Leadership

From Politico:

Obama will not push for new gun control measures

White House Press Secretary Jay Carney told reporters aboard Air Force One on Sunday that the Obama administration has no plans to push new gun control measures in the wake of the deadly shooting rampage at a Colorado movie theater

Carney said that includes a reauthorization of the Clinton-era assault-weapon ban that lapsed during the George W. Bush administration.

A closer look at private equity

piece published over at Bloomberg a few days ago has turned some heads for its less-than-flattering depiction of some of the practices deployed by Mitt Romney during his time at the helm of Bain Capital.  Its author, Anthony Luzzatto Gardner, works for the London-based private equity fund Palamon Capital Partners.

Go take a look for yourself, but, long story short, Bain made most of its money not through turning around failing companies as Romney usually suggests (e.g., eliminating inefficiencies, improving fundamentals), but rather by using a series of accounting tricks — most notably taking advantage of the tax code’s special treatment of debt — to prop up balance sheets in order to extract generous dividends for Bain’s investors.  Gardner summarizes:

What’s clear […] is that Romney was fabulously successful in generating high returns for [Bain’s] investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses. [emphasis mine]

What’s less clear is how his skills are relevant to the job of overseeing the U.S. economy, strengthening competitiveness and looking out for the welfare of the general public, especially the middle class.

What’s definitely clear is that the world of private equity is a confusing one.  Two basic questions — how it works and what it does — are points of contention.

These two short videos provide a pretty good overview of the two schools of thought.  I highly recommend taking a look at both.

The first is from the perspective of the Private Equity Growth Capital Council, a DC-based pro-private equity lobbying group.  Not surprisingly, they paint a pretty picture.


The second take, from left-of-center economist and Secretary of Labor under President Clinton, Robert Reich, is less enthusiastic about the industry. (The Bloomberg piece focuses on Reich’s steps 4-7).

So — in simplified terms — if there are generally two ways to do private equity — one that genuinely improves companies, and one that uses smoke and mirrors to enrich investors with little regard for companies’ well-being — the question is clear:  Which was practiced by Romney’s Bain?  On this question, Gardner doesn’t equivocate:

President Barack Obama is correct in distinguishing the patient creation of value for the benefit of investors through genuine operational improvements and growth — the true mission of private equity — from the form of rigged capitalism that was practiced by some in the industry in the past when debt was cheap and plentiful.

While Bain Capital wasn’t alone in using financial engineering to turbo-charge its returns, it was among the most aggressive under Romney’s leadership. Enriching investors by taking leveraged bets isn’t a qualification for a job requiring long-term vision and concern for public welfare. It is appropriate to point that out to voters. [emphasis mine]

Appropriate, indeed.

Mythbusting Obamacare

Bill Keller of the NYT put out a pretty great column earlier this week debunking five of the biggest myths about Obamacare.  You can read the whole thing yourself here, but I’ve provided a distillation below.

OBAMACARE IS A JOB-KILLER.

Some of the job-killer scare stories are based on a deliberate misreading of a Congressional Budget Office report that estimated the law would “reduce the amount of labor used in the economy” by about 800,000 jobs. Sounds like a job-killer, right? Not if you read what the C.B.O. actually wrote.

While some low-wage jobs might be lost, the C.B.O. number mainly refers to workers who — being no longer so dependent on employers for their health-care safety net — may choose to retire earlier or work part time. Those jobs would then be open for others who need them.

OBAMACARE IS A FEDERAL TAKEOVER OF HEALTH INSURANCE.

Let’s be blunt. The word for that is “lie.” The main thing the law does is deliver millions of new customers to the private insurance industry. Indeed, a significant portion of the unhappiness with Obamacare comes from liberals who believe it is not nearly federal enough: that the menu of insurance choices should have included a robust public option, or that Medicare should have been expanded into a form of universal coverage.

This is a “federal takeover” only in the crazy world where Barack Obama is a “socialist.”

THE UNFETTERED MARKETPLACE IS A BETTER SOLUTION.

“Ten percent of the population accounts for 60 percent of the health outlays,” said [Karen Davis, president of the Commonwealth Fund]. “They are the very sick, and they are not really in a position to make cost-conscious choices.”

LEAVE IT TO THE STATES. THEY’LL FIX IT.

[T]he best ideas don’t spread spontaneously. Some states are too poor to adopt worthwhile reforms. Some are intransigent, or held captive by lobbies.

You’ve heard a lot about the Massachusetts law. You may not have heard about the seven other states that passed laws requiring insurers to offer coverage to all. They were dismal failures because they failed to mandate that everyone, including the young and healthy, buy in. Massachusetts — fairly progressive, relatively affluent, with an abundance of health providers — included a mandate and became the successful exception. To expand that program beyond Massachusetts required … Barack Obama.

OBAMACARE IS A LOSER. RUN AGAINST IT, RUN FROM IT, BUT FOR HEAVEN’S SAKE DON’T RUN ON IT.

If the Obama campaign needs a snappy one-liner, it could borrow this one from David Cutler: “Never before in history has a candidate run for president with the idea that too many people have insurance coverage.”

What if?

Brad Delong ponders:

Suppose that Obama’s voters had turned out in 2010 to vote for down ballot offices in as large numbers as they turned out in 2008. Where would the US economy be now?

There would have been no tea party Republican Governors’ slashing of state employment, with attendance multiplier effect putting downward pressure on there (sic) and neighboring economies. There would have been no debt ceiling crisis to add substantially to economic uncertainty and increase the flight to quality. There would have been Larry Summers infrastructure bank, which would now be pumping out $200 billion a year in badly needed infrastructure investment.

Add all those up, and you get on economy with between $300 billion and $600 billion more of annual spending, depending on the multiplier. That is an economy with unemployment rate in the low 7s or the 6 percents. That’s an economy growing at 3 to 4% per year instead of 1 to 2% per year. That some economy with a lower projected deficits and debt to GDP ratio then the economy we have today. [emphasis mine]

The failure of marginal Obama 2008 voters to turn out for down ballot candidates in 2010 was a disaster for America.

The election of Mitt Romney and a supporting congress this November would be a much bigger disaster for America.

Obviously that’s pretty speculative.  And, yes, it’s a pretty rosy picture of how things would be if Democrats had held on to power.  Furthermore, I’m not quite as pessimistic about the future of the economy after a Republican victory as DeLong is — personally I think we’ll bounce back no matter what happens at some point during the next president’s term, though the timing, the type of growth, as well its extent and sustainability will in large part depend on who wins this fall.

That being said, DeLong isn’t just making this stuff up.  When you look at the facts about what’s resulted of the Tea Party agenda, it’s hard to overstate just how much damage the GOP has done in only a couple years.  Where they have had the power to implement their agenda — in state governments around the country — their gutting of budgets has decimated public sector employment.

Ezra Klein expounds on how much better off we’d be if public payrolls hadn’t been slashed so drastically:

Since Obama was elected, the public sector has lost about 600,000 jobs. If you put those jobs back, the unemployment rate would be 7.8 percent.

But what if we did more than that? At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent. That would be equal to a bit over 800,000 jobs today. If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent. [emphasis mine]

Who’s been responsible for these job losses?  As DeLong alludes to, overwhelmingly it’s been the Republican governors and state legislatures.

In past recoveries, this isn’t something the economy had to deal with.

It must be noted that President Obama’s jobs plan — the American Jobs Act — would send emergency relief funds to state and local governments to prevent more mass layoffs and rehire some of the teachers, police officers, and firefighters that have lost their jobs.  Republicans filibustered the bill.

Where Republicans haven’t had absolute power — namely in Washington, where they only hold a majority only in the House — they’ve used what power they do have to grind things to a halt.  The debt ceiling debacle, a crisis completely of their own making, was a disaster for the economy:

All told, the data tell us that a debt-ceiling standoff is an act of economic sabotage.

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At a time when private businesses and consumers weren’t spending money (aka a recession), their answer — despite warnings from economists on both sides of the aisle — was for governments to stop paying people and buying things. (This is what “budget cuts” are.)  Smart.

At a time when the economy was incredibly fragile, they manufactured political crises — even threatening to force the US into a completely avoidable default on its debt obligations — that have eroded consumer confidence and certainty in the economy.

And now they point to all our problems and say, “See, Obama isn’t working.”

Chutzpah.

It’s a strategy that depends on people not paying paying attention.  Let’s hope that’s an assumption that doesn’t prove true.

“Siri, when was I CEO of Bain?”

Snarky Tweet of the Day award goes to Chris Hayes.

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Andrew Sullivan has a good breakdown of Mitt’s various positions on the Bain issue here and adds some context to his obfuscation in this post:

Romney basically said what was the most convenient for his self-interest at every juncture – and finally all the contradictions and changing stories caught up with him. When you have it both ways on policy matters – we’ll increase defense spending, lower taxes even further, and cut the debt! – you only look shifty. When you have it both ways on the simple facts about your life, you look like an opportunistic liar.

Campaigns have a way of revealing the truth about people, don’t they?

Romney’s refusal to release any more tax returns even in the face of what certainly seems to be stifling criticism has a lot of people wondering just how bad their contents must really be:

Another common sentiment on Twitter and, notably, voiced earlier in the day by Governor Martin O’Malley:

Doesn’t look like this is going away any time soon.  Not a good week for the Mittster. (Earlier post from me on this here.)

In 2009, Americans paid lowest tax rates in 30 years

The Washington Post reports on the latest from the CBO:

Americans paid the lowest tax rates in 30 years to the federal government in 2009, in part because of tax cuts President Obama sought to combat the Great Recession, congressional budget analysts said Tuesday.

The irony here isn’t lost on the Post:

[A]t the very moment anti-tax protesters were emerging as the most powerful force in American politics, handing Republicans landslide control of the U.S. House, the data show that people were sending the smallest portion of their income to the federal government since 1979.

Hmm. It’s almost as if the Tea Baggers aren’t concerned with facts at all…

Worth noting, though, that it wasn’t just because of tax cuts.  From Slate:

In part, the tax decline was due to the dramatic decrease in average income that year, an effect of the Great Recession that caused many Americans to slide down into lower tax brackets.

So the complete tanking of the economy was a large driver of this development, too.  And that’s certainly not cause for celebration.

Even so, the narrative of “Obama’s tax increases are killing the economy” is pretty completely undermined by these facts, and it suggests that the Tea Party folks — whose rallying cry is “Taxed Enough Already” — may not be the most historically well-informed citizens we have in the union.

But, to be fair, the Boston Tea Party is a real thing that happened.  So credit to them on that.

Praise be to the Job Creators!

From the Washington Post:

NEW YORK — JPMorgan Chase said Friday that a bad trade had cost the bank $5.8 billion this year, almost triple its original estimate, and raised the prospect that traders had improperly tried to conceal the blunder.

“This has shaken our company to the core,” CEO Jamie Dimon said.

But remember, class, these are the Job Creators, and the real reason the economy hasn’t come around is because we’re not giving Wall Street enough freedom and President Obama is hurting their feelings by mentioning every now and then that they wrecked the world economy.

Credit to JP Morgan, though, for this:

The bank said managers tied to the bad trade had been dismissed without severance pay and that it planned to revoke two years’ worth of pay from each of those executives.

It’s sad that that’s a big deal — kind of seems like common sense that if you cost the company $5.8 billion, you won’t be getting a golden parachute.  But for high finance and corporate America, paying out millions to failed executives has become the rule, not the exception.  So credit to Dimon for leading on this issue.

But the very fact that a firm as trusted and well-regarded as JP Morgan — one that largely steered clear of the subprime mess that led to the ’08 crisis — could lose so damn much money on one trade like this is pretty staggering.  The idea that these guys should have even more freedom to gamble with the home mortgages and savings accounts of ordinary people — which is essentially what Romney and the Republicans assent to when they say they would repeal and not replace financial reform with anything — boggles the mind.

In the wake of the financial crisis, many likened Wall Street to a genie that had escaped from its bottle.  The difficulty lawmakers have had reigning it in — Dodd-Frank, while a step in the right direction, has been rendered toothless by the banking lobby — has only strengthened the analogy.  Once a genie’s been freed, it’s tough to recapture.

Difficult, but not impossible.  And, in this case, not trying really shouldn’t be an option.