“Class-Warfare Plutocrat”: Weak Man Romney Running For President
Newt Gingrich isn’t right about much. But he’s onto something about Mitt Romney’s weaknesses as the GOP candidate. Gingrich has been saying that the idea that Romney is electable is “just silly”: “I find it amazing the news media continues to say he is the most electable Republican when he can’t even break out in his own party. But the fact is that Gov. Romney in the end has a very limited appeal in a conservative party.” There are ways in which Romney is the least electable of the remaining plausible candidates. These issues, all having to do with economics (the country’s and Romney’s own), surfaced this week, and assuming he is the nominee, they’ll get plenty of air time between now and November.
On Thursday, we got the first major analysis of Romney’s tax plan, and it’s predictably reactionary. Taxes on the working poor would actually increase, says the Tax Policy Center. Households in the $50,000 and slightly above range would see a small decrease of 2.2 percent, or around $250. Households bringing in more than $1 million a year would see a decrease of 15 percent, or roughly $146,000. In some other country, this alone would be shocking and self-disqualifying. In 2012 America, sad to say, it marks Romney’s plan as slightly less extreme than those of his competitors. But the essential instinct to genuflect to the ultra-rich is intact.
In the Occupy era, Romney’s plan will be vulnerable to attack on those grounds alone. People aren’t exactly taking to the barricades demanding more tax cuts right now, least of all more giveaways to the very top earners. One poll just before Christmas asked people to rank the importance of addressing unemployment, reducing the deficit, or cutting taxes. Results, respectively: 55, 29, and 12 percent. Most people have a sense that taxes are pretty low these days, which, viewed historically, they are.
But Romney’s tax plan is most vulnerable on the deficit. The Tax Policy Center found that Romney’s tax plan would add $600 billion to the deficit in 2015. That’s a lot of cabbage; nearly half of the current deficit, which is now right just under $1.3 trillion (and projected to go under $1 trillion next year). So in other words, just as the deficit is starting to come down—an issue of great importance to swing voters, by the way—Romney is proposing a massive increase in the deficit, so the rest of us can write $146,000 checks to people who take home $1 million (not “millionaires”; people who make $1 million every single year). Obama—whose own tax plan, by the way, is estimated to reduce the deficit by around $300 billion over five years—ought to be able to destroy such a plan. The Romney people will respond, as they have to this study, with the usual lie about lower tax rates unleashing the dynamism of a newly free people and so on. It will be just as false as it was in the 2000s when the Bush people said it, and I think this time around, enough voters will be able to smell the rat.
So far, all this just makes Romney your run-of-the-mill class-warfare plutocrat. But combine it with the second Romney tax issue—his own—and I start to see the guy’s jaw turning into glass before my very eyes.
Romney will not release his tax returns. Why he won’t is a matter of speculation, but it seems a reasonable guess that he doesn’t want people to see what he’s been still making off of his earlier work at Bain Capital (remember, he’s been “unemployed” for a few years now), and he doesn’t want them to see that he’s been paying tax on this income at a rate of 15 percent rather than 35 percent. Last October, Michael Scherer of Time reported that the Romneys made somewhere between (love the size of these categories!) $6.6 million and $40 million—the vast majority of it in capital gains, which are taxed at 15 percent. A couple earning together around $100,000 in straight salary almost certainly pays a higher effective rate than the Romneys.
Then there are all of Romney’s clumsy lies about the number of jobs he created at Bain, which Greg Sargent first exposed earlier this week. Basically, Romney counted jobs gained at firms Bain reorganized long after he left the firm in 1999, but he didn’t count any jobs lost at firms Bain reorganized. I’d love to do my household budget that way, counting only the good stuff.
An ultra-rich man whose economic plan helps the ultra-rich and explodes the deficit, and who can’t be straight with the public about his own income taxes—that’s who’s leading the GOP field. He’s still probably more electable than Gingrich, or Rick Santorum, whose skeezy, Abramoff-related entanglements will soon see the light of day. But that isn’t saying much. Romney is vastly overrated by liberals as a general election foe. Sure, if the economy backslides, Romney could win, simply by not being the incumbent. But short of a new economic crisis, he’s a huge target. If Democrats want something to worry about, they can worry about the EU, or terrorism. But Mitt Romney? He may be the GOP’s only non-joke candidate, but that doesn’t mean he’s a strong one.
By: Michael Tomasky, The Daily Beast, January 7, 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
Nobody Understands Debt
In 2011, as in 2010, America was in a technical recovery but continued to suffer from disastrously high unemployment. And through most of 2011, as in 2010, almost all the conversation in Washington was about something else: the allegedly urgent issue of reducing the budget deficit.
This misplaced focus said a lot about our political culture, in particular about how disconnected Congress is from the suffering of ordinary Americans. But it also revealed something else: when people in D.C. talk about deficits and debt, by and large they have no idea what they’re talking about — and the people who talk the most understand the least.
Perhaps most obviously, the economic “experts” on whom much of Congress relies have been repeatedly, utterly wrong about the short-run effects of budget deficits. People who get their economic analysis from the likes of the Heritage Foundation have been waiting ever since President Obama took office for budget deficits to send interest rates soaring.
Any day now!
And while they’ve been waiting, those rates have dropped to historical lows. You might think that this would make politicians question their choice of experts — that is, you might think that if you didn’t know anything about our postmodern, fact-free politics.
But Washington isn’t just confused about the short run; it’s also confused about the long run. For while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.
Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.
This is, however, a really bad analogy in at least two ways.
First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.
Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.
This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.
But isn’t this time different? Not as much as you think.
It’s true that foreigners now hold large claims on the United States, including a fair amount of government debt. But every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors. If your image is of a nation that’s already deep in hock to the Chinese, you’ve been misinformed. Nor are we heading rapidly in that direction.
Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest.
And that’s why nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today’s conventional wisdom would lead you to believe. Britain, in particular, has had debt exceeding 100 percent of G.D.P. for 81 of the last 170 years. When Keynes was writing about the need to spend your way out of a depression, Britain was deeper in debt than any advanced nation today, with the exception of Japan.
Of course, America, with its rabidly antitax conservative movement, may not have a government that is responsible in this sense. But in that case the fault lies not in our debt, but in ourselves.
So yes, debt matters. But right now, other things matter more. We need more, not less, government spending to get us out of our unemployment trap. And the wrongheaded, ill-informed obsession with debt is standing in the way.
By: Paul Krugman, Op-Ed Columnist, The New York Times, January 1, 2012
Inconvenient Income Inequality
Is income inequality becoming the new global warming? In other words, is this another case where the facts of an existential threat lose traction among a weary American public as deniers attempt to reduce them to partisan opinions?
It’s beginning to seem so.
A Gallup poll released on Thursday found that, after rising rather steadily for the past two decades, the percentage of Americans who said that the country is divided into “haves” and “have-nots” took the largest drop since the question was asked.
This happened even as the percentage of Americans who grouped themselves under either label stayed relatively constant. Nearly 6 in 10 Americans still see themselves as the haves, while only about a third see themselves as the have-nots. The numbers have been in that range for a decade.
This is the new American delusion. The facts point to a very different reality.
An Associated Press report this week on census data found that “a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.” The report said that the data “depict a middle class that’s shrinking.”
An October report from the Congressional Budget Office found that, from 1979 to 2007, the average real after-tax household income for the 1 percent of the population with the highest incomes rose 275 percent. For the rest of the top 20 percent of earners, it rose 65 percent. But it rose just 18 percent for the bottom 20 percent.
And a report released in May by the Organization for Economic Cooperation and Development found that “the gap between rich and poor in O.E.C.D. countries has reached its highest level for over 30 years.” In the United States, the average income of the richest 10 percent of the population had risen to around 14 times that of the poorest 10 percent.
Our growing income inequality is a fact. So is the possibility that it could prove economically disastrous.
An April report from the International Monetary Fund found that growing income inequality has a negative effect on economic expansion. The report said that long periods of high growth, which were called “growth spells,” were “much more likely to end in countries with less equal income distributions. The effect is large.” It continued: “Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a ‘growth spell.’ ”
Our income inequality could jeopardize our recovery.
Yet another Gallup report issued Friday found that most Americans now say that the fact that some people in the U.S. are rich and others are poor does not represent a problem but is an acceptable part of our economic system.
If denial is a river, it runs through doomed societies.
By: Charlets Blow, Op-Ed Columnist, The New York Times, December 16, 2011
Sen. Olympia Snowe Does Not Understand Budgets
It seems Sen. Olympia Snowe (R-ME) isn’t even trying to make sense any more:
Fiscal shenanigans such as permanent tax increases to pay for one-year temporary measures are precisely the problem that drove our nation into a $15 trillion debt crisis.
Huh? Passing a permanent tax increase to pay for a temporary measure would, logically, decrease debt, not increase it.
And, indeed, if we look back over history, we don’t see “permanent tax increases” as drivers of debt. Tax cuts, on the other hand — like those signed by Ronald Reagan and supported by Olympia Snowe and those signed by George W. Bush and supported by Olympia Snowe — have contributed to increasing deficits and debt. Meanwhile, tax increases — like those signed by Bill Clinton and opposed by Olympia Snowe in 1993 —reduced deficits.
Given Snowe’s ongoing embrace of Tea Party Economics and shunning of basic economic concepts —not to mention her record of supporting measures that increased the deficit and opposing things that cut it — it isn’t surprising that she’d adopt the up-is-down, black-is-white economic fantasy that tax increases cause deficits and tax cuts increase revenue. But it should help put to rest the notion that she’s some kind of “moderate” or “sensible” Republican.
By: Jamison Foser, Media Matters Political Corrections, December 7, 2011
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