The business illiteracy of the mainstream press is stunning. An overwhelming, frenzied majority in the press has drawn the following conclusion: because President Trump lost money in 10 of the last 15 years, and because he has approximately $400 million in debt, he is a bad businessman.


Trump may or may not be a bad businessman. Those facts establish nothing.

The way to measure a business over time is simple: return on equity. That is, how much has the equity -- assets minus liabilities -- grown over time.

Two points highlight the absurdity of the coverage of Trump’s tax returns.

First, because of tax credits, losing money can sometimes be good business: not only do you lawfully not pay taxes, you get deductions from future tax bills for the losses. If someone loses $1 million each year for 10 years and then makes $10 million for the next five years, the net result – which is all that matters – is a hefty profit.

Perhaps the most successful company of this generation is Amazon. It is notorious for both losing money and paying little taxes. Its current market valuation? 1.5 trillion dollars.

Second, being $400 million in debt is meaningless as a standalone proposition. Debt must be measured against assets. Always. If Trump has $5 billion in assets, then the fact that he owes $400 million is not a problem. He can easily pay the debts when they are due.

Alternatively, if Trump has $50 million in assets, then owing $400 million could be a significant problem. In this instance, he might not be able to pay the debts when they are due. (Though he could potentially restructure the debt or reduce future expenses elsewhere to pay the tab.)

Most companies have debt. And some of the most successful companies in history have lots of debt. It's the comparison between debts and assets that matters.

Failing to even address the asset side of Trump’s balance sheet is a striking display of ignorance. And it is typical when it comes to mainstream coverage of Trump's business dealings.

Donald Trump may be a successful businessman. He may not be. But the question is not addressed by focusing on the fact that he lost money 10 of 15 years and has $400 million in debt. Return on equity over time is the touchstone.

The mainstream media doesn't even mention this. When it comes to Trump's business they -- still -- don’t have a clue.

William Cooper has written for The Wall Street Journal, Baltimore Sun, New York Daily News and USA Today, among others. 

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