“The Grand Old Jurassic Party”: From The Advocacy Of Freedom To Retribution Against The Weak
The Republican Party is a presidential election away from extinction. If it can’t win the 2016 contest, and unless it has bolstered its congressional presence beyond the benefits of gerrymandered redistricting—which is to say not only retaking the Senate but polling more votes than the opposition nationally—the party will die. It will die not for reasons of “branding” or marketing or electoral cosmetics but because the party is at odds with the inevitable American trajectory in the direction of liberty, and with its own nature; paradoxically the party of Abraham Lincoln, which once saved the Union and which gives such passionate lip service to constitutionality, has come to embody the values of the Confederacy in its hostility to constitutional federalism and the civil bonds that the founding document codifies. The Republican Party will vanish not because of what its says but because of what it believes, not because of how it presents itself but because of who it is when it thinks no one is looking.
The contention by some that the GOP has an identity crisis is nonsense. It’s hard to remember any political organization in the last half century that had a clearer idea of itself. The party’s problem isn’t what it doesn’t know but what everyone else does know, which is that—as displayed in Congress on Tuesday night at the president’s State of the Union address, when Republicans could barely muster perfunctory support for the most benign positions favoring fair pay and opposing domestic violence—the party apparently despises women, gays, Latinos, African Americans, the poor, and the old. The more indelible this impression becomes, the more impossible it will be for even an estimable candidate, be it Jeb Bush, Chris Christie, or the now famously desiccated Marco Rubio, to transcend the party that nominates him. This isn’t to say that the argument for limited government will die with the party. It has been part of the American conversation since James Madison and Alexander Hamilton squared off over the Constitution in 1789, with Thomas Jefferson and John Adams each in their corners holding the coats of their respective protégés. The intent of the argument, however, has changed from an essential advocacy of freedom to retribution against the weak.
The Republican Party was born of the most righteous of purposes, which was the containment and eventual elimination of slavery. Trumping the party’s love of the free market was the insistence that a human being should not be one of that market’s commodities: FREE LABOR, FREE LAND, FREE MEN was the party’s manifesto in the 1850s. Four decades after Lincoln, the party under Theodore Roosevelt believed that the captains, colonels, and generals of industry who most profited from the market had become the market’s biggest threat and needed to be constrained for the market’s sake. In the 1960s the candidacy of Barry Goldwater represented not the birth of modern corporate conservatism as later embodied by President Ronald Reagan and then Newt Gingrich, Dick Cheney, and Eric Cantor, but a libertarianism more practical and less unhinged than the present-day version. Sometime in the last 30 years, however, the party became a flack to corporate culture at the expense of either freedom or individualism, and as the country grows more economically oligarchic, the Republican Party that best reflects that oligarchy loses political credibility with the public.
What the current party shares in its collective psychosis with the party of the ’60s is its yearning for martyrdom. If it’s true that what hold on power the GOP still has lies in congressional districts more and more resembling outliers—a power that will die off as figuratively as the constituents of those districts die off literally—it’s also true that many in the party are gripped by the death wish that thrills all martyrs and leaves them moist for self-annihilation. These Republicans have a different notion from other modern political parties of what a party is supposed to be. They don’t see a party as a coalition of disparate interests having just enough in common that together everyone gets what they need, if not what they want. Republicans believe that, definitionally, a party signifies principles so unyielding that any compromise of anything at all renders the party meaningless. Nothing better indicates the theocratic personality of the party than that the very notion of coalition is corrupt, even debased, like a congregation that allows infidels in its ranks. In the last couple of weeks a national poll reported that by three to two, Democrats are willing to compromise on certain things in order to achieve other, larger things. Among Republicans, the numbers are exactly the reverse. It’s not unreasonable that true believers conclude Karl Rove—as responsible as any single person for what the party has become—is now a hack, given that he is one and always has been, and given what for true believers is the rather belated revelation that Rove loves power for its own sake which, whatever else may be so, can’t be said of the party’s zealots.
Self cannibalization is the instinct of such movements. The more desperate the Republican Party becomes, the more voraciously it devours its Robespierres, Dantons, Héberts, if such comparisons don’t unduly flatter the romantic delusions of self-styled Republican Jacobins. Thus Senator Rubio’s superstardom is already on the descent, so blemished by his flirtations with reality not to mention with compassion on the matter of immigration reform that not only did he back away from the issue in his response to the president on Tuesday but it was necessary for Kentucky Senator Rand Paul to offer another, purer response to Rubio’s tainted one. Thus the face of Hispanic Republicanism, however far beyond the oxymoronic such a concept lurches, isn’t Rubio on Tuesday night but Tuesday afternoon’s new hotshot Ted Cruz, senator from Texas for 43 days and attacking the character of Defense Secretary nominee Chuck Hagel so ruthlessly and without any facts that even fellow Hagel opponent John McCain objected. Thus the scowling response of congressional Republicans Tuesday night to the president’s clarion call on behalf of voting rights, which was last regarded as controversial 50 years ago by Southern segregationists and might have been considered in 2013 something of a gimme as far as applause lines go. Thus on further review the videotape reveals Speaker John Boehner—who initially stood with the rest of the country to applaud the victims of gun violence during the State of the Union’s concluding litany—looking out nervously at his seething and largely unmoved caucus (which leads him far more than he leads them) and, realizing the error of his heart, taking his seat again halfway through the honor roll of the dead, by the time the president got to Tucson.
By: Steve Erickson, The American Prospect, February 14, 2013
“America’s Real Welfare Queen”: Romney Critical Of Government Aid That Helped Bain Capital Profit
Mitt Romney likes to say that “government does not create prosperity.”
His record in the private equity industry shows otherwise.
During Romney’s years as chief executive of Bain Capital LLC, companies owned by the firm received millions of dollars in benefits from a variety of state and local government economic development programs.
In California, taxpayer money built one Bain company a conveyor bridge between two of its buildings. New York City gave another Bain company tax breaks and lower energy bills to discourage it from moving to New Jersey. And in Indiana, a county government issued bonds to help buy new equipment for a Bain-owned steel plant — a business success featured in a Romney campaign ad touting his private sector prowess.
“From a national perspective, this makes no economic sense to allow cities and states to do this,” said Arthur Rolnick, former director of research for the Federal Reserve Bank of Minneapolis. “In general, you want the market to be making these decisions — not the political system.”
The public-private agreements, which began in the first decade of Romney’s tenure as CEO, show that government played a supporting role in establishing Bain as among the nation’s most successful private equity firms and enabling him to accumulate a fortune his campaign says could reach $250 million.
Criticizing Government Involvement
On the campaign trail, the presumptive Republican nominee has hammered at President Barack Obama for favoring an unhealthy government role in the economy.
“When government, rather than the market, routinely selects winners or losers, or puts its hands on the scales of justice then enterprises and entrepreneurs can’t predict their prospects,” Romney said in a March 19 speech at the University of Chicago.
Asked about the disconnect between Romney’s free market rhetoric and Bain’s track record, Amanda Henneberg, a campaign spokeswoman, said: “It’s not at all uncommon for state and local governments to use competitive incentives and programs to create a favorable business climate.”
Yet in his Chicago speech, the former Massachusetts governor decried the “endless subsidies and credits intended to shape behavior in our economic society,” and assailed government “intrusion in the workings of the free marketplace itself.”
Exhibit A in Romney’s attack is the Obama administration’s investment in the failed solar power company Solyndra, which could cost taxpayers more than $500 million.
Massachusetts Investment Bankruptcy
Romney’s effort to capitalize on the administration’s stumbles was complicated this week by the June 1 failure of a Massachusetts clean energy company that received state financing while he was governor.
As a private equity investor, Romney showed no reluctance to accept help from government coffers — on one occasion even becoming partners with taxpayers.
In October 1994, a Connecticut state fund made a $500,000 equity investment in Environmental Data Resources of Milford, Connecticut, which Bain had helped start. The state’s Connecticut Innovations agency the previous year also had given the firm a separate $500,000 to be paid back with royalties from its software products.
The company used the money to hire several technologists and digitize old maps of industrial sites, according to Rob Barber, the company’s chief executive.
EDR Expansion
Beginning in 1991, Bain had invested $2.3 million in the company, which produced software for environmental site assessments, ultimately recording a 35.7 percent return, according to a Deutsche Bank prospectus that detailed the performance of Bain’s funds through 1999. Starting with just three employees, EDR grew to about 50 workers by the middle of the decade, Peter Cashman, the company’s founder, said in an interview.
Victor Budnick, who was then Connecticut Innovations’ director of investments, says the company obtained better terms for the public funds than it likely could have received from private investors. Private money would have been “disadvantageous from the perspective of ownership,” Budnick said.
The deal ultimately profited both the government and EDR. The state got back $3.8 million in return for its $500,000 equity stake plus an additional $1 million from its royalty- linked investment, according to Pamela Hartley, a spokeswoman for Connecticut Innovations.
Management-led Negotiations
There is no indication that Romney, who became CEO of Bain Capital in 1984, was directly involved in any of the individual companies’ negotiations with government officials. Such operational issues were typically left to the management of companies Bain acquired.
“I never heard of Bain Capital,” says Walter Sprouse, who was president of the Randolph County Economic Development Corporation in North Carolina when it ponied up $375,000 to help lure Sealy Inc.’s corporate headquarters.
Even so, Romney benefitted from the incentives, along with other Bain investors. When the Internet advertising company Double Click Inc. considered moving its Manhattan-based corporate headquarters, New York City’s Economic Development Corporation in 1999 provided a $4 million package of sales and energy tax breaks tied to the company’s payroll.
The company reported a loss of $56 million that year and was acquired by Google Inc. in 2008. Bain realized $88.6 million on its initial $8.5 million Double Click investment, made in 1997, according to the Deutsche Bank prospectus.
Bain Portfolio Returns
Bain’s investments in the companies that benefited from government actions were part of a portfolio that earned an 88 percent average annual return through the end of 1999, the prospectus said.
The two-time presidential candidate says his business experience qualifies him to turn around the troubled national economy. He accuses government of “standing in the way” of recovery.
Yet, government officials employed a variety of techniques to help Bain-owned companies. In Kansas City, city officials issued industrial revenue bonds as part of a financing arrangement that saved a Bain-owned steel company about $3 million in property taxes over five years, according to the Kansas City Business Journal.
Decaying Steel Plant
The GS Technologies facility, dating to the late 19th century, had employed around 4,500 workers at its peak. By the mid-1990s, the plant, which produced wire rods for the auto and furniture industries, cried out for modernization.
“Really, it was in bad, bad shape. It looked like something out of a Dickens novel,” said Mario Concha, who headed the company’s international division at the time.
To help fund a $70 million updating, the city in October 1993 authorized a $45 million industrial revenue bond, which GS Technologies was to purchase. Kansas City issued the first $5 million the following year and used the proceeds to buy steel- making equipment and lease it back to the company. That arrangement was designed so that the city could cut the mill’s property tax bill by 50 percent, according to the Kansas City Business Journal.
New equipment didn’t solve all the company’s problems. Foreign competition and a two-month strike in 1997 fueled a downward spiral, which led to bankruptcy in 2001. The Obama campaign has featured GS Technologies in a political ad that includes one former mill worker accusing Bain of “vampire” capitalism.
Industrial Revenue Bonds
Industrial revenue bonds, typically repaid with money generated from the project they fund, act as a subsidy for private business, reducing either their financing costs or their tax bill, said Timothy Bartik, senior economist of the W.E. Upjohn Institute in Kalamazoo, Michigan.
One of Bain’s companies drew government benefits on two coasts. In 1993, when Leiner Health Products of Torrance, California, was looking for a new home, officials in nearby Carson, California, agreed to construct a $500,000 conveyor bridge linking two buildings the maker of vitamins and nutritional supplements was eyeing.
“Our construction guys were in awe of how fast the turnaround time was for permits,” Giffen Ott, the former Bain executive who was the company’s vice president of manufacturing, told The Los Angeles Times.
Ott didn’t respond to e-mail and telephone requests for comment.
Upgrading Public Roads
Five years later, Leiner decided to move a portion of its manufacturing operation from Ohio to a new site in York County, South Carolina. State and local officials provided a package of benefits that included worker training, upgrades to public roads, water and sewer facilities, and tax breaks. Officials with the state’s Employment Security Commission even handled inquiries from would-be job applicants, according to a July 21, 1998 article in The Herald of Rock Hill, South Carolina.
The county cut Leiner’s property tax assessment by 43 percent, saving the company “millions of dollars,” according to Mark Farris, York County economic development director.
Leiner has since been acquired by NBTY Inc., which itself was acquired by the Carlyle Group in 2010. Michael Collins, NBTY’s chief financial officer, didn’t respond to e-mail and telephone requests for comment.
Free market purists object to such government aid to business, saying profitable companies don’t need it and unprofitable ones should be allowed to fail.
A Corporate Gift
“It is a gift to the corporation,” says James Bennett, eminent scholar at George Mason University in Fairfax, Virginia. “The American welfare queen is the American corporation. All they’re doing is grabbing for taxpayer benefits and taxpayer dollars.”
The attractiveness of such deals can be glimpsed in cases where the marriage of public and private resources pays off for both sides. In 1998, state and local officials in Indiana assembled a package of incentives to convince Steel Dynamics Inc. (STLD) to locate a $341 million steel plant in Whitley County, in the state’s northeast corner.
Whitley County issued a $13 million taxable industrial revenue bond to buy the giant caster at the heart of the steel- making operation along with a separate $10 million bond for sewer and water improvements. State officials kicked in workforce training aid.
Company Expansion
In the intervening years, the company has expanded its Whitley County facility twice and now employs 596 workers. Last year, it produced 876,000 tons of structural steel beams for the construction industry and rails for the nation’s railroads, according to the company’s filings with Securities and Exchange Commission.
“It was a fabulous opportunity. Jobs have developed beyond our expectations,” said Jeff Gage, who was the county attorney at the time.
In an ad entitled “American Dream,” the Romney campaign boasts of the role his “private sector leadership team” played in Steel Dynamics’ success.
Some of his allies acknowledge that a savvy public sector deserves some of the credit.
“The government was trying to help out,” real estate developer Donald Trump, a Romney supporter, said during a May 14 appearance on Fox News, “and sometimes, that’s not the worst thing in the world.”
By: David J. Lynch, Bloomberg, June 5, 2012
“Exotically Countercultural”: The Unhappy Triumph Of The Marketplace
This objection to Obamacare’s individual mandate, by Jonathan Adler at the libertarian Volokh Conspiracy website, grabbed my attention:
“Virtually everyone” may acquire health care—but “virtually everyone” is not “everyone.” Most people may purchase health care at some point in their lives, but some will not. Some people will refuse to purchase health care for religious reasons. Some will not purchase health care because they are lucky enough not to need such care before a sudden death. Still others may decide not to purchase health care because they have chosen to remove themselves from commerce—consider a survivalist or other person who decides to live in a shack, growing their own food, and not engaging in commerce with others.
Consider Adler’s latter example: It strikes me that the vast majority of Americans would find the idea of “not engaging in commerce with others” to be exotically countercultural at best, possibly antisocial or even deviant. Such a reaction is symptomatic of the fact that the marketplace has long enjoyed pride of place in Americans’ moral psychology. “The chief business of the American people is business,” as President Calvin Coolidge famously said.
This ethos has made proper small-l liberals of us, hasn’t it? Americans have been taught by the libertarian right and the Clintonian middle to believe that a commercial relationship between nations—trade—is the only way to achieve lasting international harmony. At least before the great stock market crash of 2008, CEOs were like cult heroes in the popular imagination. From the pluckiness of Horatio Alger’s heroes to the theology of Joel Osteen, success in the marketplace has been seen as an outward confirmation of inward virtue and divine blessedness.
So it’s with some sense of schadenfreude that I see conservatives of the classical liberal variety chafing at the requirement to buy health insurance, calling it an attempt by Congress to “create commerce.” I’m fully aware of the contractarian basis for this objection: that a forced purchase is not a legitimate commercial exchange.
But the paleocon in me responds this way: This is the antitraditional bed you’ve made for us. Now lie in it.
By: Scott Galupo, U. S. News and World Report, March 27, 2012
“Unflinching Conservative” Rick Santorum In 1993: “More Government Needed In Health Care”
Rick Santorum’s pitch to Republican voters is simple: He is the “true” and “consistent” conservative in the GOP’s presidential nomination fight. He describes himself as “a candidate who, throughout [his] career, has not only checked the box on conservative issues but has fought for conservative issues.” And he slams front-runner Mitt Romney for flip-flopping on abortion and the Wall Street bailouts and, most of all, for passing government-mandated health care reform in Massachusetts. If elected president, Santorum vows, he will end the “tyranny” of President Obama’s Affordable Care Act.
Yet as an up-and-coming congressman in the early 1990s, Santorum took a much different line. Then—like now—health care was one of the nation’s most divisive issues. In 1993, Republicans were up in arms about a health care reform bill spearheaded by Hillary Clinton and pushed by President Bill Clinton. Republicans decried the measure as excessive government intervention in the marketplace, and Santorum opposed the legislation. But his position was not so clear-cut.
During that fiery debate, Santorum said it would be a mistake to allow the delivery of health care services to be determined only by the market. He asserted that Republicans were “wrong” to let the marketplace decide how health care works. He instead argued that government should play a “proactive” role in shaping the health care marketplace “to make it work better.” (Santorum spokesman Hogan Gidley did not respond to requests for comment.)
Santorum’s call for more government intervention in health care came during a December 1993 appearance on a Pittsburgh TV program, The Editors, hosted by the Pittsburgh Post-Gazette‘s Jane Blotzer and John Craig. At the time, Santorum was running in a Republican Senate primary and looking to challenge Democratic incumbent Sen. Harris Wofford. Mother Jones obtained a previously unreported transcript of the interview made by staffers for the Wofford reelection campaign. In 1994 Santorum eked out a narrow win over Wofford, 49 percent to 47 percent, in a bitterly fought race that gained national attention.
In the 1993 interview, the 35-year-old Santorum sounds little like the unflinching conservative he claims to be today. He describes his voting record in the US House of Representatives, where he represented the eastern suburbs of Pittsburgh, as “pretty much in the middle” compared with the rest of the Pennsylvania delegation, which included 11 Democrats and 9 other Republicans. His record, he went on, was “pretty compatible” with that of Arlen Specter and the late John Heinz, both moderate Republican senators from Pennsylvania. (Specter later switched to the Democratic Party.)
In the interview, when asked about the role of government in Americans’ lives, Santorum responded, “I believe that the federal government should set up a system where we create the right incentives for you to make efficient choices.”
On health care, as he called for more government involvement, Santorum said Republicans had “dropped the ball” by not making health care reform a headline issue in recent elections. “I even said it to President Bush when he came to Pittsburgh to campaign for Dick Thornburgh [then running for US Senate] in 1991, that health care was gonna be the big issue and that we had to take responsibility for trying to solve this problem,” Santorum said. “We can’t continue to ignore it and say, ‘Oh well, you know, it will work itself out in the marketplace.’ That’s wrong.”
Government intervention, he continued, was key to creating a functioning health care marketplace. “The government helps set the marketplace up, so we have some responsibility to alter that marketplace to make it work better.”
Talking about health care, Santorum explained: “I take a much more proactive position in government in solving problems than most Republicans, because I believe government has a role. A lot of folks believe, ‘Well, just keep government out of it.’ I don’t believe that.” He added, “I think government has a role in making sure that there is equal opportunity.”
On the campaign trail these days, Santorum denounces government and maintains that it is not government’s job to help those who are suffering (because suffering has its positive consequences, he contends). His top priority, he says, is repealing “Obamacare.” He also wants to privatize Medicare and eliminate the agency that oversees it. “You want the private sector out there competing, driving down costs, improving efficiency,” he said recently.
At a November 2011 debate, Santorum boasted about his unwavering conservative record on health care. “I was always for having the government out of the health care business,” he said, “and for a bottom-up, consumer-driven health care, which is different than Governor Romney and some of the other people on this panel.” Yet Santorum, who has attacked Romney for reversing his positions, has flip-flopped as well.
Soaring Inequality: “It’s Time To Take The Crony Out Of Capitalism”
Whenever I write about Occupy Wall Street, some readers ask me if the protesters really are half-naked Communists aiming to bring down the American economic system when they’re not doing drugs or having sex in public.
The answer is no. That alarmist view of the movement is a credit to the (prurient) imagination of its critics, and voyeurs of Occupy Wall Street will be disappointed. More important, while alarmists seem to think that the movement is a “mob” trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.
To put it another way, this is a chance to save capitalism from crony capitalists.
I’m as passionate a believer in capitalism as anyone. My Krzysztofowicz cousins (who didn’t shorten the family name) lived in Poland, and their experience with Communism taught me that the way to raise living standards is capitalism.
But, in recent years, some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us. They’re not evil at all. But when the system allows you more than your fair share, it’s human to grab. That’s what explains featherbedding by both unions and tycoons, and both are impediments to a well-functioning market economy.
When I lived in Asia and covered the financial crisis there in the late 1990s, American government officials spoke scathingly about “crony capitalism” in the region. As Lawrence Summers, then a deputy Treasury secretary, put it in a speech in August 1998: “In Asia, the problems related to ‘crony capitalism’ are at the heart of this crisis, and that is why structural reforms must be a major part” of the International Monetary Fund’s solution.
The American critique of the Asian crisis was correct. The countries involved were nominally capitalist but needed major reforms to create accountability and competitive markets.
Something similar is true today of the United States.
So I’d like to invite the finance ministers of Thailand, South Korea and Indonesia — whom I and other Americans deemed emblems of crony capitalism in the 1990s — to stand up and denounce American crony capitalism today.
Capitalism is so successful an economic system partly because of an internal discipline that allows for loss and even bankruptcy. It’s the possibility of failure that creates the opportunity for triumph. Yet many of America’s major banks are too big to fail, so they can privatize profits while socializing risk.
The upshot is that financial institutions boost leverage in search of supersize profits and bonuses. Banks pretend that risk is eliminated because it’s securitized. Rating agencies accept money to issue an imprimatur that turns out to be meaningless. The system teeters, and then the taxpayer rushes in to bail bankers out. Where’s the accountability?
It’s not just rabble-rousers at Occupy Wall Street who are seeking to put America’s capitalists on a more capitalist footing. “Structural change is necessary,” Paul Volcker, the former chairman of the Federal Reserve, said in an important speech last month that discussed many of these themes. He called for more curbs on big banks, possibly including trimming their size, and he warned that otherwise we’re on a path of “increasingly frequent, complex and dangerous financial breakdowns.”
Likewise, Mohamed El-Erian, another pillar of the financial world who is the chief executive of Pimco, one of the world’s largest money managers, is sympathetic to aspects of the Occupy movement. He told me that the economic system needs to move toward “inclusive capitalism” and embrace broad-based job creation while curbing excessive inequality.
“You cannot be a good house in a rapidly deteriorating neighborhood,” he told me. “The credibility and the fair functioning of the neighborhood matter a great deal. Without that, the integrity of the capitalist system will weaken further.”
Lawrence Katz, a Harvard economist, adds that some inequality is necessary to create incentives in a capitalist economy but that “too much inequality can harm the efficient operation of the economy.” In particular, he says, excessive inequality can have two perverse consequences: first, the very wealthy lobby for favors, contracts and bailouts that distort markets; and, second, growing inequality undermines the ability of the poorest to invest in their own education.
“These factors mean that high inequality can generate further high inequality and eventually poor economic growth,” Professor Katz said.
Does that ring a bell?
So, yes, we face a threat to our capitalist system. But it’s not coming from half-naked anarchists manning the barricades at Occupy Wall Street protests. Rather, it comes from pinstriped apologists for a financial system that glides along without enough of the discipline of failure and that produces soaring inequality, socialist bank bailouts and unaccountable executives.
It’s time to take the crony out of capitalism, right here at home.
By: Nicholas D. Kristof, Op-Ed Columnist, The New York Times, October 26, 2011
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