“Meritocracy” Fantacy: America’s Unlevel Field
Last month President Obama gave a speech invoking the spirit of Teddy Roosevelt on behalf of progressive ideals — and Republicans were not happy. Mitt Romney, in particular, insisted that where Roosevelt believed that “government should level the playing field to create equal opportunities,” Mr. Obama believes that “government should create equal outcomes,” that we should have a society where “everyone receives the same or similar rewards, regardless of education, effort and willingness to take risk.”
As many people were quick to point out, this portrait of the president as radical redistributionist was pure fiction. What hasn’t been as widely noted, however, is that Mr. Romney’s picture of himself as a believer in a level playing field is just as fictional. Where is the evidence that he or his party cares at all about equality of opportunity?
Let’s talk for a minute about the actual state of the playing field.
Americans are much more likely than citizens of other nations to believe that they live in a meritocracy. But this self-image is a fantasy: as a report in The Times last week pointed out, America actually stands out as the advanced country in which it matters most who your parents were, the country in which those born on one of society’s lower rungs have the least chance of climbing to the top or even to the middle.
And if you ask why America is more class-bound in practice than the rest of the Western world, a large part of the reason is that our government falls down on the job of creating equal opportunity.
The failure starts early: in America, the holes in the social safety net mean that both low-income mothers and their children are all too likely to suffer from poor nutrition and receive inadequate health care. It continues once children reach school age, where they encounter a system in which the affluent send their kids to good, well-financed public schools or, if they choose, to private schools, while less-advantaged children get a far worse education.
Once they reach college age, those who come from disadvantaged backgrounds are far less likely to go to college — and vastly less likely to go to a top-tier school — than those luckier in their parentage. At the most selective, “Tier 1” schools, 74 percent of the entering class comes from the quarter of households that have the highest “socioeconomic status”; only 3 percent comes from the bottom quarter.
And if children from our society’s lower rungs do manage to make it into a good college, the lack of financial support makes them far more likely to drop out than the children of the affluent, even if they have as much or more native ability. One long-term study by the Department of Education found that students with high test scores but low-income parents were less likely to complete college than students with low scores but affluent parents — loosely speaking, that smart poor kids are less likely than dumb rich kids to get a degree.
It’s no wonder, then, that Horatio Alger stories, tales of poor kids who make good, are much less common in reality than they are in legend — and much less common in America than they are in Canada or Europe. Which brings me back to those, like Mr. Romney, who claim to believe in equality of opportunity. Where is the evidence for that claim?
Think about it: someone who really wanted equal opportunity would be very concerned about the inequality of our current system. He would support more nutritional aid for low-income mothers-to-be and young children. He would try to improve the quality of public schools. He would support aid to low-income college students. And he would support what every other advanced country has, a universal health care system, so that nobody need worry about untreated illness or crushing medical bills.
If Mr. Romney has come out for any of these things, I’ve missed it. And the Congressional wing of his party seems determined to make upward mobility even harder. For example, Republicans have tried to slash funds for the Women, Infants and Children program, which helps provide adequate nutrition to low-income mothers and their children; they have demanded cuts in Pell grants, which are designed to help lower-income students afford college.
And they have, of course, pledged to repeal a health reform that, for all its imperfections, would finally give Americans the guaranteed care that everyone else in the advanced world takes for granted.
So where is the evidence that Mr. Romney or his party actually believes in equal opportunity? Judging by their actions, they seem to prefer a society in which your station in life is largely determined by that of your parents — and in which the children of the very rich get to inherit their estates tax-free. Teddy Roosevelt would not have approved.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 8, 2012
Bank Of America Cuts Off Credit To Some Small Businesses
Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat.
The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can’t pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.
Business owners complain that BofA’s credit squeeze is abrupt and could strain their small companies and even put them out of business. The credit cutoff is coming at a time when the California economy can’t seem to catch a break, and bucks what the financial industry says is a new trend of easing standards on business loans.
One such customer, Babak Zahabizadeh, was told in a letter that the $96,000 debt carried by his Burbank messenger service must be repaid Jan. 25. A loan officer offered multiple alternatives over the phone that Zahabizadeh called unaffordable, including paying off the debt at 12% interest over two years. That’s about $4,500 a month, nearly 10 times his current interest-only payment.
Zahabizadeh, known as Bobby Zahabi to his customers, said he has cut the staff of his Messengers & Distribution Inc. to 80 from 200 to nurse his business through tough times.
“I was like, ‘Dude, you’re calling a guy who’s barely surviving!’ ” he said. “My final word was that I can double my payment — but not triple or quadruple it. I told them if they apply too much pressure they’re going to push me into bankruptcy.”
The capped credit lines stem from a corporate overhaul launched by Brian Moynihan, who became Bank of America’s chief executive in 2010. He promised to address losses caused by loose lending and rapid expansion by reining in risks and shedding investments deemed non-core.
BofA spokesman Jefferson George said a “very small percentage” of small-business customers have been affected by the changes. He would not provide exact numbers except to say it wasn’t in the hundreds of thousands. Some of the affected businesses had been customers of other banks that Bank of America acquired, but most were BofA customers from the start, George said.
“These changes were explained in letters to customers, and they were necessary for Bank of America to continue prudent lending to viable businesses across the U.S.,” he said.
The bank still has 3.5 million non-mortgage loans to small businesses on its books. The affected business owners were notified a year in advance that their credit lines were being called, George said, although Zahabi and several others said they had not received the early warnings.
The changes also include added annual reviews of borrowers and annual fees, and often reductions in the maximum amount of credit. George said the aim was to reduce Bank of America’s risks and to bring the loan terms in line with more stringent standards imposed after the 2007 mortgage meltdown and 2008 credit crisis.
Scott Hauge, president of the advocacy group Small Business California, called the credit cuts “a tragedy” for longtime BofA clients left vulnerable by years of struggle in a sour economy.
“If small businesses are going to lead the way out of the economic doldrums we now face in this country, they must have access to capital, not only to hire more people but to protect the jobs they are currently providing,” Hauge said.
Bank of America was a leader in the banking industry’s abortive attempt to impose debit card fees. But it appears to be a laggard in tightening business lending standards. Most other banks, having tightened lending standards in the aftermath of the financial crisis, had eased credit last year as competition for small-business customers heats up, bank analysts say.
“Everyone … is targeting commercial and particularly small-business lending as the real focus area for growth,” said Joe Morford, an analyst in San Francisco for RBC Capital Markets.
While Bank of America is advertising its own commitment to small businesses, it needs to send another message to its government supervisors because it has less of a capital cushion against losses than major rivals, said FBR Capital Markets bank analyst Paul Miller.
Restricting credit lines “is a way to show the regulators they are serious about addressing risks,” Miller said. “Bank of America is under great pressure, especially with another round of [Federal Reserve] bank stress tests coming up, as the regulators say: ‘We want you to tighten up.’ ”
The analysts said all banks monitor business customers and restrict credit on a case-by-case basis. But they said they were unaware of any other large bank systematically capping credit at this time.
Customers interviewed by The Times said they could understand how the turbulent economy might result in some restrictions. But they complained that the credit cutoffs threatened to undo businesses they shepherded through the downturn by slashing costs, hoping to expand when brighter days return.
Several small-business owners indicated that they had nearly used up all the available credit on their Bank of America lines. However, George said maxing out the lines wasn’t a major factor in the bank’s reevaluation of the credit terms.
Kathleen Caid’s Antique Artistry Studio in Glendale sells elaborately beaded, Victorian-style shades that she makes for lamps, chandeliers and sconces. She said she had understood that her $85,000 credit line would remain in place “as long as I wasn’t in default,” and she hadn’t missed any payments.
Caid and her husband, Tim Melchior, a video producer with a Burbank media company, insist they are not in serious financial trouble despite having laid off her eight full-time employees and downsized her business space by two-thirds during the recession.
Yet Bank of America says that her credit-line debt, totaling $80,000, is due in May.
“I wouldn’t have run it up if I knew what was in store,” she said, adding that she would be speaking to an attorney and other banks about her options.
By: E. Scott Reckard, Los Angeles Times, Jamuary 3, 2012
Mitt Romney’s “Post-Truth Campaign”
Suppose that President Obama were to say the following: “Mitt Romney believes that corporations are people, and he believes that only corporations and the wealthy should have any rights. He wants to reduce middle-class Americans to serfs, forced to accept whatever wages corporations choose to pay, no matter how low.”
How would this statement be received? I believe, and hope, that it would be almost universally condemned, by liberals as well as conservatives. Mr. Romney did once say that corporations are people, but he didn’t mean it literally; he supports policies that would be good for corporations and the wealthy and bad for the middle class, but that’s a long way from saying that he wants to introduce feudalism.
But now consider what Mr. Romney actually said on Tuesday: “President Obama believes that government should create equal outcomes. In an entitlement society, everyone receives the same or similar rewards, regardless of education, effort, and willingness to take risk. That which is earned by some is redistributed to the others.”
And in an interview the same day, Mr. Romney declared that the president “is going to put free enterprise on trial.”
This is every bit as bad as my imaginary Obama statement. Mr. Obama has never said anything suggesting that he holds such views, and, in fact, he goes out of his way to praise free enterprise and say that there’s nothing wrong with getting rich. His actual policy proposals do involve a rise in taxes on high-income Americans, but only back to their levels of the 1990s. And no matter how much the former Massachusetts governor may deny it, the Affordable Care Act established a national health system essentially identical to the one he himself established at a state level in 2006.
Over all, Mr. Obama’s positions on economic policy resemble those that moderate Republicans used to espouse. Yet Mr. Romney portrays the president as the second coming of Fidel Castro and seems confident that he will pay no price for making stuff up.
Welcome to post-truth politics.
Why does Mr. Romney think he can get away with this kind of thing? Well, he has already gotten away with a series of equally fraudulent attacks. In fact, he has based pretty much his whole campaign around a strategy of attacking Mr. Obama for doing things that the president hasn’t done and believing things he doesn’t believe.
For example, in October Mr. Romney pledged that as president, “I will reverse President Obama’s massive defense cuts.” That line presumably plays well with Republican audiences, but what is he talking about? The defense budget has continued to grow steadily since Mr. Obama took office.
Then there’s Mr. Romney’s frequent suggestion that the president has gone around the world “apologizing for America.” This is a popular theme on the right — but the so-called Obama apology tour is a complete fabrication, assembled by taking quotes out of context.
As Greg Sargent of The Washington Post has pointed out, there’s a common theme to these whoppers and a number of other things Mr. Romney has said: the strategy is clearly to portray the president as a suspect character, someone who doesn’t share American values. And since Mr. Obama has done and said nothing to justify this portrait, Mr. Romney just invents stuff to make his case.
But won’t there be some blowback? Won’t Mr. Romney pay a price for running a campaign based entirely on falsehoods? He obviously thinks not, and I’m afraid he may be right.
Oh, Mr. Romney will probably be called on some falsehoods. But, if past experience is any guide, most of the news media will feel as though their reporting must be “balanced,” which means that every time they point out that a Republican lied they have to match it with a comparable accusation against a Democrat — even if what the Democrat said was actually true or, at worst, a minor misstatement.
This isn’t an abstract speculation. Politifact, the project that is supposed to enforce truth in politics, has declared Democratic claims that Republicans voted to end Medicare its “Lie of the Year.” It did so even though Republicans did indeed vote to dismantle Medicare as we know it and replace it with a voucher scheme that would still be called “Medicare,” but would look nothing like the current program — and would no longer guarantee affordable care.
So here’s my forecast for next year: If Mr. Romney is in fact the Republican presidential nominee, he will make wildly false claims about Mr. Obama and, occasionally, get some flack for doing so. But news organizations will compensate by treating it as a comparable offense when, say, the president misstates the income share of the top 1 percent by a percentage point or two.
The end result will be no real penalty for running an utterly fraudulent campaign. As I said, welcome to post-truth politics.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 22, 2011
Mitt Romney Relied On Corporate Welfare: How Bain Capital Leveraged Government Assistance To Boost Profits
During the presidential campaign, Mitt Romney has lashed out at the Obama administration’s taxpayer subsidized grants to clean energy start-up companies. “The U.S. government shouldn’t be playing venture capitalist,” wrote Romney in October. “The very process invites cronyism and outright corruption.” But public records show that Romney’s private equity firm, Bain Capital, repeatedly persuaded the government to play venture capitalist when it came to its own portfolio of companies.
News outlets have recently focused attention on Romney’s history as a businessman at Bain, which he founded in 1984. What hasn’t been reported, or fully explained by the candidate, is how Romney often got ahead in the private sector by using government help.
The likely GOP nominee made much of his estimated $250 million fortune buying companies, reorganizing them, and selling them for a profit. Though Romney, whose only government experience is his one term as Massachusetts governor, is quick to claim that he turned around investments using sound management and data-driven strategies, he does not mention one aspect of his success. Bain Capital owned companies that padded their profits using millions in public subsidies. In other cases, firms owned by Bain employed K Street lobbying firms to pursue lucrative government programs.
Consider two of Romney’s first major investments: office supply company Staples Inc. and photo album manufacturer Holson Co. Both persuaded state officials to subsidize their growth.
Shortly after Bain took control of Holson in 1987, executives pushed for the company to expand in the South. Officials from the firm had negotiated with Gov. Carroll Campbell, a Republican, to extend $200,000 in utility support for a new Holson plant in the city of Gaffney. The local city council also approved a $5 million bond for construction, after meeting with representatives from Holson. Five years after South Carolina’s taxpayers had helped finance the factory, Bain chose to sell Holson’s Gaffney facility for $2.8 million. Romney’s firm reaped the profits on the taxpayers’ expenditure.
The history of Staples, a company that Bain grew from a single store, is a hallmark of the Romney record. Staples’ rapid growth, however, drew on substantial state subsidies.
In 1996, Tom Stemberg, a close Romney business partner leading Staples, met with Maryland Gov. Parris Glendening, a Democrat, to negotiate a package of taxpayer sweeteners to build a new distribution center in Hagerstown. The Glendening administration, using a “Sunny Day” fund of discretionary development money, awarded Staples $2.3 million in grants and low interest loans. The following year, as Glendening prepared for his reelection campaign, top Staples executives maxed out in donations. Stemberg and his colleagues gave a total of $16,000.
A similar story played out in Connecticut, where Staples landed a deal in which taxpayers subsidized over $6 million in low-interest loans for the company to construct a distribution center in Killingly in 1998.
Tapping Washington
The federal government also played a pivotal role in Romney’s ascendant path through corporate America.
GS Industries, a steel company purchased by Bain in the early ’90s, faced fiscal problems as Bain withdrew large dividends and management fees. Under Bain’s leadership, the steelmaker hired the K Street lobbying firm of Wiley Rein to seek government support. In 1998-99 the firm paid $140,000 for a lobbying team that included former Democratic Rep. Jim Slattery. GS Industries eventually won a federal loan guarantee, but before the loan could be delivered, the company fell to bankruptcy in 2001. Bain’s executives still made $50 million from their involvement with the firm.
In 1999, Romney departed Bain to take over as the chief executive officer of the Salt Lake City Winter Olympics. The experience, turning an organization in disarray and deeply in the red into a popular event that actually earned over $100 million in profits, is portrayed as yet another example of the candidate’s private sector management skills. Yet the turnaround was achieved in part through the use of professional influence peddling. Under Romney’s management, the Olympic organizing committee spent over $3.3 million on Beltway lobbyists to secure federal funding for the 2004 Winter games.
Olympics lobbyists from firms like Patton Boggs and King & Spalding helped secure federal grants for communications equipment, educational money and public transportation. Millions of dollars were procured from federal officials, who wanted to allay safety concerns in the aftermath of 9/11.
As the New York Times reported earlier this week, Romney’s has continued to earn a windfall from Bain. When he left the firm, he signed a severance package that allowed him to share in the company’s profits in perpetuity. The arrangement might come back to haunt the candidate, given Bain’s increased reliance on lobbyists over the last five years.
Starting in 2007, Bain Capital began retaining various lobbying firms to pressure lawmakers to keep open a loophole that allows much of the earnings by private equity managers to be taxed as capital gains rather than the top income bracket of 35 percent. Given Romney’s profit-sharing retirement deal, the campaign to extend the loophole, which still hasn’t been closed, likely boosted the candidate’s fortune. (Romney has refused to release his tax return, leaving questions about his income.)
As Romney pillories Obama for using the government to fix problems in society (health reform, the auto bailout, etc.), he invites a closer examination of his own career. A balanced view of the Romney record shows he has never had any qualms about government help when it came to his own bottom line. Whether through hiring insider lobbyists or funneling taxpayer subsidies to his companies, government assistance has been part and parcel to the rise of Romney.
By: Lee Fang, Salon, December 21, 2011
“Dear Leader” Boehner And House Republicans Cave In Payroll Taxcut Fight
This morning, House Speaker John Boehner (R-Ohio) and other leading officials from his caucus told reporters that House Republicans would stick to their guns when it comes to extending the payroll tax break. If Democrats wanted to avoid a tax increase on the middle class, they would have to cave and make Boehner and his cohorts happy.
Not quite six hours later, Boehner and his cohorts threw in the towel.
House Republicans on Thursday crumpled under the weight of White House and public pressure and have agreed to pass a two-month extension of the 2 percent payroll-tax cut, Republican and Democratic sources told National Journal.
The House made the move after Senate Majority Leader Harry Reid, D-Nev., agreed to appoint conferees to a committee to resolve differences between the Senate’s two-month payroll-tax cut and the House’s one-year alternative.
Reid, you’ll remember, made this offer on Monday, and soon after Boehner said this morning that the deal wasn’t good enough, Senate Minority Leader Mitch McConnell (R-Ky.) endorsed Reid’s solution. President Obama backed the same approach shortly thereafter.
The House will reportedly make some technical changes to the Senate bill, and the Senate will approve that final bill by unanimous consent.
With nine days to go, it appears all but certain that the payroll tax break — as well as a clean extension of unemployment benefits — will be extended for two months. Between now and then, a conference committee will be tasked with working on a deal for a full-year extension.
What changed Boehner’s mind? Or more accurately, what changed Boehner’s mind again? The Speaker, as recently as Saturday, wanted to pass the Senate compromise and send his caucus home for the holidays. They rebelled and the leader quickly became the follower.
By some accounts, this happened again today. House Republicans —- Wisconsin’s Sean Duffy, Arkansas’ Rick Crawford, Pennsylvania’s Charlie Dent, among others — started breaking ranks after getting an earful in their local districts. GOP lawmakers who wanted to fight the Senate Braveheart-style came to the conclusion, “Maybe that Senate bill isn’t so bad after all.” When his members reversed course, the Speaker again took his cues from them, rather than the other way around.
If Boehner were a stronger, more effective House Speaker, this fiasco could have been easily avoided. He could have told his caucus this was a fight they were likely to lose, so passing the Senate bill quickly was the smart course of action. But he couldn’t — Boehner takes orders; he doesn’t give them.
It’s what helps make this story a disaster, not only for Republicans in general, but also for John Boehner personally. As he surrenders this afternoon, Boehner becomes The Speaker Who Has No Clothes.
He stuck out his neck, vowing not to cave, knowing he’d likely have to cave anyway. Boehner than waited until the pressure became unbearable — after he’d lost face and friends — and walked away with his tail between his legs.
Neither party has had a Speaker this feeble in modern times. His instincts told him to take the deal over the weekend, but Boehner allowed himself to be pushed around by his unhinged caucus, then get pushed around by Democrats, then get pushed around by his allies, then get pushed around by Senate Republicans.
How big a disaster was this for Boehner? Keep an eye on whether Eric Cantor’s travel schedule changes over the holidays.
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, December 22, 2011
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