Thursday, April 07, 2016

Nothing in politics is accidental, except maybe the release of the Panama Papers

Franklin Roosevelt has been known to have said:
In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
We are at a major juncture in the Democratic Primaries. Bernie Sanders has won 7 of the last 8 contests, the one loss being Arizona, where allegations of election fraud are still in the air. The Democratic nomination is now hotly contested and the lead that Hilary has now is starting to erode. Sanders has just won Wisconsin with an open primary. We have two days to the Wyoming primary election for a state with less than a million people, yet it has 14 delegates in play. Then there is New York on the 19th.

400 investigative journalists announced the release of the Panama Papers, 2.5 Terabytes of documents covering 40 years of tax shelter activity for the wealthiest people in the world. Hundreds of thousands of shell companies built just for the purpose of shielding an estimated $21 trillion in assets from taxation by the tax authorities of the world, including the United States.

The US economy is one of the largest in the world at $16 trillion. The gross world product is about $78 trillion. So about 26% of the world's economy for a year is locked up in tax shelters all around the world. This is lost output that the rest of us could use to build and maintain infrastructure, to educate our kids and provide health care to those that need it.

Notably, only one American name has emerged from the haul so far. Even then, that one isn't very rich. One elected leader in Iceland has already resigned because of it. Now there is speculation that this leak, one of the largest by an order of magnitude so far, could put Bernie Sanders in the White House. The people who produced the Panama Papers assure us there is much more to follow.

This leak of private data comes from one law firm in Panama that has helped thousands of individuals and corporations create shell companies to hide the origins of the flow of funds around the world. Even as large as it is, it is likely to be the tip of the iceberg. But it underscores one major point of the Sanders campaign and echoed by Elizabeth Warren: the economy is rigged.

These shell companies are legal, but they are only accessible by people with the means and knowledge to use them. If you can pay the right lawyers, you can use them to shield your income from taxation and you can prove that they are perfectly legal. CNN reports that the law firm at the center of the scandal, Mossack Fonseca, helped to create more than 1,000 US companies. This is evidence of a body of law that most people didn't know existed and is completely inaccessible to them even if they knew about it.

We can thank our US Congress for writing a good chunk of that body of law. You know, the Congress that was supposed to represent all of us. Hilary Clinton served in that Congress for 8 years. She has had a long career as a lawyer and as a part of the Clinton Foundation, an organization that has raised some $3 billion over 40 years, is doubtless aware of the legal tax havens around the world. Though Clinton has called for accountability, it has been disclosed that one of her biggest donors saved billions in taxes over a decade as a result of trade agreements like that one. It would be hard to see how she could be tough on that donor and others like him in light of the support she has received from the same.

There is a running dialog between Clinton and Sanders over a trade agreement we have with Panama. Sanders has said that agreement has made the tax evasion issue worse. Sanders opposed the agreement in 2011 and seems to have predicted how bad tax evasion has become. Hilary voted for it. The next big primary is in New York, and one of the biggest tax havens in the world is Manhattan Island.

New York can send a message to the establishment. They can say, "Enough is enough", or they can ask for 4 more years. Let's hope they choose the former.
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