2012 Elections
Why Romney is Obama’s dream opponent
He represents the most reckless forces of an unfair economic system
Romney banks in the Cayman Islands (Credit: AP/Steven Senne/iStockphoto/miralex) The latest news in Mitt Romney-land is that he has been parking offshore some of the proceeds from his slash-and-burn adventures in America’s private sector. You’ve got to love a guy like this. When he falls off a cliff, he doesn’t stop to watch the seagulls. The revelation from ABC News makes it official: Romney is the most vulnerable presidential candidate to come out of Massachusetts since Michael Dukakis.
ABC said it reviewed documents showing that Romney deposited millions of dollars of his personal wealth “in investment funds set up in the Cayman Islands, a notorious Caribbean tax haven.” Let’s be clear: this is perfectly legal. It’s also, for a businessman, perfectly ethical. The tax laws allow it, as long as it isn’t used to evade taxes—as Romney’s people insist. But it also stinks, as Romney is utilizing the same kind of offshore havens that organized crime and white-collar criminals use to avoid detection. In other words, it’s very much like pretty everything else Romney did at Bain Capital: it looks dreadful to the people who lines up at the polls on Election Day.
Don’t think for a moment that all the negative press Romney is getting, like this latest bit of merry news or the front page leader in the New York Times, is going to go away if he gets the GOP nomination. This isn’t the invention of the liberal media. It’s Romney’s chickens coming home to roost. It’s going to stick. So when you see the Newt Gingrich super-PAC’s half-hour video describing what happened when “Mitt Romney came to town,” that is just an appetizer. The banquet follows in the fall, if and when Mitt gets the nomination God willing, and the Democrats start running against him.
The latest revelataion complements my analysis last week of Romney’s rampage through the most fragile industrial companies of America in the 1990s. It’s now reasonably well established that Romney represented the most reckless forces of American capitalism. He is the anti-Warren Buffett, a status that the Sage of Omaha himself reinforced a few days ago, when he told TIME magazine ““I don’t like what private-equity firms do in terms of taking out every dime they can and leveraging [companies] up so that they really aren’t equipped, in some cases, for the future.”
This is about the worst publicity the private equity firms have gotten since the early 1990s, when they were savaged as “barbarians at the gate” in the seminal book of that title. In fact, the Romney candidacy is a thrilling development in one sense, as it has commenced a national debate over the noxious giveaway for the 1% known as “carried interest.”
That was denounced at length by Buffett in his TIME interview. While one might argue that Buffett’s attacks on his fellow billionaires is a bit hypocritical, for he rarely argued against such things when he building up his gazillions, he is absolutely right-on when it comes to how outrageous carried interest surely is.
Simply put, it means that the Mitt Romneys of the world—managers of high-end investment vehicles—aren’t taxed at the same rate as the rest of us. They’re a kind of privileged class, with their income taxed at the capital gains rate of 15%, while the rest of us have to pay much higher rates on ordinary income. Buffett has pointed out that most of his income is taxed at that rate, giving him an effective tax rate of 17.7%, while his own secretary, earning $60,000, was taxed at 30%, as an ordinary working person getting W-2 income.
The reason is that Buffett gets the lion’s share of his income in the form of capital gains. That puts him in the same boat as hedge funds that manage money for the wealthy, and the private equity funds of the kind that Romney used to run. Under the tax law, their income from running such outfits is treated as capital gains. Their managers actually do get salaries and fees, but they’re just a small portion of their income. So they pay less in taxes, proportionally, than the guy who comes by after hours to scrub toilets.
Now, if the cleaning person’s income flowed from toilet-bowl company dividends, he would be taxed at the lower capital gains rate. But since he actually scrubs them out, our tax laws put him at a disadvantage. You have to understand the supposed economic purpose of the capital gains rate to understand how wacky this all is. The cleaning person gets taxed more because cleaning toilets doesn’t add value to the economy, in the eyes of the law. The fiction behind lower capital gains rates—the “differential” so holy to the finance—is that if we lavish tax benefits on people who buy and sell stocks, it will increase the amount of such activity, thereby boosting the amount of saving and investment.
It’s all a lot of rot, as numerous studies—such as this Congressional Research Service study from 2010—have proven. All a lower capital gains rate does is cut revenues to the government, without having much useful economic impact. The idiocy of a lower capital gains rate multiplies upon itself when it becomes an enormous boon for the super-wealthy buyout moguls like Mitt Romney.
No wonder Romney isn’t all that anxious to show his tax returns. He has said that he will probably do so in April, but don’t be surprised if he’s home sick with a sore throat on the appointed day. He has said that most of his income is “probably” capital gains and thus taxed at 15%.
If Obama, who has already pledged to end the carried interest obscenity, fails to exploit that issue to the hilt, he should hand in his Chicago Democratic Party membership card. And that’s not the only Romney vulnerability that he can exploit, apart from his company-killing activities.
Romney has said that he would like to repeal Dodd-Frank law regulating the financial services industry. That sounds like ordinary election-year politics, which it is. But Dodd-Frank has special resonance for the private equity industry. One of the provisions of the law that private equity managers despise is the Volcker Rule, which, among other things, prevents banks from taking a stake in private equity funds. That cuts right into their ability to raise capital.
What this means is that Romney is the last person Republicans want to argue for repeal of Dodd-Frank.
While a renewed national debate over the private equity industry will be welcome, don’t expect any actual improvements in the tax structure or any new strictures on private equity. Don’t expect Congress will do something about offshore tax havens, which are as firmly etched into the granite of the Republic as Mount Rushmore. If anything, Congress will have to fight hard to preserve the Volcker Rule and other provisions of Dodd-Frank. That’s because the private equity industry talks the lingua franca of Capitol Hill: money.
The money-in-politics trackers at MapLight.org have found that contributions to Democrats in Congress from the private equity and investment industry, $17.4 million, have far outstripped contributions to Republicans over the past four years. In fact, these fat cats gave considerably more to Obama than to John McCain in 2008. No wonder bankers like Jamie Dimon, CEO of J.P. Morgan Chase, have been griping all year like jilted suitors about Obama’s sometimes populis rhetoric.
You can’t expect Congress to change its stripes, or give up its “gimme” instincts for campaign contributions. It’s realistic to expect that carried interest, like the unjustified lower rate on capital gains, is one of those injustices that will remain with us until people fundamentally reform the payola-infested campaign finance system. The Volcker Rule, the subject of a congressional hearing today, will continue to be under assault, and the Mount Rushmore of offshore tax havens isn’t about to be blasted to smithereens.
That’s reality. Live with it. Meanwhile, count your blessings: the Republicans have a dream candidate for president.
Gary Weiss is a journalist and the author of "Ayn Rand Nation: The Hidden Struggle for America's Soul," to be published by St. Martin's Press on February 28, 2012. Follow him on Twitter @gary_weiss. More Gary Weiss.
Romney releases birth certificate
Trump goes on another birther rant; and Mitt misspells "America." Wednesday's top political stories
FILE - In this Feb. 2, 2012 file photo, Donald Trump greets Republican presidential candidate, former Massachusetts Gov. Mitt Romney during a news conference in Las Vegas. Romney is set to clinch the Republican nomination for president Tuesday with a win in the Texas primary, a feat of endurance for a candidate who came up short four years ago and watched this year as voters flirted with a carousel of front-runners before eventually warming to him. (AP Photo/Julie Jacobson, File)(Credit: AP) - Mitt Romney may just win this thing: Surprising no one, the candidate officially captured the last of the 1,144 delegates he needs to secure the GOP nomination last night in Texas, despite months of punditry about the possibility that the race could go all the way to the GOP convention.
But maybe Romney shouldn’t even bother. As Reuters reports astrologists foresee that Obama will be reelected. Still, it may not easy: “The ingress of Saturn into Scorpio may trouble him,” one said. “It won’t cost him the election, but it may indicate difficulties in the first half of his second term.”
Continue Reading CloseAlex Seitz-Wald is Salon's political reporter. Email him at aseitz-wald@salon.com, and follow him on Twitter @aseitzwald. More Alex Seitz-Wald.
Florida purging voter rolls
Governor Rick Scott moves forward with a plan to disqualify thousands of mostly Hispanic and Democratic voters
Rick Scott (Credit: Reuters/Brendan McDermid) Hated Florida Governor Rick Scott has a great idea: A big, massive purge of the state’s voter roll right before a sure-to-be-close presidential election. The governor ordered his secretary of state to compile a list of registered voters who might not be citizens, based on an unreliable and out-of-date state motor vehicle administration database. The secretary of state made a list and then realized the list was not actually very useful or accurate. Then he resigned, and now Scott is just purging away.
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Alex Pareene writes about politics for Salon and is the author of "The Rude Guide to Mitt." Email him at apareene@salon.com and follow him on Twitter @pareene More Alex Pareene.
Mitt Romney: Politics “like a sport”
What makes Mitt tick? The nominee says he likes politics because "I can't compete in competitive sports very well"
Republican presidential candidate and former Massachusetts Governor Mitt Romney gestures as he leaves a campaign event in Hillsborough, New Hampshire May 18, 2012. (Credit: Reuters/Jessica Rinaldi) Mitt Romney may have unintentionally opened a window onto his somewhat obscured motivations for running for president in an interview with the Wall Street Journal’s Peggy Noonan today, explaining that he likes sports, but isn’t very good at them, so he does politics instead.
Asked about whether he likes “the game” of politics, the presumed GOP nominee replied, “I like competition, and I think the game [of politics] is like a sport for old guys. I mean, you know, I can’t compete in competitive sports very well, but I can compete in politics, and there’s the — what was the old ABC ‘Wide World of Sports’ slogan? ‘The thrill of victory and the agony of defeat.’ The only difference is victory is still a thrill, but I don’t feel agony in loss.”
Continue Reading CloseAlex Seitz-Wald is Salon's political reporter. Email him at aseitz-wald@salon.com, and follow him on Twitter @aseitzwald. More Alex Seitz-Wald.
Trump insinuates self into Romney campaign
How a toxic attention-seeker (not Newt) will likely end up speaking at the RNC
Businessman and real estate developer Donald Trump (L) greets Mitt Romney after endorsing his candidacy for president at the Trump Hotel in Las Vegas, Nevada February 2, 2012. (Credit: Reuters/Steve Marcus) So. Donald Trump again? Are we really doing this again? I guess we are!
There were stories, recently, in the usual places, about how Trump was being seriously considered for a major speech at the Republican Convention. I did not dwell on the story much, because I assumed that these rumors were a product of Donald Trump’s prodigious vanity and powerful imagination. Ha ha ha, sure, the Republicans will definitely want the stupid make-believe TV mogul who pretends to fire people for a living, at their big party.
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Alex Pareene writes about politics for Salon and is the author of "The Rude Guide to Mitt." Email him at apareene@salon.com and follow him on Twitter @pareene More Alex Pareene.
“Battlefield Earth”: Romney vs. the Psychlos
The GOP's standard bearer calls L. Ron Hubbard's bizarro sci-fi epic his favorite novel. Is that cause for concern?
Republican presidential candidate and former Massachusetts Governor Mitt Romney reads a book to children in Manchester(Credit: Brian Snyder / Reuters) There’s a scene near the end of “Battlefield Earth,” Scientology founder L. Ron Hubbard’s 1982 science fiction epic, that may explain a bit of why Mitt Romney has said (most recently this week) that it’s his favorite novel.
Our hero, Jonnie Goodboy Tyler, has just finished taking down the Psychlo empire, which has ruled Earth for the past millennium and has dominated most of the known 16 universes for going on 300,000 years. Now Jonnie has to negotiate with the alien powers who are jockeying to fill the power vacuum left behind, and things aren’t looking so good for the human race.
Continue Reading CloseDaniel Oppenheimer's book "Turncoats: The Journey from Left to Right and How It’s Transformed America," a political and intellectual history of six prominent American intellectuals who journeyed from the left to the right of the political spectrum, will be published by Simon and Schuster More Daniel Oppenheimer.
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