$1.4 trillion are “stranded” overseas. Seventy-five Congresspeople, and growing, from both parties, respectfully led by freshman Representative John Delaney (D-Md), are advancing a plan to retrieve that money.
Senate Minority Leader Everett Dirkson reportedly once said, “A billion here, a billion there, pretty soon, you’re talking real money.” A trillion is a thousand billion.
A million million dollars. $1.4 trillion is approximately seven times the value of the U.S. government’s gold held at the bullion depository inside Fort Knox. Liberating it would be something like a reverse Goldfinger “Operation Grand Slam” times seven. That’s … real money.
Will Congress do this? Some Democrats consider it heretical. Some Republicans are dragging their feet.
Yet its beginning to look like a real possibility. The political implications of doing it are even bigger than the trillion, plus or minus, dollars at stake.
This stranded trillion dollars are American corporate profits. Last time this columnist looked, capitalism remained legal in the United States. (It is not so legal in such advanced nations as Venezuela, to whose policies some of our progressives aspire notwithstanding Caracas’s struggle to keep even toilet paper in stock.)
The trillion is stranded offshore by America’s nosebleed nominal corporate tax rate. To be sure, “stranded” is used metaphorically. This money is not stashed in tomato cans in Ireland. It is banked. And because, as Prof. Robert Mundell taught us, the only closed economy is the world economy, the capital remains readily available, very much including to the US. A current accounts deficit axiomatically is equal to a capital accounts surplus. America obviously is running a massive capital accounts surplus. There’s no shortage of financing.
That said, our nosebleed corporate tax rate causes distortions and inefficiencies in the deployment of capital. This matters, microeconomically if not macroeconomically. Based on the reported enthusiasm of the rightful owners of this money, it looks like removing a big barrier to remitting it home is a big deal and a good thing.
Republicans (at least in theory) disapprove of the kind of “Somali Pirate policy” lunacy that is holding for ransom American corporate profits honestly earned abroad. All sane people ought to condemn such lunacy. Some on the left, however, take the position that Uncle Sam somehow is entitled to over a third of this money.
Meanwhile, back home, the federal government’s highway trust fund is going bust. Some of the (civil-engineer-graded C) bridges we drive across are at risk of collapsing. Aviation (D), dams (D) and drinking water systems (D-) reportedly are in sore disrepair.
The Congress, hocus pocus, last month made a couple of tweaks and used a sick accounting gimmick to keep highway funds flowing until next May. It’s at best a short term patch.
Democrats (at least in theory) disapprove of the “Enron Accounting policy” lunacy that is putting many of our roads, bridges and other public works — and, even, lives — at risk. All sane people should disapprove of such lunacy. Some on the right, however, appear truculent about federal involvement in infrastructure.
Disapproval, however, is cold comfort. Now … there appears to be a deal in sight.
It does not stick it to the taxpayers, as would, as some propose, raising the gas tax. It merely requires Congress to “think different.”
So “Who is John Delaney” and what is his solution? Delaney (who represents this columnist’s Maryland district) was first elected in 2012. He then was elected by his colleagues as president of the Democratic freshman class.
Govtrak.us scores Delaney as center-left. He is an Obama supporter.
Delaney, however, does not labor under the pretension that Congress can command the incoming tides to halt … or repeal the natural laws of economics. Although a man of the (center) left, Delaney founded not one but two New York Stock Exchange listed companies. He is the only former CEO of a publicly traded company serving in the current Congress. Nor has this serial entrepreneur become a latter day Hollywood-besotted limousine liberal.
Delaney’s net worth is, one might say, Very Substantial. He achieved this wealth by providing valuable services to real people. There is a delicious irony in the condemnation of Delaney by Delaney’s Republican challenger in the 2014 election, Daniel Bongino, as a “$200 million Potomac banker.” Republicans attacking successful entrepreneurs for success? Hey, the Kinks were right. It’s a mixed up, muddled up, shook up world.
So Delaney clearly isn’t serving for the paycheck. He seems motivated by an interesting challenge. (The Thematic Apperception Test calls this “Need for Achievement.” It’s a nice quality.) In an in-person interview with this columnist Delaney states that he is driven by three principles: to tackle major challenges, in innovative ways, and to do so exclusively in bipartisan ways. Call it the “New Delaney Paradigm.”
Congress is obsessed with small ball. Rather than innovate, Congress is fixated on doing the same thing but expecting different results. (Rita Mae Brown, in her novel Sudden Death, famously defined this as insanity.) Congress gratuitously is polarized. So … Delaney certainly has tackled a challenge of magnitude.
Delaney first came to this columnist’s particular notice upon discovering him to be the sole Democratic (among 40) legislative sponsors of Rep. Kevin Brady’s Centennial Monetary Commission legislation. His support for the Commission, Delaney states, derives in part from his respect for Rep. Kevin Brady (R-Tx) who chairs the Congressional Joint Economic Committee on which Delaney serves. It derives, in part, from Delaney’s own pre-Congressional experience as a financier during the 2008 Meltdown. It also derives from a common sense determination to look into what works (and what does not).
Delaney’s signature legislation is The Partnership to Build America Act. It is a way of voluntarily retrieving much of the trillion plus dollars of profits “stranded” offshore and using a fraction of the proceeds to rebuild our infrastructure.
Doing this is seen by some Democrats as heretical. Yet there are other, sane, voices on the left that seem receptive.
In 2011 organized labor titan, former SEIU president, and mensch (Merriam-Webster: “a person of integrity and honor”) Andy Stern dropped a few jaws with an op-ed in Politico calling for something anticipating the Delaney Act. Stern:
Main Street is still hurting. Gas and food prices are soaring. Unemployment, while improving, is still too high. Standard & Poor’s recently adjusted its long-term credit outlook for the federal government. Middle-class families are struggling.
America, however, needs increased investment now: investment in infrastructure, innovation and jobs.
One private-sector opportunity that could offer the quickest — maybe the only — viable short-term proposal for investment and growth is to allow U.S. companies to bring back up to $1 trillion earned overseas that is now sitting in foreign banks and to pay U.S. taxes on the earnings at a reduced corporate rate.
It is estimated that a repatriation measure would move nearly $1 trillion from foreign banks back into the U.S . Companies could then invest their after-tax dollars in expanding operations, building infrastructure and creating jobs.
Some, at least, are willing to embrace JFK economist Walter Heller’s dictum: “Rise above principle and do what’s right.” Reducing the federal government’s theoretical 35% vigorish is considered heresy by some factions within the Democratic Party. Federal infrastructure engagement is considered heretical by some Republicans.
Well, “heresy” is derived from the Greek word meaning to think for yourself. To paraphrase Patrick Henry, if this be heresy make the most of it. Washington needs more elected officials who think for themselves.
A million million dollars out from under? Restoring, and not at taxpayer expense, our bridges and roads? Hello Congress?
According to Delaney.House.Gov:
The Partnership to Build America Act finances $750 billion dollar in infrastructure investment using no appropriated funds and has 75 cosponsors (39 Republicans and 36 Democrats) in the House. … The Senate version of the bill is sponsored by 6 Democrats, 7 Republicans, and 1 Independent.
- The legislation would create the American Infrastructure Fund (AIF) which would provide loans or guarantees to state or local governments to finance qualified infrastructure projects. The states or local governments would be required to pay back the loan at a market rate determined by the AIF to ensure they have “skin in the game.” …
The AIF will be funded by the sale of $50 billion worth of Infrastructure Bonds which would have a 50 year term, pay a fixed interest rate of 1 percent, and would not be guaranteed by the U.S. government.
- U.S. corporations would be incentivized to purchase these new Infrastructure Bonds by allowing them to repatriate a certain amount of their overseas earnings tax free for every $1.00 they invest in the bonds. …
- Assuming a 1:4 ratio, meaning a company repatriates $4.00 tax-free for every $1.00 in Infrastructure Bonds purchased, a company’s effective tax rate to repatriate these earnings would be approximately 8 percent …
Does this legislation achieve purist perfection? By no means. Its very impurity gives it potency.
Anarcho-capitalists yearn for the day when Big Business can do whatever the heck it wants with its money. (Uncle Sam should stick to managing such lighthouses as the Congress had not yet gotten around to privatizing.) This doesn’t do that. Sorry.
Meanwhile, those who yearn for a Socialist Workers Paradise perfervidly imagine corporations proudly lining up to fork over a third of their shareholders’ profits to Uncle Sam. These corporations, it is imagined, will receive, in return, patriotic Order of Lenin ribbons. Leninists among us will take no joy from this Partnership. Sorry.
The Delaney Act is practical politics. Conservatives gain a desideratum. Corporations can bring, maybe, something like $1 trillion of their shareholders’ money back … at a reasonable rate set by Dutch auction. Liberals achieve one of their hearts’ desires: Infrastructure. (And union jobs! Full disclosure: this far right wing columnist is a proud member of the AFL-CIO and is in solidarity with blue collars and purple tees. Happy Labor Day, all!)
So the Delaney Act is about pulling out a wedge inhibiting access to a trillion dollars, more or less, and about maintaining our roads and bridges. It does so by offering a good deal for corporations plus shrewd leverage. It does so without sticking us taxpayers, even contingently, with the tab. We voters are the big winners.
Corporate profits? Profitable businesses are the fountainhead of good jobs.
Infrastructure? Even most libertarian-tinged conservatives think that, notwithstanding the exuberance of our beloved “sell the streets” purist libertarians, it really is OK for government to maintain our roads and bridges. Certainly most voters think so. (Not coincidentally other provisions of the Delaney Act would help hold local governments accountable for maintaining these more meticulously than has been their wont.)
What really is radical (meaning fundamental rather than extreme) about John Delaney, however, goes far beyond merely reeling back seven Fort Knoxes. What really is radical goes far beyond pre-empting an incipient chorus of an American version of “London Bridge is falling down, falling down, falling down.”
The Partnership to Build America Act portends a demonstration of the New Delaney Paradigm — to “tackle major challenges, in innovative ways, in exclusively bipartisan fashion” — that holds the promise of nudging America back on track to equitable prosperity.
John Delaney begins by building bridges, politically and literally. Next up: let’s enact the Centennial Monetary Commission to consider, empirically, how best to establish good, job-creating, high-equitable-growth, low-inflation, monetary policy.
The New Delaney Paradigm begs for one more element to achieve perfection: to add to its three principles one more: Peter Drucker’s law, “In every area of effectiveness within an organization, one feeds the opportunities and starves the problem.” With that one small tweak the New Delaney Paradigm could prove a transformational political game changer.
Hello Congress? The federal government is an organization. To be effective, feed the many, now-begging, opportunities to restore America to historic trend-line (or better) economic growth. Prosperity will cause many of our systemic problems (such as the looming entitlements-driven deficit) to cure themselves. If the Delaney Act passes, and if the New Delaney Paradigm sticks, John Delaney could prove himself the transformational leader for which the Democratic Party, and America, is yearning.