Donald Trump is a habitual liar. Despite his constant denials, most people believe he slept with a porn star and then paid her to keep their liaison quiet. Certainly the New York jury that found him guilty of 34 felonies for falsifying business records didn’t buy his story. However, big lies sometimes work. Public opinion polls (Harris-Guardian), show that most Americans think the US economy is shrinking, as Trump regularly proclaims, even though it has grown more than 3% in the year beginning July 2023—a better performance than any year when Trump was President.

Lying on its own, though, doesn’t make one a Ponzi fraudster. A lot of people lie, especially politicians.

Ponzi schemes go further. The perpetrators lie to investors about financial returns and use the money they take from new investors to pay promised returns to early investors. Those getting out early win; everyone else loses because a Ponzi scheme requires more and more investors in order to keep paying returns. People fall for these schemes because they want high returns, trust the perpetrator, and believe their investment is safe—either because they think they are smart enough to know when to get out or because they believe that government and their watchdogs prevent such thievery.

While not promising large financial returns, Trump promises something similar—great economic results if you vote for him and contribute to his Presidential campaign. As with other Ponzi schemes, the gains accrue mainly for the perpetrator of the scam. And in Trump’s case, the benefits also exist for his wealthy friends and campaign contributors. Three examples stand out.

Trump recently endorsed a real Ponzi scheme—support for cryptocurrencies. He included it in the 2024 Republican Party platform. More recently, he proposed using crypto to repay the US national debt, and walking in Charles Ponzi’s shoes, he endorsed a new business venture (World Liberty Financial) that will sell crypto tokens. Just 5 years ago Trump lambasted crypto for facilitating drug deals and other illegal activities. What changed his tune? Campaign contributions from crypto supporters, including Peter Theil, who mentored Republican VP nominee J.D. Vance, helped. Another reason is Trump’s own financial woes.

Crypto pays no interest or return, since it produces nothing for sale. Unlike bank deposits, there is no government insurance or regulatory protection; people can lose everything. It can’t be used to pay for most things, such as rent, gas or groceries. And unlike money, it can change in value quickly. We saw this when Bitcoin, the most popular cryptocurrency, fell from a valuation of $69,000 in November 2021 to $17,000 in December 2022.

Crypto’s only function is to hide assets from governments and creditors. If someone fails to pay taxes for decades, the government can come after their bank accounts and other assets. If someone owes $88.3 million in defamation damages (for example, to E. Jean Carroll), bankruptcy can wipe out the debt, but only after their assets have been exhausted. Money hidden in crypto accounts can’t be tapped and can protect against the loss of one’s wealth.

Winners and Losers

A second Trump Ponzi scheme concerns taxation. As Charles Ponzi promised high interest rates on savings for everyone, President Trump promised tax cuts for the rich that would generate large gains for everyone.

Corporate income taxes under Trump were cut significantly starting in 2018—from 35% to 21%. By also slashing taxes on foreign profits, Trump’s 2017 tax bill provided incentives for companies to embrace offshore production and employment. Paying lower taxes, the wealthy owners of large corporations received greater profits after taxes, providing greater incentives for firms to raise prices, thereby contributing to US inflation.

Income taxes were also cut substantially for the rich. Everyone else received little or no income tax breaks, while higher import taxes, the one tax that Trump loves, raised prices (see my piece “Trump’s 10% Import Tax—An Economic and Ecological Nightmare” in the Jan-Feb 2024 Washington Spectator). Combining the meager income tax cuts with higher prices due to import taxes, most people lost.

Going further, Trump recently advocated for exempting tips from taxation. Because of this, some workers may vote for him in November. This could be the tipping point (pardon the pun) in states like Nevada, where a large percentage of workers receive a good part of their pay in tips. It may also earn Trump a few thousand votes in Pennsylvania, possibly enabling him to win that pivotal state, and perhaps the election. Kamala Harris quickly championed the proposal, a bad economic idea which might turn out to be good politics.

Trump claims tipped workers will gain, just like Charles Ponzi promised people 50% interest on money kept in his bank for 45 days. But it is unclear that workers will benefit. To gain, tipped workers must owe Federal income taxes in the first place. Around 40% do not. Many others owe small amounts in taxes—these modest sums will represent the entirety of their savings from not taxing tips. It’s also worth recalling that when he was President Trump proposed letting employers take the tips intended for workers. If this were allowed, workers would lose and business owners would again be the big winners.

Like all Ponzi schemes, this gambit can’t continue for long. The plan also incentivizes the wealthy to redefine their income as tips. If this plan becomes law, it is certain that royalties on books (such as The Art of the Deal) and profits from the sale of Trump-endorsed Bibles will suddenly morph into tip income, just as the wages of hedge fund managers have become carried interest and made subject to lower capital gains tax rates. The rewards would mean more tax-free income for Trump and the rich and an enormous loss of tax revenue that soon would have to be reversed.

This leads to Trump’s third Ponzi scheme. Republicans invariably assert that tax cuts for the rich pay for themselves through business expansion and job creation. They never do. George W. Bush entered the White House in 2001 with the government running a large budget surplus and the Congressional Budget Office projecting that Federal debt would fall below 10% of US GDP by 2010. Two Bush tax cuts (2001 and 2003), combined with Trump’s 2017 cut, reduced tax revenues from 19.5% of GDP to 16.5% of GDP. The debt-to-GDP ratio approached 100%.

Running for President in 2016, Trump promised to wipe out the national debt in 8 years. In fact, he increased the national debt by 50%, or $8 trillion, in only 4 years. His tax cuts remain in place and continue to increase US government debt. They are set to expire at the end of 2025. Trump and Republicans in Congress want them made permanent. This would add nearly a half trillion dollars annually to the national debt.

False claims about the consequences of tax cuts for the rich mean that the government must borrow the revenue it loses from cutting taxes in order to keep funding popular government programs that benefit everyone; otherwise, these programs must be cut. Already benefitting from tax cuts, the wealthy gain further from owning government bonds rather than being responsible for paying for popular government programs and for keeping the government running.

The gains for American households in debt and for those wanting to borrow money to buy a home or a new car are less clear. As the Fed continues to cut interest rates over the next year, interest rates paid by consumers should fall, everything else being equal. But all else will not be equal. With the Federal government borrowing enormous sums of money, they will compete for long-term loans and push up mortgage rates as well as rates on business loans, auto loans, and student loans. Once again, the rich gain from not paying taxes; but the promised gains for everyone else will not materialize.

I focused here on just 3 Trumpian Ponzi schemes. I could go on. Trump wants to cut Social Security benefits by 20%, on the premise that paying people only 80% of promised benefits will save the system from going bankrupt in 10 years. However, if Social Security goes bankrupt that doesn’t mean the system will disappear. It means that Social Security can only pay retirees around 80% of their promised benefits. It is hard to see how Trump’s plan protects the Social Security benefits that retired Americans count on (see my article “Retirement is Up for Grabs in November” the May-June 2024 Washington Spectator).

And while Trump criticizes Democrats for high inflation, he ignores the fact that inflation has been a global problem; it can’t be blamed on Democrats and can’t be solved by electing Trump. Even worse, he now proposes a 60% additional tariff on goods from China and an additional 20% on imports from elsewhere. This will push up prices and increase inflation. According to Kimberly Clausing and Mary Lovely of the Peterson Institute for International Economics, Trump’s plan will cost the average US household $2,600 every year (after taking account of the small gains from lower income taxes)—creating 4% inflation and a 4% drop in household income for the average American family.

As president Trump fleeced Americans with false promises about his economic policies. Trump and his rich campaign contributors have gained; middle- and lower-income Americans have lost. The losses will be even greater if Trump gets elected President again in November. He is a contemporary Charles Ponzi dressed up as a …well, you decide. Caveat Lector.

Steven Pressman is a part-time professor of economics at the New School for Social Research, professor emeritus of economics and finance at Monmouth University, and author of Fifty Major Economists (Routledge, 2013)