Money and Politics – 2016 Edition

Money_and_politicsWe are deep into Presidential primary election time, so I thought I’d share my views of candidates and the system with my green eyeshades on.

I don’t have a ‘unified theory’ of money in politics, but rather a series of thoughts, some connected, the rest not.
For starters, I have a fetish about honesty when it comes to money. Like, if I know an elected official or candidate accepted money illegally or unethically, that candidate is dead to me.

Direct bribes, however aren’t usually our problem (at the federal level). Rather, grey ethical areas as well as the wholly-legal weight of money are our system’s problem.

My goal, as always, is to offend all sides of the political spectrum in roughly equal measure. If I have been too gentle on your preferred political enemy, please let me know in an angry email. (Also, feel free to use ALL CAPS so I know you really mean it.)

The Republicans

Ted Cruz had the cleverness to marry a Goldman Sachs executive (a big plus in my household!). The meanest money-related thing I can think of about him is that he has not once but twice under-reported loans to his campaign from banks, first from Citibank and later from Goldman Sachs. For the moment I’m willing to chalk this up to sloppiness rather than a pattern – but be forewarned, Cruz, I’m watching you.

Ted_Cruz_for_presidentI apply personal financial prejudices when it comes to political candidates.

Marco Rubio’s well-known struggle with personal debt affects my view of him as a potential leader. I know he has presented this weakness is a strength, as it makes him ‘relate-able’ to average Americans. But I don’t want ‘average Americans’ – at least in this sense – winning the Presidency. Frankly I don’t want someone who is financially vulnerable in that way to wield so much power (and maybe to face so much temptation.) And yes, Thomas Jefferson and Winston Churchill were both amazing leaders with out-of-control personal financial situations. Still, I maintain my prejudices.

Jeb!’s anointing as the GOP favorite through mid-2015 followed logically from his ability to quickly raise a $100 million Super-PAC war chest for his candidacy. That same war chest allowed him to hang around as a moderate alternative to the rest of the field long after his less-funded rivals folded, despite his deep unpopularity with actual, you know, voters. This is interesting and troubling.[1]

In the 2012 contest, we learned that a single billionaire – in that case Sheldon Adelson – can keep a candidate afloat – in that case Newt Gingrich – long past his due date or viability with the electorate.

I think the “billionaire primary” conducted throughout 2015 – as ably reported by the New York Times, in which just 158 families contributed half of the total money raised by political campaigns – should scare the heck out of us.

A little history

I understand that the Founding Fathers of the United States went to great lengths to ensure that wealth remained a key criteria for participation in the new democracy, through gender, race, and property-based restrictions on voting. Elites of the time greatly feared “Democracy” – that radical 18th Century notion – because the disenfranchised could theoretically vote their financial interests to the detriment of the aristocratic powers-that-be. The slaughter of The French Revolution seemed to confirm all of these fears, strengthening the resolve of elites to control the political process from start to finish.

Jefferson_and_money
Jefferson had issues with banks. In a related story, he was always broke.

I mention this to acknowledge that we have a long tradition of drastically tipping the scales in favor of the wealthy when it comes to politics, so what I’m talking about with the billionaire primary is not entirely new, but a certain shift on an existing spectrum. I just have this tingly spider-sense that in the 21st Century we’ve gone a bit too far back to the Aristocratic roots of our Founding Fathers.

The Democrats

Speaking of these themes, Bernie Sanders’ appeal – as the underdog who raises $75 million in 2015 at an average campaign contribution of $27 per person – remains powerful. I really admire it. I’m totally annoyed with Sanders’ understanding of Wall Street, however, which remains cartoonish in its sophistication, at best. If you really believe, as Sanders claims, that “The business model of Wall Street is fraud,” then we’re not friends and you’re not coming to my birthday party anymore.

Hillary Clinton, on the other hand, has a sophisticated view of money, to both her advantage as well as grave disadvantage. I have a hard time getting over the idea that large donors to the Clinton Foundation – like members of the Saudi royal family or a Ukrainian oligarch, as previously reported – don’t at least believe they have purchased access and influence over Clinton through their donations. I’m not saying she or her husband have done them direct favors, but I am saying it’s reasonable to assume that’s exactly why certain people donated to the Foundation while she was Secretary of State and a strong prospective presidential candidate. She should have anticipated that clear conflict, and she should have avoided it.

The Trumpians

trump_for_presidentThe Donald, meanwhile, presents an interesting money case. His supporters, I suppose, overlook his misogyny, racism, bullying and demagoguery because he’s a “successful businessman,” who would presumably apply his “negotiating skills” to solving the country’s ills. This admiration from supporters – despite some analysis that shows he would be as wealthy today had he taken his inherited wealth in 1974, bought an all-stock index fund – and amused himself by affixing gold-lettered nameplates to Lego towers he built in his playpen. That analysis is an oversimplification that probably isn’t fair to Trump or the value of his businesses today. Put it this way though: my problems with Trump aren’t money-related.

My choice

Bloomberg_for_presidentSpeaking of billionaires, I enjoyed Mike Bloomberg’s mayoralty of New York City in part because of my belief that he cannot be ‘bought’ for any price. In fact I would vote for him for President over any of the declared candidates, in a New York minute. Sadly, I expect he wont run, and if he did run, he wouldn’t win.

 

[1] Right up until the point when he retired from the campaign Saturday night I thought there was an outsider’s chance that he would suddenly sweep in as everyone’s third choice, kind of like Romney did after outlasting Santorum, Gingrich, Huckabee, etc in 2012. I wasn’t actually disappointed Jeb! dropped out, I was just disappointed that my contrarian bet didn’t earn me “I told you so” credibility for the next year. I would have been insufferable had I been right about Jeb! though, so it’s all probably for the best.

 

A version of this post ran in the San Antonio Express News

 

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5 Replies to “Money and Politics – 2016 Edition”

  1. While the indication that Trump would have made just as much money investing in an S&P index fund in 1974, I believe his father died in 1999. I’m not sure basing an opinion on what he would have inherited had his father died six years after his college graduation is totally accurate.

    I do remember him saying on one of his books that his father gave him $250k to get started investing after he graduated college. If he had invested that in May of ’68, he would have $19.8 million today.

    1. He got transferred a 1/4 of his dad’s business (as did his 3 siblings) in 1974, so calculations people have done are based on that 1/4 value, assuming those proceeds from his father’s business could be liquidated and then put into an index fund with reinvestment of all dividends. It’s admittedly not a fair comparison, since Trump’s businesses have enterprise (brand) value beyond what they would have if he just owned stocks. Plus few people would blindly invest 100% in equities and never spend a dime of it for 40 years. But still. I feel like being ‘fair’ to many people, but not particularly to Trump.

  2. I’ve been trying to find the source of that reference for 1974, and saw that he took over the family business in 1971.

    Where did you see that he was transferred 1/4 of the business? Not that I doubt you, but I’ve discussed this article on other forums, and I want to add that source to the discussion.

  3. “In an outstanding piece for National Journal, reporter S.V. Dáte notes that in 1974, the real estate empire of Trump’s father, Fred, was worth about $200 million. Trump is one of five siblings, making his stake at that time worth about $40 million. ”

    The key thing is the ‘at that time’ statement, which does not mean the money was divided up at that time, it is just a convenient point when the numbers work, just like 1982 and 1988.

    If the point is to say that Trump could have made just as much money if his father gave him $40 million in 1974 by just investing it, that is true. But his father didn’t give him that money in ’74, so the basic premise of the article falls flat.

    It is a good example of the power of compounding, though.

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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