Mitt Romney, who secured the number of delegates needed for the Republican nomination last week, said early on that this election is a choice between President Barack Obama’s “entitlement society” in which people are dependent on government benefits, and his “opportunity society” where business is free to flourish.
But if you take Romney’s own life as representing a governing philosophy, he has the dichotomy backward. Romney is the one who has taken advantage of government entitlements — the ones that flow to the wealthy. And his interest in opportunity lies with rich investors who exploit government rules, often to the detriment of Main Street. Romney’s use of the federal bankruptcy courts to extinguish debts owed to suppliers, shops and service providers is a perfect example — more on that later.
For starters, let’s tick off some of Romney’s favorite government entitlements:
• Special tax rules allow him to pay federal income taxes of just 15 percent on his millions in “carried interest” profits, capital gains and dividends. The rest of us pay a rate of up to 35 percent on income from work.
• Bain Capital, the private equity firm Romney founded and ran from 1984 to 1999, only succeeded due to a major tax loophole. Bain was able to deduct the interest on the massive loans taken out to finance the purchase of its takeover targets — loans secured with the companies’ own assets. In 2008, Germany put limits on this kind of tax shenanigans, but don’t expect anything that enlightened to happen here.
• Romney’s firm also enjoyed government largess in the form of job creation tax breaks. Just the year before Dade Behring, a Bain company, closed its operations in Puerto Rico in early 1998, with nearly 300 workers losing their jobs, the company received federal tax break of $3 million for promoting jobs there and a $4.1 million tax exemption from Puerto Rico.
But there is no big government entitlement as magical or beloved by Romney and Bain than the get-out-of-debt-free card bestowed by federal bankruptcy court.
Dade Behring went bankrupt, leaving Main Street creditors empty-handed, but not before Romney’s firm took $242 million out of it. In fact, of Bain’s 10 top business investments that made up 70 percent of the $2.5 billion Bain made for investors, four eventually went bankrupt, according to the Wall Street Journal.
That’s called winning for losing, a game perfected by top 1 percenters.
For a closer look at one destructive bankruptcy, read “Romney Economics: Cheat Main Street,” a column by Leo Gerard in the Huffington Post (http://tinyurl.com/dylorbl).
Gerard documents the way Bain left Main Street businesses licking their financial wounds as it legally absconded with millions in management fees, dividends and other distributions. His featured example is American Pad and Paper Co. (Ampad) that Bain bought from Mead Corp. in 1992. Bain remained the company’s largest single shareholder through 1999, and three Bain executives sat on its board. In 2000, the company filed for bankruptcy, leaving debts to suppliers of more than $180 million. Even so, Bain came out smelling like money. It had invested $5 million and took out more than $100 million.
Eleven years after Ampad filed for bankruptcy, as Gerard points out, the company’s nearly 1,300 unsecured creditors finally got a pittance of what was owed: Green Bay Packaging Inc. was owed $75,500 and received $137; Lakeway Container Inc. was owed $47,100 and received $89; American Coffee Break Service was owed $1,300 and was paid $2.56. The bankruptcy trustee’s final report lists page after page of Main Street businesses receiving less than a penny on the dollar. Had that $100 million flowed to Ampad’s suppliers rather than Romney and Bain investors, it would have covered more than half the debts.
Romney desperately wants to convince the public that Bain operated in the best interests of Main Street and that he didn’t get fabulously rich under government-rigged rules. But the man exemplifies the special tax breaks and legal shields from creditors that the wealthy see as their right.
That’s Romney’s “entitlement society.”
By: Robyn E. Blumner, Columnist, Tampa Bay Times, June 3, 2012
It would be marvelous to believe that the congressional supercommittee is going to reach a bipartisan deal. Well, actually, I’m not so sure it would be marvelous, substantively. We’ll get to that. But politically, it would be nice to see Washington function for a change. Hard experience suggests to us, however, that when all the smoke clears, there will be no deal. What will happen then? The Republicans will then go in for even emptier posturing than they’re engaging in now, this time with regard to defense cuts. You think things can’t get worse? Just wait.
For a while, when the committee’s six Democrats and six Republicans were able to talk to each other in vague generalities, Washington was able to pretend that things were looking pretty hopeful. There was no precise reason for this hope. Some senators told me that their colleagues on the committee weren’t even telling them anything. But Washington elites cling to hope of bipartisan common sense winning out the way M. Night Shyamalan fans swear that he’s going to regain form in the next movie, for real this time.
But eventually and inevitably, the negotiators had to start talking numbers. And as soon as they got to specifics, two things happened. First, they realized how far apart they were. Second, the leaks started, at which point the rest of us realized how far apart they were.
Let’s compare the plans. The Democratic proposal, released by senator and committee member Max Baucus the other day, looks to cut $3 trillion from the budget. The Republican plan, leaked in parts to The Wall Street Journal and Politico after Baucus moved, cuts just $2 trillion. If it seems odd to you that Democrats are proposing more deficit reduction than Republicans, you aren’t alone. The reason is that the Republicans—surprise, surprise—are doing it all by cuts with no tax revenue, while the Democrats include $1 trillion to $1.3 trillion in new revenue.
Now, Republicans will repeat in these coming weeks that their plan does include “revenue.” And in a way, it does. It’s just not tax revenue. Or wait—it is tax revenue! But from a tax decrease! Yes: The GOP plan says the government will raise $200 billion by cutting corporate and individual taxes. You know, the way the Bush tax cuts increased revenue, which is to say, not in the real world, but in the minds of Mitch McConnell and other delusionals who think the Bush tax cuts raised revenue. So when they go around saying “our plan raises revenues,” remember their track record.
If the time comes for Pentagon cuts, will the Democrats be willing to hold the line and risk the silly accusation of being “soft on defense”? I think we know the answer.
It bears noting, once again, that the Democrats have said with the Baucus plan that they’re ready to deal if Republicans will. Their plan includes $500 billion in entitlement program cuts. They’re prepared to attach increases in Social Security benefits to the so-called chained consumer price index, which would decrease benefits, especially for those in their 80s. That’s not some token nothing. That’s a real concession, so much so that liberals are going to be up in arms about it as time marches on. That chained CPI bit probably wouldn’t make it through Nancy’s Pelosi’s caucus, but other entitlement cuts will. So the Democrats are at least showing up to play some ball.
But the Republicans are staying in the dugout. They aren’t even bothering to take the bus to the stadium. A trillion in taxes, one dollar in taxes, it doesn’t matter; Republicans will not permit a tax increase of any kind. I’m bored of writing this sentence, so you, poor reader, must be even more bored of reading it, but it has to be said, because so many others are out there peddling the falsehood that both sides are equally to blame for the impasse: No—the impasse exists because of Republicans and taxes. Period. If the GOP moved on taxes, the Democrats would give ground on entitlements, as they have now signaled yet again. And the Democrats should not and cannot accept a deal in which there are no tax increases, because they have two-thirds of the country with them and because it’s the right thing.
Put it all together and the odds of an agreement seem long indeed. Could this rump effort of 100 bipartisan House members and 40 bipartisan senators move the boulder? It’s like asking if a Boy Scout could light a fire with two sticks in the rain. Maybe. The conditions have to be just right, and no one really knows what those conditions are.
Assuming no deal, here’s what I’m told is likely to happen after everyone has acknowledged the collapse. The Republicans will, as John McCain and others have suggested, turn up the heat on the question of defense cuts. They will introduce legislation to exempt the Pentagon from cuts. Now remember—these cuts to the Pentagon, 15 percent, were agreed to by both parties in the August debt-ceiling deal. But Republicans, being the clever dialecticians that they are, will decide that the course of history has changed, and that deal will mean no more to them than one of those secret treaties Lenin routinely abrogated back in the day.
So they’ll advance a bill saying: cuts to domestic social programs, sure; cuts to Pentagon, nyet. It will pass the House. It will go to the Senate, and all the Republicans will be for it, and they’ll need 13 Democrats. So then the questions will be: will the Democrats be willing to hold the line and risk the silly accusation of being “soft on defense”? And will the White House also hold the line—bucking, of course, its own defense secretary, who agrees with the Republican position? I think we know the answer.
So the Republicans will have killed another deal with their indefensible and immoral position on taxes, and then, having stuffed that carcass in the trunk, they will retroactively work to kill the deal they agreed to last summer, and spend December demagoguing about how Democrats are going to leave America defenseless and throw hundreds of thousands of poor aeronautical engineers into the streets.
Your tax dollars at work.
By: Michael Tomasky, The Daily Beast, October 29, 2011