Blog entry

On Wednesday, Fight For A Fair Transportation Bill

Isaiah J. Poole — Tue, 22 May 2012 15:11:17 -0400

It's about time for us to break into the closed-door negotiations in Congress over a surface transportation bill.

The Leadership Conference on Civil and Human Rights is asking people on Wednesday to call their members of Congress to support "transportation equity" in the transportation bill, which will fund highway and public transportation projects for the next two years. The Leadership Conference has in mind some specific concerns affecting urban and low-income populations, but everyone concerned about making the economy work again for working-class and middle-class people has a reason to make their voice heard. This bill is too important to be left to the lobbyists who have access to the members and staffers huddled in a House-Senate conference committee.

The Leadership Conference is specifically concerned about protecting language in the Senate version of the bill that would require the federal government to continue technical assistance programs and studies related to public transportation and its accessibility to low-income people and people of color. The importance of public transportation, of course, transcends race and class—the more people use public transportation, the less clogged and the less polluted our roads are, and the less fuel we're consuming.

And just this week, the American Public Transportation Association released a report that estimated that riders would be making an additional 200 million new trips on buses and rail systems this year as gas prices fluctuate. That reports cites evidence that many riders who start taking buses or rail when gas prices spike keep on doing so when gas prices fall, as they are now.

House Republicans, however, almost got away with ditching dedicated federal funding for public transportation altogether. (Federal assistance is used for capital expenses; operating expenses are covered by a combination of fares and state and local subsidies.) They backed off in the wake of complaints from state- and local-level Republicans, but conservative ideological disdain for federal public transportation support remains on the record.

Another critical concern in the Leadership Conference call to action is preserving "community involvement in local transportation planning and decision making." The transportation bill passed by House Republicans removes the speed humps and stop signs from transportation project reviews that today allow communities to mitigate the adverse environmental or economic effects of these projects. The House bill puts strict, short limits on even multibillion-dollar projects, constraining the ability of citizens to investigate and build a case against a transportation plan that would harm a particular community or ecosystem in its path.

In the name of allegedly reducing the costs of environmental reviews, House conservatives would allow overzealous transportation projects and greedy lobbyists to steamroll communities, imposing high costs on the safety and well-being of affected people and communities. The nation's landscape is already littered with transportation projects done wrong, without thought to how a highway route would destroy the economic viability of a community or the ecological balance of a wilderness area. Fixing this damage after the fact is extraordinarily costly, if it happens at all. Yet the House bill won't allow careful consideration of the effects of highway and transit projects before they are built.

It's important to say to members of Congress that it's worth a few extra dollars and a few extra weeks to consider the long-term concerns of the public whose taxes are paying for these projects and the people who will have to live with the consequences.

There are two more reasons to call or write your member of Congress on Wednesday about the transportation bill.

First, tell them to take the Keystone XL pipeline out of the bill. Today's report from the National Resources Defense Council that the Keystone pipeline would actually increase gasoline prices is just one more reason to push back against the right-wing insistence that this pipeline be jammed down our collective throats. Conservatives have been consistently telling falsehoods about the Keystone XL pipeline: It will not create a significant number of jobs. It will not increase domestic gasoline supplies. It will not decrease prices.

Second, this bill is likely to be the most significant action the Congress will take before the election to keep the economy buoyed and produce jobs. And we need to be putting people to work now. Even though this bill is meager, it is still essential. And we cannot allow small-minded, small-government conservatives to get in the way.

Gingrich and Booker: Dragged Into a Conversation They Can't Hold

Terrance Heath — Tue, 22 May 2012 14:58:05 -0400

This strange political season gets stranger by the day. The things I'm hearing and seeing from Newt Gingrich and Cory Booker today reminded me of a song from one of the last (and, in my opinion, underrated) albums by Culture Club; my favorite band from my 80's youth. The lyric that comes to mind is from the band's 1984 single, "Mistake No. 3," when Boy George sings of people getting "dragged into a conversation they can't hold."

It's been 28 years, and I still can't figure out what that song's about. But, it's not hard to figure out that, despite coming at Mitt Romney's Bain Capital history from opposite sides, Newt Gingrich and Booker let themselves get dragged into conversations they can't hold.

What got me humming that old Culture Club tune again was Newt's advice to the Obama campaign, not to make the same "mistake" he made when he went after Romney's Bain history.

During an appearance on CNN's "Piers Morgan Tonight," the former House Speaker and GOP presidential candidate discussed the political fallout from Newark mayor Cory Booker's comments on Sunday's "Meet The Press." During that interview, Booker characterized Obama's attacks on Romney's business record as "nauseating," but later walked back his remarks and asserted that criticism of Romney's time at Bain is fair game.

"Booker is telling the truth about how the American people feel," Gingrich, who backed Romney after ending his own presidential bid earlier this month, said on Monday.

Speaking somewhat candidly about his own campaign's failures, Gingrich said he was "surprised" that Obama had taken the Bain Capital route after witnessing the backlash that met the former speaker when he went down a similar path.

"We found out when we got in a fight with Mitt Romney over this that it didn't work," he said. "People understand free enterprise. People realize that sometimes you succeed, sometimes you fail, but they refuse to take a one-sided view of it."

As we used to say down south, "Well, bless his heart."

Like a stopped clock, even Newt Gingrich can be right now and then. (Like when he nailed Paul Ryan's plan for Medicare and the so-called "super committee.") But in this case, Newt's dead wrong about what he got wrong.

The "backlash" Newt experienced was not because of "how the American people feel" about private equity. A Pew Research Center survey conducted in January of this year showed that economic inequality is a major concern for most Americans; 66% believe their are "strong" or "very strong" conflicts between rich and poor. The findings on public perceptions of the wealthy showed that Americans were almost equally split on their perceptions of the wealthy, with plurality (46%) believing that the rich are wealthy because “are wealthy mainly because they know the right people or were born into wealthy families,” as opposed to their own hard work, ambition or education" (43%).

The backlash Newt experienced, and that caused him to try to take it all back, came from conservatives who were furious that Newt was damaging their "inevitable" front runner before the primaries were anywhere near over, and outraged that Newt stirred up a perfect storm that threatened to drag the GOP itself into a conversation it couldn't hold.

The problem for Newt and the rest of the Republicans is that they can't blame the fact that more Americans see economic inequality as a problem at president Obama's feet. The Occupy movement can be credited with pushing the issue to the forefront of our national politics, but that happened largely because of economic conditions that add up to three decades of stagnant wages and increased costs of living for middle- and working-class Americans, just barely covered by cheap credit that allowed families to simulate increased living standards, until the economic crisis brought the whole house of cards tumbling down.

That's what makes it "impossible" for Republicans to talk about the kind economic inequality that Bain and other vulture capital firms leave in their wake, as a part of just doing business.

Newt has, basically, created the perfect storm for Republicans going into the South Carolina primaries, with Mitt Romney — the Man from Bain, who still smells like a Wall Street boardroom, and probably now looks more than ever to South Carolina primary voters "like the guy who laid you off." Newt has forced the Republicans into a conversation they can't hold, and aren't even remotely prepared for.

The funny part is that Newt every thought they could avoid it, and that Republicans still think they can avoid it.

Cory Booker's mistake was, oddly enough, both different from and similar to Gingrich's mistake.

Both ran afoul of their parties when they strayed too far off message; Newt with his Bain attacks, and Booker with his Bain defense. Newt elevated what turned out to be a relevant topic that neither he nor his party was truly prepared to address. Booker, on the other hand, turned about and dismissed as "crap" the very same issue, which his president and his party are presently addressing.

Both, handed their opposition material tailor-made for scathing attacks. The Obama campaign now has its own Bain ads. Republicans have launched an "I Stand With Cory" web campaign.

Both tried to "walk it back." Gingrich later backed down from his Bain attacks, and asked everyone to stop talking bout economic inequality. Faced with his own backlash, Booker took to YouTube to and Rachel Maddow's show, to attempt to repair some damage. Apparently, it suddenly dawned on him that Romney's Bain experience is fair game, since Romney's touted his financial sector resume as his main qualification for the presidency.

Booker's problem is he laid bare a problem that a number of his fellow Democrats share. In Booker's case, the conflict is partly between his relationship with the Obama campaign, and his own relationship with private equity. Ambition factors in, too. Folks back in Newark weren't terribly surprised at Booker's defense of private equity, given that "he's someone whose been courting big money ever since he first ran for office."

Wall Street money helped fuel Booker's rise in New Jersey politics, and if rumors of Booker's ambitions to hold national office are true he'll need even more Wall Street money. That makes him no different than a lot of Democrats, including the President.

But, as I pointed out this morning, if Gingrich and Booker got themselves dragged into a conversation they cant hold, President Obama is carrying the conservation (with an assist from Vice President Biden).

… [T]he reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be President is his business expertise. He is not going out there touting his experience in Massachusetts. He is saying, I’m a business guy and I know how to fix it, and this is his business.

And when you’re President, as opposed to the head of a private equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off and how are we paying for their retraining. Your job is to think about how those communities can start creating new clusters so that they can attract new businesses. Your job as President is to think about how do we set up a equitable tax system so that everybody is paying their fair share that allows us then to invest in science and technology and infrastructure, all of which are going to help us grow.

And so, if your main argument for how to grow the economy is I knew how to make a lot of money for investors, then you’re missing what this job is about. It doesn’t mean you weren’t good at private equity, but that’s not what my job is as President. My job is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but 10 years from now and 20 years from now.

So to repeat, this is not a distraction. This is what this campaign is going to be about -- is what is a strategy for us to move this country forward in a way where everybody can succeed? And that means I’ve got to think about those workers in that video just as much as I’m thinking about folks who have been much more successful.

Gingrich tried to start the conversation, and Booker tried to steer it in a different direction. Mitt Romney doesn't want to talk about it, or much else for that matter. Probably no one in national politics can have this conservation, with out stepping neck-deep into their own conflicts of interest. (That's probably why not many elected officials will "go there." On the map of American politics, that area is clearly labeled "Here Be Dragons.")

But it's a conversation America desperately needs to have. Here's President Obama can lead that conversation. It sounds like he's at least moving in the right direction.

The Irresponsibility Of John Boehner

Stan Collender — Tue, 22 May 2012 11:50:18 -0400

Originally published at Capital Gains and Games.

Like most federal budget watchers, I assumed that the extremely negative political reaction to the federal government shutdowns in 1995 and 1996 meant that tactic wasn’t likely to be threatened again, let alone actually used. That changed last year when a shutdown became the favored approach for many on Capitol Hill.

Although the timetable obviously was much more compressed, I thought much the same thing last summer after the extreme negative reaction to the fight over raising the federal debt ceiling also made that look less likely to happen again in the future. Despite the statements made by Senate Minority Leader Mitch McConnell (Ky.) and other Republicans that using the increase in the federal government’s borrowing limit as leverage to win policy changes was now the new standard operating procedure, the downside was so great that the threat seemed to be mere words.

I was sure that was the case because, unlike the situation in 1995 and 1996, the negative response to the 2011 debt ceiling increase debacle was more than political.

Yes, it was a political nightmare: The approval rating for Congress and the White House fell during and immediately after the battle. But the negative reaction was also material because it resulted in the downgrading of U.S. debt by one of the three major rating agencies.

The downgrade occurred not just because of a concern about the government’s capacity to pay the debt, which wasn’t really questioned but because of what Standard & Poor’s said was the growing inability of the U.S. political system to deal with its fiscal problems. The result was a significant hit to the government’s financial reputation. Most analysts I’ve spoken with are convinced that, were it not for the economic woes in Europe, U.S. interest rates would be much higher as a result.

It seemed so clear that not using the debt ceiling as a weapon had become the minimum price elected officials would have to pay to prevent another possible downgrade that I thought there was no way it would happen again.

That’s why the first major activity by a senior elected official on this topic since then — Speaker John Boehner’s (R-Ohio) choreographed events last week in which he repeatedly said he would prevent the debt ceiling increase that will be needed at the end of 2012 or the start of 2013 from happening unless he got what he wanted — was so exceptionally irresponsible.

I’m using the word “irresponsible” very deliberately.

Boehner is more than just a Member of Congress. As Speaker, he is next in line to the presidency after the vice president and the most powerful person in the House. That magnifies the importance of everything he says. Every Boehner pronouncement about an international issue, for example, is closely monitored around the world. Although the executive branch takes the lead in foreign policy, what the Speaker says typically generates an immediate response and, therefore, he usually treads carefully in this area.

I wish the same were true about what the Speaker does in connection with the federal budget. The Constitution gives Congress specific fiscal policy responsibilities — that makes what this or any Speaker says something that makes headlines and is taken very seriously.

Coming on the heels of last year’s downgrade, the very public way Boehner repeatedly issued his debt ceiling threat made it the equivalent of alerting S&P and the other rating agencies that little had changed since last summer. It also was an invitation to again downgrade U.S. debt.

To make matters worse, Boehner’s statements about the debt ceiling might encourage the agencies not to wait until the debate actually occurs to reconsider their ratings. His statements could provide them with all the evidence they need to justify a new review of the situation now. There’s no word for that other than irresponsible.

Boehner’s threat also was irresponsible because the immediate spending cuts he said were the only way he would allow a debt ceiling increase to be considered is the wrong fiscal policy for the current economic situation. At a time when businesses and consumers are still not spending and most state and local governments are continuing to cut back, the federal government is the only major gross domestic product component enhancing growth and creating jobs. Given the current slow recovery, the large spending cuts Boehner is demanding could push the economy back into recession.

It’s not hard to understand the political motivations behind Boehner taking the position he took on the debt ceiling. He needs the support of the House GOP caucus to remain Speaker. All indications are that, as has been the case since the 2010 election, House Republicans are not in a compromising mood on anything having to do with the federal budget.

Threatening another cliffhanger battle as he did last week doesn’t provide the leadership Boehner said was needed to deal with this. Instead of simply complaining that the president had “lost his” courage when it came to the budget, Boehner should have displayed some of his own.

Instead of following his caucus and doing the political equivalent of tying the debt ceiling increase to the track with a train barreling down, the Speaker should have been developing a way to avoid the downgrade and further erosion of confidence in the U.S. political system that, because of his action, is now more likely to happen.

Workers of the World Unite — with Shareholders

Leo Gerard — Tue, 22 May 2012 09:49:44 -0400

At Citigroup, shareholders had their say on CEO pay -- and they yelled, "No damn way!"

Concerted action by shareholders, workers and public interest groups compelled corporate change in several other cases this spring as well.

At least three CEOs resigned. Executives truncated one shareholder meeting to 12 minutes. And across America and Europe, CEOs lamented the end of automatic approval for excessive executive compensation.

A wave of corporate change is rising because the rabble and the stockholders share an interest: decent corporate governance. To shareholders, decent means more long-term corporate vision providing reasonable returns and fewer risky, quick-profit schemes benefiting only executives. To workers, the unemployed, community and environmental groups, decent means operating corporations in the best interest of the nation, including treating workers with dignity and refraining from polluting. Together, the rabble and the shareholders wield power.

They'll be exercising it inside and outside the ExxonMobil shareholder meeting next week. Some activist stockholders will seek approval of resolutions calling for the corporation to form a task force on climate change and to reduce greenhouse emissions.

Other activist shareholders, including my union, the United Steelworkers, will seek approval of a resolution calling for Rex Tillerson to give up either his CEO title or his chairmanship of the board of directors. Because corporate boards oversee executives, many experts believe holding both positions is a conflict of interest. The board, for example, determines executive pay. The ExxonMobil board gave its chairman, who also happens to the CEO, a big fat pay increase last year -- a jump from $29 million to $34.9 million.

Corporate governance and pay and the environment are important issues as well to those who will be demonstrating outside the shareholder meeting May 30 in Dallas. They are from the 99% Power coalition that includes workers, retirees, job seekers, families fighting foreclosure, students burdened by debt, immigrants and environmentalists. The coalition's goal is to demonstrate at more shareholder meetings than ever in American history to make corporations more accountable to their communities, workers and shareholders.

Steelworkers and Occupy Dallas activists worked with the 99% Power coalition to organize the protest outside the ExxonMobil meeting. USW-represented refinery and clerical workers will protest ExxonMobil's greedy and dangerous corporate behavior. This corporation, which last year gave its CEO a 20 percent pay increase, has refused for two years to approve much smaller raises for its all-female clerical staff at Baytown.

In addition, ExxonMobil, among the most profitable corporations in the world, is denying safety measures to workers the Baton Rouge refinery -- measures that it has agreed to implement at four other facilities. This refusal comes just two years after an explosion at a Tesoro refinery killed seven workers and seven years after a massive blast at BP's Texas City refinery killed 15 and injured 170.

Steelworkers have joined the 99% Power coalition in demonstrating at the Wells Fargo, Tesoro and Compass Minerals shareholder meetings and will be at Chevron next week too.

The protesters don't always get what they want. But they've succeeded in rattling some CEOs. At Tesoro, when executives realized workers who are also shareholders were in the audience, they broke tradition and refused to take questions. Then they ended the meeting in record time, just 12 minutes.

In Britain this spring, shareholder revolts against outrageous executive pay prompted the resignations of the CEOs at insurer Aviva, pharmaceutical maker AstraZeneca and publisher Trinity Mirror. At Aviva, a proposed pay raise for the CEO angered shareholders of the poorly performing company.

That's what happened at Citigroup, too. Shareholders balked when the board of directors recommended a pay increase for the CEO despite Citi racking up the worst stock price performance among large banks over a decade.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed two years ago, provided shareholders and the 99% Power coalition with new tools. One is say-on-pay, which gives shareholders the right to vote on executive compensation packages every three years. The other is the pay gap ratio requirement, which the Securities and Exchange Commission (SEC) has failed to enforce. When the SEC does, corporations will have to determine the pay gap between an average worker and the CEO.

Neither of these protections is binding. The Citi board of directors can disregard the shareholder vote against the CEO pay package. But it probably won't because that would be ignoring the sentiments of the majority of the company's owners.

Last year, the first year for the say-on-pay votes under the new law, shareholders at three dozen companies opposed executive pay packages. That's about 2 percent of the 2,300 votes taken, but it was higher than in other countries and higher than expected. This year, with shareholders and community activists organized, more "no" votes are expected.

The pay ratio will give shareholders and workers important information. Overall, in 1980, CEO compensation averaged 42 times typical worker pay. Workers at that time received a larger share of the benefits from the companies that their labor helped to succeed. Now, CEOs make 325 times what workers do, meaning the amount workers share in success is much smaller.

Apparently, that's the kind of information CEOs don't want workers and shareholders to have since they've lobbied furiously -- and successfully -- to prevent individual corporations from having to report their pay ratios.

In the wake of Wall Street recklessness that caused economic collapse in 2008, Congress gave shareholders and citizens Dodd-Frank to help them constrain self-dealing corporate executives. The 99% Coalition and shareholders are working with those tools even as Republicans vow to take them away by repealing Dodd-Frank.

What the Bain Debate is Really About

Terrance Heath — Tue, 22 May 2012 01:25:29 -0400

The 2012 presidential election may go down as one of the strangest political seasons in recent memory, for the simple reason that the influence of the financial sector in politics, policy and the economy has caused Republicans to sound like Democrats and Democrat to sound like Republicans — usually with confounding results.

When Republicans sound like Democrats, like Newt Gingrich attacking Mitt Romney's record at Bain Capital, they tend to start arguments they can't win. When Democrats start sounding like Republicans, like Cory Booker defending Bain Capital, they tend forfeit arguments they could win. That's because, in both cases, the politicians are arguing about the wrong things, in order to avoid the real argument — the one America needs to have, and Americans need to win; the argument over what kind of economy we will have going forward.

Gringirch's attack on Romney's record confused many conservatives, who equated it with an attack on capitalism itself. Newark Mayor Cory Booker echoed the concerns of confused conservatives when he called the Obama campaigns ads attacking Romney's record at Bain Capital a "nauseating" attack on private equity, labeling them a distraction. "It's either going to be a small campaign about this crap or it's going to be a big campaign, in my opinion, about the issues that the American public cares about," Booker said.

What Booker, Democrats like him, and conservatives now lauding his diatribe ignore or don't realize is that the issues affecting voters don't come much bigger and don't get much more real than the kind of capitalism Bain represents.

Bain Capitalism

As Digby said, if Romney is going to run on his Bain Capital record and tout his private equity background as his main qualification for the presidency, then his track record at Bain is fair game. I summed up that track record in my original post about his brand of "vulture capitalism."

A former managing partner at Bain, in an interview with the Los Angeles Times, made it clear that job creation was never the point at Bain.

Bain managers said their mission was clear. "I never thought of what I do for a living as job creation," said Marc B. Walpow, a former managing partner at Bain who worked closely with Romney for nine years before forming his own firm. "The primary goal of private equity is to create wealth for your investors."

Under Romney's leadership, Bain certainly created wealth for its investors, no matter what happened to the companies it acquired or the the people worked for them. The Wall Street Journal's revealing look at Romney's time at Bain shows that 22% of the companies Bain invested on under Romney's watch either filed for bankruptcy, reorganized, or closed their doors — sometimes with substantial job losses. As Pat Garofalo pointed out, that's nearly one fourth of the companies Bain invested in.

Some failed so badly that Bain lost its investments. That didn't put a damper in returns, though. Bain produced about $2.5 billion in returns for its shareholders, out of just $1.1 billion invested. (Romney did alright, too. His campaign estimates his take during his term at Bain as anywhere from $190 million to $250 million. That's enough for a lot of $10,000 bets.)

The LA Times piece makes it clear that Bain and its investors profited, no matter what happened to the companies in its portfolio. According to the Wall Street Journal, 70% of Bain's returns came from just 10 deals. The LA Times article notes that "Four of the 10 companies Bain acquired declared bankruptcy within a few years, shedding thousands of jobs." Still, Bain profited in eight of those ten deals, including three of the four that went bankrupt.

That's the way "vulture capitalism" (as I like to call it) works. Bain and its shareholders profited in the end, no matter what else happened.

That's the part of the story that the Gingrich movie seems to tell: what else happened. We know what happened on Wall Street when Mitt Romney came to town. A few people — Mitt Romney included — made a lot of money. Now we know what else happened on Main Street when Mitt Romney came to town.

What happened to those companies and the people who worked for them begins to read like a casualty list: 1,700 jobs lost at Dade International, more than 700 jobs lost at GS Industries, 200 jobs lost at American Pad and Paper (Apmad). After a while, it's easy to forget that these numbers represent the lives of real people, whose job loss sent shock waves through their families and communities; people like Donny Box and Randy Johnson.

It's also easy to miss the point that this is just how the brand of "head I win, tails you lose" capitalism Bain practiced under Romney's leadership is suppose to work; as the Obama campaign illustrates in a new video and slideshow about how Bain made $100 million on its $5 million investment in Ampad, even while sending the company into bankruptcy and its 1,500 employees to the unemployment line. Bain Capital made profits no matter what happened the companies in its portfolio. Nearly one fourth of the companies Bain invested in during Romney's tenure either went bankrupt, reorganized, or simply shut down — often with significant layoffs. Seventy percent of Bain's profits came from just 10 deals, four of which resulted in bankruptcy.

"Extracting Value"

Romney's factually challenged, incredible shrinking claims of being a "job creator" at Bain notwithstanding, his former Bain colleague got it exactly right. Bain wasn't in the business of creating jobs, and Romney wasn't in the business of creating jobs. Bain's mission, and Romney's job as its chief, was simply to "create wealth" for its investors. Period.

Bain Capital and Mitt Romney were in the business of creating even more wealth for its already-wealthy investors. They were apparently very good at it, too. But the kind of wealth Bain and Romney worked to create isn't the kind of wealth that leads to more widely shared prosperity. It's not the kind of wealth that grows the economy, according to the CBO. Nor is it the kind of wealth that leads to job creation, according to Moody's Analytics, because it doesn't get put back into the economy to support existing jobs or spur job creation by boosting demand. The wealthy don't spend their tax cut windfalls, but save them and invest them in the stock market instead; putting their money to work making money, rather than putting their money to work keeping people working and putting people to work.

The success or failure of the companies in its portfolio were beside the point. When he's not claiming the mantle of "job creator," Romney casts himself and Bain as "fixers" who acquired "broken" companies and made them better —more efficient, and more profitable. But that wasn't the point at Bain. To some extent, Bain and Romney profited from practices that were more about extracting value from its acquisitions than "fixing" them. (The language about "extracting value" is even repeated in some of Bain's own material.)

That's what Bain Capitalism is about: "extracting value" with no investment in the fate of the companies in its portfolio, the people who work from them, or the communities that rely on them.

"What This Job Is All About"

Cory Booker called the debate over Bain Capital a "distraction" that threatened to make the election a "small campaign" about small ideas, instead of a "big campaign" about "the issues the American public cares about." In his remarks at yesterday's NATO summit, President Obama made the case for why Romney's record at Bain Capital is relevant to a "big campaign" about "issues the American public cares about." (And he managed it without even calling Booker a "jackass.")

… [T]he reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be President is his business expertise. He is not going out there touting his experience in Massachusetts. He is saying, I’m a business guy and I know how to fix it, and this is his business.

And when you’re President, as opposed to the head of a private equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off and how are we paying for their retraining. Your job is to think about how those communities can start creating new clusters so that they can attract new businesses. Your job as President is to think about how do we set up a equitable tax system so that everybody is paying their fair share that allows us then to invest in science and technology and infrastructure, all of which are going to help us grow.

And so, if your main argument for how to grow the economy is I knew how to make a lot of money for investors, then you’re missing what this job is about. It doesn’t mean you weren’t good at private equity, but that’s not what my job is as President. My job is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but 10 years from now and 20 years from now.

So to repeat, this is not a distraction. This is what this campaign is going to be about -- is what is a strategy for us to move this country forward in a way where everybody can succeed? And that means I’ve got to think about those workers in that video just as much as I’m thinking about folks who have been much more successful.

The president is off to a good start on taking the debate where it needs to from here; from the particulars of Romney's record at Bain Capital to what it represents, and the economic choices facing America. But, as I pointed out before, the business practices of companies like Bain mean profit for the investor class, and pain for the 99%. Now, president Obama needs to make it personal.

This is pretty good, but I think it's going to have to get a lot more forceful. Obama has this habit, which you learn as a writer over time is really unconvincing. He very often makes an assertion without illustrating it, without saying why. It leaves listeners confused because he hasn't really put meat behind the assertion.

But he is on the right track here. I don't think this is such a difficult needle to thread. In fact he could get a lot more emotional mileage out of this sort of thing. Like how? Like so:

"The people who lost their jobs because of Mitt Romney's creative destruction, those are precisely the people the president has to think about most. Those are the people who write the letters that I read every night before I go to bed. Those are the people who need my help the most of all. Mitt Romney and his fellow investors will mostly be just fine. I think about the other people. Governor Romney says, explicitly, has said many times, of lost jobs, that's capitalism, that's just the way it goes. Do you want a president who watches an American factory shut down and says, 'Well, that's capitalism?'"

Choosing Capitalism

"Do you want a president who watches an American factory shut down and says, 'Well, that's capitalism?'"

It recasts Romney's answer to questions about bankruptcies, shutdowns, and layoffs Bain left in its wake as a Rumsfeldian "stuff happens" response to the economic consequences of Bain's practices. Stuff doesn't just happen. Stuff happens because other stuff happens. The debate is basically about whether we should regulate some stuff in order to keep it from happening, and what we should do about the stuff that happens as a result.

We are, as E.J. Dionne writes, not in the middle of a national argument about capitalism versus "socialism," but a much needed discussion about what kind of capitalism we want.

The Bain conversation has already been instructive. Romney’s friends no less than his foes have had to face the fact that Bain’s purpose was never about job-creation. Its goal was to generate large returns to Bain’s partners and investors. It did that, which is why Romney is rich.

Romney wants to focus on the positive side of his business dealings that did create jobs. He wants to brag about the companies Bain helped bring to life, among them Staples, Sports Authority and Domino’s.

That’s fair enough. But having made an issue of Bain on the plus side, he also has to answer for the pain and suffering — or, as defenders of capitalism like to call it, the “creative destruction” — that some of Bain’s deals left in their wake.

This leads naturally to the question of how creative the destruction wrought by our current brand of capitalism actually is. Since the dawn of the leveraged buyout era three decades ago, many friends of capitalism have questioned whether loading companies with debt as part of these deals is good for companies and for the economy as a whole.

What's the alternative to the "vulture capitalism" practiced by firms like Bain Capital? What it's called varies, I've heard it called "Inclusive Capitalism" and "the New Economy movement." It's components are just beginning to take shape, as more people envision a capitalism that better spreads the benefits of the "productivity revolution," that regulates the worst of capitalism's "creative destruction," and incorporates a safety net to catch those left behind by the market.

This may be another debate in which President Obama could benefit from following Vice President Biden's lead.

Vice President Biden’s speech last week in Youngstown, Ohio, drew wide attention for its criticism of Romney as someone who just doesn’t “get it.” But when Biden moved beyond Romney, he offered an energetic broadside against the new world of finance, and he picked the right venue to make his case: a noble blue-collar town that has been battered by the winds of globalization and economic change.

“You know the difference between having an economy that makes things that the rest of the world wants, and having an economy that is based on financialization of every product,” Biden told his listeners. “You know the difference between an economy . . . that’s built on making things rather than on collateralized debt, creative credit-default swaps, financial instruments like subprime mortgages. That’s not how you build an economy.”

This campaign isn't just about Bain, or Mitt Romney's past. It's about our future. It's about the kind of new economy we want to build.

Budget Cuts Have Consequences: Ask Andrews Air Force Base

Stan Collender — Mon, 21 May 2012 15:33:00 -0400

Originally posted at Capital Gains and Games.

I can't tell you the number of focus groups I've watched and polls I read where the overwhelming opinion was that federal spending could be cut without any decrease in the quantity and quality of what the government does.

Hell...As I posted about in 2010, even the recommendation from the co-chairs of the Bowles-Simpson commission -- who definitely should have known better -- proposed a reduction in the number of federal employees and the number of consultants but, presumably based on the assumption that the government wouldn't have to stop doing anything it was already doing, didn't suggest any activity be eliminated.

That's why this story in The Washington Post from several days ago caught my eye. The Defense Department has decided that what since the 1950s has been an annual show for the public at Andrews Air Force Base (now officially Joint Base Andrews) in suburban Maryland will now be held every other year. The savings are projected to be $2.1 million a year.

I have no problem with this decision or the many others like it that no doubt will be made as federal discretionary spending continues to be squeezed. I have posted in the past about how, no matter how valuable it may be in some sense, the annual National Book Festival staged by the Library of Congress should not be held at all.

As my Beautiful and Talented Wife (The BTW) can tell you, I have often railed at similar federal activities (military color guards provided free of charge to pro sports teams are especially annoying) because of their cost. Yes...I take great pride in seeing the Blue Angels do maneuvers and have enjoyed military band concerts. But as a budget guy I see little reason to be paying for that rather than better armor and training for those actually doing the fighting.

Anyone want to bet how long it takes before someone on Capital Hill, most likely someone who claims to be a fiscal conservative, proposes to restore the funds so that this show continues to be held each year? My guess is that the decision will be reversed by October 1 when fiscal 2013 begins.

Et Tu, Cory Booker?

Digby — Mon, 21 May 2012 14:44:03 -0400

False equivalence of the day:

Appearing on NBC’s “Meet The Press” on Sunday, Newark Mayor and Obama bundler Cory Booker said he was “uncomfortable” with the Obama campaign’s attacks on Mitt Romney’s career with Bain Capital.

“It’s a distraction from the real issues,” Booker said, of both attacks on Bain and Rev. Jeremiah Wright. “It’s either gonna be a small campaign about this crap, or it’s gonna be a big campaign about the issues the American public cares about.”

“I’m not about to sit here and indict private equity,” Booker added. “If you look at the totality of Bain Capital’s record, they’ve done a lot to support businesses — to grow businesses. And this to me, I’m very uncomfortable.”

No, attacks on Bain are not the equivalent of attacks on Jeremiah Wright and no, it is not a distraction from the campaign, it is the campaign. Or it should be.

If Romney can't be criticized for his vulture capitalism and we can't "indict" private equity then what does he think this campaign should be about? The deficit? Some abstract notions of "jobs" and "the economy" without any reference to the fact that it was the financial sector and "private equity" that caused this situation in the first place? Sounds perfect. For Wall Street.

Sadly, this is exactly the kind of concern trolling that will make the Village declare that the Democrats are hitting below the belt by criticizing Bain Capital and the Dems will fall in line. Indeed, the fact that it's Cory Booker who's saying it today indicates that it's the Democrats themselves saying "stop us before we hurt the Masters of the Universe's feelings again."

Facebook and Tahrir Square, Revisited

Sam Pizzigati — Sun, 20 May 2012 16:30:47 -0400

Facebook's initial public offering last week 'offered' the world another double dose of windfalls and greed. But Egypt's elections this week may bring an IPO of a different sort, the 'initial public offering' of an antidote to avarice.

Remember the heady days of the Arab spring? People in motion. Democracy breaking out all over. And right in the middle of everything . . . Facebook!

Activists in Cairo’s Tahrir Square, we marveled, were using Facebook and other social media tools to link and share and grow their movement. In a Facebook electronic age, anything suddenly seemed possible. A new world beckoned. A new world gloriously liberated from greed and corruption.

How’s that new world coming, over a year later? That depends where you look.

Over in Egypt, voters are going to the polls this week to start a two-round presidential election contest, the first presidential balloting since Tahrir Square first captured the world’s political imagination.

Egypt’s eventual future still remains hazy. But the nation's struggle for economic justice and democracy has kept moving forward over the last year. Egyptians are continuing to break new political ground, most particularly on the bold notion of a “maximum wage,” the idea that democracy and social decency both demand a limit on the income any one person can grab in a year.

The demand for a maximum wage in Egypt first surfaced in the militant labor protests that paved the way for last year’s uprising in Tahrir Square. This maximum wage demand has now gone mainstream. In the current presidential race, almost all the prime contenders are endorsing a “maximum wage” ethic.

The candidates, to be sure, do differ on the “maximum wage” specifics.

Aboul Fotouh, a liberal Islamist candidate, wants a maximum wage applied only to the public sector, and the Egyptian parliament is now putting the finishing touches on legislation that would do just that. The pending bill would set a public sector maximum at 35 times a public enterprise’s lowest wage, with an absolute income cap at the equivalent of just under $100,000 a year.

This public sector maximum would have a broad economic impact. In Egypt, the public sector covers nearly a quarter of the entire economy, not just government agencies but huge swatches of commercial and banking activity as well.

Activists from the Egyptian labor movement are calling for an even broader maximum wage. They’re urging a maximum applied to the entire economy, public and private sector alike, and former Arab League secretary general Amr Moussa, the presidential front-runner, appears to be backing that position.

In Egypt, the presidential campaigning suggests, a new world that pushes back against greed does still beckon.

On the other hand, here in the United States, the movers and shakers behind the Facebook phenomenon that meant so much for the initial Arab spring are shoving Americans in an entirely different direction.

These Facebook kingpins haven’t been challenging greed. They’ve been feting it, via an elaborately orchestrated initial public offering last week on Wall Street that dangled out to America’s investing class juicy new fantasies of over-the-top speculative windfalls.

In the days leading up to last week's Facebook IPO, investors buzzed with that old “irrational exuberance” of the 1990s dot-com bubble. Stocks typically trade at $14 of share price value for every $1 of profit. Facebook went to market asking over $100 for every $1 of profit.

And the market went along, in the process kindling get-rich fever and, on Friday, minting instant billionaires within Facebook’s inner circle.

One of those instant billionaires — Facebook co-founder Eduardo Saverin — took his money and ran. Saverin renounced his U.S. citizenship before the IPO. His move may enable him to avoid as much as $700 million in federal taxes.

The rest of the Facebook insider crew is staying put, at least for the moment, and doing its tax avoiding from the comfort of home.

Facebook’s top dog, Mark Zuckerberg, announced before Friday’s IPO that he would be exercising half the 120 million stock options he awarded himself in 2005. That decision cleared him a personal payday Friday around $2.3 billion.

The Facebook shares that Zuckerberg is still holding give him a net worth over $19 billion, and the 28-year-old seems to have no intention of sharing much of his new wealth with Uncle Sam.

The Wall Street Journal earlier this month detailed the tax code loophole — the “grantor-retained annuity trust” — that Zuckerberg and his fellow Facebook execs are likely using “to avoid at least $200 million of estate and gift taxes.”

Facebook is avoiding enormously more than this $200 million at the enterprise level, thanks to the U.S. tax code’s incredibly generous treatment of stock options. Facebook's exploitation of this option loophole, Citizens for Tax Justice calculates, will cost the federal and state governments about $6.4 billion.

How does this option loophole operate? Say Facebook hands out to execs a million options each to buy Facebook shares at $1 a share. These lucky option recipients later “exercise” their options and buy those shares at that $1 — and then turn around and sell them at $38, the Facebook going rate last Friday.

These option recipients will have to pay income tax on their $37-per-share profit. But Facebook — as an enterprise — can deduct that $37 off its corporate income tax. This deduction, of course, will fatten Facebook’s bottom line and pump up even further the value of the shares Facebook’s execs are holding.

The pushback against all this Facebook greed grabbing?

In Washington last week, two U.S. senators — Chuck Schumer from New York and Bob Casey from Pennsylvania — did propose legislation that would subject future wealthy citizenship renouncers like Eduardo Saverin to a 30 percent capital gains tax rate. But even the bill's supporters acknowledge that this legislation has no chance whatsoever of passage in the current Congress.

Legislation from Michigan senator Carl Levin that would strike down the much more significant stock option loophole faces an equally steep path to passage. New York’s Working Families Party, among other groups, is helping drive an effort to boost the Levin legislation.

Meanwhile, Fox Business News reported Friday that execs and investors who’ve “scored famously” from Facebook’s Wall Street debut have multi-million dollar mansions and $100,000 Porsches “flying off local shelves” in Silicon Valley.

America’s rich certainly do have cause to celebrate. But few people elsewhere in the world figure to be celebrating with them. For directions to a new world, they'll be better off looking toward Cairo.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.

We Had Money In The Federal Budget For ... What?

Isaiah J. Poole — Fri, 18 May 2012 15:36:27 -0400

From the House Republicans whose leader, Speaker John Boehner, just three days ago claimed that "we can’t go on spending money we don’t have," and "our economy is stuck in large part because it’s stuck with debt," comes this:

The House on Friday approved a sweeping defense authorization bill for 2013 that calls for the construction of an East Coast missile defense system in the United States by the end of 2015.

The bill obligates $100 million next year to plan for the site, but the project would cost billions of dollars in later years that has yet to be funded.

That's right — the Star Wars missile shield is back, except that this time the threat is not from intercontinental nuclear missiles from Russia, but intercontinental nuclear missiles from Iran.

“You cannot open a newspaper or turn on a TV … without seeing a story of the rising threat from Iran and North Korea to mainland United States,” said Rep. Michael Turner (R-Ohio), chairman of the Strategic Forces subcommittee that included the East Coast interceptor language.

“With these emerging threats it is inevitable that an East Coast site will be necessary in order to ensure we have the ability to lessen the threats from both Iran and North Korea,” Turner told The Hill.

Well, I am not sure what newspapers or TV shows he's been watching, but these stories of the "rising threat" of Iranian missiles hitting my Washington D.C. neighborhood have gotten past me. (This does remind me of the old saying about the person who proudly proclaimed, "I stay informed by reading the Times and the Post every day—the Washington Times and the New York Post.")

On the House floor, Democrats dismissed the missile shield as crass election-year posturing. Michael Crowley at Time last week unmasked its ludicrousness:

The plan itself makes little sense: It addresses an extremely speculative threat. Chinese missiles do threaten west coast, not the east, and despite some seemingly exaggerated warnings, Iran probably can’t land a missile beyond Eastern Europe.

Crowley adds that, in the unlikely event that Iran would be able to both build a functioning nuclear warhead and a missile that could make the journey from Iran to the United States, the United States' overwhelming ability to attack would make such an effort "an act of suicide by Tehran."

But what makes all of this more blood-boiling is that while House Republicans could feel we could afford $100 million to begin what would be a multibillion-dollar boondoggle, House Republicans have declared that we could not afford to:

Maintain current levels of food assistance for 46 million poor Americans. House Republicans voted to remove 2 million people from the Supplemental Nutrition Assistance Program, and reduce assistance for 44 million others, at the rate of $57 a month for a family of four.
Spend $1.7 billion for programs that address victims abuse or neglect, provide meals on wheels to seniors, or to supplement scarce funding for child care.
Cover the cost of a tax credit for the children of working immigrant families, meaning that those families would lose on average an additional $1,800 a year.

The list goes on. The point is that when it comes to the military industrial complex, there appears to be no such thing as wasteful, unnecessary spending. But when it comes to the basic economic security of ordinary Americans, we simply can't afford it. The message could not be clearer.

Austerian Pride

Digby — Fri, 18 May 2012 12:41:30 -0400

Yesterday I posted (twice!) a Think Progress chart proving that the government under president Obama had pursued austerity policies. It was done to refute Mitt Romney's outright lie that the president had spent the country into oblivion, but some of us wondered why the Democrats would think it was such a good thing in any case. Dday asked the fellow who made the chart for CAP:

I asked Linden why any progressive should look at this information with anything approaching pride or pleasure. “If your argument is that we shouldn’t be having a fiscal consolidation during a recovery, that’s a fair criticism of it,” Linden said. He claimed that his chart was more of a myth-busting document, merely showing the facts of the situation. It attempts to rebut criticism from the right of Obama as a tax-and-spend liberal Democrat exploding the deficit. But what about the criticism that the economy needs more, and not less, fiscal support?[...] Linden didn’t really contest the argument. “You can argue (the information on the chart) was the wrong direction, given our economic issues, given the fragility of our recovery,” he said. Linden did add that “it’s worth remembering that the President proposed a substantial jobs package last year and the Republicans blocked it.” That is true, although the payroll tax cut and an extension of unemployment insurance, a substantial part of the American Jobs Act, did pass. But this gets to the point of who should take credit for that chart. Republicans in Congress demanded less spending, lower taxes and cuts to the deficit when they took power in the House in 2011. The chart shows that this happened. They blocked higher fiscal spending. They got a debt limit deal that constrains spending for the next ten years. They put forward the measures that will reduce the deficit by trillions, if the trigger remains in place. Republican House members should be just as comfortable tweeting out this chart as the President. It falls in line with virtually every one of their professed favorite policies. “Both things are true,” Linden said. “One, that it is a myth that the President has been a great big spender… but you can also say, if you’re looking for a partial reason why our recovery hasn’t been faster, that may be one of the answers, that the President is pursuing the preferred policy path of his conservative critics.”

I think he may have missed the point. When the president and his supporters send out a chart like that lauding their success at cutting spending and taxes, they are telling people that it's their preferred policy too. But they've done this from the beginning, going all the way back to the transition when the president was giving the entire village a woodie with his Grand Bargain vision. The health care bill was sold as primarily a money saver (although nobody believed it...) They have often touted their tax cuts as huge accomplishments. president Obama himself promised to cut the deficit in half in his first term (a first term virtually defined by an epic economic downturn.) It's quite easy to see why people would assume that they truly are proud of their record of spending cuts and tax cuts and think that a soft austerity was a pretty good idea. Dday winds up with this:

“It’s a mythbusting piece more than anything else,” Linden concluded. “These are the numbers. Spending, taxes and the deficit have gone down. You can say fairly that this is not the economic policy we should be pursuing. If you want to criticize the President because he’s not been Keynesian enough, that’s OK with me. If you’re saying that he’s been too much of an austerity President, fine. But especially on a day when Mitt Romney is out there talking about the President running up massive debt and spending wildly, you have to say this is just not true.” The problem is that the policy that would be best for the economy is the policy that would feed this myth, and when I look at what’s more important, the myth or millions of people suffering needlessly, I know where I come down.

Someday, someone is going to make the case to the American people for policies that will work instead of operating entirely on the basis of conservative myths. I'm not sure when that will be but keep your eye on Europe over the next few months to see what happens when austerity finally bites so hard that the people get fed up.