It's Even Worse Than You Think

by David Cay Johnston

  Since its launching in 2011, the consumer bureau has recovered almost $12 billion for people, more than four times its budget. The Trump administration wants to abolish the agency and, failing that, hobble it.

  Another technique Baker cited to boost corporate profits was for a president to stop enforcing environmental laws. “Corporate profits can be increased by letting them destroy the environment at zero cost,” Baker noted. The point of the Clean Water Act and related laws is to make companies that cause pollution clean up after themselves instead of dumping their toxic wastes on everyone else. Regulations requiring firms to clean up these wastes create jobs, encourage innovation, and improve lives.

  To Baker a prime example of bad regulation is the Trump administration reversal of an Obama administration executive order that required mining companies to restore hilltops after they removed them. “By allowing these companies to mine areas without repairing the damage, the Trump administration is saving them money. The people in the communities will suffer the consequences in the form of polluted streams and ruined forests, but this is still good news for corporate profits,” Baker observed.

  Ignoring or repealing environmental laws would not be good news for life insurers who would have to pay out earlier for deaths caused by pollution, nor would it be good news for families whose breadwinners become sick from pollutants or whose children develop asthma and other conditions that limit their economic futures. And, of course, it would not be good news for those who get sick or die. Most of those people are, as Trump put it in his inaugural address, the forgotten men and women.

  Apprenticeship programs could help many of the forgotten. Next up, the strange way President Trump embraced them.

  Washington Apprentice

  Donald Trump made his way to the White House not by putting up gaudy buildings, which got him noticed, often unfavorably, in New York City. Nor was it his casinos, which got him attention mostly along the East Coast. It wasn’t golf or hotels that made him a household name, either. It was by association with would-be apprentices of an entertaining kind on his NBC television shows The Apprentice and The Celebrity Apprentice, where his signature line was “You’re fired.”

  As a candidate and president, Trump made good use of the word apprentice, invoking it often to promote himself as the greatest job-creating president ever.

  Apprenticeship programs can be excellent investments, paying back as much as $27 for each dollar spent on practical on-the-job training under experienced hands, according to one Canadian study. Based on Trump’s statements, that estimate may be very conservative. In America, unions have run pay-as-you-learn apprenticeship programs going back many decades that economic studies showed were sound investments in job training. But those apprenticeship programs have suffered as more construction companies cut costs by hiring nonunion labor, softening demand for people who learned in apprentice programs how to become expert carpenters, electricians, glaziers, heavy equipment operators, masons, and plumbers.

  The need for more apprenticeships was brought up by various labor economists and industrial expansion interests. The big accounting firm Deloitte, which audits the books of many manufacturers, estimated that America should expect to create 3.4 million additional manufacturing jobs over ten years, but was on a path to produce only about 1.4 million qualified applicants. And it noted that from 2003 to 2013, apprenticeship programs that combine on-the-job learning with mentorships and classroom education fell 40 percent even though manufacturing jobs paid 20 percent more wages than other industries on average. Give that demand for skilled workers and the high pay, apprenticeships ought to be growing, not shrinking.

  During the campaign, and later as president, Trump said he wanted many more apprenticeships. In the White House a spur-of-the-moment suggestion became a proposal to create five million apprenticeships, ten times the existing number in 2017.

  The idea arose during a March meeting Trump hosted for German chancellor Angela Merkel and business leaders from their two countries. Marc Benioff, the CEO of Salesforce, which helps clients manage their interactions with customers, said his firm expected to help create two million jobs using software that he said was 90 percent American-written computer code. More apprentices would be good, Benioff said, adding “We would encourage you to take a moonshot goal to create five million apprenticeships in the next five years.”

  Trump responded with his usual vague flattery—no specifics, but “nice” and “incredible” and “amazing.” Then Trump said, “Let’s do that. Let’s go for that five million. OK? [Laughter.] Very good.”

  Soon Trump was talking apprenticeships everywhere he went. That made sense because as a candidate he vowed that his presidency would be all about jobs and that voters should choose him because he was such a successful businessman that he could make good deals that the existing political leadership could not even imagine. In his inaugural address, Trump promised that “every decision . . . will be made to benefit American workers and American families. . . . I will fight for you with every breath in my body—and I will never, ever let you down. America will start winning again, winning like never before. We will bring back our jobs.”

  In June he flew to Wisconsin with his daughter Ivanka and Labor Secretary Alexander Acosta to talk apprenticeships. He proposed apprenticeship programs at every American high school, saying, “I love the name apprentice.” And just in case no one knew what being an apprentice means, Trump told his audience at Wisconsin’s Waukesha County Technical College, “It’s called earn while you learn.”

  He also made an astonishing claim. While in college—Trump enrolled at Fordham in New York City for two years and the University of Pennsylvania in Philadelphia for two more—he observed college classmates who “didn’t have a great ability or frankly didn’t have a great liking for what they were doing or what they were studying. But they could take apart an engine blindfolded.” There was no way to tell if this observation had substance or was just another of his made-up stories.

  Two days later Trump surrounded himself with apprentices in the Cabinet Room of the White House. They were props for the signing of an executive order on apprenticeships, part of Trump’s effort to show that he really was the mightiest job creator of all time.

  “Each of the apprentices here today has their own story and their own dreams—that’s what they are—dreams. Apprenticeships teach striving Americans the skills they need to operate incredible machines. And some of these machines are so intricate, so powerful, and, really—the word is—they are incredible,” Trump said.

  He singled out Charles Robel, a combat veteran from Wisconsin. Upon completing an apprenticeship program, Robel would earn a starting wage of $60,000 “and going up much higher than that.”

  If five million apprentices each started out making the same wages as Robel, their combined first-year pay would be an eye-popping $300 billion. That is so much money that based on 2015 wage data it would mean a 4 percent increase in all the wages earned in America, a huge boost to economic growth. That also would be a big step toward realizing Trump’s dream of doubling economic growth from about 2 percent annually to 4 percent or more.

  So how much would a tenfold increase in federally supported apprenticeships cost? The federal government, in Obama’s last budget, put $90 million of taxpayer money into apprenticeships. That clearly covered just a portion of the costs, but Benioff had called not for a program entirely funded by taxpayers, but for partnerships between business, government, and others.

  “The key,” Benioff said, would be “all these great companies doing workforce development. But if we all came together, if we all unified and created a great program with your leadership, I think we could create five million extra jobs in the U.S. And you know, our companies are some of the greatest universities in the world. We shape these employees, we train them, we educate them, we bring them in, and I think we can do this.”

  Anyone with a head for business could quickly calculate that if the current
programs worked, then building up the capacity from five hundred thousand to five million people at the same cost per apprentice would mean spending another $810 million of taxpayer money. Based on Trump’s example of Charles Robel making $60,000 his first year, that would produce an immediate return of $333 in increased wages for each dollar spent on apprenticeship programs for all five million people. Just the taxes on all those wages would pay for the program many times over.

  Even at ten times the cost per apprentice in the last Obama budget, this would still be a very good deal. And because it’s a one-time investment, the results when measured by lifetimes of work would be enormous, stupendous, mind-bogglingly large. The taxes that would roll in might even make it possible for Trump to show that the economists and government policy wonks were all wrong and that he really could sharply lower tax rates without adding to the federal debt.

  Apprenticeships are a one-time cost, while the benefits of higher wages go on and on. Let’s assume all five million apprentices made the amount Trump cited in his example, $60,000, and never got those big pay raises Trump characterized as virtually certain. Over thirty-five years, the standard the Social Security Administration uses in calculating retirement benefits, the total wages earned by those apprentices would come to $10.5 trillion. And how much is that? It equals all the money that all 161 million Americans with any paid work earned in 2015 plus everything they made in the first five months of 2016. It’s a bonanza.

  So what did Trump do?

  Trump told the television camera “in just a few moments, I’ll be signing an executive order to expand apprenticeships and vocational training to help all Americans find a rewarding career, earn a great living, and support themselves and their families, and love going to work in the morning. We will be removing federal restrictions that have prevented many different industries from creating apprenticeship programs. We have regulations on top of regulations. And in history, nobody has gotten rid of so many regulations as the Trump administration. And that’s one of the reasons that you see the jobs and the companies all kicking in so strongly. I think some very good numbers are going to be announced, by the way, in the very near future as to GDP,” referring to Gross Domestic Product, the country’s entire economic output.

  Asked what regulations the administration had gotten rid of, government spokespeople had a hard time coming up with answers. That doesn’t mean there aren’t any such terminated regulations, only that Trump spoke without staff work to back him up or, possibly, staff work to find if there were any such apprenticeship-blocking regulations.

  The executive order declared, “It shall be the policy of the Federal Government to provide more affordable pathways to secure, high paying jobs by promoting apprenticeships and effective workforce development programs.” Trump also directed government to review and streamline some forty-three workforce programs at thirteen agencies to find ways to spend less and do more, but without identifying any of them.

  Trump’s order also instructed Labor Secretary Acosta that he “shall use available funding to promote apprenticeships.”

  This was not an exercise in investing in the future of America and in better jobs, but in robbing Peter to pay Paul. Just where the money would come from Trump did not specify. Government officials told reporters they had no idea—and asked not to be quoted by name about that.

  Perhaps the Labor Department could further reduce the number of job safety inspectors. Maybe there could be fewer investigations of labor racketeering, something Trump benefited from when he was constructing his New York apartments and Atlantic City casinos, as federal and state law enforcement records and testimony in a federal racketeering trial showed. Maybe less money could be spent protecting pensions and retirement savings from the small minority of dishonest employers.

  Cutting job safety inspections would almost certainly come at a cost of more lives lost at work. The Labor Department inspector general’s latest report in 2017 found that oversight of emergency plans for underground mines, for example, was woefully inadequate. When employers were cited for hazardous work conditions, one in six cases received no follow-up to see if the hazardous conditions were remedied. Trump inherited that mess, but his budget aimed not to fix it, but to make it worse.

  The inspector general also scrutinized the Labor Department office charged with making sure workers receive their health benefits. That office “did not have the ability to protect the estimated 79 million plan participants in self-insured health plans from improper denials of health claims, due to a lack of knowledge of claim denials.” Again, this was a problem Trump inherited. But both his campaign rhetoric and inaugural address committed him to solving such problems, not worsening them.

  Senator Tammy Baldwin, a Wisconsin Democrat, called Trump out during his visit to her state for talking big on apprenticeships while putting deep cuts in his federal budget plan. The “rhetoric doesn’t match the reality,” she said, pointing to a $900 million cut in job training.

  Trump ignored criticism from Baldwin and many others. Instead, the president smiled at the television cameras, surrounded by Robel and the other apprentices, and said, “We want to keep jobs in America, and we want to train people and hire American workers to fill those jobs. And that’s exactly what we’re doing.”

  Creating jobs was far from the only subject in which Trump claimed to be an expert, but which in fact, showed otherwise. Another is taxes.

  PART III

  * * *

  TAXES

  The Tax Expert

  “I think nobody knows more about taxes than I do, maybe in the history of the world. Nobody knows more about taxes.”

  Donald Trump, May 13, 2016

  Trump’s short attention span, combined with his lack of knowledge about world history and events, clouds his actions in Washington. The intelligence officials who deliver the world’s most expensive news report, the President’s Daily Brief, have learned to keep it very short, to include Trump’s name frequently to keep him interested, and to eschew nuance. When Trump talks publicly about issues, he uses what some scholars say is a sixth-grade grammar rich with words like “beautiful” and “terrific,” but not much substance. Nothing he has ever said publicly demonstrates any substantial knowledge of taxes.

  The public record shows something about Trump and taxes that is deeply troubling. Public records reveal that he is an income tax cheat. Trump’s 1984 income tax returns were examined in two administrative trials held by New York state and city officials. No journalist reported on the proceedings until I found the decisions against him in 2016.

  Trump’s 1984 tax returns included what is known as a Schedule C. That is a tax form filed annually by about 27 million sole proprietors of unincorporated businesses like myself. To simplify coordination between federal and state income tax returns, New York State adheres strictly to the concepts and data required on the federal tax return.

  Trump listed himself as a business consultant. He put down $626,264 in tax-deductible business expenses and zero income on his state return. His city tax return also showed no income, but slightly less in business expenses for his consulting services.

  Both state and city tax auditors examined the return. They asked for receipts and other business records establishing that the deductions were reasonable and necessary costs of doing business. When Trump did not produce any, the deductions were disallowed and Trump was sent notices to pay more tax as well as penalties and interest. He appealed.

  The only witness at the tax trials was Jack Mitnick, the lawyer and accountant who had prepared Trump’s tax returns for more than two decades and his father, Fred Trump’s, returns before that. Mitnick testified that he was “thoroughly familiar” not only with Trump’s tax returns, but all aspects of Trump’s finances. At one trial Mitnick was shown a photocopy of Trump’s tax return, the only version anyone could produce. The photocopy, evidently, was mailed to the tax authorities instead of the original.

  Mitnick, under oath, examined the
document. He confirmed that it bore his photocopied signature. But then Mitnick declared that “we did not” prepare the tax return, referring to both himself and his firm. That was strong evidence of income tax fraud, which can be a civil issue or a criminal offense. Had the federal, state, or city government investigated the tax return Mitnick testified about, Trump would have been at serious risk of indictment—and of losing his lucrative casino licenses.

  H. Gregory Tillman, the administrative law judge who heard the city case in 1992, noted the strange circumstance of no original tax return being on file with the city, only the photocopy. In his written decision, Judge Tillman noted that Trump complained of double taxation, but he found that claim baseless. Taking the unusual step in a judicial opinion of using boldface to emphasize his point, Judge Tillman wrote, “The problem at issue is not one of double taxation, but of no taxation.”

  Tillman ruled against Trump, but did not impose penalties because the original tax return was never found.

  State tax auditors also denied Trump’s unexplained deductions. Judge Frank W. Barrie imposed the maximum civil penalties and included a note in his opinion indicating that Trump paid zero taxes on his entire income.

  Mitnick, semiretired and living in Florida, told me he did not recall either tax trial. What he did recall in two interviews with me was that Trump played no role in designing and executing tax strategies. “I did that—all of that,” Mitnick said. “Donald just signed.”

  During the campaign, no journalist even attempted to pin down Trump on his claims of world-class mastery of the tax code. Few even noted that he usually speaks of taxes in slogans and vagaries, not the wonky and detail-laced argot of tax specialists. With a few questions, any well-prepared journalist could have exposed Trump’s claims of expertise as nonsense. Nothing Trump said indicated an awareness of the hellish complexity of the American tax code, which runs to nearly 6,500 pages and includes a 1998 tax simplification provision that ironically appears in the tax code as Section 7803(c)(2)(B)(ii)(IX).