‘Mittens’ Romney, Poster Boy for The New Gilded Age

Posted by AzBlueMeanie:

Wow, it's like Robert Reich was reading my mind! Mitt Romney, Bain Capital, and The New Gilded Age:

The election of 2012 raises two perplexing questions. The first is how the GOP could put up someone for president who so brazenly epitomizes the excesses of casino capitalism that have nearly destroyed the economy and overwhelmed our democracy. The second is why the Democrats have failed to point this out.

Well, Bob, I am doing my best. It's those corporatist Democrats who want that corporate/lobbyist campaign cash whom you have a beef with.

But the real issue here isn’t Bain’s betting record. It’s that Romney’s Bain is part of the same system as Jamie Dimon’s JPMorgan Chase, Jon Corzine’s MF Global and Lloyd Blankfein’s Goldman Sachs—a system that has turned much of the economy into a betting parlor that nearly imploded in 2008, destroying millions of jobs and devastating household incomes. The winners in this system are top Wall Street executives and traders, private-equity managers and hedge-fund moguls, 
and the losers are most of the rest of us. The system is largely responsible for the greatest concentration of the nation’s income and wealth at the very top since the Gilded Age of the nineteenth century, with the richest 400 Americans owning as much as the bottom 150 million put together. And these multimillionaires and billionaires are now actively buying the 2012 election—and with it, American democracy.

The biggest players in this system have, like Romney, made their profits placing big bets with other people’s money. If the bets go well, the players make out like bandits. If they go badly, the burden lands on average workers and taxpayers. The 750 people at GS Technologies who lost their jobs thanks to a bad deal engineered by Romney’s Bain were a small foreshadowing of the 15 million who lost jobs after the cumulative dealmaking 
of the entire financial sector pushed the whole economy off a cliff. And relative to the cost to taxpayers of bailing out Wall Street, Solyndra is a rounding error.

Connect the dots of casino capitalism, and you get Mitt Romney. The fortunes raked in by financial dealmakers depend on special goodies baked into the tax code such as “carried interest,” which allows Romney and other partners in private-equity firms (as well as in many venture-capital and hedge funds) to treat their incomes as capital gains taxed at a maximum of
15 percent. This is how Romney managed to pay an average of 14 percent on more than $42 million of combined income in 2010 and 2011. But the carried-interest loophole makes no economic sense. Conservatives try to justify the tax code’s generous preference for capital gains as a reward to risk-takers—but Romney and other private-equity partners risk little, if any, of their personal wealth. They mostly bet with other investors’ money, including the pension savings of average working people.

Another goodie allows private-equity partners to sock away almost any amount of their earnings into a tax-deferred IRA, while the rest of us are limited to a few thousand dollars a year. The partners can merely low-ball the value of whatever portion of their investment partnership they put away—even valuing it at zero—because the tax code considers a partnership interest to have value only in the future. This explains how Romney’s IRA is worth as much as $101 million. The tax code further subsidizes private equity and much of the rest of the financial sector by making interest on debt tax-deductible, while taxing profits and dividends. This creates huge incentives for financiers to find ways of substituting debt for equity and is a major reason America’s biggest banks have leveraged America to the hilt. It’s also why Romney’s Bain and other private-equity partnerships have done the same to the companies they buy.

These maneuvers shift all the economic risk to debtors, who sometimes can’t repay what they owe. That’s rarely a problem for the financiers who engineer the deals; they’re sufficiently diversified to withstand some losses, or they’ve already taken their profits and moved on.

* * *

[E]ven as these firms sank, Bain and the other dealmakers continued to collect lucrative fees—transaction fees, advisory fees, management fees—sucking the companies dry until the bitter end. According to a review by the New York Times of firms that went bankrupt on Romney’s watch, Bain structured the deals so that its executives would always win, even if employees, creditors and Bain’s own investors lost out. That’s been Big Finance’s MO.

By the time Romney co-founded Bain Capital in 1984, financial wheeling and dealing was the most lucrative part of the economy, sucking into its Gordon Gekko–like maw the brightest and most ambitious MBAs, who wanted nothing more than to make huge amounts of money as quickly as possible. Between the mid-1980s and 2007, financial-sector earnings made up two-thirds of all the growth in incomes. At the same time, wages for most Americans stagnated as employers, under mounting pressure from Wall Street and private-equity firms like Bain, slashed payrolls and shipped jobs overseas.

The 2008 crash only briefly interrupted the bonanza. . .

* * *

We’ve entered a new Gilded Age, of which Mitt Romney is the perfect reflection. The original Gilded Age was a time of buoyant rich men with flashy white teeth, raging wealth and a measured disdain for anyone lacking those attributes, which was just about everyone else. Romney looks and acts the part perfectly . . .

We’ve had wealthy presidents before, but they have been traitors to their class—Teddy Roosevelt storming against the “malefactors of great wealth” and busting up the trusts, Franklin Roosevelt railing against the “economic royalists” and raising their taxes, John F. Kennedy appealing to the conscience of the nation to conquer poverty. Romney is the opposite: he wants to do everything he can to make the superwealthy even wealthier and the poor even poorer, and he justifies it all with a thinly veiled social Darwinism.

* * *

Romney uses the same logic when he accuses President Obama of creating an “entitlement society” simply because millions of desperate Americans have been forced to accept food stamps and unemployment insurance, or when he opines that government should not help distressed homeowners but instead let the market “hit the bottom,” or enthuses over a House Republican budget that would cut $3.3 trillion from low-income programs over the next decade. It’s survival of the fittest all over again.

* * *

When Romney simultaneously proposes to cut the taxes of households earning over $1 million by an average of $295,874 a year (according to an analysis of his proposals by the nonpartisan Tax Policy Center) because the rich are, allegedly, “job creators,” he mimics [the social Darwinism] view that “millionaires are a product of natural selection, acting on the whole body of men to pick out those who can meet the requirement of certain work to be done.” In truth, the whole of Republican trickle-down economics is nothing but repotted social Darwinism.

The Gilded Age was also the last time America came close to becoming a plutocracy—a system of government of, by and for the wealthy. It was an era when the lackeys of the very rich literally put sacks of money on the desks of pliant legislators, senators bore the nicknames of the giant companies whose interests they served (“the senator from Standard Oil”), and the kings of finance decided how the American economy would function.

* * *

“Wealth, like suffrage, must be considerably distributed, to support a democratick republic,” wrote Virginia Congressman John Taylor as early as 1814, “and hence, whatever draws a considerable proportion of either into a few hands, will destroy it. As power follows wealth, the majority must have wealth or lose power.” Decades later, progressives like Louis Brandeis saw the choice starkly: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

The reforms of the Progressive Era at the turn of the twentieth century saved American democracy from the robber barons, but the political power of great wealth has now resurfaced with a vengeance. And here again, Romney is the poster boy.

* * *

To be sure, Romney is no worse than any other casino capitalist of this new Gilded Age. All have been making big bets—collecting large sums when they pay off and imposing the risks and costs on the rest of us when they don’t. Many have justified their growing wealth, along with the growing impoverishment of much of the rest of the nation, with beliefs strikingly similar to social Darwinism. And a significant number have transformed their winnings into the clout needed to protect the unrestrained betting and tax preferences that have fueled their fortunes, and to lower their tax rates even further. Wall Street has already all but eviscerated the Dodd-Frank Act, and it has even turned the so-called Volcker Rule—a watered-down version of the old Glass-Steagall Act, which established a firewall between commercial and investment banking—into a Swiss cheese of 
loopholes and exemptions.

But Romney is the only casino capitalist who is running for president, at the very time in our nation’s history when these views and practices are a clear and present danger to the well-being of the rest of us—just as they were more than a century ago. . . [I]n truth he’s just another financial dealmaker in the age of the financial deal, a fat cat in an era of excessively corpulent felines, a plutocrat in this new epoch of plutocrats. That the GOP has made him its standard-bearer at this point in American history is astonishing.

* * *

I suspect a deeper reason for [Democrats] reticence is that if they connect the dots and reveal Romney for what he is—the epitome of what’s fundamentally wrong with our economy—they’ll be admitting how serious our economic problems really are. They would have to acknowledge that the economic catastrophe that continues to cause us so much suffering is, at its root, a product of the gross inequality of income, wealth and political power in America’s new Gilded Age, as well as the perverse incentives of casino capitalism.

Yet this admission would require that they propose ways of reversing these trends—proposals large and bold enough to do the job. Time will tell whether today’s Democratic Party and this White House have the courage and imagination to do it. If they do not, that in itself poses almost as great a challenge to the future of the nation as does Mitt Romney and all he represents.

What Bob said!