Good news and bad news

Glad to see that Cayman Islands bank accounts are worse than serial adultery in the eyes of Republican voters; less glad to see that a single billionaire can transform the race for the Presidency by writing a check to a super-PA for money he’ll never miss.

In a Southern Republican primary, adultery turned out to be less of a burden for a candidate than Cayman Islands bank accounts. That reflects a clearer moral sense than I would have credited Southern Republicans with.

On the other side of the ledger, a single billionaire donating $5 million to a Super-PAC completely turned the campaign around in a week. $5M is chump change compared to the stakes in the American Presidency. If unlimited amounts of untraceable cash are going to be sloshing around, there’s no way to prevent the Chinese government, or the Iranian government, or the Saudi government, from playing the game. It isn’t hard for government-sized operations to channel the relevant amounts of money to U.S.-based corporations under their effective control.

Sheldon Adelson made most of his billions in Macao, which is Chinese territory; you can believe that Adelson’s political activities are immune from Chinese pressure if you like, but you can’t reasonably doubt that if China needed a tame U.S. billionaire it could easily create one. Campaign finance reform sounds like a boring topic, but fixing it in the wake of Citizens United isn’t just a matter of asserting democratic values over plutocratic ones; it’s a matter of national sovereignty and national security.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

27 thoughts on “Good news and bad news”

  1. Considering that Sheldon Adelson’s self-professed major issue is Israel, it’s a little odd that China should be introduced as a foreign influence here instead of Israel.

    In fact, Newt Gingrich himself has admitted that his pro-Israel stance explains Adelson’s support in an interview with Ted Koppel a few days ago:

    “Koppel: There has to be a so-what at the end of it. So– if you win what does Adelson get out of it?

    Gingrich. He knows I’m very pro Israel. That’s the central value of his life. I mean, he’s very worried that Israel is going to not survive.”

    But of course, if we focus on this issue, it’s apparent that the potential for profound foreign political influence existed long before the Citizens United ruling.

  2. Apparently the social conservatives in SC wanted a pro-Israel hawk more than they wanted moral Christian.

  3. Richard Mellon Scaife bought a seven-year pseudo-scandal culminating in the impeachment of a President. And, most people think that was about a blow-job.

    The successor of the impeached President took us to war for no reason anyone can identify with certainty, though it might have something to do with . . . oil.

    The present occupant of the Oval Office has presided over the aftermath of the greatest financial crisis in 70 years and can scarcely find a banker to prosecute. They’re apparently all savvy business people.

    We lost control of our politics to plutocrats a long time. We don’t need lurid fictional speculation about Chinese plots, so much as we need to be realistic about the non-fiction.

    1. “And, most people think that was about a blow-job.”

      Well, to be fair that was the defense, in order to distract from the little things like suborning perjury, destroying evidence under subpoena, privacy act violations, and so forth. (And there’s a LOT of “so forth”!)

      1. i always thought it was about power politics. regardless of what it was about, it must have chapped the republicans that clinton’s popularity increased with impeachment.

  4. What is unethical about Mitt Romney’s investment in funds with holdings in the Caymans? Specifically. These sorts of accounts do not operate as a tax shelter for Romney or other U.S. participants. so what’s the problem?


    1. These sorts of accounts do not operate as a tax shelter for Romney or other U.S. participant

      [citation needed]

      Jonathan, can you explain what you see as their purpose?

      1. Under U.S. law, he is required to pay taxes on his earnings, unlike a corporation, which would only pay taxes upon repatriation.

      2. Sure. The purpose is to allow foreign investors to invest in the vehicle without becoming subject to U.S. taxes. U.S. investors, however, are subject to the same taxes as if the investment vehicle were based in the U.S. Further, the Caymans stopped shielding information on investments from the IRS several years ago. the only potential advantage for a U.S. investor to having the money in the Caymans (beyond being able to attract more foreign investment) is a specific levy on certain IRA investments, but the Romney campaign says this would not apply here. All of this information is readily available and has been reported in any source that bothered to investigate before making assumptions:
        See, e.g., here:


        1. OK, per your comment and the article, there are three possible reasons he might have money in the Caymans:
          1) Something having to do with IRAs that I didn’t attempt to comprehend because you assured me it wasn’t relevant.
          2) Bain may have set up an investment vehicle outside the US so that foreign investors wouldn’t have tax implications from putting money into a US-based investment vehicle, while any US-based participants (like Romney) would still be just as liable for taxes as if the investment vehicle were based in the US. Romney might have participated in this fund, and might have paid all his taxes.
          3) To avoid reporting income, and paying taxes. This was a function that stopped after an agreement was reached in 2009.

          At best, it’s (2) – that he was part of a foreign-based corporation specifically set up to help foreigners avoid taxes they’d pay if they actually invested in the US. But let’s pay a little more attention to (3), with one more datum in mind:

          Mitt Romney has announced that on Tuesday (that is, after the next debate, which still seems politically tone-deaf) he will release his tax forms – from 2010, only, plus some sort of first-draft unofficial number for his 2011 liability. Per The LA Times story:

          Trying to put the issue of tax returns behind him, he said he would release his 2010 return on Tuesday along with an estimate of his 2011 tax bill. But he brushed off a suggestion from moderator Chris Wallace that he follow the pioneering example his father, George Romney, set in the 1968 presidential campaign, when he released a dozen years of federal returns.

          So, starting in 2009 or in 2010 (depending on when that agreement by the government of the Caymans took effect), it was no longer possible to hide income in the Caymans. And Romney has announced that he will release his 2010 tax forms, but not his 2009 or 2008 tax forms – let alone his tax forms dating back to 1999, as his father would have done, and as Obama has very nearly done (back to 2000 per this link). Without tax returns dating back to the time when the Caymans could be used to shield income from taxation, we can’t know whether he used the Caymans in this manner.

          By the way, looking back at the Google results it appears that Obama released his 2000-2006 returns in 2008 in response to pressure from the Clinton campaign – and refused to release his 1997-1999 returns. I say this because (1) I don’t want to give the impression of trying to claim that Obama’s returns are out back to 2000 because he was following George Romney’s guidelines, when in fact he went just over half as far; (2) what’s sauce for the goose is sauce for the gander, and if Obama was browbeaten into releasing several years’ returns you can bet Romney will be; and (3) a comparable release by Romney would go back to 2004; this would just barely get past the beginnings of Romney’s run for President, but it would cover a fair few years that the Caymans were a haven for tax cheats. I’d argue that once Romney releases 2004-2010 he can claim parity with Obama, and a reasonable answer to the Caymans questions – if he has one.

          1. I agree that Romney should release all of his tax returns. I also agree that if Romney failed to report income — and this evasion was facilitated by the lack of information sharing prior to 2009 — this would be blameworthy. Prior to the agreement, U.S. citizens still needed to pay taxes on income earned overseas. The Caymans just made it easier to avoid this obligation. If this was done, the blameworthy act is the evasion, not the bank account.

            Recall that Prof. Kleiman’s claim was that merely having such an account is more morally blameworthy than adultery. That is the claim I seek to challenge.


        2. Jonathan,

          the Romney campaign says this would not apply here.

          If you are relying on the CSM article for this I think you are reading too much into the statement by the campaign. The article quotes Andrea Saul, the campaign’s press secretary, saying:

          Also, in regards to the Unrelated Business Income Tax: Governor Romney’s IRA is tax deferred, just like the IRA’s of every other American. Its investments are in compliance with rules created to keep it tax deferred, just like it was intended to be.

          The Unrelated Business Income Tax is what the IRA discussion is all about. But there is nothing illegal about using a fund in the Caymans to avoid this tax. According to the tax expert quoted by the CSM this is a well-known technique. I don’t see where Saul is saying Romney is not doing this. She seems just to be saying that he’s not doing anything illegal.

          And by the way since, per Saul, the assets are in a blind trust, how would she, or Romney, know how they are invested?

          While I’m here, let me suggest that Warren asks a good question, but a complicated one. The CSM refers to a 2009 agreement between the Caymans and the US, but I have only been able to find information about a TIEA (Tax Information Exchange Agreement) signed in 2001 that went into effect in the Caymans in 2006. It’s not clear, though, that it involves automatic reporting of income by Cayman institutions in the same way that US investment companies issue 1099’s. It seems more to be designed to let DOJ get information in investigating criminal tax evasion. It could be that something else was done in 2009, of course, and it’s likely that I don’t understand the treaty, but I would like to know more about all this.

          1. I’ll concede every point here, but still express wonderment that merely having such an account is more morally blameworthy than adultery. (And, let me add, that whether something is morally blameworthy is distinct from whether it should be relevant to voters; a good leader may well have serious moral failings in his/her personal life.)


  5. Since much of the world has an interest in who becomes President of the USA why shouldn’t they be able to participate in the process of selecting one?

    1. After all, what happens in China arguably has more effect on the prosperity of the whole United States than what happens in South Carolina does.

    1. Okay. Write me a constitutional amendment that actually does that. Good luck.

      One of the problems is that the argument that money equals speech isn’t really incorrect. It takes money to create a newspaper, or to buy advertising or *anything* else that you would do to distribute your opinion in a way that people will hear it. No, having a blog doesn’t count. That’s a great way to reach people who already agree with you and a terrible way to try to persuade people that don’t. Money really does lie at the heart of the basic meaning of the First Amendment. If you prohibit people from spending money in ways that would affect elections, you really are muzzling speech.

      Of course, what no one on the right will admit, or even believes, is that this is a very serious problem for a democracy. That money equals speech means that some people have more speech than others. I’m not sure how we survive this, but I have yet to see anyone propose a method of taking money out of politics that results in everyone having both a non-zero ability and an equal ability to engage in political speech. Public financing sure as hell doesn’t come close, since by itself it doesn’t prevent people from speaking out.

      Do you really intend to make it illegal for anyone to publish or broadcast anything having to do with politics? If you aren’t, then what are you proposing?

      1. I agree that it’s hard to fairly keep money out of politics. But I don’t think it’s as hard to crowd it out. Public funding of campaigns, public provision and mandating of broadcast resources, even some sort of Fairness Doctrine are all possible and not as obviously legally unfeasible – though I note that the Roberts Court invalidated a law (AZ? NM?) that attempted to provide increased public campaign funding in response to increased private funding of the opposing target.

        It’s also worth noting that when it comes to advocacy by corporations, money isn’t everything. The recent action by Wikipedia, Google, and others to protest SOPA/PIPA was remarkably effective. In this case the result was to my liking, but we shouldn’t forget that other corporate and cultural powers, or even the same ones, could use similar tactics to achieve ends we don’t like – and probably must be left free to do so. I don’t think we can or should block either such protest actions or perhaps the use of money – but it might be possible to increase the countervailing forces, and it might be possible to alter corporate behavior. This could be done by consumer boycott, or it could be done legislatively, as in Germany where the composition of corporate boards reflects by law the fact that the employees, as represented by their unions, have an interest in how the company that employs them is run.

        Also, disclosure. Citizens United said the money must flow, but didn’t say it had to remain anonymous. The continuing anonymity is a function of the failure of Congress to act.

        1. “Citizens United said the money must flow, but didn’t say it had to remain anonymous. The continuing anonymity is a function of the failure of Congress to act.”

          This isn’t clear. The Supremes have found in the past that anonymity is a crucial component of certain kinds of speech. And although at the state level contributors to various hate funds have had little luck arguing that their participation should be masked to shield them from adverse consequence, I wouldn’t bet anything I wasn’t willing to lose on the supreme court taking the same view as the lower courts.

        2. I have far less confidence than you do that private money could be crowded out. Exactly how much do you plan to give each candidate? What are you planning to do about the out years of the cycle? Political advertising can still be effective even when there are no candidates declared. What do you plan to do about advertising on issues rather than specifically on candidates? Where do you draw the line between candidates that get public finding and those that don’t?

          All of those are critical issues, and none of them have an easy answer, or even one that is obvious but hard to implement.

          1. Here is a link to a website that might provide you with some answers:

            I agree that we can’t and shouldn’t try to restrict speech, but public financing can and does work (though the Supremes have made it harder), and politicians of both parties (and some others too) happily use it.

            I see the main benefit being the greater amount of time politicians can spend on trying to fix actual problems. I think “corruption” is more of a marginal thing, though of course still horrible. That is, with robust public financing, mostly I think people would vote the same, ideologically.

            But, there would I think be a marginal change in the number of shenanigans, and most important, we’d all *feel* better about the system, and about our public servants. Instead of b****ing all the time about politicians, I wish we voters would simply hold them to higher standards. Then they would get down to work.

          2. Clean money candidates just need enough to put up a fight. We don’t even need strict equality of funds, though that SCt decision which outlawed increased public funding for candidates facing i.e. attacks (or was it self-financed opponents? I forget.) was absurd.

            More rigorous scrutiny by voters and press would easily make up the difference.

          3. Oh yeah, and don’t forget, we own the bleeping airwaves. We should use them around elections, and we should shorten the darned campaigns too.

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