The for-profit school industry gives Mitt Romney a lot of money. One of Romney’s top education advisors is William D. Hansen, who has lobbied extensively for for-profit schools. As deputy secretary of education under George W. Bush, Hansen is well known in the higher education community for issuing a directive promising that the Bush administration would relax the enforcement of rules meant to crack down on student enrollment recruiting abuses at for-profit schools.

That’s right: A man directly responsible for unleashing a decade of egregious misbehavior at for-profit colleges is now advising Mitt Romney on his plans to repeal new rules intended to clean up the mess.

The biggest for-profit schools generate 80 to 90 percent of their revenue from federally guaranteed student loans. Only one out of every ten American college students attends a for-profit institution, but these students account for a quarter of all student debt and almost half of all student loan dollars in default. There’s no sugar-coating it: The booming for-profit industry is one of the worst possible examples of the “free market” in action that one can find in the entire U.S. educational sector. For-profits charge higher tuition rates than their public school competitors, graduation rates are lower, and the entire business would not exist without massive government subsidization in the form of cheap student loans.

Last June, in an effort to address this clear market failure, the Obama administration released a new set of rules designed to tighten eligibility for student aid. Going forward, the new rules will require that most for-profit programs prove they are preparing “students for gainful employment in a recognized occupation.”

The “gainful employment” rules have three parts: At least 35 percent of former students must be actively repaying their loans, and their loan payments must not exceed 30 percent of their discretionary income, or 12 percent of their total earnings. Schools will also be required to make public information on program costs, debt-to-earnings ratios and loan repayment rates, so prospective students will be able to properly judge the quality of the programs so desperate to enroll them. If a school failed to meet these criteria three times in a period of four years, it would no longer be eligible for federal student aid programs.

But according to Mitt Romney’s newly released white paper on education, the “gainful employment” rules are “confusing and unnecessary regulations that primarily serve to drive costs higher” and that have “made it even harder for some providers to operate while distorting their incentives.” So he is pledging to get rid of them.

Yes, it will cost more money to document just how well a “career school” is doing in preparing students to actually embark on a career that pays well enough to pay down the debt accumulated while attending that school. But when your entire business model is based on signing up as many students as possible, nearly all of whom pay their tuition with government loans, some might argue that perhaps it would be a worthy goal to pay a little more attention to whether those students are actually getting educations. And to argue that the new rules distort incentives is baffling. The current incentive structure encourages schools to emphasize high enrollment and profit. That’s what Obama is trying to fix.

Neither Mitt Romney’s speech nor his white paper mention any of the problems exhibited by the for-profit sector. Maybe that’s to be expected when your top advisor has worked as a lobbyist for the Apollo Group, which owns the University of Phoenix, and when that advisor’s main claim to fame during his stint in the Bush administration was letting for-profit schools know that the government would look the other way as enrollment was boosted by any means necessary. And of course, philosophically speaking, it’s not surprising that a firm believer in private enterprise would have a vision of a higher-education future in which competition in the for-profit sector would deliver innovative new models that offer high-quality instruction for low cost.

Except, that’s not the way it works now. The for-profit college sector delivers low-quality education at a high cost, precisely because it is unregulated and unaccountable and has been assured an unlimited supply of student loan dollars. Repealing rules aimed at addressing that disaster won’t fix the problem — it will just make it worse.

Facebook’s botched IPO adds a new wrinkle. In contrast to Bain-style private equity wheeling-and-dealing, the Silicon Valley venture capital model for new firm creation has always enjoyed a much more positive public relations profile. Maybe it’s a West Coast vs. East Coast thing, but conjuring up the likes of Intel or Apple or Google from thin air is a lot more sexy than swooping down on a troubled firm, brutally slashing costs and stripping assets, and then reselling for a huge profit a few years down the line.

But the Facebook mess, with all the questions it raises about insider trading, and the clear abuse of small investors in favor of the big boys, reminds us that everybody’s got their warts and nobody should get a free pass. Facebook’s early venture capitalist investors and the big investment bank clients that got preferential access to new, and negative, information about Facebook’s future profits, were able to cash out while the little guy was left holding the bag. Sifting through the aftermath, it’s hard to avoid the conclusion that a lot of people got ripped off. And coming right in the middle of all the back and forth about the merits of private equity, Facebook’s IPO raises a provocative question: Just how is it that capitalism, East Coast or West Coast style, currently serves the interests of the American people?

Because here’s the thing: Over the past 40 years, the venture capital and private equity buyout industries have grown dramatically, from basically nothing to becoming crucial drivers of corporate formation and growth. Last year, venture capital firms invested $32 billion in new start-ups in the U.S. while private equity funds raised over $100 billion for buyout activity. All along the way, government policy lavished both sectors with extraordinarily lenient tax policy — including massive cuts in the capital gains tax and the so-called carried interest rule that allows Mitt Romney to fork over only 14 percent of his income to the IRS — which has allowed financiers of every stripe to vastly increase their individual wealth. But over that same period, income inequality has grown and the average worker’s wages have stagnated, while the cost of healthcare and education has skyrocketed.

Facebook’s IPO and Bain Capital’s track record end up telling us exactly the same thing. State-of-the-art American capitalism works very efficiently for the 1 percent, and leaves just crumbs for the rest of us. Efficiency is good for them, but not for us. That’s quite the achievement.

“Forty years ago,” David Brooks proclaimed in a New York Times column earlier this week, “corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.”

The specific purpose of Brooks’ column was to defend Bain Capital, Mitt Romney and private equity in general from demonization by Obama. But we can also throw venture capital into his “reform and transformation” pot. After all, strictly speaking, venture capital is a subset of the larger category of “private equity.” (Nothing’s “public” until the IPO.)

In pragmatic terms, there’s a key difference. What we typically call private equity generally involves a group of investors (i.e., Bain Capital) who borrow money to purchase an already-existing company — what’s known as the “leveraged buyout” — while venture capital typically focuses on investing non-borrowed cash for the purpose of creating or nurturing a new enterprise. The distinction is important, but we’ll come back to that later. For now, let’s assume that David Brooks is correct: 40 years ago, American businesses had forgotten how to compete, but today they’re much more fearsome operators. And let’s share the credit between private equity, headquartered in New York, slicing-and-dicing its way through old fogies, and venture capital, headquartered in Silicon Valley, relentlessly spawning new giants to stride the earth.

Again, the Silicon Valley venture capital model has always gotten better press (with the possible exception of the height of dot-com bubble insanity). The reason is obvious. It’s much easier to make the case that there are clear economic benefits to the country as a whole when new firms are being born and jobs are being created. It’s a lot more difficult to make the same argument about private equity, since it is very often the case that one of the ways in which the new owners “streamline” operations and make things more “efficient” is to cut costs by firing workers. To successfully defend the idea that private equity serves the interests of the general good, you have to fall back on hard-to-quantify things like the theory that weeding out the poor performers “frees up” productive forces to find better uses in the larger economy. That’s a hotly debated topic, and if you’re looking for a direct rejoinder to the assertions made in support of private equity by David Brooks, go read Josh Kosman’s new Rolling Stone Op-Ed “Why Private Equity Firms Like Bain Really Are the Worst of Capitalism.” Suffice to say, the story is not as slam dunk as Brooks would have us believe.

But never mind that. For our purposes here, it’s more interesting to focus on how the venture capital model and private equity models are similar — in the sense that the manner in which both types of investors encourage corporations to operate more efficiently and profitably can be argued to work against the interests of American workers. This is a critical point, because what have we gained from American corporations becoming less bloated over the last 40 years, if, at the same time, the fabric of our society has deteriorated and our upward mobility has become more limited?

I first really began to understand the extent to which Silicon Valley was no longer the vaunted job creation engine it had long been held up to be seven years ago when I visited the Santa Clara offices of PortalPlayer, a microchip designer riding high on Apple’s decision to use its premier product as the brains of the iPod. PortalPlayer was a state-of-the-art Silicon Valley venture-backed play. A significant portion of chip design and software development was outsourced to a fully owned subsidiary in Hyderabad, India. The chips themselves were manufactured in Taiwan. Less than half the company’s employees were located in the United States.

The visit was eye-opening. From a venture capital investment standpoint, PortalPlayer’s business model was an ultra-efficient application of resources. Indian coders were cheaper, and the time difference between Santa Clara and Hyderabad meant that PortalPlayer could develop software around the clock. Likewise, it made no sense for a small independent chip designer to fabricate its own hardware. But from an American software developer’s perspective or that of a prospective employee at a chip manufacturing plant, PortalPlayer’s model was discouraging: It clearly implied tough wage competition and fewer hiring opportunities. Repeat this model a few hundred, or a few thousand, times, and you start seriously hollowing out the United States semiconductor design and manufacturing capacity. Good for the V.C. investors, not so great for the country.

Facebook doesn’t fit as neatly into the the offshoring/outsourcing screw-the-American-worker model as do so many of today’s new technology start-ups or a Bain Capital outsourcing company. But the details of how the IPO was bungled illustrate another important way in which the wealthy benefit far more from how modern financial markets work than the general public. The emerging story of how top investment bank clients were told directly that Facebook had adjusted its revenue projections downward due to trouble selling ads on cellphones is evidence of a broken system. It calls to mind the string of dot-com frauds brought to market in the late ’90s that had no revenue at all or even the barest rudiment of a sane business plan, but still ended up delivering millions to the early V.C. investors before the newly public companies went bankrupt. For a few years, sure, there was a lot of job creation — but then everyone was laid off. Similarly, with Facebook, the earliest V.C. investors, the Greylocks and Accel Ventures, were able to cash out long before the clouds started to darken. Where Facebook is headed now is not their problem.

The private equity model of capitalism results in eerily similar outcomes for workers. One of the ways in which the new private equity owners of a firm streamline costs is through “business process outsourcing” — a bloodless phrase that means, in practice, hiring cheaper workers (either domestically or abroad) on a contract basis to perform tasks previously kept in house. Call center support operations move to the Philippines or Bangalore. Manufacturing goes to China. Et cetera.

All of these measures clearly succeed in cutting costs in the short run, which is important, because the new owners have added a lot of debt to the company’s bottom-line that needs to be paid off. But they’re not the same as making investments in the future. It’s not analogous to pouring money into research and development or taking risks developing new markets. Short-term “efficiency” is easy to maximize at the expense of long-term growth but it’s a very open question as to whether the benefits of that efficiency are broadly shared.

Bain Capital, it should be noted, didn’t just apply cost-cutting strategies that involved outsourcing to the companies it bought; Bain invested in at least two companies, Stream.com and Modus Media, that specialized in providing outsourcing services to Fortune 1000 companies. This is how American capitalism eats itself. You buy the companies that you use to carve up the other companies that you buy into little pieces.

Facebook’s IPO reminds us that even the most high-profile venture capital plays are often rigged in favor of the big investor — something that we should never have forgotten after dot-com boom became bust. But enraging as the behavior of investment bankers and Facebook executives might be, those run-of-the-mill shenanigans obscure a deeper problem. Whether the engine is powered by private equity or venture capital, we’ve created a machine that generates wealth for the few, while actually exerting downward pressure on the many. And that’s not something we’re likely to hear much about from either presidential campaign.

Here’s what we know: Sometime in the run-up to the IPO, Facebook realized that it needed to downgrade its revenue projections for the second quarter because of difficulties selling ads on mobile phones — which are increasingly the access point of choice for Facebook browsing. This news was buried deep in an SEC regulatory filing, but it also may have been communicated directly to Facebook’s underwriters who, in turn, may have told their big clients — the institutional investors who usually make out like bandits on IPO day by buying stock at the offering price and then selling on the pop. The big investors accordingly decided that the price was a little too high and dumped their stock as quickly as they could. Thus: no pop. The closing price was essentially the same as the opening price, and that wasn’t supposed to happen.

There’s a lot that’s hazy here. But it smells to high heaven, and lawsuits have already been filed. As Heidi Moore writes in The Guardian:

U.S. securities laws are very strict about what a company can say while it prepares to go public – which is to say, almost nothing. Executives maintain a “quiet period” for months. If the company has to disclose anything, it has to do so to all investors, at once. The fact that sophisticated investors knew the company was warning them about its prospects could have been enough to account for the determined selling of the stock from almost its first minute. Wall Street investors are far less patient with changing the goalposts than are the 900 million users of Facebook who accede to every whim of the company’s changing user agreements.

Whatever happened, one thing is indisputable. The little guy (by which I mean the retail investor, who probably isn’t really a “little guy” as compared to someone who’s on unemployment or facing foreclosure) got screwed. And along with Facebook, the key parties involved in the screwing included Facebook’s three biggest underwriting banks, Morgan Stanley, Goldman Sachs and JP Morgan.

Why do those names sound familiar? Oh that’s right — they were key players in wrecking the economy of the United States by screwing around with mortgage-backed securities. And if you want to go even further back, they were all hip-deep in the IPO scandals that made the dot-com boom such a minefield of fraud and get-rich-quick scams. (Indeed, one of the weirder ironic twists to the Facebook story is the sight of Business Insider founder Henry Blodget, who was himself banned for life from the securities industry for fraudulently hyping dot-com stocks, waxing aggrieved at the improprieties involved in the IPO.)

Never mind the stock price. Never mind the fact that Facebook itself made out like a bandit. The real scandal here is that Wall Street investment banks never change their stripes. Their insatiable greed inflated both the dot-com bubble and the housing bubble, and the closer you look at either episode, the more evidence you find, not just of reckless irresponsibility, but of clear criminal misbehavior. And yet their punishments — if they even get punished, which is rarer and rarer — never fit the crime and never dissuade further misbehavior. The Facebook IPO might seem like a weird flashback to the days of dot-com excess, but what it really demonstrates is business-as-usual in the financial sector.

The Volcker rule is supposed to prohibit  banks from making speculative bets with their own money on such a scale that they can endanger both the financial viability of the financial institution and the larger economy. The basic principle is simple: Government can’t allow banks of the size of JPMorgan to fail because the consequences for the general economy would be too disastrous — and that gives government the right to shackle the irresponsible tendencies of those banks. Unfortunately, the above-mentioned lobbying campaign had weakened the rule-writing process to the point where JPMorgan’s bet would probably have been permissible even after the Volcker rule came into effect.

As of last week, there’s suddenly a pretty widespread consensus among people not employed on or bankrolled by Wall Street that we need to tighten up the Volcker rule. But according to a report by Talking Points Memo’s Brian Beutler, this has put the Obama administration in a sticky situation:

The administration hasn’t specified any particular steps it would like regulators to take to shore up the so-called Volcker Rule — a bid perhaps to avoid an ugly public fight with powerful interests in an election year. But inaction — or a too-tepid response to JP Morgan’s losses — will hurt President Obama with key allies, who want to use the debacle to further rein in Wall Street.

Say what? Why on earth would the Obama administration want to “avoid an ugly public fight with powerful interests in an election year”? Shouldn’t the opposite be true? Shouldn’t the Obama administration be going out of its way to pick a fight with Wall Street? Could there be any better opportunity to tap enduring popular anger at the financial sector and draw a clear line demarcating Obama from his challenger, Mitt Romney?

On Saturday, in Obama’s weekly radio address, the president delivered a restrained call to action:

That’s why it’s so important that Members of Congress stand on the side of reform, not against it; because we can’t afford to go back to an era of weak regulation and little oversight; where excessive risk-taking on Wall Street and a lack of basic oversight in Washington nearly destroyed our economy … We’ve got to finish the job of implementing this reform and putting these rules in place.

But that’s nowhere near enough. President Obama needs to go back and remind himself how a previous crusader for financial sector regulation made his case when running for his second term as president. Just a few days before Election Day in 1936, Franklin Roosevelt appeared at a rally in Madison Square Garden and delivered a passionate tirade that still jumps right off the page (and YouTube).

We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

That’s how you run for reelection, Mr. President, when the “moneyed interests” are backing your opponent. You don’t shy away from an “ugly” fight. You embrace it.

The most recent evidence that the current incarnation of the Republican Party just can’t handle the truth arrived this month when House Republicans voted to get rid of the American Community Survey. The ACS is an annual information-gathering effort that’s part of the U.S. Census. Every year, a randomized sample of 3 million Americans is surveyed for data on “demographic, housing, social and economic characteristics.” In one form or another, the U.S. government has been carrying out similar surveys since 1850 — the current version is the fourth major iteration.

Most sensible people consider the ACS to be extremely useful, the kind of thing that government is really well equipped to carry out. That is not, or at least did not used to be, a partisan statement. Both private and public sector policymakers use ACS data to make important decisions. The federal government allocates $450 billion annually according, in part, to information derived from the ACS. Businesses also consider the ACS vital, which explains why the U.S. Chamber of Commerce, rarely a fan of government spending, is opposed to the House action.

Even conservative economists are leery: The clearest evidence that the House GOP has gone completely beyond the pale can be seen in a Businessweek article reporting that representatives of the American Enterprise Institute, Heritage Foundation and Cato Institute all declared their support for government data gathering. If you don’t understand what’s going on in the U.S. economy on a granular level, you’re flying blind. This should not be a controversial statement.

Even the Wall Street Journal is appalled — although the lead sentence of its editorial criticizing the funding cuts required some remarkable calisthenics before reaching the point of disapproval.

With the contempt of the Washington establishment raining down on House Republicans for voting on principle, every now and then the GOP does something that feeds the otherwise false narrative of political extremism.

Marvelous! In one sentence, the Journal’s editorial writer manages to deny, not once, but twice, the self-evident fact that the current crop of House Republicans occupies the nethermost regions of right-wing extremism, while at the same time admitting that, yeah, well, in this one case they are indeed bonkers.

There’s been no end of media chatter focusing on the importance of the data gathered by the ACS. We’ve also heard how the Constitution specifically enjoins Congress to gather demographic information “in such a manner as they shall by law direct.” And, in fact, the current form of the ACS follows the mandate set forth by a Republican Congress in 2005.

The sponsor of the House measure, the freshman Florida Republican Daniel Webster, claims that ACS questions are too “intrusive” and “the very picture of what’s wrong in D.C.” He seems to be projecting. The very picture of what’s wrong with D.C. is exquisitely captured by daily demonstration that one of our leading political parties is dedicated to the proposition that the less we know about what is going on in our economy or on our planet, the better. If science tells us that one of the consequences of human activity is an overheated planet, then the answer is to defund climate research. If data gathered by the ACS gives us a better understanding of where poverty may be growing as a result of economic policies put into place over the past few decades, best to just to close our eyes and ignore it.

Which brings us back to the 17th century. It’s no stretch to argue that both representative democracy and the Industrial Revolution flourished in large part through the application of Enlightenment principles. The founders of the United States were very much a product of Enlightenment ideals. Looking for an Enlightenment avatar? Think Ben Franklin. Progress is built on the accumulation of knowledge, and ideological rigidity shouldn’t be able to compete against the truth that derives from a better understanding of our universe. And yet that’s where we are today — watching as one of the two major political parties in our country becomes not just more and more distrustful of science, but also opposed to the very notion of information-gathering — and governs accordingly.