The rich are different from you and me. They have Swiss bank accounts.
Well, at least Mitt Romney does.
That was one of the big revelations when Romney released his tax records in January -- a revelation that Vanity Fair recently looked into, along with the rest of his finances. Of course, it's no secret that Mr. Romney is a man of means. But what is still secret is just how Romney has invested those means.
Maybe not so much secret as secretive. Romney has released his return for 2010 and an estimate for 2011. So we have a broad outline of what his personal finances look like. And they look something like an Epcot of financial investments: There is a blind trust with offshore accounts in Switzerland, Bermuda, and the Cayman Islands -- not to mention an almost comically large IRA account. None of this is illegal. But it has raised questions about Romney's Caribbean tax havens and his Swiss bank account. The former makes sense. The latter not as much.
Question #1: Remind me: Why does Romney have money in the Caribbean?
Let's take a quick detour. Imagine that a tax-exempt entity -- like a university endowment -- buys or otherwise acquires a business. Maybe a macaroni company. That company would have a nice little competitive edge. It wouldn't have to pay taxes. That's exactly what happened when some wealthy alums donated the Mueller Macaroni Company to the New York University Law School in 1948. This loophole prompted Congress to close it 1950. Only a tax-exempt entity's "related" businesses would in fact be tax exempt. Everything else would be taxed as "unrelated business income".
What does this have to do with Mitt Romney? Well, university endowments and public pensions are some of the biggest investors in private equity funds like Romney's Bain Capital. Those investors don't want to be hit with the unrelated business tax -- so Bain Capital sets up shop in the Caymans where it can avoid the unrelated business income tax. You might still be wondering: What does this have to do with Mitt Romney -- at least now? He left Bain Capital in 1999 (or 2001). He did, but he didn't. He still gets a share of Bain Capital's profits every year as part of his retirement package. And Bain still has corporate blockers in the Caymans. That's why Romney has investment income from the Caymans.
Question #2: Why does Romney have a Swiss bank account? And what's so great about a Swiss bank account versus any other tax haven?
Swiss banks are the gold standard of tax havens because of their secrecy and stability. Actually, that sentence should be in the past tense. Swiss banks are not nearly as secret as they used to be. Time was, the Swiss government jealously guarded its banks' reputation for never revealing client information. It was a crime to do so. High-net individuals the world over flocked to the Alps to hide money from tax collectors back home. But that started to change in 2008. A former UBS banker came forward with tales of how he helped wealthy American clients evade taxes -- including such charming details as smuggling diamonds in tubes of toothpaste. The IRS launched an investigation, and came up with a list of 52,000 names it wanted from the Swiss banking giant. A settlement followed, and then a new U.S. law. Now foreign banks have to cooperate with the IRS or face fairly tough penalties. Auf Wiedersehen, Swiss banking secrecy über alles.
But Swiss banks still have plenty going for them. They can thank the Swiss franc for that. It's a safe-haven currency -- and that makes their banks safe havens too. The Swiss are famous for their fiscal prudence and low inflation, which makes their currency particularly strong. That's even more true now thanks to the euro crisis. Demand for Swiss francs is so great that the Swiss National Bank had to cap the value of their currency last year. It was getting so expensive that it threatened to push the Swiss economy into deflation.
The Romney camp has hinted that he only had a Swiss bank account because he wanted Swiss francs. In other words, he was hedging against the dollar declining in value. That's fair, even if it's a bit odd for someone with $250 million. But you don't need a Swiss bank account to get Swiss francs. You can just buy Swiss francs.
Another possibility is that Romney had the Swiss bank account to make it easier to wire money from one European investment to another. We can't say without seeing more tax returns. All we do know is his lawyer closed this Swiss bank account in 2010.
That's the final point. Mitt Romney's long-time lawyer, R. Bradford Malt, has managed Romney's personal finances since Romney was elected governor of Massachusetts. That's when Romney set up a blind trust, to avoid any possible conflicts of interest. Still, there are questions about just how blind the trust has been. And, besides, Romney is ultimately responsible for his own money.
Question #3: Is it fair for the Obama campaign to go after the Swiss bank account?
When most people hear the words "Swiss bank account" they think "tax evasion". That's not always fair. There are plenty of good reasons an American might have a Swiss bank account. Maybe they live abroad. Or work for a Swiss company. But those are good reasons that don't apply to Mitt Romney. He didn't live abroad. And he didn't work for a Swiss company.
That doesn't mean Mitt Romney was up to no good. There's no evidence of that. It's entirely possible that Romney really was just hedging against the dollar. That's the legitimate reason a very wealthy person would want a Swiss bank account. The not-so-legitimate reason is the secrecy -- to hide money from the IRS. It's unfair for the Obama campaign to insinuate Romney was doing the latter. But it'd be a lot more unfair if Romney was more transparent. We just don't know enough to say anything definitively. We don't know how long the account existed. We don't know whether Romney's lawyer or Romney himself set it up.
What we do know is that this kind of stuff doesn't seem weird to Romney. It's what the über-wealthy do. But it is weird to most everyone else. It's not what the 99 percent do. Actually, we know one more thing. Romney can end this controversy whenever he wants. He just has to release more tax records. He's running for office for Pete's sake. He should say something.
In other words, Romney should take a page from the Swiss. Even they're less secretive nowadays.
Long after research contradicts common medical practices, patients continue to demand them and physicians continue to deliver. The result is an epidemic of unnecessary and unhelpful treatments.
First, listen to the story with the happy ending: At 61, the executive was in excellent health. His blood pressure was a bit high, but everything else looked good, and he exercised regularly. Then he had a scare. He went for a brisk post-lunch walk on a cool winter day, and his chest began to hurt. Back inside his office, he sat down, and the pain disappeared as quickly as it had come.
That night, he thought more about it: middle-aged man, high blood pressure, stressful job, chest discomfort. The next day, he went to a local emergency department. Doctors determined that the man had not suffered a heart attack and that the electrical activity of his heart was completely normal. All signs suggested that the executive had stable angina—chest pain that occurs when the heart muscle is getting less blood-borne oxygen than it needs, often because an artery is partially blocked.
Two historians weigh in on how to understand the new administration, press relations, and this moment in political time.
The election of Donald Trump, and the early days of his presidency, have driven many Americans to rummage through history in search of context and understanding. Trump himself has been compared to historical figures ranging from Ronald Reagan to Henry Ford, and from Andrew Jackson to Benito Mussolini. His steps have been condemned as unprecedented by his critics, and praised as historic by his supporters.
To place contemporary events in perspective, we turned to a pair of historians of the United States. Julian Zelizer is a professor of history and public affairs at Princeton University. He is the author, most recently, of The Fierce Urgency of Now: Lyndon Johnson, Congress, and the Battle for the Great Society. Morton Keller is a professor emeritus of history at Brandeis University. He has written or edited more than 15 books, including Obama’s Time: A History. They’ll be exchanging views periodically on how to understand Trump, his presidency, and this moment in political time. —Yoni Appelbaum
Consolidated corporate power is keeping many products’ prices high and quality low. Why aren’t more politicians opposing it?
There are many competing interpretations for why Hillary Clinton lost last fall’s election, but most observers do agree that economics played a big role. Clinton simply didn’t articulate a vision compelling enough to compete with Donald Trump’s rousing, if dubious, message that bad trade deals and illegal immigration explain the downward mobility of so many Americans.
As it happens, Clinton did have the germ of exactly such an idea—if one knew where to look. In an October 2015 op-ed, she wrote that “large corporations are concentrating control over markets” and “using their power to raise prices, limit choices for consumers, lower wages for workers, and hold back competition from startups and small businesses. It’s no wonder Americans feel the deck is stacked for those at the top.” In a speech in Toledo last fall, Clinton assailed “old-fashioned monopolies” and vowed to appoint “tough” enforcers “so the big don’t keep getting bigger and bigger.”
A $100 million gangster epic starring Robert De Niro, Al Pacino, and Joe Pesci has become too risky a proposition for major studios.
Martin Scorsese’s next project, The Irishman, is as close as you can get to a box-office guarantee for the famed director. It’s a gangster film based on a best-selling book about a mob hitman who claimed to have a part in the legendary disappearance of the union boss Jimmy Hoffa. Robert De Niro is attached to play the hitman, Al Pacino will star as Hoffa, and Scorsese favorites Joe Pesci and Harvey Keitel are also on board. After Scorsese branched into more esoteric territory this year with Silence, a meditative exploration of faith and Catholicism, The Irishman sounds like a highly bankable project—the kind studios love. And yet, the film is going to Netflix, which will bankroll its $100 million budget and distribute it around the world on the company’s streaming service.
Neither truck drivers nor bankers would put up with a system like the one that influences medical residents’ schedules.
The path to becoming a doctor is notoriously difficult. Following pre-med studies and four years of medical school, freshly minted M.D.s must spend anywhere from three to seven years (depending on their chosen specialty) training as “residents” at an established teaching hospital. Medical residencies are institutional apprenticeships—and are therefore structured to serve the dual, often dueling, aims of training the profession’s next generation and minding the hospital’s labor needs.
How to manage this tension between “education and service” is a perennial question of residency training, according to Janis Orlowski, the chief health-care officer of the Association of American Medical Colleges (AAMC). Orlowski says that the amount of menial labor residents are required to perform, known in the profession as “scut work,” has decreased "tremendously" since she was a resident in the 1980s. But she acknowledges that even "institutions that are committed to education … constantly struggle with this,” trying to stay on the right side of the boundary between training and taking advantage of residents.
In late 2015, in the Chilean desert, astronomers pointed a telescope at a faint, nearby star known as ared dwarf. Amid the star’s dim infrared glow, they spotted periodic dips, a telltale sign that something was passing in front of it, blocking its light every so often. Last summer, the astronomers concluded the mysterious dimming came from three Earth-sized planets—and that they were orbiting in the star’s temperate zone, where temperatures are not too hot, and not too cold, but just right for liquid water, and maybe even life.
This was an important find. Scientists for years had focused on stars like our sun in their search for potentially habitable planets outside our solar system. Red dwarfs, smaller and cooler than the sun, were thought to create inhospitable conditions. They’re also harder to see, detectable by infrared rather than visible light. But the astronomers aimed hundreds of hours worth of observations at this dwarf, known as TRAPPIST-1 anyway, using ground-based telescopes around the world and NASA’s Spitzer Space Telescope.
Rod Dreher makes a powerful argument for communal religious life in his book, The Benedict Option. But he has not wrestled with how to live side by side with people unlike him.
Donald Trump was elected president with the help of 81 percent of white evangelical voters. Mike Pence, the champion of Indiana’s controversial 2015 religious-freedom law, is his deputy. Neil Gorsuch, a judge deeply sympathetic to religious litigants, will likely be appointed to the Supreme Court. And Republicans hold both chambers of Congress and statehouses across the country. Right now, conservative Christians enjoy more influence on American politics than they have in decades.
And yet, Rod Dreher is terrified.
“Don’t be fooled,” he tells fellow Christians in his new book, The Benedict Option. “The upset presidential victory of Donald Trump has at best given us a bit more time to prepare for the inevitable.”
Plagues, revolutions, massive wars, collapsed states—these are what reliably reduce economic disparities.
Calls to make America great again hark back to a time when income inequality receded even as the economy boomed and the middle class expanded. Yet it is all too easy to forget just how deeply this newfound equality was rooted in the cataclysm of the world wars.
The pressures of total war became a uniquely powerful catalyst of equalizing reform, spurring unionization, extensions of voting rights, and the creation of the welfare state. During and after wartime, aggressive government intervention in the private sector and disruptions to capital holdings wiped out upper-class wealth and funneled resources to workers; even in countries that escaped physical devastation and crippling inflation, marginal tax rates surged upward. Concentrated for the most part between 1914 and 1945, this “Great Compression” (as economists call it) of inequality took several more decades to fully run its course across the developed world until the 1970s and 1980s, when it stalled and began to go into reverse.
“The question confronting us as a nation is as consequential as any we have faced since the late 1940s,” a group of Republican and Democratic experts write.
Ben Rhodes, one of Barack Obama’s top advisers, once dismissed the American foreign-policy establishment—those ex-government officials and think-tank scholars and journalists in Washington, D.C. who advocate for a particular vision of assertive U.S. leadership in the world—as the “Blob.” Donald Trump had harsher words. As a presidential candidate, he vowed never to take advice on international affairs from “those who have perfect resumes but very little to brag about except responsibility for a long history of failed policies and continued losses at war.” Both men pointed to one of the Beltway establishment’s more glaring errors: support for the war in Iraq.
Now the Blob is fighting back. The “establishment” has been unfairly “kicked around,” said Robert Kagan, a senior fellow at the Brookings Institution and former official in the Reagan administration. As World War II gave way to the Cold War, President Harry Truman and his secretary of state, Dean Acheson, “invented a foreign policy and sold it successfully to the American people. That’s what containment was and that’s what the Truman Doctrine was. … That was the foreign-policy establishment.” During that period, the U.S. government also helped create a system for restoring order to a world riven by war and economic crisis. That system, which evolved over the course of the Cold War and post-Cold War period, includes an open international economy; U.S. military and diplomatic alliances in Asia, Europe, and the Middle East; and liberal rules and institutions (human rights, the United Nations, and so on).
The preconditions are present in the U.S. today. Here’s the playbook Donald Trump could use to set the country down a path toward illiberalism.
It’s 2021, and President Donald Trump will shortly be sworn in for his second term. The 45th president has visibly aged over the past four years. He rests heavily on his daughter Ivanka’s arm during his infrequent public appearances.
Fortunately for him, he did not need to campaign hard for reelection. His has been a popular presidency: Big tax cuts, big spending, and big deficits have worked their familiar expansive magic. Wages have grown strongly in the Trump years, especially for men without a college degree, even if rising inflation is beginning to bite into the gains. The president’s supporters credit his restrictive immigration policies and his TrumpWorks infrastructure program.
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