On September 24, 1975, fourteen mayors traveled to the US Congress Joint Economic Committee in Washington, DC, to make a desperate plea for help. One of them, a diminutive man wearing a maroon tie, pink shirt, and thick black glasses, craned his head toward the banks of senators and representatives. This was the New York City mayor, Abe Beame. “The state has done all it can,” he said, chopping his hand against the table. “The city has done—and is committed to do—in the months ahead, more of what we’ve done.” Beame paused, sucking in his lips. “And if the federal government does not help us, I think it will find the problem afterwards, which it would have to help us with, much more serious.”1 “Afterwards,” in Beame’s Lower East Side accent, came out “afta-woods.”
Seated next to Beame, New Orleans Mayor Moon Landrieu, in silver aviator glasses with pinkish photosensitive lenses, blue coat, and brown tie, made his own plea for New York City. “New York is not here as a supplicant, it is not here for a hand-out. It’s not asking for anything that we haven’t done repeatedly for private enterprise.” If New York could fail, Landrieu was arguing, any American city could fail. By the mid-1970s, almost all of them were under stress.
In New York City, the manufacturing jobs which had surged during the 1940s and 1950s had dropped off precipitously, from over a million following World War II to half that amount by the 1970s.2 New York City, like the other cities, was deeply in hock: for decades, the state, banks, and financiers had encouraged the city to borrow to solve its debt problems.3 As documented by Kim Phillips-Fein in her book Fear City, the two largest ratings agencies, Moody’s and Standard & Poors, concerned about a potential slowdown in borrowing, actually upgraded New York’s bond rating in the early 1970s, continuing to prime a cycle of borrowing and debt.4
At the same time, urban populations were rapidly declining. Whites were moving out. Practices like blockbusting, though illegal, were common throughout New York—where realtors would convince whites to sell in a hurry at under-market rates because blacks were purportedly moving in, then sell to blacks at inflated prices—accelerating the cycle of foreclosure and the rate of white flight.
From 1970 to 1980, the population of New York City shrank by nearly a million, from 7,894,862 to 7,071,639. Like a business that had lost its customer base, New York was retrenching. It couldn’t pay its debts. It risked default. But instead of helping the city—and all cities—through lean times, the federal government backed away.
Urged on by his chief of staff, Donald Rumsfeld, President Gerald R. Ford had chosen not to help. “The people of this country will not be stampeded,” Ford told the world a month after the mayors’ appeal, in a speech at the National Press Club in Washington. “They will not panic when a few desperate New York City officials and bankers try to scare New York’s mortgage payments out of them.” The New York Daily News, as tabloids do, turned Ford’s statement into shorthand: “Ford to City: Drop Dead.”5
Beame, an accountant, had run for mayor on the slogan: “He Knows the Buck.”6 As a young man, five foot two at full height, Beame became an avid election-day captain for Brooklyn’s Madison Democratic Club, for which he was rewarded in 1946 with an appointment to be assistant budget director for the city. He ascended to budget director, then was elected comptroller, then mayor. But his knowledge of numbers couldn’t help him in 1975, when the federal government turned its back.7
Under Beame, New York City took unpopular measures, pushing the economic pain onto its residents. It raised transit fares from thirty-five cents to fifty cents, charged the first-ever tuition fees at the City University of New York, and cut services while laying off employees. But it was the teachers’ union that saved the city. After a tense night of negotiations, the union allowed its pension fund to cover the city’s shortfall, thus keeping the city solvent—doing what the federal government could have done, but chose not to.8
The same month that Gerald Ford didn’t precisely tell New York City to “Drop Dead,” October 1975, a twenty-nine-year-old Donald Trump—“the kid,” as government officials and real estate executives referred to him in those days—launched the deal that would make him a Manhattan real estate mogul. From a broke and broken city, Donald Trump siphoned off tax breaks worth $4 million a year. These abatements would last forty years into the future, well into the new millennium, to help finance a hotel that was profitable the day it opened.9 Nineteen seventy-five may have been one of the worst years in the life of New York City. It was one of the best years ever for Donald Trump.
By then Donald had joined his father at the Madison Club dinners, eating the chicken entrées, providing a steady stream of donations, often through companies they controlled.10 They hired the Madison Club lawyer, Bunny Lindenbaum, and later his son Sandy. The ties proved lucrative: Governor Hugh Carey came out of the Madison Club, as well as Beame. When it came to city government, it was hard to tell where Beame’s staff ended and Trump’s began.
Like his father, who had his first big break in a bankruptcy court, Donald Trump saw opportunity in the carcass of Penn Central railroad, which had recently declared the single largest bankruptcy in the nation’s history.11 Railroads had begun dying a slow death after the war, a victim of the Federal-Aid Highway Act’s support for autos over mass transit. Penn Central was looking to sell off large parcels of land and properties in Manhattan. Donald Trump was buying. He had his eye on the increasingly decrepit Commodore Hotel: a clunky and small-windowed brick behemoth on Forty-Second Street next to Grand Central Terminal. The man in charge of the sale for Penn Central, Ned Eichler, was both attracted by Donald Trump’s brashness and energy and worried about his youth. Unsure if he was making the right bet on Trump—as Wayne Barrett told the story—Eichler asked Donald for proof of his political ties.
“I’ll have to see the mayor,” Eichler said.
“When do you want to see him?” Trump wanted to know.
“Tomorrow at two P.M.” Eichler told him.
There was no hesitation, no checking to see if two o’clock in the afternoon was convenient for the mayor. Donald sent his limo to pick up Eichler at one-thirty. At two, they met with Mayor Beame, at City Hall.12
In the mid-1970s Donald Trump was still working out of Fred’s office on Avenue Z in Brooklyn. He served as a manager of his father’s outer-borough apartment complexes, collecting rents himself and handling maintenance contracts. But he had the verve and hunger to build in the center of Manhattan—and the contacts to get the approvals and zoning changes a large developer needed. “It was uppermost in our minds that . . . the developer . . . be very high in his political position. Trump is doing what, in our judgment, if anyone can do, he can do,”13 Eichler said in court papers explaining why the company had cast a favorable eye on an untested developer. Donald Trump’s political ties meant something; they were cashable chits, and in the Commodore deal, he would show just how much those connections were worth.
Trump contrived with an obscure city bureaucrat to develop the plan: Trump could buy the hotel from Penn Central, donate it to the city, and then lease it back for ninety-nine years, thus avoiding property taxes. The deal would become more favorable still: it would be run through a New York State agency, the Urban Development Corporation, or UDC, that had wide powers to condemn land and seize properties, powers that could be used to give Trump leverage removing tenants from the Commodore.14
Trump had a case to make: that a troubled city needed development, that he was willing to take a risk, and that his risk-taking would draw more economic activity to the city. But the deal he worked out was riven with fraud, self-dealing, and outright lies.
To announce the hotel deal, city officials billed it, falsely, as a new state program that was designed to stimulate the ailing city economy, not a gesture to aid one particular development project for one particular developer. Handwritten notes on a City Hall memo revealed the deception. “Rather than announce the project, announce the program with this as the first project.” There was no program, only the project.15
There wasn’t even, really, a project. Donald Trump didn’t have a commitment to the financing. He didn’t actually own the option for the property, either. In his book The Art of the Deal, Trump boasted that he fooled people about that too: “A city official had requested that I send along a copy of my option agreement with the Penn Central,” Trump wrote. “I did—but it was signed only by me, and not the railroad, because I had yet to put down my $250,000. No one even noticed that until almost two years later.”16
This is the period when the mythmaking around Donald Trump began in earnest. In 1973, Fred Trump corralled a New York Times reporter to take stock of his “empire,” complete with a prominent photo in front of Trump Village with Fred, wearing a tall black hat, standing next to a hatless, wind-tousled and very blond twenty-something Donald. “Donald is the smartest person I know,” Fred was quoted as saying in the article. “Everything he touches turns to gold.” The reporter wrote that Donald was first in his class at the Wharton School of Finance at the University of Pennsylvania.17 Donald Trump was not first in his class in the undergraduate program, which he’d entered as a third-year transfer student. The commencement program from Wharton in 1968 does not name Donald Trump as having graduated with honors of any kind.18 (When he ran for president, Donald Trump went so far as to threaten lawsuits if his grades or SAT scores were ever released.19)
A few years after the Times profile with his father, as he was beginning to formulate his plans to build in Manhattan, Donald Trump invited another Times reporter to spend a day with him, riding around in his silver Cadillac, chauffeured by an ex-cop. “He is tall, lean and blond, with dazzling white teeth, and he looks ever so much like Robert Redford,” the reporter wrote of Trump. “He is 6 feet, 3 inches tall and weighs 190 pounds, and he was wearing a three‐piece burgundy wool suit, matching patent‐leather shoes, and a white shirt with the initials ‘DJT’ sewn in burgundy thread on the cuffs.” He told her he was worth more than $200 million. He said, contra the truth, that the Trump Organization had 1,000 employees and properties in Washington, DC, Maryland, Virginia, Las Vegas, and California. He told her, falsely, “I’m Swedish.” He did not tell her he’d been unable to get financing for the Commodore deal.20
No option, no financing—but Trump had convinced an array of people to commit moral compromise to get the deal done. In the “Tax Break Hotel” chapter of his Trump biography, Barrett tallies them up. There was Mayor Beame and Governor Carey, to whom the Trumps had given tens of thousands of dollars in campaign contributions. There was a state attorney who had also worked as a fundraiser for the city comptroller, to whom Trump also donated. There was Louise Sunshine, a fundraiser for Governor Carey who became a registered Trump lobbyist and oversaw the final terms of the Commodore deal. These included a provision that allowed Trump to define his “profit”—a portion of which was supposed to go to the city—in a way that allowed him to overstate expenses and understate revenues.21
And then there was Deputy Mayor Stanley Friedman, who also had a high-level political post in the Bronx County Democratic Party, an organization controlled by Trump’s lawyer: Roy Cohn. As deputy mayor, Friedman allowed Cohn to siphon off cash from city parking lot contracts. For his part, Cohn held out the promise of a job for Friedman. Working for the city, Friedman pushed through the Commodore deal on terms almost entirely favorable to Trump.
“Cohn’s exploitation of Friedman to secure the Commodore booty was an unforgettable lesson for Donald, exposing him to the full reach of his mentor’s influence and introducing him to the netherworld of sordid quid pro quos that Cohn ruled,” Barrett wrote. “This almost ritualistic initiation not only inducted Donald into the circle of sleaze that engulfed Cohn, the bountiful success of it transferred the predatory values and habits Cohn embodied to his yearning understudy.”22
In the summer of 1976, the bicentennial of the Declaration of Independence, a group of fashion models from Montreal came to New York City to promote that summer’s Olympics, which Montreal was hosting. As Ivana Trump told it in her book Raising Trump, she was wearing a “red minidress with three-quarter sleeves and high heels. My blond hair was long and straight, swinging all the way down to my waist.” She was a beautiful young woman, with seven other beautiful women, but they could not get a table—until “a tall, smiling, blue-eyed, handsome blond man,” offered to intervene.23 He paid for dinner, sent her one hundred red roses the next day. He drove her in his Cadillac, took her to Le Club. He traveled to see her in Montreal; she came to New York. On one early trip, she met the whole Trump family, at Tavern on the Green: Fred Trump, Mary, and the four other children. Fred ordered steak. Mary ordered steak. The five Trump children ordered steak. It was eleven in the morning. Ivana ordered filet of sole. Fred interjected with the waiter, “She’ll have the steak.” After Ivana insisted on the sole, there were three minutes of silence at the table.24
Still, Donald and Ivana set a wedding date: April 7, 1977. Roy Cohn, representing Donald, wrote the prenuptial agreement, and an associate of his served as Ivana’s lawyer. Ivana was promised just $20,000 a year if their marriage broke up immediately, and $45,000 if she made it to thirteen years, which she did.25 Donald asked that the agreement include an additional lump-sum bonus payment for each potential child. He wanted five, Barrett quoted him telling a friend, so “I know that one will be guaranteed to turn out like me.”26 Ivana rejected the bonuses.
Donald and Ivana were married in the late afternoon at the Marble Collegiate Church by the Reverend Norman Vincent Peale, the author of The Power of Positive Thinking. It was an event studded with business associates and powerful officials: Abe Beame, Bunny and Sandy Lindenbaum, Roy Cohn. But in the spring of 1977, the Commodore deal still wasn’t complete.
Three months later, in July 1977, a three-day blackout led to widespread looting all over the city and nearly 4,000 arrests. In August, there were bombings inside New York office buildings by the FALN, a Puerto Rican separatist group. The Son of Sam, a serial killer, was terrorizing New York, shooting six people dead and wounding seven others. Mayor Beame’s grip on the unruly city was loosening.
“Beame Finishes Third” was the New York Times headline on September 9, 1977, in the wake of a seven-way Democratic primary for mayor.27 Beame would soon depart City Hall, leaving fewer than four months to wrap up the Commodore deal. Trump, Cohn, and Friedman began to sprint. The plan still needed approvals from nine city and state entities. One of the last was a permit for a “Garden Room” for the new Commodore, a restaurant overhanging Forty-Second Street, a flashy new attraction for a city that might be putting its worst days behind. On December 29, 1977, the last working day of the Beame administration, Stanley Friedman, at Cohn’s direction, got the final approval for a twenty-five-year consent for the restaurant. In return, Donald Trump’s restaurant would pay the city $24,000 per year, less than what the Garden Room could gross in a day.28 Within days, Friedman went to work for Cohn’s law firm. (Friedman was later convicted by an ambitious US attorney, Rudy Giuliani, on unrelated charges of mail fraud, conspiracy, and racketeering, and sentenced to twelve years in prison.)
In May 1978, the Commodore deal finally closed. But Donald Trump alone could not secure the financing. That could only be had with the guarantee of Fred C. Trump, whose Trump Village Construction Corporation also loaned Donald a million dollars during the construction.
The next month, on a sunny and blue-skied June day, Governor Carey called a press conference with Trump to celebrate the hotel’s ceremonial groundbreaking. “When he looked into cameras it was as if he was eyeing himself in a mirror, admiring the triumph he’d become, and, at the same time, laughing haughtily at the world,” Barrett wrote. “He had seen the amoral hunger of more men during this breakthrough deal than most people saw in a lifetime.”29 As Barrett put it, “the debut project of this bold entrepreneur, was, in truth, a breakthrough example of the new state capitalism—public risk for private profit.”30
By 2018, city records show, the hotel had amassed a $393,245,999.55 “tax expenditure.” That is, taxpayer money the city had allowed Trump and his partners to keep, an unusually generous government gift by any standards, and the longest ever granted by New York City.31
A year after his blue-skied Commodore groundbreaking, a cloud blew in. Federal prosecutors were examining Trump’s early dealings with Penn Central, and whether, at one point in the bankruptcy negotiations, Trump had improperly offered a lawyer for the company’s shareholders’ lucrative legal work to secure his support for Trump’s bid for the property.32 By 1979, the US attorney for the Eastern District was investigating the transaction and sought to question Donald. Rather than conduct the interview in his office on Fifth Avenue, Trump met the investigator in his father’s bare-bones office on Avenue Z, accompanied by Ivana and his toddler son, Don Jr. No charges were filed.
That November, Ronald Reagan, who’d risen to national prominence while attacking “welfare queens,” came to midtown Manhattan, to the New York Hilton, to announce his candidacy for president.33 Some fourteen hundred diners, at five hundred dollars a head, were invited to hear Reagan say of the federal government at the Hilton that night: “It has overspent, overestimated, and over-regulated.” It’s unclear whether Donald Trump attended the event, though one source of dubious veracity has placed him there: Roger Stone.34
By 1979 Stone had already built the résumé of a dirty trickster. During the Nixon administration, at age nineteen, Stone—with his then-brown hair, Roman nose, and unsettlingly penetrating gaze—had joined the Committee for the Re-Election of the President, or CREEP. Stone’s first dirty trick for the Nixon campaign had been to travel to New Hampshire to make a donation to Nixon’s primary opponent in the name of the “Young Socialist Alliance.”35
After Nixon resigned, Stone was a founder of the National Conservative Political Action Committee, or NCPAC. At a time when reformers in Washington had cracked down on the lax campaign-finance rules that contributed to Watergate, NCPAC pioneered a loophole that allowed unlimited contributions to pay for big-money attack ads that trafficked in “the half-truth, the innuendo, the distortion,” as Democratic Party activist Pamela Harriman described it in a press conference as NCPAC was emerging as a political force.36
In 1980, Stone was twenty-eight, and working as Reagan’s director for New York, New Jersey, and Connecticut. For the duration of the campaign, Stone lived in an apartment in Roy Cohn’s town house.37 “Roy was a Democrat, but he was an anti-Communist and a master of public relations, and he wanted to help me with Reagan,” Stone told the New Yorker in 2008.38 Stone, like Trump, learned from Cohn. No maneuver was too low, no offense was too offensive, no bonfire too consuming if it helped your side win. In a 1982 interview on the WNYC radio show Insight, Roy Cohn was asked who was the “smartest political sage” he’d ever met. Cohn didn’t hestitate. He named his law partner, the former Bronx boss and Trump fixer Stanley Friedman. Also, President Lyndon Johnson, though he was “full of baloney.” Also on the list was “a young guy named Roger Stone who isn’t 30 years old yet who managed the Northeast Reagan campaign.”39
Reagan carried forty-four states in 1980. With NCPAC’s help, Republicans not only seized the Senate, they also sank many of the Democratic Party’s rising stars. Weeks after his inauguration, on February 18, 1981, speaking to a joint session of congress, Reagan called for aggressive tax cuts and the defunding of social safety nets, research, and education.40 Democrats, who still held a fifty-three seat margin in the House, nevertheless agreed to a “compromise” bill that had a 25 percent individual tax cut, a cap on income taxes at 50 percent (down from 70) and a capital gains top rate down from 28 to 20 percent.
Despite bipartisan support, the new law drew criticism. New York Times White House correspondent Steven R. Weisman warned that “broad social consequences—intended and unintended—flow from changes in the tax system.” More than a third of the benefits were expected to go to less than 6 percent of the population. “The underlying philosophy seems to be a throwback to the nineteenth century view that any attempts to tamper with the free accumulation of wealth are likely to be counterproductive,” Weisman wrote.41
Even Weisman’s prescient analysis missed another twist: the tax bill of 1981 gradually raised the amount that an estate could exempt from tax from $175,000 to $600,000. The estate tax had been, for decades, a way to balance America’s egalitarian ideals with its entrepreneurial notions. Success was valued, but so was a communitarian spirit. You could pass on your wealth to your children, but you had to give some of it back to society. In 1981, the balance began to shift. It would become easier and easier to transfer wealth, unfettered, from generation to generation.
The Senate passed the bill 89–11. The Democrat-controlled House passed it, 238–195.42 Reagan signed the bill on August 13, 1981, while vacationing in California. Most of the questions at the news conference following the signing weren’t about taxes. They were about the Professional Air Traffic Controllers Organization, or PATCO, whose members Reagan had just fired for what he called an “illegal strike.”
Like the tax bill, the PATCO strike had lasting effects. “More than any other labor dispute of the past three decades,” historian Joseph McMartin wrote, the dispute “undermined the bargaining power of American workers and their labor unions. It also polarized our politics in ways that prevent us from addressing the root of our economic troubles: the continuing stagnation of incomes despite rising corporate profits and worker productivity.”43 From the New Deal until the 1980s, income had risen along with union membership, with 70 percent of the rise in income going to the poorest 90 percent of workers.44 Since PATCO, unionization rates have halved.45
Five years later, after another landslide victory, Reagan pushed through a second tax cut. The Tax Reform Act of 1986 cut the top marginal rate for individual taxes to 28 percent, corporate tax rates to 34 percent, and reduced the number of income brackets to two. At the outset of the decade, a rich person could pay over two-thirds of her top income in taxes. By decade’s end, that person would never pay more than a third.
In 1986, in the latter part of his presidency, Reagan held a news conference in Chicago to announce aid to farmers. “I think you all know that I’ve always felt the nine most terrifying words in the English language are ‘I’m from the government and I’m here to help,’ ”46 Reagan told the assembled journalists. In the decades that followed, the speech would become an iconic conservative rallying cry, and a new idea took hold: government was an instrument of harm.
If you were the victim of centuries of discrimination, or were trying to knit together a fraying social compact, or relied on government assistance or mass transit or public education, the message was clear: Drop Dead.
If you were from a well-to-do family, like the Trumps, this party was for you.