Steve Kornacki, “The Red and The Blue”

Steve Kornacki discusses his book, “The Red and The Blue, at Politics and Prose on 10/5/18. Kornacki’s lively political history of the 1990s is both an absorbing chronicle of the parallel rises of Bill Clinton and Newt Gingrich and a look at some of the key events, debates, and figures that laid the ground for today’s political landscape. In many cases—Trump, Schumer, Hillary Clinton—the cast of characters overlaps both eras. Kornacki, national political correspondent for NBC News and MSNBC, shows how, for instance, Ross Perot’s 1992 presidential bid gave Trump his first taste of electoral politics in 1999, and how Hillary Clinton’s role in the 1998 midterm elections put her on track to run for the Senate two years later. Kornacki is in conversation with Hallie Jackson, NBC’s chief White House correspondent.

Trump Makes Clear He’s Ready for a Fight He Has Long Anticipated

Impeachment, he insists, will be “a positive for me.”

He knew it was coming. It almost felt inevitable. No other president in American history has been seriously threatened with impeachment since before his inauguration. So when the announcement came on Tuesday that the House would consider charging him with high crimes and misdemeanors, President Trump made clear he was ready for a fight.

He lashed out at the opposition Democrats, denouncing them for “crazy” partisanship. He denounced the allegations against him as “more breaking news Witch Hunt garbage.” And he proclaimed that even if the impeachment battle to come will be bad for the country, it will be “a positive for me” by bolstering his chances to win a second term in next year’s election.

The beginning of the long-anticipated showdown arrived when Mr. Trump was in New York for the opening session of the United Nations General Assembly, creating a surreal split-screen spectacle as the president sought to play global statesman while fending off his enemies back in Washington. One moment, he talked of war and peace and trade with premiers and potentates. The next, he engaged in a rear-guard struggle to save his presidency.

Mr. Trump gave a desultory speech and shuffled between meetings with leaders from Britain, India and Iraq while privately consulting with aides about his next move against the House. Shortly before heading into a lunch with the United Nations secretary general, he decided to release a transcript of his July telephone call with the president of Ukraine that is central to the allegations against him. In effect, he was pushing his chips into the middle of the table, gambling that the document would prove ambiguous enough to undercut the Democratic case against him.

By afternoon, as Speaker Nancy Pelosi prepared to announce the impeachment inquiry, the president retreated to Trump Tower, his longtime home and base of operations, to contemplate his path forward. A telephone call between the president and speaker failed to head off the clash, and now the two are poised for an epic struggle that will test the limits of the Constitution and the balance of power in the American system.

“We have been headed here inexorably,” said Michael J. Gerhardt, an impeachment scholar at the University of North Carolina. “The president has pushed and pushed his powers up to and beyond the normal boundaries. He’s been going too far for some time, but even for him this most recent misconduct is beyond what most of us, or most scholars, thought was possible for a president to do.”

Long reluctant, Ms. Pelosi finally moved after reports that Mr. Trump pressed Ukraine’s president to investigate unsubstantiated corruption allegations against former Vice President Joseph R. Biden Jr., a leading Democratic candidate for president, while holding up $391 million in American aid to Ukraine. Democrats said leaning on a foreign power for dirt on an opponent crossed the line. Mr. Trump said he was only concerned about corruption in Ukraine.

Mr. Trump now joins only Andrew Johnson, Richard M. Nixon and Bill Clinton in facing a serious threat of impeachment, the constitutional equivalent of an indictment.

Mr. Nixon resigned when fellow Republicans abandoned him over Watergate, but Mr. Johnson and Mr. Clinton were each acquitted in a Senate trial, the result that seems most likely at the moment given that conviction requires a two-thirds vote, meaning at least 20 Republican senators would have to break with Mr. Trump.

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Mr. Nixon and Mr. Clinton both were privately distraught over facing impeachment even as they waged vigorous public battles to defend themselves. Undaunted, Mr. Trump appeared energized by the confrontation, eager for battle. Confident of his position in the Republican-controlled Senate, he seemed almost to assume that the Democrat-controlled House would probably vote to impeach and that he would take his case to the public in next year’s election.

Former Speaker Newt Gingrich, an ally of the president’s, said Mr. Trump could afford to feel secure. He predicted the same thing would happen to Ms. Pelosi that happened to him in 1998, when he led a party-line impeachment inquiry of Mr. Clinton and paid the price in midterm elections, costing him the speakership.

Just as the public recoiled at the Republican impeachment then, Mr. Gingrich said, it will reject a Democratic impeachment now. Instead, he said, it will give Mr. Trump and the Republicans a chance to focus attention on Mr. Biden.

“This is the fight that traps the Democrats into an increasingly unpopular position — I lived through this in 1998 — while elevating the Biden case, which involves big money,” Mr. Gingrich said. “It is a win-win for Trump.”

His point on the popularity of impeachment was a critical one. Until now, at least, polls have shown that most Americans do not support impeaching Mr. Trump, just as they never embraced impeaching Mr. Clinton. And although how the latest allegations might ultimately change public opinion remained unclear, a new survey by Reuters and Ipsos released on Tuesday night suggested that support for impeachment had actually fallen since the Ukraine revelations, with just 37 percent in favor, down from 41 percent earlier this month.

Mr. Trump, though, has never been as popular as Mr. Clinton. During the 13-month battle that stretched from 1998 into 1999 over whether Mr. Clinton committed high crimes by lying under oath about his relationship with Monica S. Lewinsky, Mr. Clinton’s approval rating was generally in the mid-60s and even surged to 73 percent in the days after he was impeached.

Mr. Trump does not have the same reservoir of good will, never having had the support of a majority of Americans in Gallup polling for even a single day of his presidency. His approval rating currently stands at 43 percent. But he has the support of 91 percent of Republicans, giving him reason to assume the party’s senators will stick with him.

Brenda Wineapple, author of “The Impeachers: The Trial of Andrew Johnson and the Dream of a Just Nation,” said there were times when a stand on principle was worth it even with a short-term cost. “Some defeats can ultimately be victories — but often only in the long or historical view,” she said. “The Johnson impeachment ultimately failed,” she said, but in the end, she added, the system worked.

At this turning point in his presidency, Mr. Trump began the day in New York toggling between world affairs and political survival. Even before he took the rostrum at the United Nations to deliver a subdued, boilerplate speech, he sought out reporters to push back on the suggestion that he used American aid to leverage Ukrainian cooperation with his investigation demand.

Mr. Trump asserted that he blocked the aid to Ukraine because European countries have not paid their fair share. He pointed to the fact that the money was eventually released as evidence that he did nothing wrong. What he did not mention was that European countries have chipped in $15 billion for Ukraine in the last few years and that he released the American aid only after senators from both parties threatened punitive legislation if he did not.

What he also did not say was that he had changed his explanation for withholding the money from just a day before. On Monday, he linked his decision to block the aid to his concerns about corruption in Ukraine, citing Mr. Biden as an example. By emphasizing instead his overall concern about foreign aid, he was advancing a rationale less tied to his demand for an investigation.

I’m leading in the polls and they have no idea how to stop me,” Mr. Trump said. “The only way they can try is through impeachment.”

In fact, Mr. Trump is trailing Mr. Biden and other Democrats seeking their party’s nomination in most polls, which is why Democrats assert he was so intent on obtaining dirt from Ukraine on the former vice president.

Either way, as stunning as the day’s developments were, the only real surprise was how long it took to get here. Mr. Trump’s critics began discussing impeachment within days of his election because of various ethical issues and Russia’s interference in the 2016 campaign. By last year’s midterm election, Mr. Trump repeatedly raised impeachment on the campaign trail, warning that Democrats would come after him if they won the House.

They did win, but the drive to impeachment stalled when the special counsel, Robert S. Mueller III, produced a report that established no criminal conspiracy between Mr. Trump’s campaign and Russia while refusing to take a position on whether the president obstructed justice during the investigation.

As it turned out, Ukraine, not Russia, proved to be rocket fuel for the semi-dormant effort. Now, more than two and a half years later, the battle is on.

Joe Biden Used Tax-Code Loophole Obama Tried to Plug

Democratic presidential candidate Joe Biden used a tax loophole that the Obama administration tried and failed to close, substantially lowering his tax bill.

Mr. Biden and his wife, Dr. Jill Biden, routed their book and speech income through S corporations, according to tax returns the couple released this week. They paid income taxes on those profits, but the strategy let the couple avoid the 3.8% self-employment tax they would have paid had they been compensated directly instead of through the S corporations.

The tax savings were as much as $500,000, compared to what the Bidens would have owed if paid directly or if the Obama proposal had become law.

There’s no reason for these to be in an S corp—none, other than to save on self-employment tax,” said Tony Nitti, an accountant at RubinBrown LLP who reviewed the returns.

“As demonstrated by their effective federal tax rate in 2017 and 2018—which exceeded 33%—the Bidens are committed to ensuring that all Americans pay their fair share,” the Biden campaign said in a statement Wednesday.

The technique is known in tax circles as the Gingrich-Edwards loophole—for former presidential candidates Newt Gingrich, a Republican, and John Edwards, a Democrat—whose tax strategies were scrutinized and drew calls for policy changes years ago. Other prominent politicians, including former President Barack Obama and fellow Democrat Hillary Clinton, as well as current contenders for the 2020 Democratic nomination Sens. Elizabeth Warren and Bernie Sanders, received their book or speech income differently and paid self-employment taxes.

Some tax experts have pointed to pieces of President Trump’s financial disclosures and leaked tax returns to suggest that he has used a similar tax-avoidance strategy.

Unlike his Democratic rivals and predecessors in both parties, Mr. Trump has refused to release his tax returns, and his administration is fighting House Democrats’ attempt to use their statutory authority to obtain them. Democratic presidential candidates have released their tax returns and welcomed criticism to draw a contrast with Mr. Trump.

Mr. Biden, who was vice president from 2009 to 2017, has led the Democratic field in polls since entering the race. He is campaigning on making high-income Americans pay more in taxes and on closing tax loopholes that benefit the wealthy.

Mr. Biden has decried the proliferation of such loopholes since Ronald Reagan’s presidency and said the tax revenue could be used, in part, to help pay for initiatives to provide free community-college tuition or to fight climate change.

We don’t have to punish anybody, including the rich. But everybody should start paying their fair share a little bit. When I’m president, we’re going to have a fairer tax code,” Mr. Biden said last month during a speech in Davenport, Iowa.

The U.S. imposes a 3.8% tax on high-income households—defined as individuals making above $200,000 and married couples making above $250,000. Wage earners have part of the tax taken out of their paychecks and pay part of it on their returns. Self-employed business owners have to pay it, too. People with investment earnings pay a 3.8% tax as well.

But people with profits from their active involvement in businesses can declare those earnings to be neither compensation nor investment income. The Obama administration proposed closing that gap by requiring all such income to be subject to a 3.8% tax, and it was the largest item on a list of “loophole closers” in a plan Mr. Obama released during his last year in office. The administration estimated that proposal, which didn’t advance in Congress, would have raised $272 billion from 2017 through 2026.

Under current law, S-corporation owners can legally avoid paying the 3.8% tax on their profits as long as they pay themselves “reasonable compensation” that is subject to regular payroll taxes. S corporations are a commonly used form for closely held businesses in which the profits flow through to the owners’ individual tax returns and are taxed there instead of at the business level.

The difficulty is in defining reasonable compensation, and the IRS has had mixed success in challenging business owners on the issue. The Bidens’ S corporations—CelticCapri Corp. and Giacoppa Corp.—reported more than $13 million in combined profits in 2017 and 2018 that weren’t subject to the self-employment tax, while those companies paid them less than $800,000 in salary.

If the entire amount were considered compensation, the Bidens could owe about $500,000. An IRS inquiry might reach a conclusion somewhat short of that.

“The salaries earned by the Bidens are reasonable and were determined in good faith, considering the nature of the entities and the services they performed,” the Biden campaign statement said.

For businesses that generate money from capital investments or from a large workforce, less of the profits stem from the owner’s work, and thus reasonable compensation can be lower. For businesses whose profits are largely attributable to the owner’s work, the case for reasonable compensation that is far below profits is harder to make.

To the extent that the Bidens’ profits came directly from the couple’s consulting and public speaking, “to treat those as other than compensation is pretty aggressive,” said Steve Rosenthal, a senior fellow at the Tax Policy Center, a research group run by a former Obama administration official.

Mr. Nitti said he uses a “call in sick” rule for his clients trying to navigate the reasonable-compensation question: If the owner called in sick, how much money could the company still make?

“The reasonable comp standard is a nebulous one,” Mr. Nitti said. “This is pretty cut and dried. If you’re speaking or writing a book, it’s all attributable to your efforts.”

The IRS puts more energy into cases where the business owners pay so little reasonable compensation that they owe the full Social Security and Medicare payroll taxes of 15.3%, Mr. Nitti said.

In a statement released Tuesday along with the candidate’s tax returns, the Biden campaign noted that the couple employs others through its S corporation and calls the companies a “common method for taxpayers who have outside sources of income to consolidate their earnings and expenses.”

‘Quite a shock’: The priest was a D.C. luminary. Then he had a disturbing fall from grace.

“There was a brashness about him that I always associated with the Wall Street ethos,” the Rev. John Paul Wauck, an Opus Dei priest who knew McCloskey, wrote in an email. “You could say that, as a priest, he maintained an entrepreneurial attitude. For some, this was off-putting; for others, it was, I’d say, invigorating and even entertaining.”

McCloskey harnessed that entrepreneurial spirit to persuade people, mostly men, to become Catholics. In New York in 1997, he converted Kudlow, who was recovering from addiction. Mark Belnick, a former general counsel of Tyco International, who described McCloskey as a “great friend” in a New York magazine article, soon followed. They would be among the first in a long line of high-profile conversions that McCloskey facilitated.

“It’s just like the brokerage business or any business of sales,” McCloskey told the National Catholic Reporter in 2003. “You get a reputation, you deal with one person and they mention you to another person . . . and all of a sudden you have a string of people.”

The conversions came naturally to McCloskey because “he just had an absolute certainty about what he was proposing, and he had no hesi­ta­tion at all about unapologetically offering Catholicism as an option,” said Shaw, his co-author.

.. Although he left Washington at perhaps the height of his fame, McCloskey’s legacy is the ongoing influence of the Catholic Information Center. The center’s board includes Leonard Leo, executive vice president of the Federalist Society, which helped shepherd the Supreme Court nominations of Brett M. Kavanaugh and Neil M. Gorsuch. White House counsel Pat Cipollone is a former board member, as is William P. Barr, who served as attorney general under President George H.W. Bush and is now President Trump’s nominee for the same position.

.. The small center — its members and its leaders — continue to have an outsize impact on policy and politics. It is the conservative spiritual and intellectual center that McCloskey had imagined and its influence is felt in all of Washington’s corridors of power.