an autodidact meets a dilettante…

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Represent US and ‘US democracy’, part 1

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If there was one decision I would overrule, it would be ‘Citizens United.’ I think the notion that we have all the democracy that money can buy strays so far from what our democracy is supposed to be.

Ruth Bader Ginsburg

Leaving the weird awfulness of Covid-19 aside for a while, I must thank a good friend for sending this video my way. Jennifer Lawrence is an American actor none of whose films I’ve ever seen, but in this video she and Josh Silver, fellow member of the activist group Represent Us (with presumably a play on the US – and they’ve been making videos for years now), effectively focus on a problem of US politics I’ve largely neglected in my own analyses of the subject since the advent of the most recent incumbent in the white palace.

I’ve referred to it obliquely, for example when writing about the election cycle in that country, and my view that there’s at least one election too many – i.e. the presidential election. It all seems too much of an expenditure of time and energy, but I neglected to focus enough on the most insuperable problem – money.

So in this post I want to look at what Lawrence and Silver claim about the influence of money and wealthy lobbyists on government, especially federal government, and the corresponding lack of influence the relatively disadvantaged generally have, in spite of their vast numbers. Are there claims accurate?

l’ll try to fact check much of this – and their first claim isn’t directly about money, it’s the claim that the last two presidential candidates, Clinton and Trump, were ‘the least popular candidates since they began keeping track of such things’. Australia’s journalistic website The Conversation certainly confirms this about Trump. At election time, he ‘had the highest unfavorability rating in history, with over 61% of Americans having an “unfavorable” or “disapproving” view’. His victory, with fewer votes, says much about the electoral college system and how it favours less populated ‘red’ states, but I won’t go into that here. Clinton, though, was a ‘historically unpopular opponent’, with an unfavourable rating of 52%, the worst rating ever recorded for a losing candidate. So that checks out.

The next claim is that ‘only 4% of Americans have a great deal of confidence in Congress now.’ I imagine that the word ‘great’ is key here, as everything depends on framing. For example the question might be – how much confidence do you have in Congress? (a) no confidence (b) very little confidence (c) a fair amount of confidence (d) a great deal of confidence – or something similar. And how many constituents, anywhere, would say they have a great deal of confidence in their politicians, where there’s space to express skepticism? A quick check shows that the figure comes from a Gallup poll reported in The Atlantic back in 2014, and indeed it was a multiple choice question, but the most interesting/disturbing finding was that the attitude to Congress has suffered a massive downturn in recent decades, as shown by the graph below. So, unless there’s been an uptick in the last few years – and surely there hasn’t – Represent Us is right on this too.

The video next focuses on a Princeton study on ‘how public opinion influences the laws that Congress passes’. Represent Us presents this as a ‘thirty percent rule’. Any law has a 30% chance of being passed by Congress, regardless of its public support (from no support to complete support). The Princeton study concluded, apparently, that ‘the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact on public policy.’

So, the 2014 study, by two professors of politics and decision-making, Martin Gilens and Benjamin Page, is self-described as ‘tentative and preliminary’, but they are clear about their findings:

The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.

I’ve just read the study, and, unsurprisingly it’s a lot more nuanced, complex and at times dauntingly technical than the 12-minute video. For example it points out that policies advocated by cashed-up lobby groups may well benefit most of the public in spite of their lack of popular support. However, the economic elites, who have the most influence on Congress through financial, quid pro quo support, favour policies which are generally non-beneficial to the poorer, and far more numerous, sectors of the population. In fact, a lot of the findings remind me of passages in a very different text, Robert Sapolsky’s monumental book Behave, where he examines class-based behaviour (he calls it socio-economic status rather than class, coz we all know that the USA is a classless society haha). Take this example:

… a culture highly unequal in material resources is almost always also unequal in the ability to pull the strings of power, to have efficacy, to be visible. For example, as income inequality grows, the percentage of people who bother voting generally declines.

R Sapolsky, Behave, p292

As Sapolsky also points out, the super-rich, and their children, tend to move in the limited circle of their peers and so reinforce each other in seeking to maintain and enhance their lifestyles. The super-poor, meanwhile, are more often in a battle with each other (and not with the super-rich who are invisible to them) for resources, and tend not to trust government, since it is run by ‘them’. So the more economically unequal the nation, the more political power falls into the hands of the wealthy.

Anyway, returning to the video, the next claim is an odd one: ‘politicians are spending up to 70% of their time raising funds for re-election’. The term ‘up to 70%’ could actually mean anything from zero to 70%, so let’s take that with a pinch of salt. Another Represent Us website quotes former Democrat senator Tom Daschle: ‘a typical US senator spends two-thirds of the last two years of their term raising money’. I’m not sure if this is meant literally, but of course time spent isn’t the issue, rather money raised is the issue. The video goes on to make this interesting claim: ‘in order to win a seat in some races, you would have to raise $45,000 every day for six years to raise enough money to win’. I’m not sure how to fact-check such a claim, though ‘in some races’ could be a warning sign of some exaggeration or over-simplification. Then again, the idea of those kinds of dollars being involved in any electoral race is a sure sign of shonkiness. In any case the claim has to be seen in tandem with the next factoid presented, that ‘only .05% of Americans give more than $10,000 to politics’, which suggests that this tiny sector – the super-rich and wealthy special interest groups – are the funders of election campaigns, generally with agendas that the pollies are politely commanded to comply with – with the inevitable result for the increasingly disengaged majority.

So, whether these facts are precisely correct or not, it’s clear enough that money is poisoning democracy in the USA. As the video goes on to say, Americans are leaving the major parties in droves, and some 42% are registered as independent, rather than members of the duopoly of Republicans and Democrats. And since there are virtually no independent candidates, the quote from Sapolsky above becomes all the more relevant.

I’ve only looked at about a third of the video, but I’ll post this lot and present my take on the rest in my next post. Keep well!

Written by stewart henderson

March 30, 2020 at 2:43 pm

getting roolly rich in the USA 1: Jeffrey Epstein

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Epstein’s two islands in the Caribbean – Little St James is immediately below the Great one

The Jeffrey Epstein case, in terms of women, girls and exploitation, is something I’m far too squeamish to explore, and of course it’s very very sad and disgusting, but my interest was also piqued by the news that he was/is a hedge fund manager (but maybe not), with mansions and an island and oodles of moolah to invest in all sorts of science projects. This raised many questions. Was he obnoxiously rich to begin with, like little Donny Trump? And what is a hedge fund, and can you legitimately make millions from one?

I’ve never been rich and I’ve never invested in anything, unless you call giving money to Oxfam or UNHCR an investment, so I’m really starting from scratch here. The first definition I’ve found is that a hedge fund is ‘an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital’. So, if this is true, why invest ‘offshore’, and how are you able to do this with money you don’t really have or haven’t earned? I suspect I won’t find easy answers to these questions. The website Investopedia (which sounds immediately suss!) starts with another definition: ‘Hedge funds are alternative investments (?!) using pooled funds that employ different strategies to earn active return, or alpha, for their investors’. Alpha! What a lovely musical note that hits for investors (especially combined with ‘male’). But the mention of pooled funds (e.g. mutual funds and pension funds, as well as hedge funds) might explain how you can make money even if you have little personally to invest. Investopedia also tells us that hedge funds ‘are generally only accessible to accredited investors’, because they’re less regulated than other funds. And we all know that the wealthy are very very keen to have less regulation and oversight than what the Yanks call ‘regular folks’

However, it does seem that, to be an ‘accredited investor’, it helps to be already rich. The term applies to financial institutions such as ‘investment banks’ and corporations as well as individuals. Needless to say, this is a world of which I know absolutely nothing. All I’ve really heard about it is negative – high rollers, corruption, anti-government arrogance and the like – which says much about where I get my information from. Even so, the most objective analysis raises questions – for example, the Australian Corporations Act of 2001 ‘defines “sophisticated investor” [basically synonymous with ‘accredited investor’] so as to exclude them from certain disclosure requirements.’ That rings alarm bells for me – you’d think that these heavy investors would be the last people to be excluded from disclosure. The Act also says that such investors require an accountant’s certificate to the effect that they have a minimum of $2.5 million in net assets or a gross income of $250,000 over each of the previous two years. Presumably they’re not asked about how they acquired such income/assets. And the financial bar is considerably lower in the USA.

Hedge funds have grown in popularity, and as a proportion of the asset management field, over the years. After the GFC of 2007-8 there was an attempt (probably feeble) to rein in the sector. The essential hedge fund strategy (think ‘hedging your bets’) is to receive a positive return regardless of bear or bull markets, by spreading the risk in some clever non-risky way. If you get to be a hedge fund manager (which some reports have claimed Epstein to be, though Wikipedia doesn’t mention this in a fairly comprehensive bio) you get to keep a certain percentage of invested funds for yourself – generally a management fee (maybe 2% of assets) and a performance fee (a substantial percentage of any annual increase in net asset value). You can see how disclosure is essential in payment of such fees, and why the temptation to cook the books would be high.

Epstein seems to have ‘risen’ from humble beginnings. His mother was a ‘homemaker’ and one-time school aide, and his father was a groundsman and gardener, yet Epstein is described, at various periods in his career from the early eighties, as an options trader, a financial consultant, a limited partner (at the dodgy investment bank Bear Stearns), a finance manager and other such vagueries – all despite a patchy scholastic record (but as an autodidact and dilettante I certainly don’t hold that against him). However, one very interesting item stands out….

Back in the eighties, Epstein became an associate of one Steven Hoffenberg, who hired him as a consultant for his company, Tower Financial Corporation (TFC). Epstein was paid $25,000 a month, which to me is an absurdly huge amount for anyone to be paid, though in this world it’s probably peanuts. Even before joining TFC (a collection agency that bought up other people’s debts – and if you think that’s dodgy, read on), Epstein had been bruiting it about among the crooked rich that he was a ‘high-level bounty hunter’, sometimes working for governments or the super-rich to recover embezzled funds, sometimes working for clients to secure embezzled funds. He and Hoffenberg became very close, flying around the world to do their dodgy deals, done not so dirt cheap, but in 1993 TFC collapsed and was exposed as one of the biggest Ponzi schemes in US history, with some $475 million of investor funds vanishing. Epstein, though, had already left the company and managed to escape without charge. Hoffenberg was sentenced to 20 years’ jail, and has always claimed that Epstein was intimately involved in the scheme. In fact, Wikipedia’s brief entry on Hoffenberg ends with this fascinating line:

In July 2019, he claimed that the American financier Jeffrey Epstein was his co-conspirator in the Ponzi scheme.

That’s right now, folks. Presumably he has the evidence for that – so why wasn’t Epstein prosecuted way back then?

Anyway, it appears, surprise surprise, that Epstein’s criminality isn’t restricted to his treatment of the opposite sex, which makes you wonder how many super-rich types who don’t draw attention to themselves vis-a-vis sexual exploitation can be shown to be criminals. And how is it possible to buy what is presumably an American island to use as a tax haven?

Tax havens are always described as ‘offshore’. That’s to say, not a part of the country in which you want to avoid paying taxes. The US site Investopedia underlines its dodginess by providing plenty of info on tax havens (hey man, we’re just tellin’ stuff, not selling’ stuff, I mean, peace off man), as well as providing a list which includes the British (but not the US) Virgin Islands. Epstein owns two of the US Virgin Islands, Great Saint James and Little Saint James, where he has one of his mansions. Great Saint James cost him $18 million in 2016, pretty cheap for an island I would’ve thought, and I can’t find the price he paid for Little Saint James back in 1998. This tiny island was his principal centre of sexploitation, aka Orgy Island by the cognoscenti.

The USA has an international reputation as a bad actor in respect of tax disclosure. With monumental hypocrisy, it implemented the Foreign Account Tax Compliance Act in 2010, requiring or ‘forcing’ (dog knows how) financial firms everywhere in the world to report accounts held by US citizens to their IRS, while at the same time refusing to comply with the OECD’s Common Reporting Standard – the only major nation to do so. To be clear about this the USA demands that other countries share information about US citizens’ offshore dealings, but refuses to share the same information with those countries about foreign investment in the USA. As a result, the USA is arguably now the world’s biggest tax haven. How this works exactly for US citizens like Epstein I’m not sure at this point, but the USA has become, especially over the last decade, one of the easiest places in the world for successful tax evasion, especially through the use of LLCs or shell companies. We’re finding this out through examination of Trump’s criminal activities, but of course I’m far from understanding the detailed nature of LLCs, offshore trusts and the like. I need to lern more.

I’ll end this piece – almost – with a quote from an organisation and site that’s the polar opposite of Investopedia, the Tax Justice Network:

The United States, which has for decades hosted vast stocks of financial and other wealth under conditions of considerable secrecy, has moved up from sixth to third place in our index. It is more of a cause for concern than any other individual country – because of both the size of its offshore sector, and also its rather recalcitrant attitude to international co-operation and reform. Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions, aggressively taking on the Swiss banking establishment and setting up its technically quite strong Foreign Account Tax Compliance Act (FATCA) – it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction at both the Federal and state levels.

Of course, none of this clearly explains how Epstein ill-got the wealth to be tax-liable in the first place. Certainly the Ponzi scheme he seems to have gotten away with was one, possibly the main, source, but he seems even before this to have ingratiated himself into the world of dodgy financial entities and personae, presumably through schmoozing and force of personality. Certainly his relationship with Ghislaine Maxwell, daughter of that supremo of repugnant dodginess, Robert Maxwell, is an indication of the world Epstein had become familiar with, a world in which everyone is advising everyone else on how to make money out of nothing and how to retain as much of that money as possible, regardless of anything so inconvenient as the law.



Written by stewart henderson

July 21, 2019 at 2:14 pm