May 27th, 2015
The Bleak World Mitt Romney Has in Store for you
FILED TO: Economics
By Ben Cohen: If you want to understand the type of country a politician wants to build, it is often a good idea to take a look into the life they built for themselves before stepping onto the national stage. Obviously it’s not the only indicator, but someone who has dedicated their life to public service would be more likely to have a more socially minded vision for the country as opposed to a businessman who has spent a lifetime dedicated to profit making.
Let’s take the two Presidential candidates this year. One of them, Barack Obama was a community organizer and a law professor, while the other, Mitt Romney worked exclusively in private equity and asset management.
During his tenure as President, Obama has to a degree reflected the life he led before coming into office. The President has fought to maintain the social safety net and provide support for the poorest people in America. His record on civil rights is not fantastic, but his commitment to using what is left of government to do good from an economic standpoint is fairly clear. He passed the stimulus package, reformed health care and extended unemployment, all in the face of an opposition that did everything in its power to stop him.
Mitt Romney on the other hand has spent most of his adult life making extraordinary amounts of money through private equity, and a short spell in government passing tax cuts for the wealthy.
The picture is obviously more complicated than this – Obama’s record on standing up to Wall St is pretty desultory and his policy is certainly not reflective of his social background or rhetoric, and Romney passed a widely praised health care plan in Massachusetts that did benefit the economically disadvantaged.
But as a whole, the difference is pretty clear – at least for office in 2012. The community organizer from a disadvantaged background is running on a platform to help the poor and middle classes, while the private equity rich kid is running on a platform to almost exclusively cater to the rich at the expense of everyone else.
If you look more closely at Mitt Romney’s professional background, a very disturbing picture emerges. Matt Taibbi’s excellent piece in Rolling Stone takes a good stab at trying to understand Romney’s pre-political life and his world view, and it’s a pretty frightening account of his life as a modern capitalist titan. Writes Taibbi:
Romney was a prime mover in the radical social and political transformation that was cooked up by Wall Street beginning in the 1980s. In fact, you can trace the whole history of the modern age of financialization just by following the highly specific corner of the economic universe inhabited by the leveraged buyout business, where Mitt Romney thrived. If you look at the number of leveraged buyouts dating back two or three decades, you see a clear pattern: Takeovers rose sharply with each of Wall Street’s great easy-money schemes, then plummeted just as sharply after each of those scams crashed and burned, leaving the rest of us with the bill.
In the Eighties, when Romney and Bain were cutting their teeth in the LBO business, the primary magic trick involved the junk bonds pioneered by convicted felon Mike Milken, which allowed firms like Bain to find easy financing for takeovers by using wildly overpriced distressed corporate bonds as collateral. Junk bonds gave the Gordon Gekkos of the world sudden primacy over old-school industrial titans like the Fords and the Rockefellers: For the first time, the ability to make deals became more valuable than the ability to make stuff, and the ability to instantly engineer billions in illusory financing trumped the comparatively slow process of making and selling products for gradual returns.
Romney basically helped pioneer a horrific form of vulture capitalism that saw financial trickery and leverage as legitimate ways of creating inordinate amounts of wealth through massive amounts of debt. The trick at Bain was to buy companies with other people’s money, load them with debt, then get out before the house burnt down with a massive pay off for themselves. It worked brilliantly – at least for Romney and his fellow finance pals – but not so much for the companies that were often left crippled by the deals they made. As Jesse Eisinger at ProPublicanotes:
The Wall Street Journal found that many of the businesses Bain bought went bust, even when Bain reaped big financial wins. The paper analyzed 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, finding that 22 percent either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested. An additional 8 percent ran into so much trouble that all of the money Bain invested was lost. .
It is stunning that a candidate running almost exclusively on reducing the deficit spent a lifetime accumulating debt for other people then walking away as they crumbled underneath it. But no matter for Romney who has always emerged unscathed from the looting his company engaged in. He’s a multi millionaire, and proof at least in his own head that anyone can make it in America.
Mitt Romney is running on a platform to codify this type of vulture capitalism, and astonishingly, he picked a running mate even more extreme than him. Writes Ezra Klein:
In picking Paul Ryan, Mitt Romney has doubled down on his own campaign promise to give big tax breaks to the wealthy, uniting himself with a candidate who goes even further to do so: While Romney would bring taxes for top incomes down to 28 percent, Ryan has proposed bringing the top rate down even lower, to 25 percent. Meanwhile, Ryan’s plan would actually increase the effective tax rate on the very poorest Americans by getting rid of tax breaks that benefit low earners.
So this is the world envisioned by Romney and his side kick Ryan – a bleak, cutthroat society where the poor are left to fend for themselves and the rich given more power and control over everyone’s lives with the explicit protection of the federal government. Says Taibbi:
Obama ran on “change” in 2008, but Mitt Romney represents a far more real and seismic shift in the American landscape. Romney is the frontman and apostle of an economic revolution, in which transactions are manufactured instead of products, wealth is generated without accompanying prosperity, and Cayman Islands partnerships are lovingly erected and nurtured while American communities fall apart. The entire purpose of the business model that Romney helped pioneer is to move money into the archipelago from the places outside it, using massive amounts of taxpayer-subsidized debt to enrich a handful of billionaires. It’s a vision of society that’s crazy, vicious and almost unbelievably selfish, yet it’s running for president, and it has a chance of winning. Perhaps that change is coming whether we like it or not. Perhaps Mitt Romney is the best man to manage the transition. But it seems a little early to vote for that kind of wholesale surrender.