Let’s dispense once and for all with the nonsensical fantasy that if we elected businessmen they would run government like a business – more efficient and cheaper. We regularly elect businessmen to public office whether at the local, state, or federal level. Yet, my diligent search for a businessman who actually applied the lessons of their MBA or corporate experience to their government positions yielded zero examples.
Businessmen running for political office may tell potential voters that they will run their office like a business and then, when elected, miraculously transform themselves into politicians, usually of a lower mental and moral character than most career politicians and public servants whom they slander. The comparison between Trump and Biden illustrates this best – although this might not be the best example. Trump was a lousy businessman. According to ForbesDaily Cover of October 11, 2021, hardly a bastion of left-wing politics, Trump would have been “400 million dollars richer if he had just put his father’s money in the (S&P 500) index.”
The point is that Trump, like businessmen-turned-politicians before him, imitated the garden-variety politician by making economic decisions that would garner votes rather than improve governance. Early in his term, he passed one of the largest tax cuts in recent history whose benefits went overwhelmingly to people making big campaign contributions. Trump at the time claimed that the tax cuts would allow the Uber Wealthy to make so many investments that the tax cuts would pay for themselves in a couple of years. Trump’s administration also ran budget deficits not seen since World War II, increasing national debt by 68% – before the pandemic struck. He pumped so much money into consumption that, like a sugar high, employment was artificially juiced. However, despite campaign promises, he made no investments in infrastructure, the backbone of the economy, or in anything else.
Taking Trump and his apologists at their word, that he is a genius without peer, one must assume that he excelled at his studies at the Wharton School. Thus, he must fully understand the difference between Operating Expense (OPEX) and Capital Expense (CAPEX) as taught in CorpFinance 101. One textbook describes the difference: “An operating expense (OPEX) is an expense required for the day-to-day functioning of a business. In contrast, a capital expense (CAPEX) is an expense a business incurs to create a benefit in the future.”
Trump’s unparallel genius informed him that OPEX – that is just spending money that flows directly into consumer pockets – pays off with votes in the next election, while CAPEX benefits the national economy three or four elections down the road. Opting for reelection and letting another later President worry about a rapidly deteriorating national infrastructure was a no-brainer.
Again, to be fair, Trump did bring business into the White House – his own. He spent taxpayer money on his hotels and tried to con foreign leaders into holding meetings at his properties.
Biden, by contrast, is a professional politician who makes no pretense at business genius. Again, citing Forbes, his current wealth is about $8 million, including his house and a beach house. His biggest sources of income before entering the White House were book deals and speaking engagements as well as his VP’s pension. Yet he tries to manage the United States economy and its citizens the same way as a good CEO, looking after the long-term interests of his company and its stakeholders. In contrast to Trump’s tax cut, which just shoveled $2.3 trillion to the rich, Biden’s $1.9 trillion Covid relief bill aimed at protecting American citizens from economic harm. It protects both tenants and landlords from the catastrophic costs of evictions, keeps small businesses alive, and invests in education and childcare, both essential to keeping the country going. It also provides relief to tens of millions whose jobs the pandemic killed. The larger $3.5 trillion proposal is even more a CAPEX rather than an OPEX budget. It includes $726 billion for education, which always produces the best return on investment to a country and its stakeholders, i.e., its people. It allocates $135 billion to rebuild after climate-induced catastrophes such as forest fires and drought, and $332 billion to address the country’s huge housing deficit, another drag on economic growth. The bill also includes significant sums to get more people back to work such as a child tax credit and childcare provisions that will enable working mothers to get back to their jobs.
Opponents of the bill are like the clowns in a three-ring circus; they are there to distract the audience while the acts are changing. The Trumplican Party, allegedly the party that once followed good business practices, has attacked the total cost of the bill, demonstrating once again its ignorance of the difference between CAPEX and OPEX. The Trumplicans rant and rave about fiscal probity but ignore it when in power. (Trump, after all, often admitted to welching on debts through bankruptcy.) For a party that claims to bring the best qualities of a CEO to governance, Trump’s acolytes in Congress have decided that wrecking America’s credit rating is not too high a price to pay to get back into power. Now they are terrified that wages for the bottom 80% are going up as well as the stock market. Would not a good businessman rejoice at such developments? Or are they really acting like politicians, preferring to harm the country so long as it gives them electoral campaign fodder?
It seems odd that professional politicians, like Biden, understand better how to run a business than businessmen-turned politician.