Tom,
You know that I like you personally and think extremely high of the architectural talents you demonstrate consistently in your work. But, though you have had a lot of experience with real estate developers, you seem to have some misunderstanding on how business works.
Trump may be able to swing better terms because of his record, but most developers are typically required to put their own money or property into deals, particularly if non-recourse financing (no personal liability in the event of default) is involved. Even during the 1980s days of the S & L debacle when non-recourse financing was common, developers were expected to put money or property into the deal, and when things went upside down they not only lost their equity contribution, but also had a huge tax liability for debt forgiveness (which the IRS considers as income). To suggest that developers don't face significant loses is not correct.
For example, you know of your friend Jack Nicklaus and his experience playing developer which nearly wiped him out. Others: I know one prominent developer who put hundreds of prime commercial land his family had owned for decades as collateral for a site development loan and lost it all when tract sales failed to materialize. I am friends with another who barely escaped jail because the prosecutor alleged that he had willfully falsified his loan application (a valuation of assets issue which nearly every developer and investor faced when real estate values collapsed with the S & L industry). This guy lost some 20 pieces of land, all of which he had purchased with significant equity contributions, and one apartment complex for which he had personal liability and was hounded for many years by a purchaser of the debt. A third acquaintance lost his interests in several suburban office buildings he built and was forced to sell his 5,000+ s.f. estate home and move into a small tract home with his large young family to satisfy various claims against him.
What the successful real estate developers seem to have is cajones and the ability to get back on their feet after being knocked down a few times. Two of the three above have recovered very nicely; I've lost contact with the third.
As to the deductibility of mortgage interest, no doubt that it has served as a subsidy to business. However, the reason it is there is the taxpayer- the consumer who votes and receives the biggest benefit. I agree with Mike Hendren who opined on another thread that the "ownership society" is a misnomer.
The same is true of the bank bailout. Bank owners, the stockholders, are not being bailed out. Bank owners just like GM and Ford stockholders have been essentially wiped-out. Depositors, employees of banks, acquiring (often politically connected) instituions and, theoretically (I disagree), the American economy are the beneficiaries. Ditto for the investment banks, Fanny and Freddie.
It is the populist notion that the government is saving the fat cats, but the reality is that government is largely saving itself- Dodd, Frank, Rangel, et. al. who are the real fat cats with fabulous pay, benefits, and lifelong career protection. And as we saw from President Clinton's and Senator Daschle's experiences, the seven, eight and nine figure golden parachutes ain't bad either.
BTW, I would much prefer a tax system that is designed solely to raise revenue as opposed to socially engineer a society with government choosing the winners and losers. Figure out how much the government really needs, get rid of all special interest deductions, lower rates, and tax ALL of EVERYONE's income regardless of its source accordingly. It won't happen in my lifetime, likely never, but I dare dream.