This is the second rebuttal to my criticism of the President’s effort to use his influence and power to harm Amazon. I’m very impressed with it, but I have to give a rationalizations alert, for there are several evoked here, including, a few versions of #1, Everybody does it,” #2 A. Sicilian Ethics, or “They had it coming,” #3. Consequentialism, or “It Worked Out for the Best” #39. The Pioneer’s Lament, or “Why should [He] be the first?,” #45. The Unethical Precedent, or “It’s Not The First Time,” and probably others.
Here is Greg’s Comment of the Day on the #2 in “Morning Ethics Warm-Up, 4/4/2018: Baseball Lies, A Presidential High Crime, And A Judge Makes A Panty Raid”:
There is nothing wrong, much less anything impeachable, about the President making valid, policy-based attacks that target specific companies, even though the attacks may “suppress the companies’ stock values.” Attacks on Standard Oil were justified, even though stockholders in Standard Oil may have suffered. Trump’s comments about Amazon are fair. In any case, there is no reason to think that his remarks were intended to drive down Amazon’s stock price and very little reason to think that they will cause any particular harm to Amazon or its stock.
Trump’s recent tweets have made three points about Amazon, all of which he has made many times before: (1) Amazon benefits from a sales tax loophole that unfairly costs states money and disadvantages brick-and-mortar retailers, (2) Jeff Bezos uses the Washington Post to lobby for the continuation of this advantage and (3) the US Postal Service undercharges Amazon and should negotiate higher rates.
Trump has been making the first two points since at least 2015. He made them repeatedly during his campaign in tweets, in interviews and in speeches. Here’s the earliest reference that I found: https://www.washingtonpost.com/news/the-fix/wp/2015/12/07/donald-trump-called-out-jeff-bezos-on-twitter-then-bezos-called-his-bluff/?utm_term=.8573b4279b6d.
Trump has continued to make both points since he became president. Here’s just one example: https://www.bloomberg.com/news/articles/2017-08-17/trump-s-bruising-tweet-highlights-amazon-s-lingering-tax-fight. His Treasury Department has been studying the sales tax issue for over a year, http://thehill.com/policy/finance/343972-mnuchin-trump-administration-is-examining-online-sales-tax-issue, and his Justice Department last month filed an amicus brief in South Dakota v. Wayfair, a case currently before the Supreme Court, arguing that the Court should close the sales tax loophole that benefits Amazon and other online retailers.
Trump has been making the third point (about USPS rates) since at least December last year. http://fortune.com/2017/12/29/trump-amazon-post-office.
None of those previous statements and actions by Trump and his administration caused Amazon’s stock price to fall. Trump could not have expected that thisweek’s tweets, repeating exactly the same points that he has made many times before, would have any effect on Amazon’s stock price.
Moreover, Trump’s tweets haven’t made any threats against Amazon and he doesn’t seem to have any intention of taking any unilateral action to hurt Amazon. To the extent that his tweets may have affected Amazon’s stock price, they most likely did that by drawing investors’ attention belatedly to genuine issues regarding Amazon’s business model, in particular the possibilities that the Supreme Court might actually close Amazon’s sales tax loophole and that the USPS might actually negotiate a better deal with Amazon. If his tweets have pointed out concerns that investors previously hadn’t given proper weight, then he has done a valuable service for the markets. If these concerns turn out to be unjustified, then Amazon’s stock price will soon recover and Trump’s tweets will have done no harm.
But it’s not even clear that his tweets have been responsible at all for Amazon’s stock fluctuations. Stocks in the tech sector have fallen dramatically in the past month. Amazon’s stock hasn’t fallen more than the sector in general over that period. Online retailers have been hit particularly hard, but Amazon’s stock has fallen much less than other online retailers. Overstock, for example, has fallen more than 40% in the past month compared to less than 8% for Amazon.
It has pleased Jeff Bezos and Trump’s enemies to claim that Trump’s positions on sales taxes and USPS rates are motivated by his hatred of the Washington Post, and Trump, as is his wont, has personalized the issue by attacking Bezos by name. But there’s no evidence that personal animus rather than policy beliefs are his motivation. The Washington Post article that I linked to, written after his first three tweets about Amazon in 2015, noted that, “The first three tweets seem to come out of nowhere. There appears to be no obvious provocation from The Post or Bezos — or any sort of story that would set Trump off.” And it is not true that Trump has been just Bezos-bashing. He has given valid reasons for his positions on these issues, and those reasons are consistent with the broader themes that he has consistently struck since he started running for president.
(1) Regarding the sales tax issue, Trump has claimed that the current sales tax loophole costs local and state governments money and harms local, brick-and-mortar retailers. This is consistent with his larger theme that local heartland businesses are being destroyed by ill-conceived policies that benefit a handful of coastal elites. In his campaign rallies, he used Amazon as only one of his many examples of how this is being done.
And Trump’s claims are true. There is no question that the current sales tax loophole costs local and state governments significant tax revenue. The GAO has estimated the lost revenues at $8 billion to $13 billion. https://www.gao.gov/assets/690/688437.pdf. The state and local governments affected by the loophole certainly think that the amounts involved are significant. Amicus briefs agreeing with Trump’s position were filed in the Wayfair case by 41 states, two territories and the District of Columbia; by the Multistate Tax Commission and the Federal of Tax Administrators, which collectively represent all 50 states, the District of Columbia and the cities of New York and Philadelphia; and by many other organizations representing state and local government officials and employees, including the National Governors Association, National Conference of State Legislatures, Council of State Governments, National Association of Counties, National League of Cities, US Conference of Mayors, International City/County Management Association, International Municipal Lawyers Association, Government Finance Officers Association, National Public Labor Relations Association, International Public Management Association for Human Resources, National Association of State Treasurers, National School Boards Association, School Superintendents Association, National Association of Elementary School Principal and Association of School Business Officials.
There is also no question that the current sales tax loophole disadvantages local, brick-and-mortar retailers, and at least some experts agree with Trump that the disadvantage is significant. http://www.nber.org/papers/w20052. The retailers themselves certainly think so. Dozens of retailers and trade associations have filed amicus briefs agreeing with Trump.
In fact, the sales tax issue is one that, until Trump began pushing it, had been more a Democratic issue than a Republican one. The Wall Street Journal has been vocal for many years in support of the loophole, as have other conservative organs. Several bills have been introduced in Congress to revoke the loophole, but they consistently have been shelved by the votes of Republicans, joined by Democrats from states that do not charge sales taxes.
If the Supreme Court rules in favor of closing Amazon’s loophole (as I think is likely, given various remarks that certain justices, particularly Kennedy and Gorsuch, have made about the relevant precedents) and Trump’s tweets forestall Congress from yielding to the inevitable, intensive lobbying effort by Amazon to reinstate it, then Trump will have done the country a service.
(2) Trump claims that Bezos uses the Washington Post to lobby Congress and regulators. Who can deny that? Of course, that’s what Bezos uses it for. It loses money. He didn’t buy it as an investment in its own right. He bought it so he could make his voice heard in DC.
I’ve never agreed with Jack that it’s always wrong for a President to “punch down” at a private citizen. I think it’s often appropriate for the President to call out malefactors by name. And when a “private citizen” happens to be the world’s richest man and own the world’s first- or second-most influential newspaper, I think “punching down” is scarcely a fair description. Was Teddy Roosevelt “punching down” at John D. Rockefeller?
Personally, I think Trump’s use of Bezos has been rather well-calculated. The “3-D chess” explanation of why he keeps attacking Bezos by name goes like this: Heartland retailers are suffering at the hands of online retailers. One reason is that online retailers have an unfair tax advantage. The ethical and fair thing to do would be to eliminate the tax loophole. But any proposal to do so will be countered by opponents who will tell voters that “Trump is trying to make you pay more for your purchases from Amazon.” The rational, policy-centered answer to this argument is that local and state governments need to raise taxes somehow and if voters don’t pay sales taxes on their purchases from Amazon, they will just have to pay the same amount of taxes in some other way, either by raising sales taxes even higher for brick-and-mortar retailers or by raising other taxes. But that statement has no emotional resonance at all and, though true, will fall completely flat with voters. The answer that will resonate emotionally with voters is that “Jeff Bezos is an arrogant, spoiled jackass who shaves his head and stuffs his pockets with money that ought to be going to the states, local school boards and local mom-and-pop retailers.” This statement is also true and, unlike the policy-centered answer, might actually persuade voters to support the wise policy of closing the tax loophole.
(3) Trump claims that the USPS can and should negotiate higher rates with Amazon. This is consistent with his larger theme that he is the president who is best qualified to negotiate better deals with everybody about everything. Trump is unquestionably right that the USPS should negotiate the most favorable rates that it can get, and if he is also right that the current deal with Amazon is lousy, then the USPS should certainly try to negotiate a better one. I don’t know whether he’s right or not, but experience suggests that the USPS is probably not as good at negotiations as its for-profit competitors such as UPS and Fed Ex. (If you read Trump’s tweets and his spoken remarks, you’ll notice that his complaints about postal rates have been couched as attacks on the USPS’s leadership for being lousy negotiators, not just as attacks on Amazon for getting a great deal — just as his attacks on the Chinese trade deal have been couched as attacks on Obama for negotiating a lousy deal, coupled with grudging admiration of the Chinese for being such superior negotiators.) And in fact, at least one stock market analyst who follows the shipping industry has estimated that the USPS charges Amazon only half as much per package as UPS and Fed Ex do. http://fortune.com/2017/12/29/trump-amazon-post-office/. I don’t know whether that’s because the USPS has negotiated a worse deal than UPS and Fed Ex or because the USPS provides worse service. But if the President can use his influence to negotiate better rates for the USPS, thus eliminating a de facto subsidy of Amazon by the USPS, that would save money for American taxpayers, decrease another unfair advantage that Amazon has gained over brick-and-mortar retailers, and be an entirely a proper use of his office.