Not Part of the Club

The reaction to Sen. Arlen Specter's (D-Penn) announcement that he would leave the Republican Party a couple of weeks ago was predictable.

It's been clear for years that there's no room for RINO's (Republicans In Name Only) in Rush Limbaugh's Republican party, and Rush made his opinion very clear: "It's ultimately good. You're weeding out people who aren't really Republicans."

But while Rush was weeding his garden, other Republicans offered more thoughtful comments. In a written opinion the New York Times, Sen. Olympia Snowe (R-Maine) gave voice to the frustration of moderate Republicans:

There is no plausible scenario under which Republicans can grow into a majority while shrinking our ideological confines and continuing to retract into a regional party. Ideological purity is not the ticket back to the promised land of governing majorities — indeed, it was when we began to emphasize social issues to the detriment of some of our basic tenets as a party that we encountered an electoral backlash.

Specter and Snowe recently received a great deal of publicity when they voted, along with Susan Collins (R-Maine), in favor of Obama's stimulus plan. So it's not surprising that Snowe would come to Specter's defense. But they have more in common than their vote on a single bill.

They are both on the hit list of the conservative "Club for Growth," an organization that targets moderate GOP incumbents who do not adhere to their narrow agenda. The group has a very specific method they use to control voter "choice." By funding the primary campaign of far-right Republican challengers, they make certain they get "true" Republicans on the ballot; even if it means the Republican party ultimately loses the election. It's kind of like "weeding the garden" with money...lots of money.

But the more interesting story is how Specter and Snowe came to be on the Club for Growth's "RINO Watch" in the first place. It wasn't because they betrayed the trust of Senate Republicans determined to defeat Obama's reckless stimulus spending, in a valiant effort to balance the budget. On the contrary.

More than eight years ago, when the first of the Bush tax cuts was under consideration. Olympia Snowe had the audacity to suggest something new: include a "trigger" that ties tax cuts to surpluses (For those of you that don't recall, "budget surplus" is an obsolete political term that goes back to the Clinton years).

The idea was simple: the "trigger" would have delayed spending for new government programs and "phased-in" tax cuts until the surplus reached specified levels. In other words, taxes would be cut only in proportion to spending, and only as long as the plan to reduce the national debt was on schedule.

By proposing the trigger (S. Con. Res. 21), Sen. Snowe was, in effect, "nominating herself as an early possible target" of the newly formed Club for Growth. Among the other 10 Senators supporting Snowe's bipartisan proposal: Sen. Specter and Sen. Collins.

Needless to say, Sen. Snowe's proposal to control government spending didn't make it into the Bush tax legislation (Economic Growth and Tax Relief Reconciliation Act of 2001). The "true" Republicans were in charge, and the era of big spending, big government, and big deficits was underway.

The Largest Building in the World

From the outside, you'd never guess that this modest 5 story building in the Cayman Islands is the official headquarters of more than 12,000 companies, including subsidiaries of major United States corporations, such as Pfizer, Coca-Cola Co, Proctor and Gamble, FedEx, and Intel.


















It's called the Ugland House, and it's a favorite tax haven of major corporations, not to mention wealthy individuals who want to avoid paying billions in taxes and work on their tans at the same time. According to the U.S. Treasury, this costs the government about $100 billion each year in lost tax revenues, including $40-$70 billion from individuals and $30-$60 billion from corporations.

It's not a new tax scam. In fact, it's been around for years. In 2004, David Evans of Bloomberg Markets wrote an excellent article describing the growing problem:

"In 2001, almost half of the money U.S. companies earned outside the U.S. - 47 percent - was accounted for in offshore tax havens, such as the Cayman Islands, which has no corporate income tax..."

Every few years, the issue would make the front page and a few politicians would promise to tackle the problem. In 2001, a few Congressmen kicked up a fuss when the General Accounting Office (GAO) reported that 24 government contractors were receiving $35 billion in government payments at their address in the Caymans. Apparently, government contractors are supposed to pay taxes like everyone else.

A few years later, John Kerry made offshore tax havens an issue in his bid for the Presidency. But the American public wasn't buying. Apparently we were mesmerized by the latest version of voodoo economics: "allowing businesses to pay no tax on profits they make overseas will create jobs in America...don't worry, be happy."

In June, 2007, Senate Finance Committee chairman Max Baucus specifically requested a study of Ugland House: “I want the GAO (Government Accountability Office) to go looking in one of the most likely places shady tax transactions could be sheltered, and that’s this building in the Caymans.”

After a year of trips back and forth to the Caymans, the GAO completed their work, and released a study intended "to help Congress better understand the nature of U.S. persons' business activities in the Cayman Islands." The only real conclusion was that the problem had grown (there were now 18,857 companies in this little 5 story building) and, sure enough, it was a tax scam. Still no action.

In today's announcement of plans to crack down on overseas tax havens, President Obama, referred to Ugland House as "either this is the largest building in the world or the largest tax scam in the world."

Funny, it doesn't look that big from the outside. My guess is that it's about to get a lot smaller.