“Why Bain Is Back”: The Folks On The Receiving End Of Capitalism’s Creative Destruction
A month ago, conventional wisdom had it that the Bain attacks on Mitt Romney were somehow failing terribly — notwithstanding the fact that they’ve been key parts of every other campaign Democrats and Republicans have run against Romney going all the way back to 1994. And yet all of a sudden, the Obama campaign is going full outsource/Bain attack on Romney at every opportunity. So they think it’s working great. New polling suggests they may be on to something. And in the most telling development, in the days leading up to the surprise Supreme Court ruling, the Romney campaign itself is mounting a mammoth pushback, signaling more clearly than anything that they think it’s working too.
So what happened?
Consider three basic factors. First, round one of the Bain Wars was almost entirely hashed out in what you might call the Acela corridor — an insular community, overwhelmingly affluent and educated, and decidedly not the audience for the message or the folks who find themselves on the receiving end of capitalism’s creative destruction.
Sen. Sherrod Brown (D-OH) visited TPM’s DC offices last week as part of our Newsmaker interview series and said basically: trust me, this message worked in Ohio. Maybe he was right all along. I suspect he was.
But there was another rhetorical dimension. ‘Private equity’ is a weird phrase. Most people have no idea what it does or doesn’t mean. And the Romney campaign through it’s surrogates was able to hit its opponents with something like ‘Hey, it’s poor form to be going all Nation magaziney and pretending that private equity isn’t awesome!’
And within that community, it worked. Thus Cory Booker, Bill Clinton, and a lot of other Democrats. ‘Private equity’ means a lot of different things. My own sense is that some parts of it are incredibly destructive while others create efficient allocations of capital. But who cares what I think? Wherever you come down on that question there’s simply no question that private equity is at the tip of the the spear of creative destruction in our society. So in a country where everybody gets to vote, it’s sort of crazy to think criticizing something like that would somehow be beyond the pale like attacking the Pope or crapping on motherhood and apple pie. But there it was.
‘Outsourcing’ though and ‘Offshoring’ — these are just more graspable words, more concrete concepts. Everybody understands them. Everybody knows what they mean. I’m pretty sure the Romney campaign wants to say something like, ‘C’mon, our whole economy today is based on stuff like this and we all know it and everybody accepts it so don’t pretend otherwise.’ But they can’t. And what really got them all boxed up was when they got themselves into this ridiculous debate over whether Mitt’s an ‘outsourcer’ or an ‘offershorer’. As I said Monday, that’s an argument you lose by winning. Or lose by losing. Whichever way, you lose.
Even really smart strategists manage sometimes to charge into a brown paper bag like this. But this was a bad move because it opened Romney up to that most lethal political weapons: ridicule and mockery. The Obama camp seemed to get this early and just decided to drive a freight train right through him. Holding out for this distinction seemed incredibly stupid and more than that wildly out of touch since the difference is basically immaterial to people who lose their jobs as a result of it. And, as always, weakness which invites attacks.
In a country afflicted for decades by loss of high-paying manufacturing jobs and chronically stagnant working class and middle class wages it’s crazy to think that Romney’s history as a private equity king — especially one working the lower tiers of the private equity world — wouldn’t be a liability for a lot of voters. But it was something that DC reporters were best positioned to miss.
By: Josh Marshall, Talking Points Memo, July 2, 2012
“Call It A Penalty, Call It A Fine, Don’t Call It A Tax”: Debunking The Individual Mandate “Tax”
Having lost their Supreme Court fight against the Affordable Care Act, opponents of health care reform have in recent days been attacking the individual mandate provision of the law as a “tax” on the middle class. This line of reasoning only makes sense if you think penalties for littering, speeding, or engaging in other irresponsible behavior are also “taxes.”
Yes, it’s true that conservative Chief Justice John Roberts used a tax rationale when upholding the constitutionality of the individual mandate—and the entire law—last week. But Roberts was making a technical argument and using the word “tax” in a way that really only makes sense in an arcane legal context.
First, some background: The health care law’s so-called “individual mandate” provision requires people who can afford to buy health insurance to do so, and when it’s phased in, it will assess a penalty of up to 2.5 percent of household income on those who don’t. That’s only fair, since the health care costs of the uninsured are borne by the rest of us.
You don’t need a law degree to understand the difference between a fine and a tax, and this one falls pretty neatly into the former category, as we explain below. Moreover, the vast majority of Americans—rich, poor, or middle class—will never be assessed what’s more rightly understood as the “freeloader penalty” at the center of this debate.
Still, while the tax-themed attack on the individual mandate is incoherent, it remains dangerous. Opponents of health reform well understand the power of the T-word to fire popular resentment, and will try to confuse the public about what the individual mandate is and how it works. Here are some facts to keep in mind.
Unlike taxes, this penalty is avoidable
Taxes are, for the most part, involuntary. We pay taxes on our income and when we buy things. The only way to avoid taxes is to earn less money and consume less. Penalties and fines, however, are quite different. We can avoid fines by avoiding bad behavior.
The individual mandate presents people with a choice: Either have health insurance or pay an annual penalty. The only people who will pay this penalty are those who willfully neglect to take responsibility for getting health insurance—and then stick the rest of us with the bill when they get sick or injured.
People who have health insurance will never pay the penalty
More than 80 percent of Americans today have health insurance, and the health reform law will dramatically expand coverage. When the law is fully phased in, only 6 percent of Americans will face the choice of either buying private insurance they can afford or paying a penalty, according to the Urban Institute. And only 1.2 percent of Americans will actually pay the penalty, according to congressional estimates.
Americans who can’t afford insurance will have it provided for them
Under the law, people who can’t afford to buy insurance will receive Medicaid coverage or the government will split with them the cost of buying private health insurance. Therefore, the penalty will only apply to people who can afford health insurance but would rather have taxpayers—you and me—bail them out when they need medical attention.
The individual mandate is grounded in conservative principles of individual responsibility
The idea that people should be required to purchase health insurance if they can afford to do so was first popularized by the conservative Heritage Foundation in 1989 and first implemented in law by former Massachusetts Gov. Mitt Romney—a Republican. The idea then and today is to promote individual responsibility and to prevent self-sufficient people from relying on public assistance. “[E]ach household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself,” Heritage wrote in defense of the individual mandate.
Happily, the evidence suggests that the individual mandate penalty will apply nationwide to a small fraction of the population. Less than 1 percent of residents of Massachusetts, the only state with an individual mandate in place, were assessed the penalty in 2009.
Once the federal law takes full effect in 2014 and Americans see that the individual mandate penalty only applies to a small number of freeloaders, the antitax argument should lose all power.
It already appears to be waning in some very telling quarters. An advisor to Romney on Monday said that the presumptive GOP presidential nominee agrees with President Barack Obama that the individual mandate penalty is not a tax.
By: Gadi Dechter, Center for American Progress, July 3, 2012
“A Lie Designed To Mislead”: Don’t Buy The GOP Narrative That Obamacare Is A Tax On Middle Class
Majority Leader Mitch McConnell wasted no time getting to the floor of the Senate to argue
that today’s Supreme Court ruling clarifies that Obamacare is nothing more than a tax on the middle class which—according to McConnell—is precisely what the Administration and Congressional Democrats promised it was not.
Leader McConnell, and his fellow Republicans, should read the Majority ruling before they embarrasses themselves further.
In the opening paragraphs of Chief Justice Roberts’ opinion, he clarifies that the law specifically does not involve a tax. If it did, Roberts clarifies, the Court would have had no choice but to reject the case for lack of jurisdiction as a tax case cannot be brought until someone is actually forced to pay the tax. This is, as we know, not the case.
The fact that the Court found that the mandate was constitutional under the taxing authority granted Congress by the Constitution is an entirely different matter. This finding does not reduce the individual mandate to the status of a tax—it merely says that as the penalty for failing to purchase health insurance will fall to the Internal Revenue Service for collection was something Congress could provide for under it’s Constitutional authority.
While I grant you that this gets a bit into the weeds, the effort that is being made by the GOP to use the Court’s basis for decision as a weapon fails on its face and is completely disingenuous. There is a difference between the levying of a tax and the Court finding Constitutional authority for Congress under the taxing authority. But then, anything that is more complicated than your basic “See Spot Run” first grade reading primer has always been fair game and fodder for the GOP message machine which would prefer to base their arguments on misstatements than educating and enlightening its base.
By: Rick Ungar, Contributor, Forbes, June 28, 2012
“End Of The Middle Class?”: What Happens If America Loses Its Unions
Are American unions history?
In the wake of labor’s defeated effort to recall Wisconsin Gov. Scott Walker (R) last week, both pro– and anti-union pundits have opined that unions are in an all-but-irreversible decline. Privately, a number of my friends and acquaintances in the labor movement have voiced similar sentiments. Most don’t think that decline is irreversible but few have any idea how labor would come back.
What would America look like without a union movement? That’s not a hard question to answer, because we’re almost at that point. The rate of private-sector unionization has fallen below 7 percent, from a post-World War II high of roughly 40 percent. Already, the economic effects of a union-free America are glaringly apparent: an economically stagnant or downwardly mobile middle class, a steady clawing-back of job-related health and retirement benefits and ever-rising economic inequality.
In the three decades after World War II the United States dominated the global economy, but that’s only one of the two reasons our country became the first to have a middle-class majority. The other is that this was the only time in our history when we had a high degree of unionization. From 1947 through 1972 — the peak years of unionization — productivity increased by 102 percent, and median household income also increased by 102 percent. Thereafter, as the rate of unionization relentlessly fell, a gap opened between the economic benefits flowing from a more productive economy and the incomes of ordinary Americans, so much so that in recent decades, all the gains in productivity — as economists Ian Dew-Becker and Robert Gordon have shown — have gone to the wealthiest 10 percent of Americans. When labor was at its numerical apogee in 1955, the wealthiest 10 percent claimed just 33 percent of the nation’s income. By 2007, with the labor movement greatly diminished, the wealthiest 10 percent claimed 50 percent of the nation’s income.
Today, wages account for the lowest share of both gross domestic product and corporate revenue since World War II ended — and that share continues to shrink. An International Monetary Fund study released in April shows that the portion of GDP going to wages and benefits has declined from 64 percent in 2001 to 58 percent this year. The survey compared the United States with Europe, where the only other nations in which labor’s share declined were Greece, Spain and Ireland — countries whose economies are at death’s door. Our economy is nowhere near so weak, but as Americans’ ability to collectively bargain has waned, so has their power to keep all corporate revenue from going to top executives and shareholders.
When unions are powerful, they boost the incomes of not only their members but also of nonunion workers in their sector or region. Princeton economist Henry Farber has shown that the wages of a nonunion worker in an industry that is 25 percent unionized are 7.5 percent higher because of that unionization. Today, however, few industries have so high a rate of unionization, and a consequence is that unions can no longer win the kinds of wages and benefits they used to.
Deunionization is just one reason Americans’ incomes have declined, of course; globalization has taken its toll as well. But the declining share of pretax income going to wages is chiefly the result of the weakening of unions, which is the main reason American managers now routinely seek to thwart their workers’ attempts to unionize through legally questionable but economically rewarding tactics (rewarding, that is, for the managers).
The weakening of unions has had a huge political effect as well: the realignment of the white working class. Since the ’60s, exit polls have shown that unionized blue-collar whites vote Democratic at a rate 20 to 30 percent higher than their nonunion counterparts. The decline in union membership has weakened Democrats in such heavily white, increasingly deunionized states as West Virginia and Wisconsin — the main reason Republicans such as Walker have sought to reduce labor’s numbers. Liberals who have been indifferent to unions’ decline will find it difficult to enact progressive legislation in their absence.
Understandably, some liberals are searching for ways to arrest the economic decline of the majority of their fellow Americans in a post-union environment. I fear they’re bound to be frustrated. If workers can’t bargain with their employers, it can’t be done. If and when Big Labor dies — it’s on life support now — America’s big middle class dies with it.
By: Harold Meyerson, Opinion Writer, The Washington Post, June 12, 2012
“Setting The Terms”: Foolproof Win-Win Strategy Plan For President Obama
Over the weekend I was mulling both of our crises, the political one (dysfunction, paralysis) and the policy one (looming tax-mageddon, sequestration). Yep, I mull these things on Saturdays. How, I wondered for the 486th time, can Obama get the Republicans to dig their heels out of the mud and get the upper hand politically while also doing some good for the country? Here’s how.
Obama should go to Congress and say: “I offer you the following deal. I will extend all the Bush tax cuts for one year—yes, even for the wealthiest Americans. One year. In exchange, I’d like you to agree to fund the initial, start-up $10 billion for the Kerry-Hutchison infrastructure bank, and the $35 billion I asked of you last September in direct aid for states and localities to rehire laid-off teachers and first responders. Then, after I am reelected, my administration and I will take the first six months of 2013 to write comprehensive tax reform, and Congress will then have six months to pass it, and we’ll have a new tax structure that we’ve both agreed on.
“The business community complains about uncertainty? This is certainty. The Bush rates will stay in place for one more year. We will give corporations our word that the basic corporate rate will be lowered in our package from the current 35 percent. The top marginal rate on the very highest earners will go up—I will continue to insist on that. But not for a year. The rates on middle- and low-income payers will stay the same or go down slightly. We will look at tax expenditures and loopholes and so on and close the ones that aren’t justified. But businesses will now have no reason to doubt what the tax rates will be next January and will have confidence that we’re going to work something out, if you agree to this very reasonable compromise.”
Obama gives some ground, the Republicans give some ground. Nobody gets everything, but everybody gets something. Isn’t that what compromise is? And the “certainty” point is key—it takes away an argument against private-sector investment and job creation that some in the business world have been making, at this moment of record corporate profits.
I’m well aware that liberals may hate this. I’ll get to that. But the politics of this idea seem awfully sound to me. Obama would have the Republicans over a barrel. He will have offered a huge concession on the high-end tax rates, which the media will note. If the Republicans say no, which of course is likely because the infrastructure bank is socialism and no one wants teachers anyway, then it becomes manifestly clear to swing voters that Republicans are the true obstructionists. Voters will get that Obama will have made a major concession here. They’ll see that the GOP fail to respond in kind, and most of them will draw the logical conclusion.
And if the Republicans say yes, then even better: They will have made Obama, at this eleventh hour of his first term, into the bipartisan leader they’ve so successfully prevented him from being. And more important than that, there are the real-world upshots of public investment in infrastructure—a proposal that has the support, by the way, of the left-wing United States Chamber of Commerce—and the rehiring of hundreds of thousands of laid-off workers.
The Republicans will be boxed in. They’ll think up a clever response. They always do. They’ll try to bring in defense spending, perhaps, or insist on two years. They’ll obviously set out immediately on trying to figure out a way to box Obama in and make the Bush rates permanent. They’ll think of nine other things I’m not cynical enough to conjure up. They’ll dismiss it as a gimmick, but I’d wager that Obama can sell the idea that his giving ground on high-income tax rates is serious, not gimmicky. And if Obama stands firm, the lines are simple and clear: “I’m giving up something, and I’m asking you to give up something, for the sake of helping put Americans to work, and of doing the jobs we’re paid to do.”
My idea doesn’t deal directly with budget sequestration, and the huge cuts that are supposed to kick in January 1. Maybe Obama can propose that those be deferred for a while as well. Or maybe he is better off just leaving that to the senators who are allegedly working on it now. It might muddy things up.
Now, liberals. There will be outrage that Obama caved on his one heretofore firm condition on taxes. Under other circumstances, I might be outraged. But these strike me as pretty decent circumstances. Remember, Obama agreed to extend the Bush rates once before, in December 2010, and a fair number of liberals and independent analysts were basically fine with that deal. That time, what did Obama get? His own tax cuts, to the payroll tax, and some unemployment insurance extensions. This time, if the GOP actually agreed, he’d be getting far, far more—Republicans agreeing for the first time in the Obama era to real stimulative spending. Liberals should cheer this outcome—just as they should cheer the idea that, unlike during the December 2010 deal or the debt fiasco of last year, Obama would be looking like the guy who set the terms. He’d look strong, not weak, and he’d be very nicely teed up for reelection.
Which is why the Republicans will say no. Though it’ll be worse for the country, it would be great for Obama politically. Mitt Romney, of course, would dismiss Obama’s offer too, so my ploy would bring the added benefit of making Romney look extreme and unreasonable to centrist voters. Obama could then campaign saying that he tried repeatedly to reason with Republicans and was rebuffed at every turn, even when he offered to lower tax rates for millionaires. Romney and the GOP will campaign saying, “We’ll give you the tax cuts without all this spending.” Obama will then have to make the case that spending—investment—has value. But he has to make that case anyway. In my scenario, he can make it in a context in which he can prove to voters that the other party won’t budge one single inch. He’ll finally look like, to resuscitate a phrase we haven’t heard much of in the last two years, the adult in the room.
By: Michael Tomasky, The Daily Beast, June 12, 2012
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