WASHINGTON, January 24, 2018: In a January 22 column in the New York Times “The art of the broken deal,” economist Paul Krugman asserts that President Trump’s negotiating is really “just words he feels free to ignore a few days later.” Krugman says that the government shutdown was Trump’s fault because Trump cannot be trusted.
Krugman explains that Trump’s positions are constantly changing. “But what did you expect? Trump’s whole business career has been a series of betrayals – failed business ventures from which he profited….while others ended up holding the bag.”
Krugman simply doesn’t understand business
In business, people take risks. Some risks turn out to be good ventures while others fail. Donald Trump has had hundreds of successes and he has had a few failures. When a failure occurs, all people involved tend to lose something.
When economics is taught in higher education, colleges and universities make a choice. Some schools treat economics as a social science. As such, the economics department is housed in a liberal arts college. Other schools treat economics as a business subject so the econ department is housed in the Business School.
While the principles taught are generally similar, the emphasis changes. Treating economics as a social science usually means that perceived social justice, a fair distribution of income and a strong social safety net, are the primary focus. Treating economics as a business subject means the focus is on economic growth, understanding how markets operate and studying relationships between business, government and consumers.
Krugman favors the social science approach to economics As such, he emphasizes the problems of income inequality, providing health insurance for all Americans and protecting consumers. Because of that position, he appears to not understand how business actually works.
Krugman, Trump and the art of the deal
In business negotiations, the focus is always on achieving desired results. During such negotiations, there is a lot of give and take. Often each side asks for more than they expect to get and then the position is modified as the negotiations proceed. Krugman says when Trump is negotiating, he “can’t be trusted to honor a deal.”
Remember that Trump achieved his business success and wealth in the real estate development field. In that business, to be successful, Trump had to learn how to effectively negotiate. That meant when buying property, he always offered less than he expected to pay, so there was room for negotiation.
Also during negotiation Trump probably said things to develop a rapport with the seller, knowing that when it came time to finalize the deal he may have to modify his position. Had he offered his final position at the start of negotiations, the deal would probably not have been made.
Trump also knows that when dealing with real estate, nothing said verbally is part of a contract. Only those items that are included in the written contract are legal and binding. So, he is accustomed to saying things that may not be included in the final deal.
Trump wants results
So far, as President, Donald Trump is getting the results he wants. For instance, he knows that at least nine Democratic Senators will have to vote for a spending bill in order for it to pass. The Democrats want to solve the DACA problem at the same time. Trump will consider that as long as border security is also considered.
He sometimes says he favors something in order to build rapport and then modifies that position as negotiations proceed. While people like Krugman and Senator Chuck Schumer consider that dealing with Trump is “like negotiating with Jell-O,” the reality is that’s how negotiations often work. When new information or positions enter negotiations, positions of all parties are likely to change.
Trump says he will modify his position on DACA as long as Dems modify their opposition to border security. Trump could argue that the Dems are negotiating like Jell-O since they keep changing their position on issues like funding for a border wall. He doesn’t say that because he understands negotiations.
It is really time for all of the people who oppose Trump to put the needs of America above the desire to cure perceived social injustices. Social economists like Paul Krugman continue to place the needs of lower-income Americans above the needs of the majority. They look to place the needs of 700,000 illegals ahead of the security needs of hundreds of millions of American citizens.
Ours is a system by and for the majority. Exactly what is it that Nobel Prize-winning economist Paul Krugman fails to understand?