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“Why Bain Questions Matter”: Free Markets Should Serve All The People

Who are the dastardly enemies of free enterprise who decided to make an issue of Mitt Romney’s tenure at the private-equity firm Bain Capital? Er, those would be his fellow Republicans.

Listen to what Newt Gingrich said in January: “The Bain model is to go in at a very low price, borrow an immense amount of money, pay Bain an immense amount of money and leave. I’ll let you decide if that’s really good capitalism. I think that’s exploitation.”

Or what Rick Perry said that same month: “There is something inherently wrong when getting rich off failure and sticking it to someone else is how you do your business. I happen to think that that is indefensible.”

When Democrats say things like that, they’re accused of being Bolsheviks who want to destroy capitalism. But even in the context of the GOP primary battle, where “moderate” was the ultimate epithet, Romney’s actions at Bain were seen as raising a legitimate and important question: Shouldn’t free markets serve the American people, rather than the other way around?

President Obama is right to raise this issue now. I wish he had done so during the debate on financial regulatory reform — only now is he posing the kind of fundamental questions that needed to be asked — but better late than never. In his defense, a tough reelection campaign does tend to focus the mind.

There’s nothing inherently wrong with private equity, which plays an important role in the economy. And, of course, there’s nothing wrong with wealth; those who risk their capital in private-equity ventures should be rewarded when those deals pay off. No one begrudges Romney his offshore investment accounts, his mansions or his wife’s Cadillacs.

But as Romney himself acknowledges, free markets need rules and regulations in order to function. Some kinds of dealings are prohibited or even criminalized — insider trading, for example, because of the way it benefits a select few at the expense of other investors.

It is reasonable to ask whether some highly leveraged buyout deals, of the kind that Bain and other private-equity firms often conduct, should fall into the same thumb-on-the-scale category as insider trading.

Suppose a company is failing and appears beyond rescue. Suppose a private-equity firm buys the company with borrowed money, burdens it with more debt, and then spends the next few years firing workers, selling assets, eliminating pension plans — all while collecting handsome “management fees.” Then the company fails anyway, as it was fated to do.

What higher economic purpose has been served? Why is this not what Perry memorably called “vulture capitalism”?

The discussion we should be having goes far beyond the relatively small world of private equity. Look at the mounting losses at the nation’s largest and supposedly best-run bank, JPMorgan Chase — at least $2 billion and perhaps much more.

The transactions that produced the losses are numbingly complex, but essentially they involved betting both ways on the direction of various economic and business indicators. The idea was to balance the bets so that if the bank’s predictions were right it would make a lot of money; if the predictions were wrong, it would lose money, but not so much.

The bank got on a winning streak, so it made bigger and bigger bets. Then the bank’s luck turned, and Chairman Jamie Dimon discovered that the betting positions were unbalanced — instead of losing a little money, the bank was set up to lose a lot. Sharp-eyed traders at hedge funds noticed what was happening and jumped in to take advantage of a big spender on the skids.

That’s a classic Las Vegas story, but why should it be a Wall Street story? Should a bank whose deposits are federally insured — a bank big enough to crash the financial system — be standing at a craps table in the middle of the night yelling, “Baby needs a new pair of shoes”?

This is what Rick Santorum said in March: “I heard Governor Romney here called me an economic lightweight because I wasn’t a Wall Street financier like he was. Do you really believe this country wants to elect a Wall Street financier as the president of the United States? Do you think that’s the kind of experience we need? Someone who’s going to take and look after, as he did, his friends on Wall Street and bail them out at the expense of Main Street America?”

Good question. I’d like to hear Romney’s answer.


By: Eugene Robinson, Opinion Writer, The Washington Post, May 24, 2012

May 25, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“Untempered Individualism”: Conservatives Used To Care About Community

To secure his standing as the presumptive Republican presidential nominee, Mitt Romney has disowned every sliver of moderation in his record. He’s moved to the right on tax cuts and twisted himself into a pretzel over the health-care plan he championed in Massachusetts — because conservatives are no longer allowed to acknowledge that government can improve citizens’ lives.

Romney is simply following the lead of Republicans in Congress who have abandoned American conservatism’s most attractive features: prudence, caution and a sense that change should be gradual. But most important of all, conservatism used to care passionately about fostering community, and it no longer does. This commitment now lies buried beneath slogans that lift up the heroic and disconnected individual — or the “job creator” — with little concern for the rest.

Today’s conservatism is about low taxes, fewer regulations, less government — and little else. Anyone who dares to define it differently faces political extinction. Sen. Richard Lugar of Indiana was considered a solid conservative, until conservatives decided that anyone who seeks bipartisan consensus on anything is a sellout. Even Orrin Hatch of Utah, one of the longest-serving Republican senators, is facing a primary challenge. His flaw? He occasionally collaborated with the late Democratic senator Edward M. Kennedy on providing health insurance coverage for children and encouraging young Americans to join national service programs. In the eyes of Hatch’s onetime allies, these commitments make him an ultra-leftist.

I have long admired the conservative tradition and for years have written about it with great respect. But the new conservatism, for all its claims of representing the values that inspired our founders, breaks with the country’s deepest traditions. The United States rose to power and wealth on the basis of a balance between the public and the private spheres, between government and the marketplace, and between our love of individualism and our quest for community.

Conservatism today places individualism on a pedestal, but it originally arose in revolt against that idea. As the conservative thinker Robert A. Nisbet noted in 1968, conservatism represented a “reaction to the individualistic Enlightenment.” It “stressed the small social groups of society” and regarded such clusters of humanity — not individuals — as society’s “irreducible unit.”

True, conservatives continue to preach the importance of the family as a communal unit. But for Nisbet and many other conservatives of his era, the movement was about something larger. It “insisted upon the primacy of society to the individual — historically, logically and ethically.”

Because of the depth of our commitment to individual liberty, Americans never fully adopted this all-encompassing view of community. But we never fully rejected it, either. And therein lies the genius of the American tradition: We were born with a divided political heart. From the beginning, we have been torn by a deep but healthy tension between individualism and community. We are communitarian individualists or individualistic communitarians, but we have rarely been comfortable with being all one or all the other.

The great American conservative William F. Buckley Jr. certainly understood this. In his book “Gratitude: Reflections on What We Owe to Our Country,” he quotes approvingly John Stuart Mill’s insistence that “everyone who receives the protection of society owes a return for the benefit.” With liberty comes responsibility to the community.

Before the Civil War, conservatives such as Alexander Hamilton and Henry Clay believed in an active federal government that served the common good. This included a commitment to internal improvements (what we now, less elegantly, call infrastructure), public schooling, and the encouragement of manufacturing and science. Clay, an unapologetic supporter of national economic planning, called his program “the American System,” explicitly distinguishing his idea from the British laissez-faire system. (The Club for Growth would not have been pleased.)

Abraham Lincoln, for whom Clay was a hero, built upon this tradition, laying the foundation for our public universities by backing the establishment of land-grant colleges.

Civil War pensions — the first great social insurance program and a central Republican cause — were supporting about 28 percent of men 65 and over by 1910. In 1894, the program’s most expensive year, the pensions accounted for 37 percent of federal spending. Sounds like a massive entitlement program, doesn’t it?

And the first American version of socialized medicine was signed into law in 1798 by that great conservative president, John Adams. The Marine Hospital Servicefunded hospitals across the country to treat sailors who were sick or got injured on the job. There is no record of a mass campaign to repeal AdamsCare.

Mr. Conservative himself, Robert A. Taft, a Republican senator from Ohio and Senate majority leader, urged federal support for decent housing for all Americans in the 1940s. Dwight Eisenhower created the interstate highway system and established the federal student loan program in the 1950s.

More recently, Ronald Reagan never tried to dismantle the New Deal and acknowledged, sometimes with wry humor, the need for tax increases. He was acutely alive to the communal side of conservatism. Nearly all of the pictures in his 1984 “Morning in America” commercial — one of the most famous political ads in our history — invoked community: a father and son working together, tidy neighborhoods, a wedding, young campers earnestly saluting the flag. Reagan spoke regularly not only of the power of the market and the dangers of Soviet communism, but also of the centrality of families and neighborhoods.

George W. Bush, who promoted “compassionate conservatism,” built on old progressive programs with his No Child Left Behind law, using federal aid to education as a lever for reform. And he added a prescription-drug benefit to the Medicare program that Lyndon B. Johnson pushed into law.

In other words, until recently conservatives operated within America’s long consensus that accepted a market economy as well as a robust role for a government that served the common good. American politics is now roiled because this consensus is under the fiercest attack it has faced in more than 100 years.

For most of the 20th century, conservatives and progressives alternated in power, each trying to correct the mistakes of the other. Neither scared the wits out of the other (although campaign rhetoric sometimes suggested otherwise), and this equilibrium allowed both sides to compromise and move forward. It didn’t mean that politics was devoid of philosophical conflicts, of course. The clashes over McCarthyism, the civil rights revolution, the Vietnam War, Watergate and the Great Inflation of the late 1970s remind us that our consensus went only so far. Conservatives challenged aspects of the New Deal-era worldview from the late 1960s on, dethroning a liberal triumphalism that long refused to take conservatism seriously. Over time, even progressives came to appreciate some essential instincts that conservatives brought to the debate.

So why has this consensus unraveled?

Modern conservatism’s rejection of its communal roots is a relatively recent development. It can be traced to a simultaneous reaction against Bush’s failures and Barack Obama’s rise.

Bush’s unpopularity at the end of his term encouraged conservatives, including the fledgling tea party movement, to distance themselves from his legacy. They declared that Bush’s shortcomings stemmed from his embrace of “big government” and “big spending” — even if much of the spending was in Iraq and Afghanistan. They recoiled from his “compassionate conservatism,” deciding, as right-wing columnist Michelle Malkin put it, that “ ‘compassionate conservatism’ and fiscal conservatism were never compatible.”

That would be true, of course, only if “fiscal conservatism” were confined to reductions in government and not viewed instead as an effort to keep revenue and spending in line with each other, which was how older conservatives had defined the term.

Obama, in the meantime, pitched communal themes from the moment he took office, declaring in his inaugural address that America is “bigger than the sum of our individual ambitions.” The more he emphasized a better balance between the individual and the community, the less interested conservatives became in anything that smacked of such equilibrium.

That’s why today’s conservatives can’t do business with liberals or even moderates who are still working within the American tradition defined by balance. It’s why they can’t agree even to budget deals that tilt heavily, but not entirely, toward spending cuts; only sharp reductions in taxes and government will do. It’s why they cannot accept (as Romney and the Heritage Foundation once did) energetic efforts by the government to expand access to health insurance. It’s why, even after a catastrophic financial crisis, they continue to resist new rules aimed not at overturning capitalism but at making it more stable.

For much of our history, Americans — even in our most quarrelsome moments — have avoided the kind of polarized politics we have now. We did so because we understood that it is when we balance our individualism with a sense of communal obligation that we are most ourselves as Americans. The 20th century was built on this balance, and we will once again prove the prophets of U.S. decline wrong if we can refresh and build upon that tradition. But doing so will require conservatives to abandon untempered individualism, which betrays what conservatism has been and should be.

By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, May 24, 2012

May 25, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

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