Republican Congress Signals Post Presidential Election 'Crony Capitalist' Stimulus Rewards

By: Gordon Long | Mon, Dec 21, 2015
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When the GOP handed congress the $1.1 trillion spending measure to pass, which would avoid a government shutdown (with no time for congress to actually read it), the backroom republican strategists buried within it the removal of FIRPTA. There are major reasons for this as we outlined in "Obama Abruptly Waives 1980 Foreign Investment in Real Property Tax Act (FIRPTA)" but less recognized was that it subtle shows what we can expect if the Republican party wins the White House in the upcoming election. The clearly confident GOP party is quietly laying the foundations now.

Klueger & Stein, LLP, who's clients are "individual investors and multinational businesses entering the United States to acquire a U.S. business, invest in U.S. real estate, or enter the U.S. market through a joint venture or the creation of a U.S. subsidiary and also assist U.S. investors and businesses looking to engage in commercial transactions or acquire valuable assets abroad", recently wrote this article which appeared in the corporate rag: LOWTAX - Global Tax & Business Portal:

Our neighbors to the North may have found a way to accomplish some U.S. tax reform. Canada is offering the U.S. the opportunity to gain much needed investment for public works such as U.S. freeways and bridges by using Canadian pension funds. The condition is - drop the 10% tax tagged onto foreigners selling U.S. property.

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) was implemented in response to the growing fear of a takeover of domestic resources by foreign money. The law imposes a 10% tax of the sale price on U.S. real property owned and sold by foreigners. Because the law is so broad, it includes foreign pension funds.

President Obama has been pushing for changes to FIRPTA that would exempt foreign pension funds from paying taxes on U.S. real property sales.

In the U.S., public-private relationships, especially foreign ones, have traditionally been viewed with skepticism, and investment in public infrastructure has suffered because of this. Investment in public infrastructure by private funds is reported at 3.6% of the nation's Gross Domestic Product, a significant shortfall compared to the estimated $3 trillion needed to bring the country's public infrastructure up to standard.

If the proposals pass, foreign, including Canadian pension funds could invest in public works projects without investors worrying about the FIRPTA tax burden.

Canadian pension funds including the Canadian Pension Plan Investment Board, the largest in Canada, has been the biggest supporter for the change. Should the FIRPTA law include this exemption it will cost the U.S. government approximately $2 billion in lost tax revenue over the next decade. However, the flurry of foreign investment would far surpass the losses.

Klueger & Stein, LLP are keeping our international clients informed of any changes to FIRPTA that may affect their foreign pension funds and investment portfolios.


Conclusion

The FRA (Financial Repression Authority) believes that a historic stimulus plan currently on the US public policy drawing board is aimed at US Infrastructure Investment. The above article confirms our belief about the degree of backroom "crony capitalism" in the form of Public-Private Partnership negotiations that have been going on. No doubt this has been tied to GOP campaign contributions to fund a historic high slate of 15 candidates. It will of course be sold to the US electorate after the 2016 election as being targeted at creating jobs and stimulating an economy rapidly falling into recession.

However, the real truth is about the massive transfer of wealth needed from pensions to support US government debt financing. Separately, the recent formation of the $51T AIIB (Asian Infrastructure Investment Bank) is an indicator of what the global strategists see as mandatory to keep a rapidly weakening global economy on "life support".

 


 

Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

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