MItt Romney, Money And “Quiet Rooms”: Mr. 1 Percent Is Clueless About Inequality
The GOP primary keeps getting funnier. Just as Newt Gingrich was telling a South Carolina Romney supporter “I agree with you” that attacking Mitt Romney’s Bain Capital career could help Democrats on Wednesday, his friendly Super PAC “Winning the Future” released the long version of its hit piece “When Mitt Romney Came to Town.” I thought MoveOn did a bang-up job last week with an ad profiling a pair of older Kansas City steelworkers left jobless thanks to Bain; this ad is so slashing MoveOn might have thought twice about releasing it. If you haven’t seen it, it’s here. Clearly, Gingrich is trying to have it both ways: Mollifying wealthy GOP donors horrified by his attacks on capitalism while continuing to bloody Romney. We’ll see how well it works.
Romney continues to insist Democrats, as well as some of his GOP rivals, are practicing “the politics of envy,” and on NBC Wednesday made what might be his dumbest remark yet. Asked whether there was ever a fair way to discuss income inequality, the GOP front-runner replied:
I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like. But the president has made it part of his campaign rally. Everywhere he goes we hear him talking about millionaires and billionaires and executives and Wall Street. It’s a very envy-oriented, attack-oriented approach and I think it will fail.
Maybe Mitt wants to confine talk of inequality to “quiet rooms” because he’s seen the Pew Research Center data showing that Americans think conflict is growing between rich and poor. Two-thirds of Americans see that conflict, up 50 percent since 2009. While African-Americans are still more likely than whites to see that conflict, the percentage of whites who agree tripled. Credit Occupy Wall Street for hiking consciousness about the gap between rich and poor, but credit the GOP for creating the conditions that allowed income inequality to soar, and the top 1 percent to gobble up 40 percent of the nation’s wealth.
A sly Sarah Palin called for Romney to release his tax returns on Sean Hannity’s show last night, to Hannity’s seeming distress. Palin defended Rick Perry’s “vulture capitalism” attack even as Hannity kept trying to get her to declare it unfair. She’s gone rogue again! We can only dream that Romney releases his tax returns. I think he’s less scared about showing his staggering wealth than revealing the scandalously low tax rate he pays, given how much of his income comes from investment and is thus subject to lower capital gain taxes. (I’m sure we’d also learn a lot from the tricks Romney’s accountants use to keep his effective tax rate even lower.)
Palin also demanded that Romney substantiate his claims to have created 100,000 jobs while at Bain, calling it a “come to Jesus” moment. What is she up to? Her snow-machine-driving husband Todd endorsed Newt Gingrich last week, to great derision, but it did raise questions about what the nominally neutral ex-V.P. nominee is thinking. She’s not thinking good thoughts about Mitt Romney, that’s for sure.
Meanwhile, the man who foisted Palin on the world, John McCain, today accused Romney’s anti-Bain attackers as supporting “communism.” But BuzzFeed recalls that in 2008, McCain himself attacked Romney’s Bain days. “He presided over the acquisition of companies that laid off thousands of workers,” McCain complained back then, and campaign manager Rick Davis told the National Journal:
“He learned politics and economics from being a venture capitalist, where you go and buy companies, you strip away the jobs, and you resell them. And if that’s what his experience has been to be able to lead our economy, I’d really raise questions.”
By: Joan Walsh, Editor at Large, January, 12, 2012
An Untenable Figure: Mitt Romney And 100,000 Jobs
Last week, when we first looked at the former Massachusetts governor’s claim that “we helped create over 100,000 new jobs,” his campaign provided a list that included the growth in jobs from three companies that it said Romney helped to start or grow while at Bain Capital: Staples (a gain of 89,000 jobs), The Sports Authority (15,000 jobs), and Domino’s (7,900 jobs).
As we noted, “This tally obviously does not include job losses from other companies with which Bain Capital was involved — and are based on current employment figures, not the period when Romney worked at Bain.”
Glenn Kessler live chatted with readers on this topic. Read the chat transcript now.
In Saturday’s ABC News-Yahoo debate, Romney expanded on the list: “There’s a steel company called Steel Dynamics in Indiana, thousands of jobs there; Bright Horizons Children’s Centers, about 15,000 jobs there; Sports Authority, about 15,000 jobs there, Staples alone, 90,000 employed. That’s a business that we helped start from the ground up.”
Last week, when we looked at this 100,000 figure, we evaluated it along with Romney’s claims about President Obama’s job creation figures, which overall earned One Pinocchio. Earlier, we had ruled that it was all but impossible to prove or disprove Romney’s claims on job creation. But in light of Romney’s comments during the debate and some additional research, we have come to a new assessment.
The Facts
By all accounts, Romney was a highly successful venture capitalist. While running Bain Capital, he helped pick some real winners, earning his investors substantial returns. High finance is a difficult subject to convey in a sound bite, so Romney evidently has chosen to focus on job creation.
This is a mistake, because it overstates the purposes of Bain’s investments and has now led Romney into a factually challenging cul-de-sac.
Romney never could have raised money from investors if the prospectus seeking $1-million investments from the super wealthy had said it would focus on creating jobs. Instead, it said: “The objective of the fund is to achieve an annual rate of return on invested capital in excess of the returns generated by conventional investments in the public equity market and the private equity market.”
Indeed, the prospectus never mentions “jobs,” “job,” or “employees.”
Second, it has become increasingly hard to understand how Romney’s personal involvement played a role in creating these jobs, especially years later. He clearly is adding up all the jobs now at the companies that are thriving, arguing these numbers far outweigh the job losses at companies that failed. But as the Wall Street Journal reported Monday, the failure rate one can attribute to Bain Capital changes significantly if one counts five years from an investment or eight years from an investment.
Bain, in fact, rejected the Journal’s analysis, saying it “uses a fundamentally flawed methodology that unfairly assigns responsibility to us for many events that occurred in companies when we did not own or control them, and disregards dozens of successful venture capital investments.”
In other words, Bain appears to be rejecting a central premise of Romney’s calculation — that years after the investment ended, one can attribute either good news or bad news about the company to Bain’s involvement.
Romney is generally careful to use phrases such as “helped create.” He also acknowledged Saturday that we “were investors to help get them going.” But even that overstates the case.
Bain may have provided management expertise or money when others would not, but a company such as Staples — one of the biggest contributors to Romney’s job figures — was largely the brainchild of entrepreneur Tom Stemberg. Stemberg presumably should get most of the credit for inventing a killer new business category. (Left unsaid, of course, is all the jobs that might have been lost at small stationery stores unable to compete with the low prices of Staples, Office Depot and so forth.)
Moreover, should Romney even get any credit for jobs at Domino’s, as his campaign claims? The deal in which Bain Capital bought Domino’s closed on Dec. 21, 1998, according to a Domino’s news release that referred to “Milt Romney.” Less than two months later Romney had left Bain to run the Salt Lake Olympics, meaning he had barely any role in running the company once it became part of the Bain investment portfolio.
When Romney made a run for the governorship, the Boston Globe reported in 2002 that he had not been involved in the details of many deals toward the end of his Bain experience: “These days, Romney can say he hasn’t inked a deal in many years. Even during the end of his tenure at Bain, from 1994 to 1999, he played the role of CEO and rainmaker rather than delving into the details of buyouts.”
Interestingly, when Romney ran for the Senate in 1994, his campaign only claimed he had created 10,000 jobs. In one ad, a narrator said: “Mitt Romney has spent his life building more than 20 businesses and helping to create more than 10,000 jobs. So when it comes to creating jobs, he’s not just talk. He’s done it.”
Now, apparently, those 10,000 jobs have increased tenfold, apparently in part because of Bain investments in which Romney had at best a tangential role.
In the 2008 presidential campaign, as far as we can tell, Romney never highlighted any number for jobs created, having learned a lesson from how ruthlessly he was attacked by Sen. Edward Kennedy in that Senate race for jobs lost through Bain investments.
We asked the Romney campaign for a response, but did not get one.
The Pinocchio Test
Romney certainly has a good story to tell about knowing how to manage a business, spotting opportunities and understanding high finance. But if he is to continue to make claims about job creation, the Romney campaign needs to provide a real accounting of how many jobs were gained or lost through Bain Capital investments while the firm managed these companies — and while Romney was chief executive. Any jobs counted after either of those data points simply do not pass the laugh test.
By: Glenn Kessler, The Washington Post, January 10, 2012
America Is Not A Corporation
“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”
That’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.
Today, however, let’s focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it’s the main plank of Mitt Romney’s case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.
In so doing, he has, of course, invited close scrutiny of his business career. And it turns out that there is at least a whiff of Gordon Gekko in his time at Bain Capital, a private equity firm; he was a buyer and seller of businesses, often to the detriment of their employees, rather than someone who ran companies for the long haul. (Also, when will he release his tax returns?) Nor has he helped his credibility by making untenable claims about his role as a “job creator.”
But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.
Why isn’t a national economy like a corporation? For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company.
Most relevant for our current situation, however, is the point that even giant corporations sell the great bulk of what they produce to other people, not to their own employees — whereas even small countries sell most of what they produce to themselves, and big countries like America are overwhelmingly their own main customers.
Yes, there’s a global economy. But six out of seven American workers are employed in service industries, which are largely insulated from international competition, and even our manufacturers sell much of their production to the domestic market.
And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.
Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.
But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.
Now, to be fair, being a career politician isn’t necessarily a better preparation for managing economic policy than being a businessman. But Mr. Romney is the one claiming that his career makes him especially suited for the presidency. Did I mention that the last businessman to live in the White House was a guy named Herbert Hoover? (Unless you count former President George W. Bush.)
And there’s also the question of whether Mr. Romney understands the difference between running a business and managing an economy.
Like many observers, I was somewhat startled by his latest defense of his record at Bain — namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.
But what really struck me was how Mr. Romney characterized President Obama’s actions: “He did it to try to save the business.” No, he didn’t; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America’s slump. Does Mr. Romney understand the distinction?
America certainly needs better economic policies than it has right now — and while most of the blame for poor policies belongs to Republicans and their scorched-earth opposition to anything constructive, the president has made some important mistakes. But we’re not going to get better policies if the man sitting in the Oval Office next year sees his job as being that of engineering a leveraged buyout of America Inc.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 12, 2012
“Investment Baining”: Bitter Politics of Envy?
You’re just jealous. At least that’s how Mitt Romney sees it. The millionaire who posed for a picture with the boys at Bain Capital with the long green clinched between their teeth and poking out of their collars and jackets now says that people who question what he did there, and what rich people do now, are just green with envy.
In his New Hampshire victory speech on Tuesday, Romney lambasted his Republican opponents (who have raised real issues about his role at the private equity firm Bain Capital) for following the lead of President Obama, whom he described as a leader who divides us “with the bitter politics of envy.”
The next day on “Today” on NBC, Romney defended the statement, rejecting the notion that there were questions about Wall Street behavior, saying the whole discussion was about class warfare. He even went so far as to suggest that such talk shouldn’t even be openly entertained. When the interviewer asked, “Are there no fair questions about the distribution of wealth without it being seen as envy, though?” Romney responded, “I think it’s fine to talk about those things in quiet rooms and discussions about tax policy and the like.”
In quiet rooms? That’s the problem. Too many have been too quiet for too long. And, on this point, we must applaud the efforts of the Occupy Wall Street movement. It took income inequality and corporate responsibility out of the shadows and into the streets.
A report released on Wednesday by the Pew Research Center found that about two-thirds of Americans now perceive a strong conflict between the rich and poor in this country. That was up 19 percentage points from 2009.
As The New York Times pointed out in regard to the report, “conflict between rich and poor now eclipses racial strain and friction between immigrants and the native-born as the greatest source of tension in American society.”
And this has nothing to do with envy and everything to do with fairness.
Elizabeth Warren, who is now running for the Senate seat that Romney ran for in 1994 and didn’t get, probably rebuts this myth of class warfare best by reframing the discussion in terms of a “social contract” between the rich and the rest of society. At one of her campaign events, she explained:
“There is nobody in this country who got rich on his own. Nobody. You built a factory out there, good for you. But, I want to be clear: you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did. Now look, you built a factory and it turned into something terrific or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
That is the corporate Contract With America: societal symbiosis. We create a society in which smart, hard-working people can be safe and prosper, and they in turn reinvest a fair share of that prosperity back into society for posterity.
Everyone benefits.
But somewhere along the way this got lost. Greed got good. The rich wanted all of the societal benefits and none of the societal responsibilities. They got addicted to seeing profits go up and taxes go down, by any means necessary, no matter the damage to the individual or the collective. Those Maseratis weren’t going to pay for themselves.
And the resulting income inequality helped to stall economic mobility.
As The New York Times reported last week, “many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe.” The Times report speculated that: “One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.”
Indeed, a November report by the Pew Charitable Trusts’ Economic Mobility Project pointed out, “In the United States, there is a stronger link between parental education and children’s economic, educational, and socio-emotional outcomes than in any other country investigated.”
Pew has found that most children raised at the top of the income spectrum stay there and most raised at the bottom stay at the bottom.
An equal opportunity to success is central to this country’s optimistic ethos, but income inequality and corporate greed are making a lie of that most basic American truism. The rich and their handmaidens on the political right have consolidated America’s wealth on the ever-narrowing peak of a steep hill and greased the slope. And they want to cast everyone at the bottom as lazy or jealous, without acknowledging the accident of birth and collusion of policies that helped grant them their perch.
Income inequality is a threat to this country and the middle class that made her great. If Romney wants to be president, he needs to understand that.
As Alan Krueger, the chairman of the White House Council of Economic Advisers, said on Thursday, “I think it is clear that we can’t go back to the type of policies that exacerbated the rise in inequality and threatened economic mobility in the first place if we want an economy that builds the middle class.”
Not envy Mr. Romney. Opportunity.
By: Charles Blow, Op-Ed Columnist, The New York Times, January 13, 2012
Mitt Romney’s Lies: “It’s Almost As If He Can’t Control Himself”
As his briefly front-running campaign sunk in the polls under relentless punishment from Mitt Romney’s “super PAC” allies in the days before the Iowa caucuses, former House Speaker Newt Gingrich caused a brief stir by matter-of-factly telling a TV interviewer that Romney is a “liar.”
“Why are you saying he’s a liar?” his apparently shocked interlocutor pressed. The notion that Mitt Romney routinely makes statements lacking a factual basis should not come as a surprise to anyone who has followed the campaign. On the left, Paul Krugman has marveled that no other candidate has ever “lied so freely, with so little compunction.” On the right, The American Conservative‘s Daniel Larison wondered about why he lies, concluding that the former Massachusetts governor is “so contemptuous of the people he tells lies to that he never thinks he will be found out.”
With Romney sweeping Iowa and New Hampshire and leading in the polls in South Carolina, this is a good time to catalogue some of Romney’s greatest hits thus far.
“100,000 new jobs.” Romney has repeatedly claimed that during his tenure at Bain Capital, “net-net, we created over 100,000 jobs.” His campaign defends the figure by tallying the current employment totals of some companies Bain aided. That’s a stretch in and of itself, but it’s also not a net figure. It lacks the balancing context of how many jobs were destroyed by Bain. As the Los Angeles Times reported in December, while Bain helped some companies grow, “Romney and his team also maximized returns by firing workers, seeking government subsidies, and flipping companies quickly for large profits. Sometimes Bain investors gained even when companies slid into bankruptcy.”
Indeed, the Wall Street Journal looked closely at Bain’s record under Romney and found that 22 percent “either filed for bankruptcy or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses.” Which is not really terribly surprising: Bain’s raison d’etre is not job creation but wealth creation for its investors. As Washington Post fact checker Glenn Kessler noted in an article Monday calling Romney’s “100,000 jobs” figure “untenable,” Romney and Bain “never could have raised money from investors if the prospectus seeking $1-million investments from the super wealthy had said it would focus on creating jobs.”
As a corollary, when Romney’s record has been criticized, he has dismissed criticisms as an attempt to “put free enterprise on trial.” It’s not an attack on free enterprise. It’s an attack on Romney’s strained attempt to spin his successful record of wealth-creation into one of job-creation. It’s also a recognition that while a net good, the free market has its destructive side—and it’s a fair question to ask, whether voters consider experience in that sort of vulture capitalism as a good qualification for the presidency. Do they want government to be run more like that kind of business?
Obama’s jobs record. By Romney’s own logic (touting jobs created but ignoring jobs lost), his attacks on President Obama’s economic record are nonsensical. He told Time that Obama “has not created any new jobs,” and he told Fox News last week that Obama has “lost” 2 million jobs as president. This is indeed a net figure, but also a misleading one. When Obama took office, the economy was shedding jobs at a rate of nearly 1 million jobs per month, losing roughly 3 million during the first four months of 2009. But presidential policies don’t take effect as soon as the incoming chief takes his oath. Once Obama’s policies started to take effect, the trend turned. The country had added 3.2 million private sector jobs over the course of 22 straight months of private sector growth. By Romney’s definition, the president has created more than 3 million jobs—not enough, but also not none.
In fact the biggest drag on job growth is the 600,000 public sector jobs that have disappeared under the auspices of budget austerity. As my colleague Danielle Kurtzleben reported in September, “government jobs are being shed by the tens of thousands almost every month, hindering an already weak recovery.”
“Entitlement society.” Romney has argued that Obama “is replacing our merit-based, opportunity society with an entitlement society,” where “everyone is handed the same rewards, regardless of education, effort, and willingness to take risk.” As New York‘s Jonathan Chait has observed, “This accusation is approximately as accurate as claiming that the Republican Party wants to pass laws forbidding poor people from making more money.” The idea that President Obama (or any Democrat) advocates for equality of outcomes simply lacks a basis in fact.
It’s an important fabrication, because it marks a turning point in Romney’s attacks on Obama. Previously the president was characterized as ineffectual, but not a socialist. Forced to battle to win the GOP primaries, Romney has adopted the Tea Party’s extremist rhetoric. It won’t play with swing voters, even delivered in his polished drone.
Defense cuts. In an October speech on national security, Romney promised to “reverse President Obama’s massive defense cuts.” One problem: Pentagon spending has gone up under Obama, from $594 billion in 2008 to $666 billion. The 2011 request was for $739 billion. As Rick Perry would say, “Oops.”
No apologies. Romney has said that Obama “went around the world and apologized for America.” This is part of the conservative, dog-whistle meme that Obama is un-American (and possibly even a foreigner!). While the notion of an international apology tour is a staple of the conservative case against Obama, it is also fictitious. The Washington Post’s fact-checker concluded that “the claim that Obama repeatedly has apologized for the United States is not borne out by the facts, especially if his full quotes are viewed in context.” Don’t hold your breath waiting for an apology from Romney on this one.
“Mitt.” It’s a small one, but might be my favorite. During a debate in November, when moderator Wolf Blitzer introduced himself by saying that “Wolf” is really his first name, Romney greeted the audience by saying, “I’m Mitt Romney, and yes, Wolf, that’s also my first name.” In fact, Willard is his first name. It’s a lie notable for being so mundane: Why would someone fudge their name? It’s almost as if he can’t control himself.
Robert Schlesinger, U. S. News and World Report, January 12, 2012
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