Romney’s Genuine Capitalist Bona Fides Could Be His Downfall
Say what you will about him, Mitt Romney is the real thing: a Wall Street guy to his bones, a numbers whiz who took a small start-up, Bain Capital, and helped turn it into a $65 billion giant among private-equity firms (which is what we now call the the old corporate-raiding leveraged-buyout buccaneers we used to think of as “barbarians at the gate” back in ’80s; in case anyone was wondering, they’re now allowed inside the gate). Romney actually is, in other words, what Newt Gingrich and Rick Santorum and Rick Perry can only talk about in the abstract: he’s a real capitalist.
And now we find that he gets paid like one too. To the surprise of very few, the GOP’s nominee presumptive acknowledged on Tuesday that he pays about 15 percent in taxes, far less a percentage than the average middle-class American, thanks to a host of tax breaks proffered by what Warren Buffett once critically called “our billionaire-friendly Congress.”
But Romney’s biggest political problem right now is not that he is at loggerheads with his fellow Rich Guy, St. Warren of Omaha, who has generously demanded that the billionaire-friendly Congress ask more of the super-wealthy in taxes (which Romney vehemently opposes). Buffett doesn’t command that many votes. Romney’s biggest problem is determining whether the mood of the country has really shifted against the financial plutocrats as much as the Occupy Wall Street movement might indicate.
I think it has, and Romney will have a lot of self-defense to do in the general election.
As much as they might have annoyed their conservative base, Gingrich and Perry were on to something when they attacked Bain Capital in South Carolina. The anti-Wall Steet anger cuts across party lines. It’s not so much the kind of activities that Romney and Bain were engaged in; Bain is really just feeling the blowback from anger on both left and pight. Bain may sometimes destroy jobs, but when it fails at a venture, at least it loses money.
Yet the public may no longer be interested in making the distinction between Wall Street firms that follow the rules and those that don’t. The reason that what Gingrich and Perry are saying resonates goes back to Wall Street’s offenses over the last decade with subprime mortgage securitization. The issue here is not really about the ordinary “the rough and tumble of market capitalism,” as The Wall Street Journal‘s Gerald Seib suggested at the debate last night. Most Americans don’t have a problem with that. The issue is really the corruption of market capitalism represented by the massive fraud that Wall Street banks got away with, for which they were then bailed out by the federal government with no questions asked. All this has aggravated, for average Americans, the frustration they already feel because of the record levels of income inequality that exist in our economy.
That’s why the public is likely to get its dander about Romney’s 15 percent. It is an issue that unites conservatives and liberals, OWS protesters and tea partiers alike. As I wrote in my 2010 book Capital Offense, both the left and the right were justifiably offended by the way the American system of capitalism — real capitalism, that is, the way it’s supposed to work — was subverted during the subprime era. Liberals were appalled by the rampant destruction of social equity, and the rigged way so much wealth was amassed in the hands of the 1 percent; conservatives were outraged that the system didn’t work the way it was supposed to: in other words, if you fail, you die.
So Romney’s biggest problem may not be his robotic campaign style, or the tin ear that lead him to bet Perry $10,000 (presumably at low tax rates) at one point. His biggest problem may be his golden resume. Given the mood of the country, Romney may have a tougher time persuading the public he’s the One during the general election season than he thinks.
By: Michael Hirsh, Chief Correspondent, National Journal; Published in The Atlantic, January 17, 2012
So, Should We Start Calling Gingrich A Socialist?
You mean the wealthy on Wall Street aren’t benevolent “job creators” after all and that one of the pirate captains flying the Jolly Roger of buccaneer capitalism is a “predatory corporate raider” who goes by the name of Mitt Romney? Who knew?
In boardrooms across America, the plutocrats are freaking out. Their carefully plotted strategy of making the 2012 election a referendum between economic “freedom” and suffocating “big government” is being blown to smithereens by that infamous bomb-thrower, Newt Gingrich, who is detonating the idea that unsupervised laissez faire capitalism is the unmitigated blessing its cheerleaders at the Wall Street Journal have always claimed it to be.
I guess I spoke too soon when I wrote the other day that an entire philosophical tradition of conservative anti-capitalism had been lost now that the Republican Party has made itself into the wholly-owned subsidiary of Wall Street. But how was I to know Newt Gingrich was about to launch a jihad against the black magic of compound interest?
Gingrich is the guy, remember, who closed down the government in order to stick it to President Clinton for a perceived slight he suffered on Air Force One. So, why should we be surprised that Gingrich would lay waste to 30 years of supply-side mythology if doing so let him get back at that spoiled rich kid who used daddy’s money to torment him in Iowa?
This is what everyone in the Republican Party was afraid from the start Gingrich would do to them given his well-known MO, says Mother Jones’ Kevin Drum: “Destroy them utterly if they declined to nominate him.”
And with a $5 million in the bank thanks to right-wing casino mogul Sheldon Adelson, Gingrich now has lots of money to put to use the Karl Rove strategy of inflicting maximum pain by hitting an opponent right where he’s strongest. And in South Carolina Gingrich intends to hit Mitt Romney where he is strongest, specifically by pulling down all those statues erected to “The Job Creator from Bain Capital.”
The political effect of these attack ads, says New York magazine’s Jon Chait, is to tear down Romney’s carefully-crafted image in such a way that “his private-sector experience becomes an indicator — not that he will fix the economy — but that he will help the already-rich. It’s a smash-you-over-the-head blunt message, with ominous music and storybook dialogue.”
And according to the transcript of the ad Gingrich plans to run: “Mitt Romney was not a capitalist during his reign at Bain. He was a predatory corporate raider. His firm didn’t seek to create value. Instead, like a scavenger, Romney looked for businesses he could pick apart. Indeed, he represented the worst possible kind of predator, operating within the law but well outside the bounds of what most real capitalists consider ethical…..He and his friends at Bain were bad guys. Any real capitalists should disavow Romney’s ‘creative destruction’ model that made him wealthy at the expense of thousands of American jobs.”
This is brutal stuff that plays right into President Obama’s hands as he portrays the GOP as the Party of the One Percent unconcerned with the fate of the other 99%, says Drum. It also undermines the whole trickle-down rationale underpinning finance capitalism.
The supply-side oligarchs who rule the Republican Establishment are beside themselves as they circle the wagons against this madman from Georgia, who not only says Wall Street plutocrats who preach the virtues of capitalism have no clothes but that the clothes they do have on order are being imported from Chinese sweat shops which pay slave wages to child coolie labor.
The day before voters went to the polls in New Hampshire’s primary, the Wall Street Journal reported that the right wing Club for Growth reflected the shock among conservatives when it went after Gingrich for his “disgusting” attacks against Romney and his record at Bain Capital.
The group’s president, former Rep. Chris Chocola (R-Ind), said in a written statement: “Attacking Governor Romney for participating in free-market capitalism is just beyond the pale for any purported ‘Reagan conservative.'”
Like smart traders who buy low and sell high, America’s plutocracy has profited spectacularly from the yawning gap which exists between the values used by the public to judge and reward economic behavior and the public’s understanding of the revolutionary changes in the economy over the past 30 years that have made those values obsolete.
When conservatives talk about the virtue of competition and “entrepreneurship,” for example, they are exploiting the ignorance of a public that still believes America’s economy is dominated by people who make things and so thinks rewards should naturally go to those who can make things faster, better, cheaper.
As a reader on Andrew Sullivan’s Daily Beast site put it: “Most Americans appreciate a free market system in which those that produce the best goods and services at the best value should be successful and become wealthy. However, when people become fabulously wealthy at the expense of others while producing nothing but investment gain for the investors, I think most Americans take pause.”
Yet, as economic historian Kevin Phillips notes, Wall Street is no longer the servant of Main Street where profits are confined to the earnings it can make by providing capital to entrepreneurs and businesses to invest in real things and good ideas. Today, financial firms earn more than 40% of all corporate profits and command a quarter of stock market capitalization — up from just 6% when Ronald Reagan was elected in 1980 – largely because of the powers Wall Street’s been given from deregulation to create debt and to earn fees from the distribution of that debt.
Historically, says Phillips, this transformation from a making to a papering economy “is as momentous as the emergence of railroads, iron and steel and the displacement of agriculture during the decades after the Civil War.”
And the problem for Mitt Romney is that he embodies these fundamental if poorly understood changes, which is why Republicans are so furious with Newt Gingrich for putting this all up in lights.
All Republicans talk about free markets, says Kevin Drum, but Mitt Romney has actually lived it. “That makes him a more concrete messenger, someone who can credibly say that he not only believes in free markets, but has lots of experience in making them work.”
Chances are that when Americans hear about free enterprise from conservatives “it’s usually accompanied by images of sunrises over wheat fields, hardworking farmers, and small-town construction workers heading home after a day of honest labor,” says Drum. “It is very definitely not accompanied by images of well-coiffed guys in suits and green eyeshades, making millions by sitting in boardrooms and approving mass layoffs by adding a quick line to a spreadsheet before they head out to lunch.”
Someone like Newt Gingrich can get up on his soapbox and keep things “fuzzy” by delivering a stem-winder about free markets, the glories of competition and keeping government off our backs “and then just walk off the stage — mission accomplished,” says Drum.
Not so Mitt Romney. When Romney talks about free markets the stakes are much higher, says Drum.
“He can’t get away with platitudes,” says Drum. “His experience at Bain Capital will inevitably be Exhibit 1 in just what he means when he talks about free markets.”
Short of being the CEO of Goldman Sachs, “this is quite possibly the worst possible face you can imagine for a conservative message about the glories of free enterprise and wealth creation,” adds Drum. “Romney, whether he likes it or not, won’t be able to talk about those glories without also facing up to the human destruction that often follows in its wake.”
Americans may say they are for free markets. But at the end of the day they are just regular folks who believe in a regular day’s pay for a regular day’s work. So, “if you rub their noses in the true face of modern capitalism, they aren’t going to like what they see,” Drum insists.
And that is what Gingrich is threatening to do. So, you can understand why Republicans and their wealthy benefactors are so uneasy — and incensed — by what Gingrich is about to do.
The revolutionary bomb-thrower who once brought down a House Speaker and ended 40 years of consecutive Democratic rule is now poised to blow up the Republican Party’s designated heir apparent and with him the Republican Party’s name-brand issue.
Wouldn’t it be ironic, then, if Newt Gingrich’s final act as America’s most famous radical was to squander the profits Republicans have so regularly earned — both economically and politically – through the arbitrage which exploits the gap between fact and fiction, reality and myth, in America’s system of free market capitalism?
By: Ted Frier, Open Salon, January 11, 2012
All The G.O.P.’s Gekkos: “I Create Nothing I Own”
Almost a quarter of a century has passed since the release of the movie “Wall Street,” and the film seems more relevant than ever. The self-righteous screeds of financial tycoons denouncing President Obama all read like variations on Gordon Gekko’s famous “greed is good” speech, while the complaints of Occupy Wall Street sound just like what Gekko says in private: “I create nothing I own”, he declares at one point; at another, he asks his protégé, “Now you’re not naïve enough to think we’re living in a democracy, are you, buddy?”
Yet, with the benefit of hindsight, we can see that the movie went a little off at the end. It closes with Gekko getting his comeuppance, and justice served thanks to the diligence of the Securities and Exchange Commission. In reality, the financial industry just kept getting more and more powerful, and the regulators were neutered.
And, according to the prediction market Intrade, there’s a 45 percent chance that a real-life Gordon Gekko will be the next Republican presidential nominee.
I am not, of course, the first person to notice the similarity between Mitt Romney’s business career and the fictional exploits of Oliver Stone’s antihero. In fact, the labor-backed group Americans United for Change is using “Romney-Gekko” as the basis for an ad campaign. But there’s an issue here that runs deeper than potshots against Mr. Romney.
For the current orthodoxy among Republicans is that we mustn’t even criticize the wealthy, let alone demand that they pay higher taxes, because they’re “job creators.” Yet the fact is that quite a few of today’s wealthy got that way by destroying jobs rather than creating them. And Mr. Romney’s business history offers a very good illustration of that fact.
The Los Angeles Times recently surveyed the record of Bain Capital, the private equity firm that Mr. Romney ran from 1984 to 1999. As the report notes, Mr. Romney made a lot of money over those years, both for himself and for his investors. But he did so in ways that often hurt ordinary workers.
Bain specialized in leveraged buyouts, buying control of companies with borrowed money, pledged against those companies’ earnings or assets. The idea was to increase the acquired companies’ profits, then resell them.
But how were profits to be increased? The popular image — shaped in part by Oliver Stone — is that buyouts were followed by ruthless cost-cutting, largely at the expense of workers who either lost their jobs or found their wages and benefits cut. And while reality is more complex than this image — some companies have expanded and added workers after a leveraged buyout — it contains more than a grain of truth. One recent analysis of “private equity transactions” — the kind of buyouts and takeovers Bain specialized in — noted that business in general is always both creating and destroying jobs, and that this is also true of companies that were buyout or takeover targets. However, job creation at the target firms is no greater than in similar firms that aren’t targets, while “gross job destruction is substantially higher.”
So Mr. Romney made his fortune in a business that is, on balance, about job destruction rather than job creation. And because job destruction hurts workers even as it increases profits and the incomes of top executives, leveraged buyout firms have contributed to the combination of stagnant wages and soaring incomes at the top that has characterized America since 1980.
Now I’ve just said that the leveraged buyout industry as a whole has been a job destroyer, but what about Bain in particular? Well, by at least one criterion, Bain during the Romney years seems to have been especially hard on workers, since four of its top 10 targets by dollar value ended up going bankrupt. (Bain, nonetheless, made money on three of those deals.) That’s a much higher rate of failure than is typical even of companies going through leveraged buyouts — and when the companies went under, many workers ended up losing their jobs, their pensions, or both.
So what do we learn from this story? Not that Mitt Romney the businessman was a villain. Contrary to conservative claims, liberals aren’t out to demonize or punish the rich. But they do object to the attempts of the right to do the opposite, to canonize the wealthy and exempt them from the sacrifices everyone else is expected to make because of the wonderful things they supposedly do for the rest of us.
The truth is that what’s good for the 1 percent, or even better the 0.1 percent, isn’t necessarily good for the rest of America — and Mr. Romney’s career illustrates that point perfectly. There’s no need, and no reason, to hate Mr. Romney and others like him. We do, however, need to get such people paying more in taxes — and we shouldn’t let myths about “job creators” get in the way.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 8, 2011
GOP Governors Taught How To Describe Occupy Wall Street
During a meeting of the Republican Governors Association in Orlando this week, Frank Luntz, one of the most well known political communications strategist in the country, talked to GOPers about how they could do a better job talking about the Occupy Wall Street movement.
Yahoo News’ Chris Moody reports that “Luntz offered tips on how Republicans could discuss the grievances of the Occupiers, and help the governors better handle all these new questions from constituents about ‘income inequality’ and ‘paying your fair share.’”
“I’m so scared of this anti-Wall Street effort. I’m frightened to death,” said Luntz, a Republican strategist and one of the nation’s foremost experts on crafting the perfect political message. “They’re having an impact on what the American people think of capitalism.”
According to Moody, this was Luntz’s advice:
1. Don’t say ‘capitalism.’
“I’m trying to get that word removed and we’re replacing it with either ‘economic freedom’ or ‘free market,’ ” Luntz said. “The public . . . still prefers capitalism to socialism, but they think capitalism is immoral. And if we’re seen as defenders of quote, Wall Street, end quote, we’ve got a problem.”
2. Don’t say that the government ‘taxes the rich.’ Instead, tell them that the government ‘takes from the rich.’
“If you talk about raising taxes on the rich,” the public responds favorably, Luntz cautioned. But ”if you talk about government taking the money from hardworking Americans, the public says no. Taxing, the public will say yes.”
3. Republicans should forget about winning the battle over the ‘middle class.’ Call them ‘hardworking taxpayers.’
“They cannot win if the fight is on hardworking taxpayers. We can say we defend the ‘middle class’ and the public will say, I’m not sure about that. But defending ‘hardworking taxpayers’ and Republicans have the advantage.”
4. Don’t talk about ‘jobs.’ Talk about ‘careers.’
“Everyone in this room talks about ‘jobs,’” Luntz said. “Watch this.”
He then asked everyone to raise their hand if they want a “job.” Few hands went up. Then he asked who wants a “career.” Almost every hand was raised.
“So why are we talking about jobs?”
5. Don’t say ‘government spending.’ Call it ‘waste.’
“It’s not about ‘government spending.’ It’s about ‘waste.’ That’s what makes people angry.”
6. Don’t ever say you’re willing to ‘compromise.’
“If you talk about ‘compromise,’ they’ll say you’re selling out. Your side doesn’t want you to ‘compromise.’ What you use in that to replace it with is ‘cooperation.’ It means the same thing. But cooperation means you stick to your principles but still get the job done. Compromise says that you’re selling out those principles.”
7. The three most important words you can say to an Occupier: ‘I get it.’
“First off, here are three words for you all: ‘I get it.’ . . . ‘I get that you’re. I get that you’ve seen inequality. I get that you want to fix the system.”
Then, he instructed, offer Republican solutions to the problem.
8. Out: ‘Entrepreneur.’ In: ‘Job creator.’
Use the phrases “small business owners” and “job creators” instead of “entrepreneurs” and “innovators.”
9. Don’t ever ask anyone you want them to ‘sacrifice.’
“There isn’t an America today in November of 2011 who doesn’t think they’ve already sacrificed. If you tell them you want them to ‘sacrifice,’ they’re going to be be pretty angry at you. You talk about how ‘we’re all in this together.’ We either succeed together or we fail together.”
10. Always blame Washington.
Tell them, “You shouldn’t be occupying Wall Street, you should be occupying Washington. You should occupy the White House because it’s the policies over the past few years that have created this problem.”
The Occupy movement has scored a number of small victories since September, when the Occupy Wall Street protesters first assembled in downtown New York. Bank of America announced it would not be charging debit card fees, one of the many triggers that sparked the protests, and a congressman introduced an amendment called the OCCUPIED Amendment that would reform campaign finance laws. Campaign finance rules that favor corporate power are a chief Occupy Wall Street target.
By: The Washington Independent, Admin, December 1, 2011
Is Mitt Romney The Candidate Of The “One Percent”?
A number of people are pointing to this scorching quote from Joe McQuaid, the publisher of the New Hampshire Union Leader, explaining the paper’s decision to endorse Newt Gingrich over Mitt Romney:
“I think — and this is crazy, but so are we — that Gingrich is going to have a better time in the general election than Mitt Romney,” publisher Joe McQuaid told FOX News. “I think it’s going to be Obama’s 99% versus the 1%, and Romney sort of represents the 1%.”
Aside from the obvious humor value here, this actually gets at something serious: The possibility that Mitt Romney’s tax rates, and not just his corporate past and support for cutting taxes on the wealthy and corporations, amount to an unexplored vulnerability in a general election. Because he gets income from investments, Romney would have paid roughly 14 percent of his income in taxes in 2010, according to the Citizens for Tax Justice — lower than the rate paid by many middle class taxpayers.
Wait, there’s more. According to Bloomberg News, Romney is now benefitting from the fundraising of Stephen Schwarzman, the chairman of the world’s largest private equity firm, who is also soliciting help for Romney from colleagues. Bloomberg presents this as a sign that Romney is “closing the sale with Wall Street’s wealthiest donors.”
But there’s more to it than this. As Pat Garofalo notes, Schwarzman is also well known as a warrior against efforts to close loopholes that benefit private equity firms. Indeed, this new Romney supporter has even compared his battle against such efforts to World War Two:
“It’s a war,” Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. “It’s like when Hitler invaded Poland in 1939.”
Obviously, people like Schwarzman will back the GOP nominee, whoever he is, and Dems will likely highlight this kind of thing to paint the eventual GOP nominee, whoever he is, as in the pocket of Wall Street. But the fact that Romney himself personally benefits from aspects of the tax code that Obama wants to change makes him a less-than-ideal messenger to deliver criticism of Obama’s push for tax fairness, and will likely make Dem attacks along these lines more potent. After all, Dems can argue that not only do the Schwarzmans of the world prefer Romney’s policies, but on top of that, Romney himself is actually one of them. You can’t say that about Newt.
This general election vulnerability is being obscured right now, because for obvious reasons, it isn’t an issue in the GOP primary. But the Obama team has taken note of this weakness — and Obama surrogates are likely going to work very hard to exploit it — even if it isn’t getting much attention right now. It seems like Republicans who are evaluating Romney’s strengths and weaknesses as a general election candidate might want to consider how this will play next year, particularly if resurgent populism continues to help shape the political environment, as many expect it to do.
By: Greg Sargent, The Washington Post, The Plum Line, November 28, 2011
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 