billion more dollars because Amazon has to pay less corporate taxes at the expense of excellent children’s programming like Sesame Street and Daniel Tiger? (PBS is much more than that obviously, but that programming was critical in our family.)
The other thing about lowering taxes is that it increases the national debt. I’m not a fan of debt. The Committe for a Responsible Federal Budget lists four main consequences of a large national debt:
- Lower national savings and income
- Higher interest payments, leading to large tax hikes and spending cuts
- Decreased ability to respond to problems
- Greater risk of a fiscal crisis
I feel like we are seeing the consequences of spending cuts and the lack of ability to respond to COVID today.
If corporations pay more taxes instead of buying back stock, we can fund great, popular, endangered programs like Social Security.
Trump and Unemployment
Trump has often said that he’s been great at reducing unemployment. That’s true. This graph shows unemployment went from about 10% when Obama inherited the subprime mortgage mess from Bush’s administration. He was able to steadily get it down to 5%. Under Trump unemployment continued its path down to 3.5%. Both presidents deserve credit when it comes to unemployment.
Of course, we all know what happened in 2020. COVID-19 happened. Unemployment spiked to nearly 15%. Trump didn’t create COVID-19, but he made it worse than it needed to be. I’ll get that a little later.
CEOs for Joe Biden
Companies can’t depend on Donald Trump. Believe it or not, it was only about 6 weeks ago that Trump called for a boycott on Goodyear tires. I can’t imagine another President of the United States openly trying to kill an iconic 100+ year-old American business. If the company posed some kind of threat to consumers, I can see it happening, but it doesn’t make sense to pick on a company that makes tires.
Before that, Trump asked people to boycott Harley Davidson. What did Herley Davidson do to deserve this treatment? They complained the tariff war caused them to lose $1.4 billion dollars. That’s the second 100-year old transportation manufacturing company.
Many of America’s CEOs are endorsing Joe Biden. They say that Trump’s response to COVID has made business terrible. Almost all of these very smart group of CEOs say that Trump’s lack of response hurt their ability to run their business. Other countries were able to open up. Other countries had fewer cases and deaths. The United States didn’t.
COVID-19 and the Economy
I’ve dug into Trump quite a bit now for his COVID-19 response. I personally blame him for countless tens of thousands of deaths because he wouldn’t say, “You should all wear a mask for two weeks. If you do that we can get back to work.” It took a long, long time for him to warm up to masks. And while he may carry one around with him for the show, he clearly doesn’t use them when he should. Of course, the COVID-19 superspreader event at The White House over the last 10 days is evidence of that.
Trump’s hatred of masks came at a tremendous economic cost. Back in late June, Goldman Sachs said that a a national mask mandate could slash infections and save economy from a 5% GDP hit. A growth of 5% to the GDP is huge – roughly a trillion dollars (using 2018’s GDP numbers of $20 trillion). Imagine saving a country a trillion dollars, not to mention more than a hundred thousand lives, with a simple stroke of a pen or two… and refusing to do it without explanation.
That’s not the kind of behavior of a person who is “good with the economy.” My 6-year old could have made the obvious economic decision that Trump couldn’t.
In sharp contrast, Joe Biden predicted all this mess would happen under Trump back in late January. Yes, that was 6 weeks before the US shut down in the middle of March. At the time only 80 people in China had died… there were only 5 cases in the United States. He wrote about the things he would do in an USA Today Op-Ed.
Wouldn’t you like to take your DeLorean back to January and see how things would have faired with a president who had a plan, even before it started to spread throughout the United States?
Trump’s “Businesses” and Taxes
Let’s turn our attention to Trump’s businesses and taxes. I think that’s where many people get the false impression that Trump is good with money. He’s not good with money. He’s a disaster. He inherited around $413 million from his father. According to that New York Times article, he was a millionaire by age 8 in 1954. A million dollars in 1954 certainly goes a long way, but the money kept coming over the years.
You could compare Donald Trump to Paris Hilton – an extreme case of trust-fund baby turned into a reality TV star. Trump doesn’t have a lot of profitable business ventures on his own. The biggest one was The Apprentice, which again was based on a false narrative that he was good with business despite all the bankruptcies. The next biggest source of income for him was selling his fraudulent luxury lifestyle to MLM/pyramid scams (Source). As every reader of Lazy Man and Money should know, I’ve spent thousands and thousands of hours fighting those kinds of pyramid scheme fraud companies.
We learned a lot when Trump’s tax information came into focus a two and half weeks ago.
Trump for years has been said a lot about his taxes that don’t add up. When he was accused of not paying much in taxes, he’d claim that was because he was smart. That’s tacitly admitting that those accusations were correct. Minimizing taxes is something that I’ve praised in this space – it is indeed a smart thing to do if done legally. However, Trump has also said that he’s paid a lot in taxes. Obviously, you can’t be paying “almost nothing” and “a lot” at the same time.
Trump has also claimed that he can’t provide his taxes because they are under audit. The IRS has said that this is simply not true – anyone can show their own taxes. It is an excuse that he uses hoping to pacify people who may not be educated enough to know the truth.
I think we kind of knew what going on with Trump’s taxes, but New York Times reveal of his taxes confirmed what we thought. Trump doesn’t pay much in taxes. In ten out of 15 years he paid nothing. As President, he paid $750. While this could be legal, I look for a higher bar from a US President. He’s been charging US taxpayers to fund the Secret Service staying at his hotels. It costs millions and millions of dollars and the hotels are cashing all those checks. In return, he contributes $750 – when he contributes at all.
If you pay more in taxes than Trump and receive the worse health care you should not vote for him. It’s that simple.
One of Trump’s tax deductions included $70,000 for his haircuts during The Apprentice. We’ve all seen his hair, that isn’t $70,000 hair. A smart person doesn’t pay $70,000 for that kind of work. The Apprentice should have its own hair and make-up people that are funded by Mark Burnett. A reasonable person would say that doing some kind of financial favor and probably getting something in return. Is it even legal to deduct a $70,000 haircut? Let’s look at the first sentence of IRS guidelines:
“To be deductible, a business expense must be both ordinary and necessary.”
Is it ordinary for a male television star to spend $70,000 on their hair themselves? (I differentiate between male and female because we all know that women pay an extraordinary pink tax for hair cuts.) I don’t think $70,000 on top of The Apprentice’s own staff is very ordinary. I also don’t think it is necessary – people still watch America’s Got Talent and Howie Mandel has no hair. A $70,000 hair cut was never necessary for the success or failure of The Apprentice.
It doesn’t seem legal to me, but I’m not a lawyer.
One thing I can say is that the IRS doesn’t have the power to audit ultrawealthy people like Donald Trump. I know that sounds weird, so here’s the proof:
“For starters, [the ultra rich] can devote seemingly limitless resources to hiring the best legal and accounting talent. Such taxpayers tend not to steamroll tax laws; they employ complex, highly refined strategies that seek to stretch the tax code to their advantage. It can take years for IRS investigators just to understand a transaction and deem it to be a violation.
Once that happens, the IRS team has to contend with battalions of high-priced lawyers and accountants that often outnumber and outgun even the agency’s elite SWAT team.”
That certainly sounds like Donald Trump to me.
Additionally, the IRS admitted that it simply doesn’t have the funding and resources to audit the ultra-wealthy.
The average person may think of the IRS as this all-power entity, and it is to the average person. To the people with hundreds of millions of dollars, the IRS is more of an annoyance like a fly in the room.
Trump Ends Stimulus Bill Negotiations
In the latest development (10/5/2020), Trump Tweeted an end to the stimulus bill negotiations. The stock market tanked. This is another case where everyone was left puzzled. The Federal Reserve Chair had earlier said it was of extreme importance to get it done. It seemed that some progress was getting made. A stimulus bill would look very good for Trump politically with less than a month until election day.
The markets don’t like uncertainty. Trump has been nothing but uncertain. At any moment he could Tweet any kind of crazy thing. Everyone has to run around like chickens with their head cut off to make sense of that crazy thing. It’s dangerous to the economy to have that kind of extreme, unstable, liability.
In this case, many experts thought that the point of the Tweet is to get the Senate focused on the political job of confirming Amy Coney Barrett to the Supreme Court. At a time when many Americans need financial help, Trump was turning his back on them.
Of course, a few hours later Trump demanded that a stimulus bill gets on his desk so he could sign it right away. At this point, everyone had a choice: 1) run around with their heads cut off again or 2) simply ignore the President of the United States. That’s a lose-lose situation. It simply isn’t productive and it’s terrible for America.
After nearly 3,000 words (around 4x longer than my typical article), I’m not sure there’s too much to more say. I realize that much of this article has been more why not to vote for Trump’s economic platform instead of why to vote for Biden’s. I wish I had more time to get into the merits of Biden’s economic policy – it is a good one. I could probably round a good 4000 words in total.
For now, I want to make sure people understand that Trump being a businessman is simply a show and an illusion. When it comes to helping Americans economically, he failed the biggest test. He could have used an ounce of prevention early and saved us multiple tons of cure.
Update – Experts all know that Biden is best for the economy. See this article about six [bipartisan] former secretaries of Commerce endorse Joe Biden. Specifically, they say, “We believe that a Biden presidency will mark the return to the certainty and security that our economy needs to thrive.” That’s one of the points I tried to make in the article