Relevant and even prescient commentary on news, politics and the economy.

The Public Learns Disaster Relief Was Etched Out of the Sketch. Uh-Oh.

MITT ROMNEY: “Every time you have an occasion to take something from the federal government and send it back to the states, that’s the right direction. And if you can go even further, and send it back to the private sector, that’s even better. Instead of thinking, in the federal budget, what we should cut, we should ask the opposite question, what should we keep?”

DEBATE MODERATOR JOHN KING: Including disaster relief, though?”

ROMNEY: We cannot — we cannot afford to do those things without jeopardizing the future for our kids. It is simply immoral, in my view, for us to continue to rack up larger and larger debts and pass them on to our kids, knowing full well that we’ll all be dead and gone before it’s paid off. It makes no sense at all.

Republican primary campaign debate last year

Slate’s Matthew Yglesias points to that today andcomments:

More prosaically, though the Romney campaign was understandably circumspect over the weekend about his spending plans the fact is that his overall budget requires sharp cuts in everything. The central issue is that Romney wants to cap government spending at 20 percent of GDP while boosting military spending to 4 percent of GDP and leaving Social Security harmless. That means a 34 percent across-the-board cut in other programs according to the Center on Budget and Policy Priorities. Unless, that is, Medicare is also exempted from the cuts in which case you’d need a 53 percent cut. …

If a storm damages basic physical infrastructure (power lines, bridges) and imperils human life it would be the height of penny-wise, pound-foolish thinking to suppose that the afflicted area should wait months or years to repair the damage. Ultimately, anyplace is going to go back to robust wealth creation faster if basic stuff gets fixed up faster. But that requires financing by an entity capable of rapidly financing expensive projects—i.e., the federal government. Left to its own devices a storm-ravaged Delaware or Louisiana is going to be squeezed between balanced budget rules and falling sales tax receipts and be forced into an increasing state of dilapidation.

How about a storm-ravaged Florida?  According to current polls, slightly more than half of Florida voters want their state to take over disaster relief, at least until arrangements can be made for the private sector to take it over.

And, about that question Romney asked: What should we KEEP?  Well, in addition to the Bush tax cuts for the wealthy and defense spending for private contractors, what DOES Romney think we should keep?

We cannot – we cannot afford to do things like disaster relief without jeopardizing the future of our kids.  We CAN, though, afford to give massive additional tax cuts to the wealthy, and huge additional contracts to Republican defense contractors, without jeopardizing the future of our kids.  Right?

What’s truly unconscionable is that it’s taking Hurricane Sandy to educate the public about the plans Romney and Ryan have stated so clearly.  I’ve been utterly unable to understand why the Obama campaign hasn’t been running video clips of Romney’s primary-campaign statements as the foundation of their ads.  I’ve thought all along that this is all Obama would need to do in order to win.  I think Sandy will prove me right.

And, here’s a shout-out to New York Time columnist Bill Keller for exposing for the absurd myth that it is the punditry’s “in” refrain that we don’t know what either of the two candidates would use the office to do in the next four years, because, well, neither has specified sufficiently.  As Keller says, actually both have specified sufficiently. 

And Romney’s already begun to reverse-sketch his etchings.  Suffice it to say that he’s not spent the last week promising “BIG CHANGE” because he plans to etch out of his sketch all those primary-campaign promises. 

So this IS how Romney’s miracle Caymans IRA metastasized! And we also know now how he plans to help the 47% take responsibility for their lives: Nu Skin samples!

Okay, all.  Remember all the speculation last summer about how Romney managed to parlay an IRA in a Cayman Islands bank into an account worth between $20 million and $101 million? 

Much of the speculation concerned whether Romney stacked the account with Bain shares and significantly undervalued them as worth less than the maximum yearly deposits.  There was speculation that he also might have done the same with privately-held shares in companies that Bain owned.  I don’t remember whether Staples was specifically mentioned in the speculation back then.  But it sure appears now that it should have been.  And should be, now.

And when the Romney campaign starts whining that raising this issue now is an attempt to change the subject from Obama’s record, Obama and the PAC supporting him should respond by suggesting that we start talking about certain aspects of Romney’s record—such as the aspect of Romney’s record that New York Times columnist Joe Nocera writes about in his column today. In short, Romney suggested that the 47% of Americans who don’t take responsibility for their own lives do so by using … Nu Skin!

Seriously.  He did!  Nu Skin is “about taking control of your life and managing your own destiny,” he said.

Well, anyway, no one can say any longer that Romney has no actual plan for helping the 47% take responsibility for their lives.  Too bad he’ll never be able to convince them to vote for him.  They just don’t know what they’d be missing, if only he were elected: Nu Skin samples!

Romney, Family Business, Carried Interest, and potential conflicts of interest

by Linda Beale

Romney, Family Business, Carried Interest, and potential conflicts of interest

Just a quick note this morning on an interesting article in the October 29, 2012 edition of The Nation magazine, Lee Fang, Romney Family Business: Investors in Tagg Romney’s firm, Solamere Capital, could hit the jackpot if his father wins, The Nation (Oct. 29, 2012), at 18.

Marc Leder, the wealthy investor who hosted the Romney fundraiser last May in Boca Raton where Romney made his comment disparaging almost half of Americans as personally irresponsible and happy to depend on government, is just one of several high-powered investors linked to the Romney family business empire.  The Nation article describes it this way.

In 2008, … [Romney’s] eldest son Tagg and his chief fundraiser Spencer Zwick formed Solamere Capital, a private equity firm …. What Tagg lacked in experience in the world of high finance, he made up for with a vast network of political connections forged through his father, who seeded the firm with $10 million and was the featured speaker at its first investor conference in January 2010. …
Unlike most private equity firms…, Solamere specializes in something else:  billing itself as a ‘fund of funds’ with ‘unparalleled networks’, it provides investors with ‘unique access’ to an elite set of other private equity firms and hedge funds.
***

Solamere, a firm predicated on its founders’ relationship with Romney, presents a channel for powerful investors to influence the White House if he wins.

The looming matters range from general matters that affect all private equity firms–such as tax changes or the new rules mandated by the Dodd-Frank financial reform bill–to more specific concerns relating to businesses owned or controlled by Solamere’s partner firms.   Many of these businesses, in fact, depend on government contracts; indeed, some have been accused of fleecing taxpayers…. A Romney administration could directly affect the profitability of these companies–and, by extension, potentially the success of Tagg’s venture….
Take Leder … whose Sun Capital firm bought a stake in the Scooter Store last year.  The company, known for its ubiquitous television ads promising seemingly free motorized wheelchairs for Medicare beneficiaries, has struggled as the Centers for Medicare and Medicaid Services, the federal agency that governs the programs, implements rules to curb rampant billing fraud.  …80 percent of the claims for scooters and power wheelchairs did not meet Medicare requirements, meaning that $492 million a year is being improperly spent.  In 2007, the Scooter Store gave up $13 million in Medicare payments and paid $4 million to settle with the Justice Department over allegations that it had overbiled for its electric wheelchairs. … Disclosures … suggest that pressuring the government is the only way [Leder’s] investment in Scooter Store can turn a profit.  Since Leder’s firm invested in the Scooter Store, the company has spent nearly $900,000 on lobbyists to push back on [the] two latest challenges to its motorized-scooter empire.
***
Records indicate the firm [Solamere Capital] was incorporated at the same Boston office where Romney’s campaign headquarters had been located, and later shared an office address with Romney’s PAC. Zwick … has been referred to as Romney’s ‘sixth son.’  And by all accounts, he’s one of the most trusted advisers in Romney’s circle. … [I]n February 2008, Solamer Capital registered with the State of Massachusetts. Zwick and Tagg joined with Eric Scheuermann, a former Jupiter Partners executive, as the three managing partners of the firm.  Scheuermann was the only one with prior experience in private equity. … However, success for the firm seemed preordained. … Solamere surpassed its $200 million fundraising goal with help from an elite set of ‘high net worth’ individuals, many of whom are close Romney allies. … The three managing partners will receive $16.8 million in management fees over the first six years, as well as ‘performance-based incentive’ pay. … A tax return filed by Mitt and Ann Romney, made public in September, showed that Solamere has used an array of Cayman Islands entities … [It] likely uses ‘blocker corporations’ to help its tax-exempt investors avoid paying the unrelated business income tax.
***
In June, the Romney campaign announced that if he’s elected, the candidate would move his assets into a federally qualified blind trust, and would also likely sell off any assets that ‘are not fully compliant with federal disclosure and other rules applicable to the office of the presidency.’ But if Romney wins, there’s almost no chance that the underlying assets of his son’s firm, Solamere, will be revealed.  Solamere could have assets involved in healthcare, energy, telecommunications or any number of other industries, but the public will be left in the dark.
***
What is known is that Solamere’s private equity partners are eager to influence the federal government. Three of the firms listed in the Solamere prospectus–Sun Capital Partners, TPG Capital and TA Associates–are currently financing a lobbying campaign under a trade group called the Private Equity Growth Capital Councill (PEGCC), which is seeking to influence a number of tax and regulatory decisions.  The PEGCC has spent nearly $5.8 million on federal lobbying over the past three years, and untold millions this year on a public relations campaign in swing states to improve the image of private equity–a strategy seen as designed to benefit Romney’s campaign. One of the primary concerns of the PEGCC … is that the carried interest loophole, which allows wealthy investment managers to be taxed [on their compensation for services] at only the 15 percent capital gains rate, may be closed. The group has also …held meetings with regulators to complain about the Dodd-Frank financial reform bill’s mandates.
***
Other Solamere investment partners own businesses that face imminent regulatory action [including SCF partners, Rockwater Energy Solutions, and IPS Canada].
***
Meanwhile, HIG Capital–one of the largest Solamere partners, with nearly $10 billion of equity capital–owns a number of other firms that are closely monitoring the federal government.  One area where private equity firms have made lucrative investments is the new industry of dental management companies that bill Medicaid.  In November 2011, Senators Chuck Grassley of Iowa and Max Baucus of Montana opened an investigation in response to allegations that these corporate-controlled dentists have abused children.
***
The Medicaid reimbursements for the dental management companies offer a revealing look at the underlying business model being pursued by the Romney-supporting private equity firms:  big government, when harnessed to industry-friendly regulators, can mean big profits. Many of these private equity-owned companies rely on federal and state contracts, from HIG Capital’s Hart Intercivic, a voting machine company, to EnviroFoam Technologies, a biological and chemical decontamination firm that does business with the US military and is owned by Peterson Partners, a private equity firm listed in the Solamere prospectus.
***
Asked about the rising cost of colleges …, Romney said that students should take a look at for-profit colleges like Full Sail Uniersity …. Weeks later… Romney hailed the ‘advent of for-profit institutions of higher learning’ for providing competition with public and private universities.  He again volunteered Full Sail University as a good example of how students can ‘hold down the cost of their education.’
What Romney neglected to mention is that Full Sail University–in fact the third most expensive college in the United States–is owned by TA Associates.  Indeed, TA Associates has viewed the for-profit college industry–a $40 billion maker where 85 percent of the funds are supplied by taxpayers–as an excellent opportunity for growth. …Like most profit driven colleges, which account for only 10 percent of all students but about half of all loan defaults, TA Associates’ schools do not boast a stellar track record.
***
‘The fact that Romney praised an overpriced, underperforming college that is owned by his son’s investment partners, and whose owners have contributed a quarter-million dollars to his campaign and Super PAC, shows how he embodies the corrupting influence of money on politics,’ asserts David Halperin …. ‘It shows how his administration could, as a matter of course, allow special interests–the interests of his rich friends–to skew important policy decisions and harm the public interest.’ Id (emphases added).

The article goes on to discuss how closely Solarmere and its investors are intertwined with the Romney campaign.  Tagg is a part of Romney’s inner circle.  Solamere holds an investor conference that happens to coincide with a neighboring fundraising event for the campaign.  American Crossroads, Karl Rove’s Super PAC engine of radical GOP ideas, attends both.  The Super PAC can’t coordinate with campaigns, but the fundraising is hosted by Solamere so that makes it okay, technically.

This excerpt thus amply illustrates the way class warfare really works:  a closely knit group of oligarchs with business ties through their private equity empires and a shared corporatist perspective on society can use insider access to the channels of government power to make government work for them and prevent its working for ordinary folk.

First, money speaks loudly, so legislation tends to get passed that favors the elite or gets blocked when it disfavors their special interests.  Ending the carried interest loophole can’t make it through Congress, even though there is a wealth of commentary condemning it as an inappropriate subsidy for an industry that is often destructive to the economy.  Hampering the EPA’s ability to safeguard wildnerness lands or healthy air and water is easily accomplished.  Insider information, influential networks among oligarchs, and intimate acquaintanceship among executives in government and corporate executives ensures the smooth flow and fit of wishlists and accomplishments.

Second, with their focus steadfastly on their own rentier profits from their vulture businesses, oligarchs refuse to support measures that are important for the commonweal, and urge the passage of measures that have harsh impact on ordinary workers.  Offshoring is praised as a “creative destruction” even though compensating creative innovation seldom offsets the costs of worker loss, community disintegration, and economic decline.  Unions are viewed as hostile opponents (because the more money that goes to workers in respect of their real work acomplished, the less can be skimmed off the top by vulture capitalists), and hence much of big corporate money is targeted to eliminate collective bargaining rights that protect workers.

Note that this is always just one of many blows from private equity’s leveraged buyout methods, since the use of excess leveraging for quick profits to the private equity managers builds up debt that sucks out cashflow and either provides justification for reduced wages to workers from a barely stable industry or provides justification for a bankruptcy process through which the company’s pension obligations to its retired workers can more easily be scrapped (even though it could have met them if it had only treated them as important as its payouts to overpaid managers).

cross posted with ataxingmatter

Did Romney Begin to Reverse-Etch-A-Sketch Today?

CINCINNATI, Ohio — Mitt Romney tried Thursday to borrow the campaign themes that got President Barack Obama elected in 2008.

The Republican nominee repeatedly promised “big change” in Washington, a fresh phrase for him and one that he used more than a dozen times in a 20-minute speech at a rally that kicked off a day-long Ohio bus tour.

Romney borrows Obama campaign themes, James Hohmann, Politico, today,

Seems to me that Obama should point out what big changes would be in store.  He can start with Medicare and then get into some other highlights of the Ryan budget—and of Romney’s primary-campaign statements, and run ads using clips of Romney saying these things.

He can then point out that Romney is doing what he’s so good at: writing generic fine print that he can then point to and say, “But this is what I said during the campaign that I would do! Seeee??”

Sorta like, it depends on what the meaning of “Let Detroit go bankrupt” means.  Which depends on what the meaning of “managed bankruptcy” is, when you’re suggesting that the government shouldn’t provide GM and Chrysler with money to fund a managed bankruptcy that would not result in liquidation.  Which in turn, I guess, depends on what the meaning of liquidation is.  

Which a very large number of people who are now employed directly or indirectly by those companies would have no trouble defining.

Romney’s Prescience—a.k.a., The OTHER important point about Romney’s auto-bailout position

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

— Mitt Romney, Let Detroit Go Bankrupt, New York Times, Nov. 18, 2008

The problem for Romney?  That the turnaround that Detroit needed could not have occurred without that check.

The solution for Romney?  Say that he was proposing a “managed bankruptcy” rather than a liquidation bankruptcy, and pretend that those two things are mutually exclusive.  And—voila!—everyone’s focused on whether Romney was or was not proposing a liquidation of GM and Chrysler. 

Which, of course, he was, because, well, the turnaround that Detroit needed could not have occurred without that check. 

But in that op-ed, Romney said—unequivocally—that receipt of that check by the auto companies would spell the demise of the American automotive industry.  He said he could virtually guarantee it.  

That’s right, folks.  The man who claims that his business savvy means he will, if elected president, cause the creation of 12 million new American jobs didn’t know that there was no private-sector financing available to fund a non-liquidation managed bankruptcy for these companies.  And, even more important, he thought that federal funding would spell the demise of the automotive industry

In other words, even more important than that this guy is the Houdini candidate is that, by his own accounting—by his own words in that op-ed—he economics prowess is an apparition.  

Well, it isalmost Halloween.

Good thing that guarantee was only virtual.

Binders Full of Battleships, Horses and Bayonets

I loved the horses-and-bayonets rejoinder, and I especially loved that it highlighted Romney’s incessant plucking of irrelevant statistics and misrepresenting what they indicate.  But the line I liked best wasn’t any line that Obama said.  It was this one, said by Romney in his closing statement:

I’ll lead you in an open and honest way.

You can start being open and honest now, Governor. You don’t have to wait until you’ve become our leader to be open.  And to be honest.

Honestly.

Ann Romney’s blind trust had a seeing-eye dog. … Was blind but now can see….

Solamere Capital—named after an exclusive neighborhood in Utah where the family had a vacation home—was incorporated in February of 2008, only weeks after the campaign ended. Its first office address was the Romney campaign headquarters in Boston’s North End. One of its first big commitments was $10 million from Ann Romney’s blind trust… According to a copy of the Solamere prospectus that The Boston Globe obtained, they promised “unique access” to lucrative deals that the partners would land thanks to their “close personal and business relationships.” The New York Times reported that the firm ultimately raised money from a variety of Romney donors and fund-raisers, including John Miller, a longtime family friend and former corporate CEO, and Meg Whitman, the former head of eBay.

Ann Romney’s blind trust had a seeing-eye dog. The trust was blind but then could see.  Truly amazing grace.

Is New York Times columnist Timothy Egan the only one who noticed THIS?

New York Times columnist Timothy Egan writes today:

The Mitt Romney of the second debate, to use Mike Huckabee’s memorable phrase, “looks like the guy who fires you.” He exposed, once again, his biggest fault: that he has no idea what it’s like to be middle-class and struggling in 2012 America.

To take just a couple of examples, here was Romney explaining the benefits of his tax program, the breaks that you’ll get on your stock dividends and mutual funds. As he outlined it with all the mercenary gusto of the visiting suit with a PowerPoint, Romney said, “Every middle-income taxpayer will no longer pay any tax on interest, dividends or capital gains.” And, a bit later, “If you’re getting a statement from a mutual fund or any other kind of investment you have, you don’t have to worry about filing taxes on that.”

No kidding. In Romney’s world, and throughout his own tax return, the money earned from money — as opposed to money earned from working — is the chief source of wealth. And it’s already taxed at a lower rate than middle-income earnings. Getting rid of those taxes altogether does nothing for the warehouse manager, schoolteacher or insurance sales person taking home a salary and being taxed at a full rate for making a living. But it’s great for someone living off mutual fund dividends.

Why hasn’t the media—and the Obama campaign!—been talking about that capital-gains/dividends/interest policy statement of Romney’s?  Isn’t that a very big deal?  

Is Egan the only one who noticed this?  Anyone who matters, I mean?  I was stunned when Romney said that on Tuesday, and assumed that that would play as big news.  When it didn’t, I forgot about it. 

Egan reminded me.  And maybe he reminded the Obama campaign, too.  

Shouldn’t Obama point this out when he campaigns in, say, Ohio and Wisconsin?

Romney’s "Binders full of women" comment

by Linda Beale

Romney’s “Binders full of women” comment
editor’s note:  this is a political commentary and not a tax discussion.

When Romney was asked what he could do about the inequity in women’s compensation, he didn’t answer the question.  He tried to turn it to his advantage by telling a story of how he ended up bringing a number of women into his cabinet back in the days when he was a more liberal politician serving as governor of Massachusetts.  He claimed that he wasn’t pleased that his staff hadn’t found qualified women for cabinet posts, and that he told them to go shake the trees and find some.  They came back with a binder full of women and he appointed a cabinet with record numbers of women.

So he didn’t answer what he would do about the pay inequities that exist.  He didn’t answer what he would do about the hiring inequities that exist, other than what seemed to be a personal claim that he personally ensured that there was an adequate search to establish a deep pool of women cabinet candidates.
But as a woman, I was jarred by the comment.  It was as though there really weren’t any “qualified” women but when pushed, he was able to come up with “binders” of women that could be appointed anyway and he did.  There was a hint that the women he appointed weren’t really “qualified”.  Or that because he had to push his staff to go out and find them, something else was wrong.

It turns out that another organization–the Massachusetts Women’s Political Caucus– was thinking ahead and trying to ensure that whomever was elected governor would be aware of the many qualified women who could serve on a cabinet.  It created a Government Appointments Project (MassGAP) that developed an extensive process for candidate consultation on including women in high-level positions and got pre-election commitment from both the Democratic and Republican candidates to make efforts towards that goal. It was binders put together by MassGAP that the governor used to make his appointments.  (Perhaps if organizations in other states had prepared in that way, even more governors would have done better jobs of appointing females to their cabinets.)

Further, the meaty positions that were considered central to the functioning of the state (budget, trade, and similar matters) were indeed handed over to men.  The women were given more peripheral roles.
While Romney should receive some recognition for acknowledging that appointment of women was and is the right thing to do, his awkward phrasing nonetheless suggests that he doesn’t think women are at a par with men in this game of politics, and his avoidance of the heart of the equity question suggests he doesn’t get it.

cross posted with ataxingmatter