As the Republican convention approaches, “Etch-a-Sketch” Mitt Romney continues to reshape himself. Overnight, he’s for allowing abortion in cases of rape and incest, after being against it. Now he’s the savior of Medicare after being the scourge of the entitlement society.
But for all the shapeshifting, Romney’s core worldview is clear, forged in the experience that made his fortune as head of Bain Capital. For this reason, the Campaign for America’s Future has created bainofourexistence.com to provide a constantly updated resource of reporting on and analysis of Bain and Romney. (This will be a constant work in progress. To contribute to the site, please use this contact page.)
The questions spawned by the various scandals surrounding Romney at Bain – Did he create jobs or destroy them? Did he actually quit in 1999 or later? Was he responsible for companies that went bankrupt after he left? – miss the point. Bain Capital, with Romney at its head, epitomizes the Gilded Age capitalism of the last decades, the casino finance that eventually brought the economy to its knees. And Romney, for all of his repositioning, is running as an advocate of that casino capitalism, a defender of the rigged rules and skewed policies that underpin it. Unlike Teddy and Franklin Roosevelt, who ran as “traitors to their class,” Romney is an unabashed tribune of the rich. The worldview forged at Bain is revealed in his personal life as well as his policy choices.
The Fixed Casino
As Charles Ferguson writes in Predator Nation, private equity companies like Bain Capital may be the “most efficient money-seeking organisms in the world.” As the head of Bain, Romney was a money guy, not a businessman. Bain people don’t know cars or steel; they aren’t part of building companies grounded in communities, with proud workforces. They aren’t entrepreneurs with an idea, seeking to build a business. They know numbers, money and tax codes.
Typically, Bain and private equity firms buy existing companies with other people’s money. Firm partners put little of their own capital in their deals. The money comes from their limited partner investors and from taking on debt. The companies they buy are forced to take on enormous debts. Bain would pay itself exorbitant fees and distribute special dividends to itself and its limited partners. The debt is attractive because interest can be written off.
Under Bain guidance, the new managers would then seek to lower operating costs to sustain profits. Not surprisingly, Bain was an early proponent of offshoring and outsourcing of jobs, and a brutal adversary of unions and worker contracts. After getting their money out in fees, Bain would take risks with companies laden with debt. If things worked out, the companies might expand. If they failed, as they often did, the companies went bankrupt, workers lost their jobs, communities were shattered, but Bain partners profited.
Thus, as Bloomberg reported, 10 of roughly 67 major deals by Bain Capital during Romney’s watch produced about 70 percent of the firm’s profits. Four of those 10 deals, as well as others, went bankrupt even as Bain cleaned up. Joe Soptic, the steelworker in the Obama ad who lost his job, his health care and his wife, was a victim. The workers at UniMac, K.B Toys, DDI and AmPad –in the famous Gingrich film, “When Mitt Romney Came to Town,” were collateral damage. As David Stockman, the former budget director for Ronald Reagan said, Bain wasn’t about creating jobs: “The LBO business is about how to strip cash out of old, long-in-the-tooth companies and how to make short-term profits.”
Romney similarly sought to limit his own personal risk in setting up Bain Capital. He got a guarantee that if the firm failed, he would be made whole financially, guaranteed a position in the parent investment company, and provided with a cover story to erase the failure from his record. He insisted there was, as Bill Bain put it, “no professional or financial risk.”
A key part of the Bain and private equity firm operation is avoiding taxes. Bain, as we’ve seen from Romney’s tax return, milked every overseas tax haven, tax loophole, tax dodge possible. Romney is virtually persona non grata in Italy because of the way Bain fleeced the government in a shady deal flipping the Italian yellow pages, featuring laundering the money through Luxembourg shell companies.
Similarly, Romney personally paid a 14 percent tax rate on income of $20 million a decade after leaving the firm by working every angle in the book. He parked money in a Swiss bank account, and overseas tax havens in the Cayman Islands and Bermuda. He clearly parked underpriced stock options into IRAs, now worth over $100 million tax-free. And of course, he took advantage of the obscene “carried interest” tax scam that allows private equity partners to treat their income from investing other people’s money as capital gains rather than normal income.
Romney forged not only his fortune but also his worldview at Bain. His platform trumpets policies that reinforce the casino capitalism represented by Bain. He champions more corporate trade accords that aid in offshoring jobs. He advocates a “territorial tax system,” that would remove any taxes on profits reported abroad – giving multinationals every incentive to report more and more of their profits overseas, and providing them with a world of nations to turn into tax havens.
Romney promises to repeal Dodd-Frank, the modest reforms Obama was able to get passed through the Congress to try to put some limits on Wall Street. He espouses privatization as the answer to fixing everything from health care to public education.
His tax plan would provide tax cuts to the wealthiest Americans, and by “mathematical certainty” according to the non-partisan Tax Center, end up hiking taxes on middle and low-income workers. He would sustain the low tax rate on capital gains and dividends, insuring those with income form wealth pay lower rates than those with income from work. He’d eliminate the alternative minimum tax so there would be no floor on exemptions the wealthy might claim.
At the same time, Romney wants to weaken any support for the workers he would put into competition with cheap labor abroad. He’s against raising the minimum wage, against labor law reform, and echoes the conservative assault on public employees and their unions. He’s embraced the Republican House budget, written by his running mate Rep. Paul Ryan, that would savage support for the poor and the vulnerable with deep cuts in Medicaid, food stamps, Head Start and nutrition programs for children, Pell grants for students. For Romney, these are part of an “entitlement society” that threatens the American (read Bain) way of doing business.
How will Romney sell this program to Americans? Well, here too his Bain experience informs his strategy. First and foremost, money talks. Romney has enlisted Wall Street and billionaires to lavish funds on his campaign and on the “independent” PACs and non-profits that will spend over $1 billion on ads assailing Obama. Gingrich says Romney won the nomination because “in the end, he had 16 billionaires and we had one.” Not surprisingly, Romney has sought to keep his bundlers secret. And more and more of the independent money is being spent by organizations that don’t have to identify their donors rather than PACs that do. The Barons of the Gilded Age are doubling down on one of their own, but most prefer to do it anonymously.
Second, they’ll rig the rules. Private equity guys like Bain sing the gospel of Ayn Rand and Adam Smith, but they don’t believe in free markets or open competition. They prefer safe bets, where others take the risks and they rake in the dough. This leads to widespread cheating and lawlessness. A recent survey of 500 financial executives in the U.S. and Britain revealed that 30 percent thought their compensation plans created pressure to violate the law or basic ethical standards. A quarter said they believed unethical or illegal conduct was necessary for success, and a similar number said they had first hand knowledge of such wrongdoing in their workplace.
It also leads to high-priced lobbying. Wall Street’s lobby, employing legions of former legislators from both parties, has managed to delay and dilute the Dodd-Frank reforms. No high ranking banking official has been prosecuted for the pervasive fraud that helped blow up the housing bubble. Bain joined other private equity firms in a furious lobby to preserve the “carried interest” dodge. They rig the rules to benefit themselves.
And in this election, Republicans have systematically sought to rig the rules. For the first time since Jim Crow, a party has set out to limit rather than expand the right to vote. In Florida, Pennsylvania, Ohio, Wisconsin and dozens of other states, Republican legislators have sought to impose picture ID requirements, limit days and hours of voting, close down early voting periods, and make it harder for independent groups to help citizens register and get out to vote. The recent comments from the Ohio State election official that the state “shouldn’t contort the voting process to accommodate the urban— read African-American —voter-turnout machine” – reveals the intent of the strategy.
The Republican convention with its high-tech stage and Hollywood directors will once more remake Mitt Romney, introducing him as a family man of faith, charitable, good hearted, experienced in business and government, ready to put America back on track. For an antidote, check into bainofourexistence.com. Romney is of, by and for the very Gilded Age capitalism that generated extreme inequality, rising poverty, a declining middle class even before it blew up the economy. He will change his views with his clothes, his image with each rising sun. But his stance is clear. Want more of what we’ve had? He is your man.