Tag: donald trump

Donald Trump as Litigation Bully

Do you need another reason — besides the tariff talk, the eminent domain trail, the inane birtherism, and, well, the hundred other reasons — to hope the presidential campaign of Donald Trump goes nowhere? Well, here’s another reason: he’s an aggressive, some might say abusive, user of lawsuits and threats of lawsuits against those who apply unwanted scrutiny to his business operations.

Twenty years ago, analyst Marvin Roffman of the Philadelphia investment firm of Janney Montgomery Scott predicted that Trump’s then-new Taj Mahal casino would have difficulty recouping its huge investment, in part because of its troubled Atlantic City location. As financial predictions go, Roffman’s was a very shrewd one, borne out by the later restructuring of the casino’s finances, which was costly for bondholders. At the time, however, Trump threatened the Janney firm in no uncertain terms: “I am now planning to institute a major lawsuit against your firm unless Mr. Roffman makes a public apology or is dismissed.” No profile in courage, the Janney firm proceeded to fire Mr. Roffman.

More recently, Trump pursued New York Times reporter Tim O’Brien and Warner Books through extensive defamation litigation (eventually dismissed) over O’Brien’s 2005 book TrumpNation, which placed a much lower valuation on the net worth of Trump’s empire than Trump thought proper or accurate.

There are words that come to mind to describe wealthy people who repeatedly use lawsuits or the threat of lawsuits to shut up or extract apologies from people they think have criticized them, and one of those words is “bully.” Why one would seek out that sort of character trait in a candidate for higher office is anything but clear.

A Wall Street Journal Column Understates the Size of U.S. Manufacturing

The Wall Street Journal’s December 1 “Ahead of the Tape” column, by Kelly Evans, says “manufacturing is a relatively small part of the economy; It employs about 9% of the work force and accounts for about the same percentage of GDP.” Actually, manufacturing accounts for about 12 percent of nominal GDP.  But that, too, is misleading.  

Chicago Fed economist William Strauss explains why neither U.S. manufacturing’s share of employment nor its share of GDP captures the actual strength of manufacturing:

Between 1950 and 2007 (prior to the severe recession), manufacturing output was just over 600% higher while over the same period growth in real GDP of the U.S. was only a slightly lesser 560%. Yet, the manufacturing share of GDP declined markedly over this period as measured in current dollar value of output. In 1950, the manufacturing share of the U.S. economy amounted to 27% of nominal GDP, but by 2007 it had fallen to 12.1%. How did a sector that experienced growth at a faster pace than the overall economy become a smaller part of the overall economy? The answer again is productivity growth. The greater efficiency of the manufacturing sector afforded either a slower price increase or an outright decline in the prices of this sector’s goods. As one example, inflation (as measured by the Consumer Price Index) averaged 3.7% between 1980 and 2009, while at the same time the rise in prices for new vehicles averaged 1.7%. So while the number (and quality) of manufactured goods had been rising over time, their relative value compared with the output of other sectors did not keep pace. This allowed manufactured goods to be less costly to consumers and led to the manufacturing sector’s declining share of GDP.

Those who imagine “we don’t make anything anymore,” as Donald Trump claims, don’t grasp the magnitude of America’s industrial productivity gains.

In reality, the U.S. is by far the world’s largest manufacturer, with China trailing by 22 percent according to U.N. data for 2008 and arguably much more when we’re not in recession.

Revenge of the Laffer Curve, Part II

An earlier post revealed that higher tax rates in Maryland were backfiring, leading to less revenue from upper-income taxpayers. It seems New York politicians are running into a similar problem. According to an AP report, the state’s 100 richest taxpayers have paid $1 billion less than expected following a big tax hike. The story notes that several rich people have left the state, and all three examples are about people who have redomiciled in Florida, which has no state income tax. For more background information on why higher taxes on the rich do not necessarily raise revenue, see this three-part Laffer Curve video series (here, here, and here):

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth.

…[New York Governor David] Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.

…So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing.

…State officials say they don’t know how much of the missing revenue is because any wealthy New Yorkers simply left. But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh.

…Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes.

Not Waiting for Government

As Tad DeHaven mentioned the other day, CNN reported recently that business owners and residents on Hawaii’s Kauai island got together and made repairs to a state park – in eight days – that the state had said would cost $4 million and might not get done for months. Businesses were losing money since people couldn’t visit the park, so they decided to take matters into their own hands.

“We can wait around for the state or federal government to make this move, or we can go out and do our part,” [kayaking company owner Ivan] Slack said. “Just like everyone’s sitting around waiting for a stimulus check, we were waiting for this but decided we couldn’t wait anymore.”…

“We shouldn’t have to do this, but when it gets to a state level, it just gets so bureaucratic, something that took us eight days would have taken them years,” said Troy Martin of Martin Steel, who donated machinery and steel for the repairs. “So we got together – the community – and we got it done.”

It reminds me of the story 20 years ago of how Donald Trump got tired of watching the city of New York take six years to renovate a skating rink, so he just called up Mayor Ed Koch, offered to do it himself, and got the job done in less than four months. He got so enamored of the skating rink that he ended up getting the concession to run it.

And it also reminds me of the stories in James Tooley’s brand-new book, The Beautiful Tree: A Personal Journey Into How the World’s Poorest People Are Educating Themselves, which talks about how poor people in China, India, and Africa have set up schools for their children because government schools were absent or of poor quality.

If government would get out of the way, businesses, churches, charities, and individuals would solve a lot more social problems.