Money Matters

Donald Trump and the golden age of America’s oligarchy

October 8, 2018
By Edward Luce

One of Donald Trump’s advantages is the illusion that he comes from a different species to America’s wealthy elites. Once asked by a foreigner what “white trash” meant, he replied: “They are just like me. Only they’re poor.”

One of Donald Trump’s advantages is the illusion that he comes from a different species to America’s wealthy elites. Once asked by a foreigner what “white trash” meant, he replied: “They are just like me. Only they’re poor.”

Yet in financial terms, Mr Trump shares basic traits with other scions of wealth. This week an exhaustive New York Times investigation demolished what little credibility was left to Mr Trump’s story of being self-made. The Times reported that he inherited more than $400m in today’s money from his father, Fred Trump, and that he used every trick in the book — including allegedly fraudulent ones, which is denied by his lawyer — to avoid paying taxes on it.

It is Mr Trump’s style that sets him apart. In terms of money, he is a fitting president for the times. The cut-off point for making it on to the Forbes 400 list of wealthiest Americans, which was also released this week, is $2.1bn. Mr Trump ranks 259th with assets of $3.1bn. About a third of those on the list inherited their fortunes. Many of the super-rich wince when Mr Trump opens his mouth. But Ivanka Trump and her husband Jared Kushner are quite at home with their peers.

America has a thriving mutual support network of family trusts and estates. The Trump administration is serving their interests well. What caught the headlines in Mr Trump’s tax bill last December was the cut in the corporate tax rate. Private wealth also had plenty to cheer. The bill doubled the floor at which people must start paying inheritance taxes.

Couples can now shelter their children from paying a cent on the first $22m of what they inherit. The previous floor was already high, even by America’s standards. At the turn of this century 2 per cent of American estates paid any estate tax. That has now fallen to a tenth of 1 per cent, according to the Joint Committee on Taxation.

Future Fred Trumps need not go to such lengths to disguise their inter-generational largesse. Many of America’s wealthy complain loudly about Mr Trump’s social values. It is hard to recall many who objected to his tax bill.

To be sure, Mr Trump’s campaign sparked concern. He was the only Republican who pledged to close the “carried interest loophole”, which allows hedge funds and private equity to pay taxes on their gains far below normal income tax rates. He was also alone in promising to spend plenty of taxpayers’ money on infrastructure.

They need not have worried. Mr Trump left the hedge fund exemption largely intact. He no longer even pays lip service to infrastructure.

That could change if Democrats take control of Congress in November. But the chances that Mr Trump and the Democrats will be in the mood to strike deals are slim. One of the first things Democrats would probably do is subpoena Mr Trump’s tax record. The Times has whetted appetites to prove he is a fraud.

Is Mr Trump the president America deserves? In terms of social values, the answer is surely no. Most Americans disapprove of Brett Kavanaugh, his Supreme Court nominee, because he would chip away at abortion rights, gay marriage and other milestones of progress. Mr Kavanaugh’s howl of rage over sexual assault allegations has turned him into a symbol of male arrogance. He personifies a past most Americans want to reject.

Yet his background is typical of America’s establishment. Mr Kavanaugh boasted that he had “busted a gut” to make it to Yale and benefited from “no connections”. In fact, he attended a Washington private school that churns out Ivy League material. Other Georgetown Prep alumni include Neil Gorsuch, a Supreme Court justice, and Jay Powell, chair of the Federal Reserve. Mr Kavanaugh’s grandfather studied at Yale.

Like Mr Trump, Mr Kavanaugh offers a cracked reflection of society. America’s elites do not like what they see. It distorts their world as they like to see it: meritocratic, fair-minded and politically correct. Each in their way presents a grotesquerie of America’s less noble side. In Mr Kavanaugh’s case, it is the slipped mask of a man trying to imitate Lady Justice. In Mr Trump’s it is a president who reinforces an economic structure that sustains them.

Mr Trump knows that America’s elites want to have their cake and eat it. Which doesn’t? When Mr Trump looks in the mirror he sees just what he wants to. Others may view him as an oligarchic narcissist. Mr Trump sees only a self-made man.