President Trump forced Secretary of State Rex Tillerson to hold a press conference on Wednesday morning to proclaim that the president is "smart," after NBC News reported that Tillerson had called him a "moron" back in June. On the same day, White House Director of the Office of Management and Budget Mick Mulvaney directly contradicted Trump, after the president casually remarked that "we're going to have to wipe out" Puerto Rico's gigantic $73 billion debt and said, "You’re going to say goodbye to that, I don’t know if it’s Goldman Sachs but whoever it is you can wave goodbye to that." Mulvaney quickly responded that "we're absolutely not going to bail them out," and emphasized that Puerto Rico would have to pay up.
Yet Trump has so far not forced Mulvaney to recant, or given any sign of sticking to his guns. Why is the president allowing himself to be jerked around like this?
Remarkably, this is not the first time that Mulvaney has overridden Trump. Indeed, he has openly boasted to reporters about how he manipulated Trump into supporting the traditional GOP policy priorities of slashing social programs — in direct violation of Trump's campaign promises — by tricking him. On CNBC in March, he told John Harwood that he got the president to sign off on deleting the Appalachian Regional Commission by falsely claiming there was a more efficient way to get the money to its recipients. (In reality, the money would be gone along with the entire program.) Later, Mulvaney bragged to Politico's Mike Grunwald that he got Trump to go along with savage cuts to Social Security Disability Insurance and Supplemental Security Income by not telling him that both are part of the Social Security program.
Even more remarkably, the Puerto Rico remark was one of the few times when Trump's business instincts were spot-on. He has personally used the bankruptcy process on many occasions to escape from unpayable debt. Indeed, most of his fortune was built up during the 1980s New York real estate boom by borrowing heavily, investing in big properties, cashing out the equity to a protected location as it accumulated, then declaring bankruptcy to wipe out the debt. (Trump's god-awful management of his properties wasn't just bad business, it was key to the whole strategy.)
Puerto Rico is not a shady real estate empire, of course, but Trump's instinct that its debts are totally unpayable — and what it needs is to write most of them off and get a fresh start — is 100 percent correct. The case is even more compelling when you take into account that much of Puerto Rico's debt is held by ultra-wealthy vulture funds — "total killers," to quote Trump in 2015 — who bought the debt through shell companies at steeply discounted prices, and are using the legal system to try to force them to pay up in full. Trump was even right that Goldman Sachs is up to its neck in this.
It's more compelling still when you remember that the austerity decreed by the PROMESA dictatorship (imposed by Congress and President Obama in 2016), has doomed Puerto Rico to economic stagnation and crisis for a decade at least — and that was before Hurricane Maria laid waste to the entire island. It's all but certain that the only way those bondholders are going to get anything at all is after a partial writedown and a big stimulus and infrastructure investment package. If Puerto Rico can first be returned to economic health, it will be in a far better position to repay its creditors. (As John Maynard Keynes put it after the similarly ruinous Treaty of Versailles, "If Germany is to be 'milked,' she must first of all not be ruined.")
So here's an instance where a president with some deal-making acumen could really do a lot of good. Puerto Rico gets a partial debt cancellation (say, three-fourths of the total) a long repayment delay, a big rebuilding package, and everyone comes out ahead — except for a few billionaire hedge fund goons who probably weren't going to get their big payday anyway.
When the secretary of state directly insults Trump's intelligence, the president blows his stack and demands cringing submission. But when his budget guy implies the exact same thing on television, and contradicts one of his best ideas, Trump doesn't even seem to notice. What gives, Mr. President?