Search

 

 

Entries in Donald Trump (3)

Friday
Dec092016

Trump’s Big Bait and Switch: How to Swamp Washington and Double-cross Your Supporters 

(This piece originally appeared in Tom Dispatch / December 8, 2016)

Given his cabinet picks so far, it’s reasonable to assume that The Donald finds hanging out with anyone who isn’t a billionaire (or at least a multimillionaire) a drag. What would there be to talk about if you left the Machiavellian class and its exploits for the company of the sort of normal folk you can rouse at a rally?  It’s been a month since the election and here’s what’s clear: crony capitalism, the kind that festers and grows when offered public support in its search for private profits, is the order of the day among Donald Trump’s cabinet picks. Forget his own “conflicts of interest.” Whatever financial, tax, and other policies his administration puts in place, most of his appointees are going to profit like mad from them and, in the end, Trump might not even wind up being the richest member of the crew. 

Only a month has passed since November 8th, but it’s already clear (not that it wasn’t before) that Trump’s anti-establishment campaign rhetoric was the biggest scam of his career, one he pulled off perfectly. As president-elect and the country’s next CEO-in-chief, he’s now doing what many presidents have done: doling out power to like-minded friends and associates, loyalists, and -- think John F. Kennedy, for instance -- possibly family.  

Here, however, is a major historical difference: the magnitude of Trump’s cronyism is off the charts, even for Washington. Of course, he’s never been a man known for doing small and humble. So his cabinet, as yet incomplete, is already the richest one ever. Estimates of how loaded it will be are almost meaningless at this point, given that we don’t even know Trump’s true wealth (and will likely never see his tax returns). Still, with more billionaires at the doorstep, estimates of the wealth of his new cabinet members and of the president-elect range from my own guesstimate of about $12 billion up to $35 billion. Though the process is as yet incomplete, this already reflects at least a quadrupling of the wealth represented by Barack Obama’s cabinet.

Trump’s version of a political and financial establishment, just forming, will be bound together by certain behavioral patterns born of relationships among those of similar status, background, social position, legacy connections, and an assumed allegiance to a dogma of self-aggrandizement that overshadows everything else. In the realm of politico-financial power and in Trump’s experience and ideology, the one with the most toys always wins. So it’s hardly a surprise that his money- and power-centric cabinet won’t be focused on public service or patriotism or civic duty, but on the consolidation of corporate and private gain at the expense of the citizenry.

It’s already obvious that, to Trump, “draining the swamp” means filling it with new layers of golden sludge, similar in color to the decorations that adorn buildings with his name, including the new Trump International Hotelon Pennsylvania Avenue near the White House where foreign diplomats are already flocking to curry favor and even the toilet paper holders in the lobby bathrooms are faux-gold-plated.

The rarified world of his cabinet choices is certainly a universe away from the struggling working class folks he bamboozled with promises of bringing back American “greatness.” And yet the soaring value of his cabinet should be seen as merely a departure point for our four-year (or more) leap into what is guaranteed to be an abyss of inequality and instability. Forget their wealth. What their business conflicts, relationships, and ideological stances indicate about what they’ll do to America is far more worrisome. And though Trump promised (and tweeted) that he’d be “completely out of business operations,” the possibility of such a full exit for him (or any of his crew) is about as likely as a full reveal of those tax returns.

Trumping History

There is, in fact, some historical precedent for a president surrounding himself with such a group of self-interested power-grabbers, but you’d have to return to Warren G. Harding’s administration in the early 1920s to find it. The “Roaring Twenties” that ended explosively in a stock market collapse in 1929 began, ominously enough, with a presidency filled with similar figures, as well as policies remarkably similar to those now being promised under Trump, including major tax cuts and giveaways for corporations and the deregulation of Wall Street. 

A notably weak figure, Harding liberally delegated policymaking to the group of senior Republicans he chose to oversee his administration who were dubbed “the Ohio gang” (though they were not all from Ohio). Scandal soon followed, above all the notorious Teapot Dome incident in which Secretary of the Interior Albert Fall leased petroleum reserves owned by the Navy in Wyoming and California to two private oil companies without competitive bidding, receiving millions of dollars in kickbacks in return. That scandal and the attention it received darkened Harding’s administration. Until the Enron scandal of 2001-2002, it would serve as the poster child for money (and oil) in politics gone bad. Given Donald Trump’s predisposition for green-lighting pipelines and promoting fossil fuel development, a modern reenactment of Teapot Dome is hardly beyond imagining.

Harding’s other main contributions to American history involved two choices he made. He offered businessman Herbert Hoover the job of secretary of commerce and so put him in play to become president in the years just preceding the Great Depression.  And in a fashion that now looks Trumpian, he also appointed one of the richest men on Earth, billionaire Andrew Mellon, as his treasury secretary.  Mellon, a Pittsburgh industrialist-financier, was head of the Mellon National Bank; he founded both the Aluminum Company of America (Alcoa), for which he’d be accused of unethicalbehavior while treasury secretary (as he still owned stock in the company and his brother was a close associate), and the Gulf Oil Company; and with Henry Clay Frick, he co-founded the Union Steel Company.  

He promptly set to work -- and this will sound familiar today -- cutting taxes on the wealthy and corporations. At the same time, he essentially left Wall Street free to concoct the shadowy “trusts” that would use borrowed money to purchase collections of shares in companies and real estate, igniting the 1929 stock market crash. After Mellon, who had served three presidents, left Herbert Hoover’s administration, he fell under investigation for unpaid federal taxes and tax-related conflicts of interest.

Modernizing Warren G.

Within the political-financial establishment, the more things change, the more, it seems, they stay the same. As Trump moves ahead with his cabinet picks, several of them already stand out in a Mellon-esque fashion for their staggering wealth, their legal entanglements, and the policies they seem ready to support that sound like eerie throwbacks to the age of Harding.  Of course, you can’t tell the players without a scorecard, so here are the top four of the moment (with more on the way).

Secretary of Commerce Wilbur Ross (net worth $2.9 billion)

Shades of Andrew Mellon, Ross, a registered Democrat until Trump scooped him up, made his fortune as a corporate vulture (sporting the nickname “the king of bankruptcy”).  He was notorious for devouring the carcasses of dying companies, spitting them out, and pocketing the profits.  He bought bankrupt steel companies, while moving $6.4 billion of their employee pension benefits to the rescue fund of the government’s Pension Benefit Guaranty Corporation so he could make company financials look better. In the early 2000s, his steel industry deals bagged him an impressive $267 millionStripped of health-care benefits, retired steelworkers at his companies didn’t fare as well.   

Trump, of course, has promised the world to the sinking coal industry and out-of-work coal miners. His new commerce secretary, however, owned a coal mine in West Virginia, notoriously cited for hundreds of violations, where 12 miners subsequently died in an explosion.  

Ross also made money running Rothschild Inc.’s bankruptcy-restructuring group for nearly two-and-a-half decades. A member (and once leader) of a secret Wall Street fraternity, Kappa Beta Phi, in 2014 he remarked that “the one percent is being picked on for political reasons.” He has an art collection valued conservatively at $150 million, or 3,000 times the average American’s income of $51,000. In addition, he happens to own a Florida estate only miles down the road from Trump’s Mar-a-Lago private club.

While Trump has lambasted China for stealing American jobs, Ross (like Trump) has made money from China. In 2010, one of that country’s state-owned enterprises, China Investment Corporation, put $500 million in Ross’s private equity fund, WL Ross & Company. Ross has not disclosed whether these investments remain in his fund, though he told the New York Post that if Trump believes there are conflicts of interest among any of his investments, he would divest himself of them. In August 2016, his company had to pay a $2.3 million fine to the Securities and Exchange Commission to settle charges for not properly disclosing $10.4 million in management fees charged to his investors in the decade leading up to 2011.

In October, Ross assured Bloomberg that China will continue to be an investment opportunity.  As secretary of commerce, the world will become his personal business venture and boardroom, while U.S. taxpayers will be his funders. He is an ardent crusader for corporate tax cuts (wanting to slash them from 35% to 15%). As head of the commerce department, the man the Economist dubbed “Mr. Protectionism” in 2004 will be in charge of any protectionist policies the administration implements.

Secretary of Education Betsy DeVos (family wealth $5.1 billion)

DeVos, the daughter of a billionaire and daughter-in-law of the cofounder of the multilevel marketing empire Amway, has had no actual experience with public schools. Unlike most of the rest of America (myself included), she never attended a public school, nor have any of her children. (Neither did Trump.) But she and her family have excelled at the arithmetic of campaign contributions. They are estimated to have contributed at least $200 million to shaping the conservative movement and various right-wing causes over the last half-century.  As she wrote in the Capitol Hill newspaper Roll Call in 1997, “My family is the biggest contributor of soft money to the Republican National Committee.” That trend only continued in the years that followed. According to the Center for Responsive Politics, since 1989 she and her relatives have given at least $20.2 million to Republican candidates, party committees, PACs, and super PACs. 

The center further noted that, “Betsy herself, along with her husband, Dick DeVos, Jr., has contributed more than $7.7 million to federal candidates, committees, and parties since 1990, including almost $4.8 million to super PACs.”  Her brother, ex-Navy SEAL Erik Prince, foundedthe controversial private security contractor Blackwater (now known as Academi). He also made two considerable donations to Make America Number 1, a super PAC that first backed Senator Ted Cruz and then Trump.

So whatever you do, don’t expect Betsy De Vos’s help in allocating additional federal funds to elevate the education of citizens who actually do attend public schools, or rather what Donald Trump now likes to call “failing government schools.” Instead, she’s undoubtedly going to promote privatizing school voucher programs and charter schools across the country and let those failing government schools go down the tubes as part of a Republican war on public education.  

Transportation Secretary Elaine Chao (net worth $25 million)

As the daughter of a wealthy shipping magnate, a former labor secretary for George W. Bush, and the wife of Senate Majority Leader Mitch McConnell, Chao’s establishment connections are overwhelming. They include board positions at Rupert Murdoch’s News Corp and at Wells Fargo Bank.  While Chao was on its board, Wells Fargo scammed its customers to the tune of $2.4 million, and incurred billions of dollars of fines for other crimes. She was silent when its former CEO John Stumpf resigned in a blaze of contriteness.   

In 2008, Chao ranked 8th in Bush’s executive branch in terms of net worth at  $16.9 million. In 2009, Politico reported that, in memory of her mother who passed away in 2007, she and her husband received a “personal gift” from the Chao family worth between $5 million and $25 million. In 2014, the Center for Responsive Politics ranked McConnell, with an estimated net worth somewhere around $22 million, as the 11th richest senator. As with all things wealth related, the truth is a moving target but the one thing Chao’s not (which may make her a rarity in this cabinet) is a billionaire.

Treasury Secretary Steven Mnuchin (net worth between $46 million and $1 billion)

Hedge fund mogul and Hollywood producer Steven Mnuchin is the third installment on Goldman Sachs’s claim to own the position of Treasury secretary. In fact, when it comes to the stewardship of the country’s economy,Goldman continues to reign supreme.  Bill Clinton appointed the company’s former co-chairman Robert Rubin to Treasury in gratitude for his ability to bestow on him Wall Street cred and the contributions that went with it. George W. Bush appointed former Goldman Sachs Chairman and CEO Hank Paulson as his final Treasury secretary, just in time for the “too big to fail” economic meltdown of 2007-2008.

Now, Trump, who swore he’d drain “the swamp” in Washington, is carrying on the tradition. The difference? While Rubin and Paulson pushed for the deregulation of the financial industry that led to the Great Recession and then used federal funds to bail out their friends, Mnuchin, who spent 17 years with Goldman Sachs, eventually made an even bigger fortune by being on the predatory receiving end of federal support while scarfing up a failed bank.

In 2008, the Federal Deposit Insurance Corporation (FDIC), formed in 1934to insure the deposits of citizens at commercial banks, closed 25 banks, including the Pasadena-based IndyMac Bank. In early January 2009, the FDIC agreed to sell failed lender IndyMac to IMB HoldCo LLC, a company owned by a pack of private equity investors led by former Goldman Sachs partner Mnuchin of Dune Capital Management LP for about $13.9 billion. (They only had to put up $1.3 billion in cash for it, however.)

When the deal closed on March 19, 2009, IMB formed a new federally chartered savings bank, OneWest Bank (also run by Mnuchin), to complete the purchase. The FDIC took a $10.7 billion loss in the process. OneWest then set about foreclosing on IndyMac’s properties, the cost of which was fronted by the FDIC, as was most of the loss that was incurred from hemorrhaging mortgages. In other words, the government backed Mnuchin’s private deal big time and so helped give him his nickname, the “foreclosure king,” as he became an even wealthier man.

By October 2011, protesters were marching outside Mnuchin’s Los Angeles mansion with “Stop taking our homes” signs. OneWest soon became mired in lawsuits and on multiple occasions settled for millions of dollars. Nonetheless, Mnuchin sold the bank for a cool $3.4 billion in August 2015. Shades of the president-elect, he also left another beleaguered company, Relativity Media, where he had been co-chairman, two months before it filed for Chapter 11 bankruptcy in 2015.

Mnuchin’s policy priorities include an overhaul of the federal tax code (aimed mainly at helping his elite buddies), financial deregulation (including making the Dodd-Frank Act of 2010 significantly more lenient for hedge funds), and a review of existing trade agreements. He has indicated no support for reinstating the Glass-Steagall Act of 1933, which separated commercial banks that held citizens’ deposits and loans from the speculative practices of investment banks until it was repealed in 1999 under the Clinton administration.

Gilded Government

Hillary Clinton certainly cashed in big time on her Wall Street connections during her career and her presidential campaign. And yet her approach already seems modest compared to Trump’s new open-door policy to any billionaire willing to come on board his ship. His new incarnation of the old establishment largely consists of billionaires and multimillionaires with less than appetizing nicknames from their previous predatory careers. They favor government support for their private gain as well as deregulation, several of them having already specialized in making money off the collateral damage from such policies.

Trump offered Americans this promise: "I'm going to surround myself only with the best and most serious people." In his world, best means rich, and serious means seriously shielded from the way much of the rest of the country lives. Once upon a time, I, too, worked for Goldman Sachs. I left in 2002, the same year that Steven Mnuchin did.  I did not go on to construct deals that hurt citizens. He did. Public spirit is a choice.

Aspiring to run government as a business (something President Calvin Coolidge tried out in the 1920s with dismal results for America), Trump is now surrounding himself with a crew of crony capitalists who understand boardroom speak, but have nothing in common with most Americans.  So give him credit: his administration is already one of the great political bait-and-switch productions in our history and it hasn’t even begun.  Count on one thing: in his presidency he’ll only double down on that “promise.”

 

Friday
May132016

Gimme Shelter (From the Tax Man) Disappearing Money and Opportunistic Candidates  

This article orginally appeared in TomDispatch. The latest Panama Papers May 9th disclosures underscore the broad and ongoing global connections between big banks and tax havens. A swath of politicians on both sides of the aisle remain enablers and users...

There’s a pile of money hiding offshore. It’s true that jobs are also leaving the United States because American companies find it convenient to cut labor costs by moving manufacturing abroad, the economic issue you’re hearing most about in this election season. But the stunning amount of money that continues to flow across American borders (and those of other countries), and eventually disappears into the pockets of the corporate and political elite, ultimately causes even more damage to our finances and our lives.

While the two leading candidates for the presidency, Donald Trump and Hillary Clinton, have indeed suggested cosmetic fixes for a situation that only grows more extreme with the passage of time, they have themselves taken advantage of numerous tax “efficiency” strategies that make money evaporate. Of course, you shouldn’t doubt for a second that they’ll change their ways once in the Oval Office.

As with so much in our American heritage, there’s a history to the “offshore” world, too. Finding places to shield money from tax collection first became commonplace among upper-crust industrialists, bankers, and even public servants back in the 1920s. Treasury Secretary Andrew Mellon, a millionaire mogul who served presidents Calvin Coolidge, Warren Harding, and Herbert Hoover (and had a knack for cutting taxes on the wealthy), left office under mounting congressional probes into his tax evasion strategies.

Fast-forward about a century and tax dodging has been woven into the fabric of the lives of the affluent and corporate worldwide in an extraordinary way. According to an April 2016 Oxfam report, the top 50 U.S. companies are hoarding more than $1.4 trillion in cash offshore.

What’s more, for every dollar that these firms spent lobbying Congress for “favorable” tax treatment (a collective total of $2.6 billion between 2008 and 2014), they received $130 dollars in tax breaks and $4,000 in subsidies from the U.S. government. These companies, including Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter & Gamble, created “an opaque and secretive network” of more than 1,600 company subsidiaries located in tax havens that they decided to disclose. (Because of the weak reporting requirements of the Securities and Exchange Commission, there could be thousands more.) According to a March 3rd report from the Citizens for Tax Justice, the Fortune 500 companies are now saving $695 billion in federal income taxes on a total of $2.4 trillion in offshore holdings.

Americans can’t afford to ignore such tax games, since we’re the ones who, in effect, wind up paying the taxes these firms don’t. For government policymakers, such tax evasion is a grim matter of attrition, since the U.S. (and other countries) plunge ever deeper into debt thanks to such antics and then find themselves cutting services or raising taxes on us to cover the gap between the money they’re losing and the taxes they’re collecting. 

Not only are such firms unpatriotic, they are parasitic and while they’re at it, they use similar techniques -- let’s not call it theft (though it is) -- to avoid tax payments in the poorest places on Earth. As Oxfam reports, “the biggest burden” of tax havens “falls on the poorest people.” In the process, they only increase already oppressive levels of inequality globally.

Tax “secrecy” specialists -- people working in the money-hiding field -- help rich individuals, multinational corporations, political leaders, terrorists, and organized crime groups divert cash and capital, sometimes in staggering amounts, from local economies into an obscure, complex, multi-layered global financial network that operates outside any national or international regulatory or tax system. Given this, isn’t it a little surprising that the top candidates for the presidency barely pay lip service to the impact of such hidden money?  What toothless policies they have proposed to deal with the phenomenon will do little or nothing to change it.

The Panama Papers

U.S. trade agreements generally include rosy promises about partnering with regional economies around the world to encourage the flow of goods and services across borders. At the same time, they generally are focused on the obliteration of barriers that in any way restrict money from flowing out of the United States or into the embrace of other nations. The free movement of capital, or financial globalization as it’s called, has been a bedrock Washington policy for a century and, since the 1980s, places like Panama -- a renowned tax haven -- have abetted this process.

A month ago, the International Consortium of Investigative Journalists released a trove of documents, 2.6 terabytes of them, including “more than 4.8 million emails, 3 million database files, and 2.1 million PDFs.” These were turned over by an undisclosed source (“John Doe”), communicating through encrypted channels to avoid repercussions. Now known as “the Panama Papers,” they reveal how elite multinational companies, the super rich, and government figures have engaged in tax-dodging practices engineered by a single Panama City-based law firm, Mossack Fonseca (MF).

In addition to public officials and billionaires, more than 500 global banks, their subsidiaries and branches, have registered at least 15,600 shell companies there using MF’s services. That word “shell” is descriptively accurate since such “companies” rarely have employees and are commonly no more than a post office box providing a façade through which books can be doctored, taxes dodged, losses concealed, and money-laundering and other criminal actions carried out.  And keep in mind that MF, which acts for approximately 300,000 companies, is only the fourth largest provider of such offshore services globally. 

One mega-bank that used its services extensively was HSBC, which created an astonishing 2,300 shell companies with that law firm’s help. We’ll return to HSBC.

Mossack Fonseca’s official mission, it claims, is “to deliver quality, reliable and comprehensive services to our worldwide clients in the legal, trust, investment consultancy, and digital solution fields.” That’s code for helping select establishment outfits and dubious enterprises to avoid paying taxes on profits, investments, or money made from buying and selling real estate, luxury yachts or planes, oil wells, weapons, or drugs, among other things.

Secrecy is its calling card. Tax havens, or locales amenable to tax dodging, whether in the Caribbean, Central America, Switzerland (still the world’s top location for financial secrecy), or for that matter the state of Delaware, exist to circumvent tax laws. Period. And these operations are so shady that even the functionaries working in the shadows to establish such secret accounts are barely aware of exactly who owns them, where the money came from, or where it’s going. For regulators, prosecutors, and tax collectors, the opacity is far worse.

You don’t necessarily have to be rich or powerful to access the services of such offshore firms and banks, but it helps. Some havens take anyone ready to put up a minimum of $25,000, while others demand staggering sums. Western Samoa, for instance, requires a cool $10 million to get started.

The most alarming aspect of the Panama Papers revelations was not MF’s clientele or even its secretive practices, but that what it does is completely “legal.” Nor was this the first such disclosure. In November 2014, for instance, the “Luxleaks” scandal involving a whole “menagerie of Luxembourg-based tax schemes,” as the Guardian put it, was disclosed by two whistleblowers from the accounting firm PricewaterhouseCoopers. (Luxembourg is a major European tax haven.) Citigroup, Deutsche Bank, Facebook, HSBC, JPMorgan Chase, and Microsoft were on the list of its more than 350 multinational “tax avoiders.”

Avoiding vs. Evading Taxes and Corporate Inversions

Avoiding and evading taxes are technically considered different kinds of acts, the former being legal in the U.S., the latter not. According to the Internal Revenue Service, “Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means.” Tax evasion, on the other hand, involves an “act to evade or defeat a tax, or payment of tax” by “deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.”

The line between the two is obviously thin and vague, but both practices result in the same thing: paying fewer taxes or hiding money.

The subject of tax avoidance and evasion has generally gotten little traction on the campaign trail in election 2016, the exception being corporate “inversions.” These happen when, for example, an American company merges with a foreign one in a tax haven, and so gets a lower tax rate by re-incorporating (filling out some paperwork) there. This, too, is “legal,” although it represents the purest form of corporate tax evasion.  Perhaps you won’t be surprised to learn that the practice began in Panama about 30 years ago.

In 2014, companies with household names like Apple, Microsoft, Pfizer, and General Electric avoided paying a collective $90 billion in taxes through inversion strategies. Apple led that list, holding $181.1 billion offshore.  That’s a lot of iPhone sales.

The Leading Candidates and Hidden Money

Tax havens are, in essence, perfectly “legal” criminal facilities designed to steal money from the rest of us. The two leading candidates in this election season, however, aren’t talking about closing down tax havens for good (which would piss off lots of rich people, banks, drug cartels, and terrorists). They are instead focused on getting companies to voluntarily repatriate, or return, profits made abroad for taxation purposes or on closing tax “loopholes” that allow money to disappear.  Neither, however, offers much detail as to what that means. 

Both do share one thing, however, when it comes to tax havens: Hillary Clinton and Donald Trump have companies registered at the same address (also “shared” by 285,000 other companies) in Wilmington, Delaware. In other words, they make use of the “Delaware loophole,” which allows for the legal shifting of earnings from elsewhere in the country to the ultimate tax haven state in the U.S.  Neither, as Rupert Neate of the Guardian has written, has been willing to offer any explanation for this. That’s the political beauty of loopholes: closing one is different from eradicating an entire practice but suffices as a promise.

Hillary

Hillary has gone after tax havens before. In 2004, as a New York senator, she vowed to close tax loopholes for “people who create a mailbox, or a drop, or send one person to sit on the beach in some island paradise and claim that it is their offshore headquarters.”  She introduced no bills to do so, however.

She has spoken out against corporate tax inversions, too. She wants Congress to prevent them by imposing what she calls a “commonsense 50%” threshold on them; in other words, as long as a company keeps at least half of its operations in this country, it would be considered a U.S. company for tax purposes, no matter the inversions. She also has favored an “exit tax” to ensure that multinationals pay a “fair” share of U.S. taxes owed on earnings stored overseas. Both of these suggestions would put some modest limits on offshore tax dodging (after the fact), but not come within a country mile of banning it.

On such subjects, she can sound strong indeed at appropriate moments. InFebruary 2016, for instance, she said, “We need to go after a company like Johnson Controls that is trying to avoid paying taxes after all of us bailed it out by pretending to sell itself in a so-called inversion in Europe.” It evidently didn’t matter to her that the same automotive parts company set to merge with Tyco International (based in Ireland to dodge taxes) had donated money to the Clinton Foundation charity as recently as December 2015. (Johnson Controls denied Hillary’s claims that it had received a bailout during the financial crisis.)

Hillary, lest we forget, joined the board of directors of the the Clinton Foundation, the family charity, in 2013. She resigned in April 2015 to run for president. Now, keeping it in the family, her husband, Bill, and her daughter, Chelsea, remain standing members of the board. Spawned from the William J. Clinton Foundation, founded in 1997, the charity has raised $2 billion, has about 2,000 employees (including at times members of Hillary's political team), and boasts an annual budget of $223 million.

Like many gilt-edged couples, Hillary and Bill Clinton have themselves utilized onshore and offshore tax loopholes. In 2010, they used a common tax-dodging technique by placing their multi-million dollar home in Chappaqua, New York, in a “residence trust.” After he left office, Bill spent five years as an “adviser” to billionaire (now-ex-pal) Ron Burkle’s investment fund, Yucaipa Global, which had funds registered in the Cayman Islands and Dubai. That alliance netted Bill at least $15 million.

Hillary’s bedrock thinking on money flowing out of the U.S. and into the offshore world can best be seen in her support for the 2012 U.S.-Panama Trade Promotion Agreement when she was secretary of state. The agreement removed “barriers to U.S. services, including financial services,” which actually simplified the process of squirreling money away in or through Panama by allowing it to flow freely into that country.

The Clinton Foundation inhales donations from people using tax havens (including Panama). Although Hillary denounced Mossack Fonseca’s dealings on cue after the Panama Papers story broke, a number of individuals and multinationals that have contributed to the foundation used MF to establish offshore accounts, according to McClatchy. These include Canadian mining billionaire Frank Giustra who features in the foundation’s $25 million top-tier donor bracket, and two firms tied to Ng Lap Seng, the Chinese billionaire implicated in a major donor scandal involving the Clintons and the Democratic National Committee.

Similarly, in a speech she gave at the New School in July 2015, Hillary highlighted the “criminal behavior” of global bank HSBC. In 2012, the behemoth financial institution agreed to a record $1.92 billion settlement with the Department of Justice and the Treasury Department for enabling drug cartel money laundering and violating U.S. sanctions by conducting transactions for customers in Iran, Libya, Sudan, and Burma. She vowed, “On my watch, it will change.”

Yet, in 2014, the Clinton Foundation accepted between $500,000 and $1 million from that bank. 

The Panama Papers are but one conflicted instance in which Hillary’s stated beliefs, her actions, and the generosity of her friends and acquaintances came together in a contradictory fashion. The evidence suggests that tax-dodgers will, in fact, be able to breathe a sigh of relief if she becomes president.  Her actions are likely to -- if you’ll excuse the expression -- trump her words when it comes to curtailing the behavior of offshore scofflaws in significant ways.  And speaking of Trump...

The Donald

Consider the fact that The Donald won’t even disclose his tax returns. His indignantly delivered explanation is that they are “under audit.” Under the circumstances, don’t hold your breath. Perhaps he doesn’t make nearly as much money as he claims -- or maybe he has an embarrassing tax haven habit. Who knows?

Ironically, Mossack Fonseca’s Panama City headquarters is located a mereseven-minute drive from the Trump International Hotel and Towers in Panama City. (If you’re interested, its website is pitching a bargain on rooms at “15% off our currently available Best Unrestricted Rate.”)  That decadent complex is one of many sketchy enterprises to which Trump lent his name for licensing purposes. According to his (unaudited) personal financial disclosurereport filed with the Federal Election Commission, the deal earned him $5 million. In true Trumpian style, lawsuits and battles surround the endeavor.

Under the tax plan he’s touting in his presidential campaign, U.S. businesses would see a reduction in their maximum tax rate from 35% to 15%. This lower rate (“one of the best in the world”) would, he claims, render corporate inversions unnecessary. The Donald apparently hopes that corporate America will be so eternally grateful to him that they’ll move their money back onshore and pay taxes on it voluntarily (though most of them already don’t pay the top tax rate here anyway).

Trump’s views on a “repatriation tax holiday” that would let companies bring home their overseas stashes on a one-time basis for little or nothing have shifted over the course of his candidacy. Last year, he proposed the repatriation of hidden funds without penalty or taxation of any kind. Now he’s advocating a more populist one-time 10% tax on them.

Although a key promise of his tax reform plan is to end the practice of stockpiling money in offshore accounts by American companies, he has personally invested in many of the companies that do so. As CBS News noted, in October 2015, Trump owned stock in 22 of the top 30 Fortune 500 companies ranked by their number of offshore subsidiaries. It’s a group that has engineered 1,225 tax-haven subsidiaries holding $1.4 trillion. Of course, Trump has a keen understanding of the practices that disguise or shelter money from taxes. As he explained to supporters in Iowa this January, when it comes to his own business enterprises, "I pay as little as possible. I use every single thing in the book."

Bernie

As far as we know, Bernie has no personal experience with tax havens and has a far more structured plan than either of the leading candidates to combat their money-sucking, tax-dodging prowess. His policies would prevent American companies from avoiding U.S. taxes through inversions, block them from escaping taxes by establishing a post office box in a tax haven site, and end the practice of letting corporations defer paying taxes on profits from offshore subsidiaries.  

In the real world, financial speculation, crime, and tax evasion -- sorry for this word again -- trump the highly touted goal of “free trade” when it comes to tax havens. Bernie understood this well when he voted against the Panama “free trade” agreement of 2011. In a Senate speech on the subject, he presciently noted that “Panama is a world leader when it comes to allowing large corporations and wealthy Americans to evade U.S. taxes by stashing their cash in offshore tax havens. And the Panama free trade agreement would make this bad situation much worse.”

He was right then and he remains right today. Unfortunately, no one was listening or interested in acting on his warning -- certainly not Hillary, who, as secretary of state, characterized the agreement as “an example of the Obama Administration’s commitment to economic statecraft and deepening our economic engagement throughout the world.”

In practical terms, Sanders went significantly further than Hillary by formulating actual legislation on the subject. Last April, he introduced theCorporate Tax Dodging Prevention Act of 2015 in the Senate. Among other things, it aspires to “prevent corporations from sheltering profits in tax havens like Bermuda and the Cayman Islands and would stop rewarding companies that ship jobs and factories overseas with tax breaks.”

Regarding inversions, he would treat companies as American for tax purposes if they were majority-owned by U.S. interests and operating in this country. Even his plan, however, would fall short unless it made inversions illegal -- and too many companies are invested in not letting that happen.

Ted

Ted would abolish the Internal Revenue Service and enable people and companies to file taxes on a postcard, so there’s no real point in further analysis of his “positions” on tax havens.

Missing Money Costs

As of 2014, according to Gabriel Zucman, University of California economist and author of The Hidden Wealth of Nations, at least $7.6 trillion, or approximately 8% of global financial wealth, was “missing” somewhere offshore. His analysis demonstrates that the sorts of tax-dodging practices we’ve been discussing put governments across the planet in the red by approximately $200 billion annually. Tax avoidance by major U.S. companies costs governments an additional $130 billion per year since nearly a third of their profits are hidden offshore.

The U.N. estimates that tax dodging by multinational companies costs developing countries $100 billion a year, an amount “equivalent to what it would cost to provide basic life-saving health services or safe water and sanitation to more than 2.2 billion people.”

There are, in other words, harrowing costs to tax dodging. When the wealthy and powerful hide money from governments or speculate with it in sneaky ways, it destabilizes economies and enables the commission of crimes that place a further burden on ordinary people. When money flows from the economic necessities needed by the less privileged to the top fraction of a percent of the world’s population and is then hidden offshore, essentially “disappeared,” it’s a net drain on and a blow to the world economy. This impacts jobs and the quality of our future. Unfortunately, the leading candidates in this election year aren’t championing a major change for the better.

Friday
Dec042015

The American Hunger Games:The Six Top GOP Candidates, Economic Policies And Panem 2016 

This piece originally appeared on TomDispatch.

Fact: too many Republican candidates are clogging the political scene. Perhaps what’s needed is an American Hunger Games to cut the field to size. Each candidate could enter the wilderness with one weapon and one undocumented worker and see who wins. Unlike in the fictional Hunger Games for which contestants were plucked from 13 struggling, drab districts in the dystopian country of Panem, in the GOP version, everyone already lives in the Capitol. (Okay, Marco Rubio lives just outside it but is about to enter, and Donald Trump like some gilded President Snow inhabits a universe all his own with accommodations and ego to match.)

The six candidates chosen here (based on composite polling) have remarkably similar, unoriginal, inequality-inducing, trickle-down economic recommendations for the country: reduce taxes (mostly on those who don’t need it), “grow” the economy like a sprouting weed, balance the budget by cutting as yet not-delineated social programs, overthrow Obama’s health-care legacy without breaking up the insurance companies, and (yawn)... well, you get the idea. If these six contenders were indeed Hunger Games tributes, their skills in the American political wilderness would run this way: Ben Carson inspires confusion; Marco Rubio conveys exaggerated humility; Ted Cruz exudes scorn; Jeb Bush can obliterate his personality at a whim; and Carly Fiorina’s sternness could slice granite. This leaves Donald Trump, endowed with the ultimate skill: self-promotion. As a tribute, he claims to believe that all our problems stem from China and Mexico, as well as Muslim terrorists and refugees (more or less the same thing, of course), and at present he’s leading the Games.

 

When it comes to economic policy, it seems as if none of them will ever make it out of the Capitol and into the actual world of American reality.  Like Hillary Clinton, blessed by Wall Street’s apparently undying gratitude for her 9/11 heroism, none of the Republican contestants have outlined a plan of any sort to deal with, no less break the financial stronghold of the big banks on our world or reduce disproportionate corporate power over the economy, though in a crisis Cruz would “absolutely not” bail them out again.   Stumbling around in the wilderness, Carson at least offered a series of disjointed, semi-incomprehensible financial suggestions during the last Republican “debate,” when asked why he wouldn’t break banks up. "I don't want to go in and tear anybody down,” he said. “I mean that doesn't help us, but what does help us is to stop tinkering around the edges and fix the problem."

Rubio, already in top Hunger Games form, swears that it’s recent regulations (not legacy elite decisions) that did the dirty deed. “The government made [the banks] big by adding thousands and thousands of pages of regulations," he saidof Dodd-Frank legislation (which doesn’t actually alter Wall Street structurally in any way). In fact, in recent decades every major power grab or consolidation in American business, from banks to energy companies, resulted from bipartisan deregulation.

None of these big-money-backed candidates seem particularly concerned that another economic crisis could ever cripple the country, or have evidently even noticed that most Americans have yet to experience the present “recovery.”  None seem to realize that when the Federal Reserve winds down its cheap money policy and banks and companies are left to fend for themselves, more economic hell could break loose in the style of the 2007-2008 meltdown. Jeb Bush recently summed up the general 2016 Republican position on the economy in a single what-me-worry-style sentence: “We shouldn't have another financial crisis.” ‘Nuff said.

In the 2012 presidential election, Mitt Romney’s chances dwindled after hedisparaged 47% of the country as so many leeches. Today’s Hunger Gamers have learned from his experience. Optics spell opportunity, so as a group they’re shuffling the usual Republican-brand tax cuts for corporations and the wealthy in with selective recognition of the broader population and promises to kill all loopholes in some future utopian tax bill. None of them, of course, would consider raising the minimum wage to put more money in the pockets of workers before tax-time hits. Even old Henry Ford knew the power of wages when, early in the last century, he strengthened his car empire by doubling the then-prevailing minimum wage for his workers to $5 a day -- enough for them not only to save up and buy his Model-Ts, but also boost productivity.

The present set of Hunger Gamers could invoke Republican President Teddy Roosevelt’s trust-busting ire, or President Dwight D. Eisenhower’s willingness to fund vast national construction projects, or even (to reach into the distant past) President Herbert Hoover’s initial attempts to pass what became, under Democrat Franklin Delano Roosevelt, the 1933 Glass-Steagall Act that separated deposit-taking from speculation at banks. But to be realistic, none of them belong to the Republican Party as it once existed.  They all live in an American Panem and so feel no compunctions about promoting the idea that corporations contributing ever less to the federal till would Make America Great Again.

Now, let’s send those six candidates into that wilderness, weapons in hand, one at a time, and while we’re at it, examine their minor differences by checking out their campaign websites to see what kind of games we can expect in a coming Republican era of “good times.”

Ben Carson

If you look through the index of Ben Carson's latest bestseller, A More Perfect Union, you won’t even find the words “economy,” “banks,” or “Wall Street.”  Instead, his campaign slogan “Heal, Inspire, Revive,” could headline a yoga retreat. His position as the Republican co-frontrunner or runner-up (depending on which polls you look at) relies on his soft-spoken, non-politician persona, not his vague economic ideas that flash by in a chameleon-like fashion.

Yes, he was a brilliant neurosurgeon, but the tenacity and skills required to become a gifted medical practitioner have not translated well into presidential-style economic policies.  To the extent that he has a policy at all, it’s a shopworn version of the twenty-first-century Republican usuals: ratifying a balanced budget amendment to the Constitution “to restore fiscal responsibility,” introducing a flat tax, not raising the minimum wage, yada, yada, yada.  In a Washington Post op-ed last year, he recounted his mother’s days as a “domestic in the homes of wealthy people who were generous to her” and would slip young Carson and his brother “significant monetary incentives” in return for good grades. One even loaned him a luxury convertible. With such employers -- and the incredibly rich are a well-known generous bunch, at least when it comes to supporting Republican presidential candidates (just 158 families have contributed more than half the money to this election so far, mostly to Republicans) -- who needs a government-declared minimum wage?

Regarding taxes, Carson considers the 74,000-page tax code “an abomination.” And who would argue otherwise? But like his various opponents, he's not about to point out that it was largely crafted by the representatives of mega-corporations, not Wal-Mart workers at meet-ups with senators. He’s for a flat tax of 10% with no exemptions for the poor, based on biblical economics 101. Maybe people who don’t produce bumper crops should just pray for a better lot.

He would conveniently cut the official corporate tax rate from 35% (the average effective tax rate is 27.9% but the biggest, brightest companies don’t even approach that amount) to between 15% and 20%, the definition of corporate manna from heaven.  He would also allow companies to bring their foreign profits back to the U.S. completely tax-free if they would even... pretty, pretty please... consider allocating 10% of them to “finance enterprise zones” in major cities. And so it goes in Carsonland.

Best bet on his campaign website: A $25 bumper sticker that says #IAMACHRISTIAN, proof that he’s eager to channel his inner evangelical Katniss.

Donald Trump

Trump actually brought up President Dwight Eisenhower recently, but only for Operation Wetback, his grim Mexican immigrant deportation program. No I-like-Ike mention was made of his funding of the interstate highway system or the way he strengthened banking regulations.

The Donald lists five core positions on his site, including the two economic pillars of his campaign: “U.S.-China trade reform” and “tax reform,” both of which would, of course, “make America great again.” This may already sound a bit repetitively familiar to you, but he wants to reduce the corporate tax rate to 15% because it “would be 10 percentage points below China’s and 20 points below our current burdensome rate that pushes companies and jobs offshore.”  Given that our biggest companies already pay far less than that “burdensome” rate, can there be any question that lowering it further would produce more generous CEOs and slay dreaded China at the same time?

Like President Snow, Trump would start aggressively and only get more so, economically speaking. He would “attack” the national debt and deficit by eliminating government waste, fraud, and abuse, and “grow” the economy xenophobically by doing in local Mexicans and distant Chinese, and all of this cutting and slashing would, like a Chia Pet, make the economy sprout even as tax revenues were savaged.  Or, even if it isn’t one of his five core positions, he could pull a genuine Snow and get rid of old-fashioned-style government, leaving Americans officially beholden to an oligarch.

In another piece of (black) magic, his campaign website assures readers that cutting the deficit and reducing our debt would also stop China from “blackmail[ing] us with our own Treasury bonds.” No matter that China actually lent us money to run our government and bolster our financial system, and that a thank-you note might be in order (on paper made in China, of course).

When it comes to tax reform, Trump’s “populist” program would remove 75 million households from the income tax rolls and provide them, so he claims, with a simple one-page form to send the IRS, saying “I win.”  Though he would cut the current seven tax brackets to four -- 0%, 10%, 20%, and 25% -- it’s his 15% corporate tax rate that trumps the field. Rubio would only chop it to 25%, Bush to 20%, Cruz to 16%, and Carson... who knows? Various estimates suggest that Trump’s plan would lead to a staggering federal revenue loss (so lucky for us that, in a Trump presidency, the rich would undoubtedly be so grateful that their generosity would soar beyond imagining). The nonpartisan Citizens for Tax Justice computed the cost of his plan at $12 trillion over 10 years.  So don’t expect any Eisenhower-esque national building campaigns (other than that “beautiful” wall on the Mexican border).

Best gimmick on his campaign website: A $15 Trump dog sweater modeled bythe saddest damn wiener dog ever. Perhaps its mother was a deported Chihuahua.

Marco Rubio

Rubio’s slogan “a new American century” couldn’t be grander, perhaps to compensate for the lackluster version of economic policy at his campaign website.  It’s certainly not the sort of thing you’d expect from someone aspiring to be president of the world’s largest economy. Despite that, rest assured that he’s had economics and success on his mind 24/7.  After all, Goldman Sachs is now his top contributor and his super PACs are on a run, too, including the rap-inspired “Baby Got Pac” just launched by multimillionaire John Jordan.

And in true Hunger Games fashion -- when the “odds” head in a tribute’s favor, the patrons and gifts begin rolling in -- Rubio just bagged Republican mega-donor billionaire Frank VanderSloot. Mitt Romney’s former national finance co-chairman, VanderSloot joins a growing roster of Rubio billionaires, including hedge-fund moguls Paul Singer and Cliff Asness.

“Marco Rubio is the brightest and most capable candidate," wrote VanderSloot of his new political buddy. Of the others he and his brain trust considered, headded, "Jeb simply does not have the leadership skills necessary to unite the people behind him"; Carson lacks “the international knowledge or skill set"; Cruz and Trump are “simply not electable in a general election" (no billionaire-envy there); and Fiorina, his second choice, “simply isn’t resonating with the voters.”

Rubio’s tax plan, the “cornerstone” of his economic policy, would -- you won’t be surprised to learn -- reduce the number of tax brackets from seven to three and eliminate taxes in ways particularly beneficial to the billionaire (especially hedge-fund billionaire) class, including the estate tax and taxes on capital gains and dividends. For the broad population, Rubio includes family tax cuts. According to an analysis by the Tax Policy Center, his plan would be a bargain compared to Trump’s, costing federal government coffers a mere $2.4 trillion or more in receipts over the next decade. As a byproduct, his program is essentially guaranteed to spark a new round of financial speculation, but don’t for a second let the 2007-2008 meltdown cross your mind since, as every Republican knows, with a Marco Rubio, Donald Trump, or Ben Carson in the Oval Office that can’t happen.

Best gimmick on his campaign website: You can “fall into campaign season” by ordering a “Marco Polo” made-in-the-USA shirt for $48 in patriotic red, white, or blue naturally! For a mere $500 extra, you can personally have the honor of buying Rubio a “plane ticket” (perhaps to meet and greet his next billionaire).

Ted Cruz

The Cruz campaign website offers a hodge-podge of semi-incoherent economic salesmanship. His tax plan, or what he likes to call (without the slightest justification) the “next American revolution,” promises to “reignite growth in our economy.” His “simple flat tax” (yep, another of those!) would abolish the Internal Revenue Service as well.  Personal income tax brackets would go from seven to... count ‘em!... one at a 10% rate across the board and the corporate income tax would be replaced by a flat tax of 16%. And it should be taken for granted that the American economy would soar into the stratosphere!

Cruz’s tax code would be so “simple with a capital-S” that it would make Donald Trump’s look complicated. A postcard or phone app would suffice for individual and family filings. There would be no tax on profits earned abroad and it almost goes without saying that Obamacare taxes would die a strangulated death. Loopholes for businesses would apparently go, too.

Cruz claims his simple flat tax will elevate the gross domestic product, increase wages by 12.2%, create nearly five million new jobs, and undoubtedly fill the world with unicorns.  It would also wipe out between $768 billion and $3.6 trillion in federal tax receipts over 10 years.

Best gimmick on his campaign website: For $55 you can get a bad-boy posterof Cruz sporting a Sons of Anarchy look (tattoos, cigarette in mouth, etc.) captioned “Blacklisted and Loving It.”

Jeb Bush

Jeb! has by far the sleekest web page. He and his donor entourage took the “presidential concept” seriously with a look that seems to have been stolen directly from “the Capitol” in the Hunger Games.

Its economic section excoriates the tax code for being “rigged with multiple carve-outs for favored industries.” He blasts Obama’s economic policies for leading to “low growth, crony capitalism, and easy debt.” Yet, under Jeb’s governorship, Florida's debt escalated from $15 billion to more than $23 billion. After his term, the housing-bubble that had inflated the state’s coffers burst big time, and Florida's economy under-performed much of the country during the financial crisis. While homeowners statewide went underwater, helanded a multi-million dollar consultancy gig with... gulp!... Lehman Brothers.

By now, you won’t be shocked to learn that Bush’s plan would cut tax brackets from seven to three: 28%, 25% and 10%, and that he would cut the corporate tax rate from 35% to 20%, five points below China’s. (These days, if you’re a Republican, you’ve got to stick it to China.)

While Jeb would not rein in Wall Street (for all the obvious and already well-documented reasons), right now it looks as if he’s not going to have a chance to not rein in anything.  While his PR team maintains “Jeb can fix it,” invigorating his wilting campaign will require more than a bow and arrow and a mockingbird.

Best gimmick on his campaign web page: “The Guaca Bowle” for $75because who doesn’t need one? (Bush family guac recipe not included.)

Carly Fiorina

Fiorina’s web page doesn’t offer a lot of economic anything. It’s more like a personality infomercial. For her official positions, you need to watch video clips of her TV appearances from CBS This Morning to late night talk shows and -- if you’re starting to get bored -- just imagine Stanley Tucci as Hunger Games host of festivities Caesar Flickerman narrating.

Fiorina calls for “zero-based budgeting” because “zero” sounds so much cleverer than “balanced” and touts ad nauseam a three-page tax plan (perhaps the current one in a microscopic font, since we don’t actually know the details). The repetition of simple concepts to the masses seems to be her modus operandi.

Best gimmick on the Carly for America Super PAC website: For only $26 you can get a “Hillary Who?” infant one-piece, the perfect gift for any Republican baby.

How Corporations Really Pay Taxes

Despite the prominence of tax cuts in the policies of the top six Republican candidates, even the venerable Brookings Institution found that they have a minimal effect on economic growth.  In addition, when you consider all the promised corporate cuts, you should know that corporations already don’t contribute much.

According to Citizens for Tax Justice, between 2008 and 2012, 26 of the 288 Fortune 500 firms (consistently profitable in those years) managed to pay nothing, nada, zero in federal income tax.  The 288 firms collectively paid an effective federal income tax rate of 19.4%, and a third of them paid an effective rate of less than 10%. Five companies -- Wells Fargo, AT&T, IBM, General Electric, and Verizon -- also bagged over $77 billion of the $364 billion in tax breaks doled out in those years. Extra jobs didn't follow. Think of this crew as the real winners of the American Hunger Games in this period.

For 2014, for instance, Goldman Sachs avoided forking over federal income taxes on almost half of its $6.8 billion in U.S. profits, paying an effective tax rate of 18.6%. Between 2010 and 2012, due to tax breaks associated with executive pay, Fortune 500 companies saved an extra $27 billion in federal and state taxes. That’s a lot of dosh to use for Super PAC support.

In 2012, the Democrats blasted candidate Mitt Romney’s tax plan as a giveaway to the rich. This time around, our six tributes-cum-candidates are taking no such chances.  They’re making sure to throw crumbs to the middle and working classes, even as they offer more caviar to the wealthy and corporations. Depending on the candidate and plan, the overall loss of national revenue will range from an estimated $1.6 trillion (even factoring in growth that may never happen) to $12 trillion, but will be a stunning amount.

Perhaps with such a field of candidates, the classic Hunger Games line will need to be adapted: “Let the games begin and may the oddity of it all be ever in your favor.” Certainly, there has never been a stranger or more unsettling Republican campaign for the presidential nomination or one more filled with economic balderdash and showmanship.  Of course, at some point in 2016, we’ll be at that moment when President Snow says to Katniss Everdeen, "Make no mistake, the game is coming to its end." One of these candidates or a rival Democrat will actually enter the Oval Office and when that happens, both parties will be left with guilt on their hands and all the promises that will have to be fulfilled to repay their super-rich supporters (Bernie aside). And that, of course, is when the real Hunger Games are likely to begin for most Americans.  Those of us in the outer districts can but hope for revolution.