The Washington Post has a great column up today concerning the impact of the Obama Administration’s Panama trade agreement, as revealed by the Panama Papers. As it turns out, President Obama and then-Secretary of State Hillary Clinton were right on the deal. Senator Bernie Sanders, “Bernie-Is-A-Prophet” memes notwithstanding, was wrong, at least as far as the deal’s impact on offshore tax-avoidance goes.
The Post reports that such practices have been decreasing since talks on the agreement began, and that the decline accelerated following its implementation under President Obama. The column states:
Specifically, the number of offshore incorporations fell from 4,741 in 2005 to 835 in 2015. Most important, as of last year Mossack Fonseca appeared to have nearly completely ceased incorporating the least transparent form of company — known as “bearer shares” — which often don’t need to register an owner’s name.
Even before the free-trade deal, Panama was under pressure from both the United States and Europe to clean up its tax-haven act; the pressure intensified after the financial crisis of 2008. The Obama administration, backed by members of Congress, made it clear the free-trade deal — which Panama badly wanted, to match a deal between its Central American neighbors and the United States — hinged on a separate agreement granting U.S. tax authorities more access to Panama’s financial system. The United States particularly insisted on plugging the “bearer shares” loophole. Panama agreed and changed its laws accordingly — before the free-trade agreement reached the Senate and Mr. Sanders nevertheless voted “no,” claiming, wrongly, that it would make the tax haven “worse.”
While no agreement (or piece of legislation, for that matter) is perfect, it is clear from these facts that the Obama Administration’s approach to the tax haven issue improved appreciably on the status quo. Far from selling out to corporations, this example shows Obama and Clinton making the right calls to create progress on an important and outrageous issue, while Sanders railed against the deal, allowing the perfect to be the enemy of the good and effectively voting against an improvement to the status quo even when it was clear that no alternative deal was on the table. To be clear, I believe that tax avoidance wrong, and the behavior detailed in the Panama Papers must be addressed. But to me, that means fighting for real progress wherever it can be found rather than allowing that progress to be derailed by any dogma, including a reflexive blanket opposition to trade agreements. Furthermore, the facts should have been checked before any observers attacked Obama and Clinton as corporate sellouts.
This episode also further establishes Secretary Clinton as the best candidate to protect and improve on President Obama’s legacy through her methodical and effective approach to creating change.
As for Senator Sanders’ response, the Post writes, “In response to our questions, the Sanders campaign didn’t address the data, but said the administration had missed an opportunity to completely “eradicate” the Panama tax haven.” It is apparent that in light of this new information, the criticism has transformed from “Obama failed on this issue by selling out to corporations” to “Obama failed on this issue by merely sharply reducing offshore tax avoidance instead of eliminating it 100%.” Personally, I’ll take the progress Obama and Clinton fought for on this issue, while expecting that they’ll continue to push for further positive change on this and other issues of importance to my fellow progressives and me.