Why Romney’s so afraid of talking about what he did at Bain

Discussion in 'Politics' started by Synthaholic, Jul 18, 2012.

  1. Synthaholic
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    Synthaholic Platinum Member

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    The Pain in Bain





    1. Obama is more eager to make his case about Bain than Romney is. The president is comfortable attacking the negative consequences, if not the fundamental concept of free-market capitalism: outsourcing and offshoring, shuttered factories, cheap Asian imports, declining middle-class wages. These have been familiar resonant notes for Democratic candidates for the past 25 years. Romney, on the other hand, doesn’t much want to defend creative destruction. He boasts about building Bain, but won’t discuss it in detail because it opens up a conversation about those same unattractive consequences: lost jobs, bankruptcies, private pensions dumped onto the federal government. In the case of China, Romney has tried to outhawk Obama, promising to launch what would amount to a trade war beginning his first day in office. When it comes to Detroit, Romney has backed away from his principled position that failed businesses should be allowed to fail. He’s in a corner, because he thinks it’s politically unsound to say what he really believes.




    2. It’s not clear that private equity—like other forms of financial innovation—is good for America. You’d think that if private equity made businesses more efficient and valuable overall, there’d be clear evidence to support it, but there isn’t. Private equity firms earn most of their money through financial engineering. A big share of their returns comes from “tax arbitrage”—figuring out how to exploit loopholes to pay less to the government. Because interest is a deductible business expense, debt financing means they often pay little or no corporate tax. Private equity’s reliance on leverage can also magnify short-term earnings without leaving the companies they manage more valuable overall. One legal but dubious practice that private equity firms engage in is paying large “special dividends” out of borrowed money. As Jim Surowiecki of the New Yorker has written, “These dividends created no economic value—they just redistributed money from the company to the private-equity investors.” There’s some anecdotal evidence that the well-regarded Bain has been a better owner than most. But there’s no real way to evaluate that either.




    3. Bain shows how Wall Street is rigged in favor of the rich. Private equity firms, like hedge funds, earn their money through a 2-and-20 structure, which means investors pay a 2 percent annual management fee, and give away one-fifth of their profits. According to one study, firms like Bain get two-thirds of of their earnings from fees charged to investors, rather than from the share of profits. According to another study, private equity firms managed to keep 70 percent of all investment profits for themselves, rather than paying them out. They’ve figured out how to be hugely profitable even if they aren’t successful, and even where firms they own go bankrupt. And because their gains come in the form of “carried interest,” private equity owners are taxed at 15 percent, rather than the top corporate rate of 35 percent.




    4. Romney’s Bain career is a story about rising inequality. It’s a telling that George Romney, Mitt’s father, made around $200,000 through most of the years he ran American Motors Corporation. Doing work that clearly created jobs, the elder Romney paid an effective tax rate that averaged 37 percent. His son made vastly more running a corporate chop shop in an industry that does not appear to create jobs overall. In 2010, Mitt Romney paid an effective tax rate of 13.9 percent on $21.7 million in investment income—around 14 times as his father much in inflation-adjusted terms. This difference encapsulates the change from corporate titans who lived in the same world as the people who worked for them, in an America with real social mobility, to a financial overclass that makes its own separate rules and has choked off social mobility. The elder Romney wasn’t embarrassed to explain what he’d done as a businessman or to release his tax returns.




    5. Bain reminds everybody how rich Romney is, how different that makes him from ordinary people, and how this kind of advantage perpetuates itself. Five years ago, according to disclosure statements, he was already worth between $190 and $250 million, not counting another $70-100 million in trusts for his children and grandchildren, and not counting real estate worth tens of millions more. It’s not clear how he turned a maximum contribution of $450,000 over 15 years at Bain into an IRA worth between $21 and $102 million (where it grows tax free). Here’s some informed speculation. Once again, the details are mysterious even if his massive exploitation of a tax break meant to encourage middle class people to save more is not.
     
  2. Warrior102
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    Warrior102 Gold Member

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    Another Bain thread?

    Any new material in the upcoming weeks?
     
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  3. Chris
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    Chris Gold Member

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    "Let Detroit go bankrupt" -Mitt Romney

    "I'll take a lot of credit for saving the auto industry" -Mitt Romney
     
  4. 8537
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    8537 Senior Member

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    I'm not sure what's more impressive: How spectacularly the Romney camp has blown the opportunity to define him and his experience at Bain.

    Or how spectacularly the Obama administration has moved the chess pieces and made Romney's biggest perceived strength into his greatest weakness, leading the narrative completely and defining Romney before Romney had a chance to do so.
     
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  5. onecut39
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    onecut39 VIP Member

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    The Bush people successfully attacked Kerry's military record saying it wasn't as presented. They succeeded. There is a lot more ammunition here than against Kerry.

    Mitt put himself in a box. A self made box that he constructed himself. Now the only way to get out would be to admit he is a liar. Looking t it from a pragmatic point of view I cannot see where one more lie in the sea of lies he has told would make a difference.

    There is after all one born every minute.
     
  6. Katzndogz
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    Katzndogz Diamond Member

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    Romney should take credit for saving the auto industry. He's the one that first advised a managed bankruptcy which what was ultimately done. All obama did was give GM a bunch of money to build a factory in China.

    Under obama, Stockton, Mammoth Lakes and San Bernardino have already gone bankrupt and that's just California. More to follow, like Scranton PA.

    Meanwhile, under obama, Detroit is just tearing itself down.

    http://www.cnbc.com/id/48214569
     
    Last edited: Jul 18, 2012
  7. onecut39
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    onecut39 VIP Member

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    Mitt could end it in a second by releasing his taxes, unless they would prove him not only a liar but as practicing the the things we have always hated the fat cats for practicing.

    Who knows how many taxes this plutocrat has avoided. Legal or not it will make him look like shit!
     
  8. Truthmatters
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    Truthmatters BANNED

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    Heres your problem with the cities going bankrupt and blaming obama.


    the LIBOR scandal is about to break wide open on this side of the pond and GUESS who it turns out cheated some of these cities
     
  9. LogikAndReazon
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    LogikAndReazon Gold Member

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    A private sector success, running against an unsuccessful community organizing, public beggar..................Tough choice LOL
     
  10. peach174
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    peach174 Gold Member Gold Supporting Member Supporting Member

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    Cities are going bankrupt, because of unfunded state pensions, demanded by the the unions.
    The one's who are not dealing with this issue are going bankrupt.
     

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