Category Archives: Commentary

All written commentary.

Are Trump’s bankruptcies worse than other business law manipulations?

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The Washington Post earlier this month described Trump’s business bankruptcies:

The 69-year-old real estate tycoon has never filed for personal bankruptcy and has for years portrayed the Chapter 11 bankruptcies of his glittering hotels and casinos as calculated, even shrewd maneuvers, and facts of life in the high-stakes worlds of mega-development and commercial finance.

The Trump-tied bankruptcies have all been filed under Chapter 11, a provision allowing troubled companies to stay in business while restructuring their business model or reducing their debts. In the business world, those filings are far more common, and far less disastrous, than Chapter 7 bankruptcies, in which companies are liquidated to satisfy debts.
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An estimated 5 percent of the 500 biggest U.S. companies have filed for bankruptcy in the past two decades, Georgetown law professor Adam Levitin said.

 
While I am not defending Donald Trump’s view of his activities, I do have to ask: Are Trump’s business bankruptcies really worse than other corporate legal manipulations?

True, Chapter 11 bankruptcy is uncommon by comparison to other maneuvers through American business and tax law, but is it worse? Major U.S. companies use and abuse legal provisions constantly to evade and avoid taxes to the government. Trump used the law to avoid creditors — at major investment banks and funds, so let’s not weep too hard (and most of them came out the other side of his restructurings with lucrative deals).

Some US companies do complicated maneuvers like “offshore reincorporation” and other tax-avoidance mergers. He used Chapter 11 for cashflow management purposes. If companies use the US legal code to boost their profits and cashflow via tax avoidance, how is that better than Chapter 11 bankruptcy?

Trump made business deals on the (correct) assumption that he could fall back on restructuring laws. Other firms make deals based on assumptions that they can fall back on tax loopholes.

Perhaps you are both unswayed by moral arguments and unpersuaded by his argument that he was using the system to his advantage like everyone else. Perhaps you would prefer to judge his record solely on what these bankruptcies says about his ability to run businesses.

Well, what about comparing it to popular and trendy legal maneuvers that are questionable long-term business practices? Many companies have been borrowing heavily to shower money on their shareholders, instead of using it to invest in expansion:

This practice of borrowing to pay shareholders instead of borrowing to invest, as you might guess, basically means shareholders are profiting against the company’s future financial health, rather than from current (or future) returns on its previous (or current) investments. That means literally raiding the companies’ future earnings to generate payout cash now. The company will eventually have to pay back the borrowed money with interest, but it will not have gained anything from that borrowing because it was used to rain money down on shareholders instead of actually growing the company’s operations. This means companies are putting themselves deeper into a long-term hole, even as wealthy shareholders […] rake in money in the short-term.
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Down the line, a lot of American companies could have very high debt burdens while also being very underdeveloped compared to foreign competitors who invested in keeping up with the times and growing their long-term potential earnings. That will make them vulnerable to bankruptcy and other problems.

 
Maybe it’s true that Trump flew closer to the sun (and did so sooner) than these other future Icaruses, but the effect will eventually be the same.

Once again, one finds that Trump is not the epitome of evil. He is merely reflecting back a refined and purified vision of what America has become in its re-expanding dark corners. Those corners of our society exercise financial and political power in a dangerous direction. He didn’t make it that way. This is our country. We allowed this to happen.

AFD Micron #19

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Curt Schilling’s tweet: “It’s said only 5-10% of Muslims are extremists. In 1940, only 7% of Germans were Nazis. How’d that go?” wouldn’t make his point even if the numbers were accurate. Unless Curt Schilling is suggesting discrimination against Muslims is the only way to be effective against Muslim terrorists because discriminating against Germans is such an effective way of dealing with Nazis…. which would be a little weird for a guy named Curt Schilling.

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U.S. homeownership in 2015 (in a global context)

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Statistics and analysis compiled for and by The Globalist Research Center.

In the second quarter of 2015, the homeownership rate among U.S. households reached a new recent low of 63.4%, according to the U.S. Census Bureau. This was the lowest reported rate since 1967!

Homeownership in the United States had reached an all-time high of 69.2% in 2005, two years before the housing bubble burst in late 2007. Following the recession, prospective buyers shifted instead into renting. Growth in the rental market — approaching record occupancy levels in many areas of the country — is one of the factors driving down the share of homeowners in the overall pool of households.

At the same time, U.S. home buying and home prices have actually increased recently. But that demand has largely come from institutional investors, speculators, and foreign buyers. This makes it harder for ordinary homebuyers, especially in the youngest generation of would-be first-time buyers, to break into the market.

For comparison to some other major economies’ homeownership rates, about 53% of German households own their homes, 73% of Italian households own their homes, and 90% of Chinese households own their homes. The global average, however, is slightly below the latest U.S. homeownership rate.

But not all homeowners are created equal. In Romania, 95.6% of households own their own homes as of 2013 — the highest ownership rate of any EU country. And eight of the ten EU member countries with the highest rates of homeownership are all former Warsaw Pact or Soviet states. (Another is ex-Yugoslavian.) The ownership level is similar in Russia itself, where 84% of housing was owner-occupied as of 2010. All of this is at least partially related to rapid housing privatizations in the early 1990s. However, there are concerns that many of the homes in those countries, constructed in the suburbs and countryside during the Communist era, might not hold up much longer. Little new construction occurred in the decade after 1991. This could potentially put much of the housing stock in jeopardy and add major stress to those already relatively poor European nations.

Homeownership promotion has long been a goal of U.S. public policy — maybe because of its cultural association with early American colonists, homesteading pioneers, and the American Dream. Today its promoters seek to encourage building up equity and to ensure a steady need for jobs in the construction industry. The George W. Bush Administration, for example, promoted what it called an “ownership society.”

The general idea (in theory, at least) is that when people living in a home-owning household reach retirement age, the equity they have in their residence can provide a major source of funds to finance their retirement.

Home-owning households are generally wealthier, as least on paper, because a residence is often their largest asset. However, that asset is usually not a readily accessible source of cash.

Moreover, more than two-thirds of American homeowners in 2014 had mortgages on their homes. Homeownership is far less associated with debt in China, for example, than it is in the United States. Taking out a mortgage to buy a property is very uncommon in that country, barely reaching double-digits as a percentage share of homeowners in 2010.

Why We Should Keep the (Whole) 14th Amendment

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Margaret Thatcher once said, “Europe was created by history. America was created by philosophy.” When a country is united by ideals and not bloodlines, defining citizenship is a unique challenge, one that the United States has grappled with time and time again in its history.

In recent weeks, many of those seeking to be the GOP’s candidate for president have begun talk of getting rid of a constitutional amendment in order to redefine who is a citizen. Frontrunner Donald Trump and others would like to see the United States do away with the Citizenship Clause of the 14th Amendment, which grants citizenship to anybody born within US borders and subject to the the jurisdiction of federal laws (i.e. the baby’s parents are not foreign diplomats or have other formal relationships with foreign governments). Rick Ungar, a contributor for Forbes writes:

It turns out that those who have long enjoyed portraying themselves as the “Guardians of our Constitution”, through strict interpretation of the same, and the proponents of law & order as the bulwark of an orderly society — of course I’m speaking of Republicans — are the very folks who no longer have much use for the Constitution when it fails to meet their desires or live up to their expectations.

 
The argument around the 14th Amendment is largely due to frustration over so called “anchor babies”, a derogatory term for babies born to illegal immigrants in the United States supposedly under the pretense that the child will somehow help the parent gain legal status. It is true that for the past 147 years, all children born within US borders are legal US citizens, regardless of their parent’s legal status.

However, the idea that these babies and US citizens are helping to grant their parents legal status in the United States is a fallacy for which there is no legal backing. In fact, in 2011 there were 5,000 children in state care or foster homes because their parents had been deported. In 2013, Immigrations and Customs Enforcement deported 72,410 people who had at least one child who was a US citizen.

Still, the term “anchor baby” and the vitriolic desire to get rid of the 14th Amendment persist. The amendment was a Reconstruction Amendment, adopted on July 9, 1868, with the goal of providing citizenship to African-Americans who had formerly been slaves with no protection under the law. The Citizenship Clause of the Amendment overruled the Supreme Court’s findings in Dred Scott v. Sanford, which stated that African-Americans, even those who were free, were not American citizens and therefore could not sue in federal court.

When the 14th Amendment was originally debated, there were a few mentions of children born to immigrants on the debate floor. However, in 1868 there was no limit to immigration into the United States, meaning there was no illegal immigration at the time of the amendment’s adoption. In 1898, the Supreme Court cleared this up in United States v. Wong Kim Ark, by ruling that the children of immigrants born in the US are indeed entitled to citizenship.

Since that time, America has continued to grapple with immigrant policy and citizenship laws, but with little exception, those born within the borders of the United States are citizens of our country. While American immigration policy leaves much to be desired, the 14th Amendment has provided continuity and stability to the definition of citizen. Our country’s greatness is derived from the diversity of our citizens and the uniqueness of our history. Paternity tests or another arbitrary way to obtain citizenship would rob future generations of the philosophy and ideology on which this country was founded and continues to grow.

14th Amendment of the United States Constitution, section 1. (National Archives of the United States.)

14th Amendment of the United States Constitution, section 1. (National Archives of the United States.)

Yemen: Saudis “liberate” Aden; Qaeda waltzes in immediately

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Saudi Arabia liberates and stabilizes Yemen like this:

“Dozens of al Qaeda militants were patrolling the streets with their weapons in total freedom in a number of areas in Tawahi [port district, Aden]. At the same time, others raised the al Qaeda black flag above government buildings,” a resident told Reuters.

He said the flag was also flying over the administrative building of the port, although a port official later said that the flag was flying at the gate of the port’s complex.
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Yemen’s Deputy Interior Minister Brigadier General Ali Nasser Lakhsha played down the threat posed by the gunmen in the Aden neighborhoods.
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Residents say policemen and government army units are now largely absent from Aden, where services have lapsed and the ruins from earlier battles have gone unrepaired.

“All these guns and gunmen everywhere is a thing that Aden has never seen before…Fear is spreading that it will eventually give way to chaos, and more wars in the future” said Yemeni analyst Abdulqader Ba Ras.

 
That was on Saturday, August 23rd. They withdrew on Sunday after first trying to seize a military base. They still control the populous southern port city of Mukalla (see map above).
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