Robert Reich has a post on his website explaining how the rules of finance, taxation and bankruptcy rig the game in favor of the super-rich and against the average person. He uses Donald Trump’s frequent bankruptcies as an example of how it all works.
Thirty years ago, on its opening day in 1984, Donald Trump stood in a dark topcoat on the casino floor at Atlantic City’s Trump Plaza, celebrating his new investment as the finest building in Atlantic City and possibly the nation.
Last week, the Trump Plaza folded and the Trump Taj Mahal filed for bankruptcy, leaving some 1,000 employees without jobs.
Trump, meanwhile, was on twitter claiming he had “nothing to do with Atlantic City,” and praising himself for his “great timing” in getting out of the investment.
In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble.
The laws protect them through limited liability and bankruptcy.
But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills, have no such protection. Jobs vanish, skills are suddenly irrelevant, and home values plummet.
He’s right. All Trump did was sell the right to use his name to the casino, which means if it goes under he has no obligations at all. He gets paid a huge up front fee and a percentage of the profits but takes none of the risk. His multiple bankruptcies in businesses that he does control aren’t failures, they’re planned events to shed himself of debt. And it’s hardly unique to him. Other companies do the same thing routinely before taking a golden parachute out, leaving everyone else holding the bag:
Bankruptcy was designed so people could start over. But these days, the only ones starting over are big corporations, wealthy moguls, and Wall Street.
Corporations are even using bankruptcy to break contracts with their employees. When American Airlines went into bankruptcy three years ago, it voided its labor agreements and froze its employee pension plan.
After it emerged from bankruptcy last year and merged with U.S. Airways, America’s creditors were fully repaid, its shareholders came out richer than they went in, and its CEO got a severance package valued at $19.9 million.
But American’s former employees got shafted.
And then there’s student loans:
Student loan debt has more than doubled since 2006, from $509 billion to $1.3 trillion. It now accounts for 40 percent of all personal debt – more than credit card debts and auto loans.
But the bankruptcy law doesn’t cover student debts. The student loan industry made sure of that.
If former students can’t meet their payments, lenders can garnish their paychecks. (Some borrowers, still behind by the time they retire, have even found chunks taken out of their Social Security checks.)
The only way borrowers can reduce their student debt burdens is to prove in a separate lawsuit that repayment would impose an “undue hardship” on them and their dependents.
This is a stricter standard than bankruptcy courts apply to gamblers trying to reduce their gambling debts.
Americans love the Just World mythology. The world is fundamentally fair, they think, and that means talent, ambition and hard work makes someone rich and laziness and sloth make someone poor. Even if they’re poor themselves, they tend to think this is how things work. But it doesn’t. The real golden rule: Those who have the gold get to rule, which means they get to rig the game in their favor so that heads they win, tails you lose.
Donald Trump made his money through inheritance, government contracts (no-bid, of course), eminent domain (stealing other people’s property), sweatshops, undocumented workers and rigged markets. But he sells himself as the self-made man, a shining example of the fundamental fairness of capitalist meritocracy. And the people he exploits cheer wildly as he boasts and poses.