Our Lost Generation

From “In Shovels, A Remedy For Jobs And Growth,” Eduardo Porter, NYT:

“At the end of last year, according to the nonpartisan Congressional Budget Office, the economy was still about 5.5 percent smaller than it would have been had it avoided the recession and kept growing along its long-term potential path, making full use of the workers and equipment currently sitting idle. … By the time we recover to our potential — which the C.B.O. expects will take until 2017 — the Great Recession set off by the implosion of the housing bubble more than five years ago will have cost us nearly half of one year’s entire economic production:  about $7.5 trillion.

“We will be paying the price for years.  The slump is hindering capital investment, stunting the careers of college graduates and encouraging workers to drop out of the labor force….”  Emphasis added.

Every time I hear some Republican apoplectic about the debt we’re placing on our kids and the high taxes they will have to pay, I think of my own Millenial son who does not have a job commensurate with his education and is not on the career path he should be.  I believe his earnings and achievements will be adversely affected for the rest of his life.  I’m sure he would much, much rather pay higher taxes down the road on an income higher than what now seems in store for him.  It’s not just the loss of money that’s so sad, it’s the loss of career satisfaction as well.

Krugman Scolds the Deficit Scolds

From “Fighting Fiscal Phantoms,” Paul Krugman, NYT:

“But we’re not  Greece, and it’s almost impossible to see how this [a run on Treasuries, a spike in interest rates and a return to recession] could actually happen to a country in our situation.

“For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars.  So our government, unlike the Greek government, literally can’t run out of money.  After all, it can print the stuff.

“But if the U. S. government prints money to pay its bills, won’t that lead to inflation?  No, not if the economy is still depressed.

“Still, haven’t crises like the one envisioned by deficit scolds happened in the past?  Actually, no.  As far as I can tell, every example supposedly illustrating the dangers of debt involves either a country that, like Greece today, lacked its own currency, or a country that, like Asian economies in the 1990s, had large debts in foreign currencies.

“For years, deficit scolds have held Washington in thrall with warnings of an imminent debt crisis, even though investors, who continue to buy U. S. bonds, clearly believe that such a crisis won’t happen; economic analysis says that such a crisis can’t happen; and the historical record shows no examples bearing any resemblance to our current situation in which such a crisis actually did happen.”

More Revenue, But Far From Redistribution

So how much does that Commie redistributionist in the White House want to soak the rich?  Not so much, it turns out.

From “Tax Talks Raise Bar for Richest,” David Kocieniewski, NYT:

“If all Mr. Obama’s tax proposals for wealthy Americans were enacted [aint gonna happen], they would raise $1.6 trillion over the next decade.  And an analysis by the Tax Policy Center, a nonpartisan research firm, found that the increases would be heavily weighted toward the wealthiest. … Those with adjusted gross incomes from $200,000 to $500,000 would face a tax increase averaging $4,446, with people toward the lower end having only a modest increase….

“A married couple with two children earning $300,000 would see its effective tax rate increase to 21.1 percent from 16.5 percent, ….  A married couple with two children earning $2 million would see its effective federal income tax rate rise to 26.8 percent from 21.6 percent.

“About four million of the 114 million American households face a possible tax increase.

“If all of Mr. Obama’s proposals are enacted, those with adjusted gross incomes of $200,000 to $500,000 would see their after-tax income drop an average of 1.3 percent.  Taxpayers with incomes over $1 million would face a decline in after-tax income of 8.8 percent….”

So we’re not talking Marxism-Leninism here, despite what Rush and Sean and Grover would have you believe.

You’ll Be Better Off Four Years From Now

From “Cleaning Up The Economy,” Paul Krugman, NYT:

“The forces that have been holding the economy back seem likely to fade away in the years ahead.  Housing starts have been at extremely low levels for years, so the overhang of excess construction from the bubble years is long past — and it looks as if a housing recovery has already begun.  Household debt is still high by historical standards, but the ratio of debt to G.D.P. is way down from its peak, setting the stage for stronger consumer demand looking forward.

“And what about business investment?  It has actually been recovering rapidly since late 2009, and there’s every reason to expect it to keep rising as businesses see rising demand for their products.

“So…the odds are that barring major mistakes, the next four years will be much better than the past four years.”

Both Mitt and Obama know this.   The business cycle hath certainly taken away, but it’s about to giveth.  Mitt wants to waltz in and preside over — and take credit for — the coming better years.  Obama is thinking, “Hey, Mitt, you didn’t build that!”

How Mitt Might Have Paid Little or Nothing in 2008 and 2009

From “Here’s How Mitt Romney Might Have Paid No Taxes,” Rick Newman, U. S. News & World Report:

The clue comes in Schedule D of his 2010 return, in which he claimed a $4.8 million loss carried over from prior years. That helped reduce his tax bill for 2010, in which he paid $3 million in taxes on $21.7 million of income, for an effective tax rate of 13.9 percent.

The carryover means that Romney probably claimed a much bigger loss a year or two earlier, which could easily have pushed his tax rate for 2008 or 2009 down to the low single digits. Most investors lost money in 2008, the year that Lehman Brothers collapsed and the S&P 500 stock index fell by 37 percent. Romney was probably no different.

“During bad years, wealthy investors often use a legal strategy called ‘tax harvesting’ in which they sell weak investments at a loss, which they can use to offset the tax they’d need to pay on gains from better-performing investments. The loss can be carried forward, to help lower the tax bill in later years when investments might have done better.

“About half of Romney’s income in 2010 came from capital gains. If that were zeroed out in 2008, say, on account of the crumbling economy, it could have cut his income for that year to $10 million or less, with a huge deduction for a capital loss. Combined with the same sorts of charitable donations and other deductions he claimed in 2010, that could have pushed his tax burden close to zero. If Romney’s losses were big enough in 2008, he could have carried a portion of the loss forward into 2009, helping lower his taxes then, too. The fact that the loss carryover appeared on his 2010 return suggests that may well have happened.”  Emphasis added.

A Perfect Match — Mitt and a Snake Oil Salesman

Josh Marshall at Talking Points Memo reminds us that the economic “expert” Mitt is using to push his “Romney Economic Boom” plan, Kevin Hassett, wrote a best-selling book in the late 1990’s.

That book was Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market.

You remember when the Dow hit 36,000, don’t you?  Me either.


Mitt’s Possible Swiss Bank Amnesty Getting Into MSM

The mainstream media is finally raising the question of whether Mitt took advantage of the IRS’s 2009 tax amnesty for Americans with previously undisclosed Swiss banks accounts.  Participation in that amnesty would have required him to pay back taxes and a fine, but allowed him to avoid prosecution.

Matt Yglesias has raised it in the Washington Post, “If Romney releases his tax returns, what are the worst things we could find?”  Yglesias has previously written about the amnesty scenario in Slate, but WaPo is a big step up for the story to get some legs.

Yglesias also suggests that Mitt may have had either big profits from the financial crash, when most people were suffering, or big losses from the crash, so that he paid a teeny, tiny amount of taxes.  While his campaign has denied that he paid nothing, Yglesias rightly asks, “But would paying $2.75 really look all that different from paying $0?”

Of course, there is an easy way to end all the speculation about his taxes.  Mittens, the ball is in your court.  You know, the private court that’s part of your New Hampshire vacation estate.

I’m sure Mitt will post many years of tax returns online soon.  Keep checking at http://www.aintgonnahappen.com.

Mitt Is LBO, Not VC, and Why It Matters

Mitt keeps trying to portray himself as a venture capital guy, but we need to remember that he was a leveraged buyout guy and the difference between them when it comes to job creation.

From “Mitt Romney:  The Man Without a Past,” Michael Hirsh, The Atlantic:

“Mitt Romney has an identity problem.  He is running for president by making promises about America’s future, but as a man who is largely without a past.  Not only has Romney renounced many of his previous positions — on abortion, immigration, gun control, climate change, and the individual mandate he once championed as Massachusetts governor.  He also refuses to divulge many details about what even he has said is his main qualification for the White House in a faltering economy:  his successful career in ‘private equity’ from 1984 to 1999 (or thereabouts).

“What is it about the private equity world that Romney doesn’t appear eager to bring up? … The term ‘private equity’ sounds respectable, but it is a euphemism for the old leveraged buyout deals we remember from the 1980s, the era of corporate raiders like T. Boone Pickens and Henry Kravis.  After junk-bond king Michael Milken, who funded a lot of those takeovers [and whom Mitt worked with], went to jail, the industry decided to rename itself in order to remove the taint.

This is Mitt Romney’s true world.  As the founder of Bain Capital, Romney became a brilliant LBO buccaneer who specialized in buying up firms by taking on a lot of debt, using the target firm as collateral, and then trying to make the firm profitable — often by breaking up or slashing jobs — to the point where Bain and its investors could load up the firm with even more debt, which Bain would then use to pay itself off.  That would ensure a profit for Bain investors whether or not the companies themselves succeeded in the long run. 

But job creation is irrelevant to Bain’s business model, which is all about paying back investors.  Nor does the long-term fate of the companies that private-equity firms buy up matter crucially to Bain’s bottom line (though of course success is better).  The only real risk for Bain is that these companies fail to make enough initial profit in order to permit Bain to pile on more debt and extract a payout, so that it can make back its investment quickly.”  Emphasis added.

If people understand what Mitt did, and they want to vote for him anyway, that’s fine.  I just hate to think of all the people who will vote for him without really getting the Bain business model and the source of Mitt’s extraordinary wealth.

Mitt Will Lose Because He Thinks He’s Better Than We Are

From “Pathos of the Plutocrat,” Paul Krugman, NYT:

“Anyway, what’s now apparent is that the [Romney] campaign was completely unprepared for the obvious questions, and it has reacted to the Obama campaign’s decision to ask those questions with a hysteria that surely must be coming from the top.  Clearly, Mr. Romney believed that he could run for president while remaining safe inside the plutocratic bubble and is both shocked and angry at the discovery that the rules that apply to others also apply to people like him.  [F. Scott] Fitzgerald again, about the very rich:  ‘They think, deep down, that they are better than we are.’

“There are plenty of very rich Americans who have a sense of perspective, who take pride in their achievements without believing that their success entitles them to live by different rules.

“But Mitt Romney, it seems, isn’t one of those people.  And that discovery may be an even bigger issue than whatever is hidden in those tax returns he won’t release.”

Krugman’s point here is why I believe it’s okay to dislike Mitt without engaging in class warfare.  I don’t hate rich people, I just really dislike this particular rich person.

Also, Krugman shows why Mitt is more un-American than anything the fevered brains of the far right can dream up about President Obama.  There is nothing more un-American, more antithetical to who we are as a people, than thinking you’re better than other people, and I agree with Krugman that Mitt (and Ann) believe that they are superior to those of us who don’t move in their charmed circles.  It’s hard to be down-to-earth when you’re atop a dressage horse or a car elevator.


Is Mitt Lying to Us or to the SEC?

Mitt keeps saying that he retired from Bain Capital in February 1999.  He’s been saying this since his run for Massachusetts governor in 2002 to avoid responsibility for bankruptcies and layoffs in companies Bain owned.  It’s been his claim in both his presidential runs.

But nine SEC filings between 1999 and 2002 name Mitt as Bain’s chief executive and chairman, including five new partnerships.  If people invested in Bain believing that he was running it, and he wasn’t, that’s one hell of a misrepresentation.

Moreover, Mitt filed a financial disclosure in Massachusetts in 2003 declaring that he owned all of Bain Capital in 2002.  And Mitt’s severance agreement with Bain was reached in 2002.

Either Mitt is lying to the American people now or lied to the SEC then.  If it’s the former, he shouldn’t be president.  If it’s the latter, he should be prosecuted.

My guess is that since the SEC filings didn’t become an issue in his Massachusetts run, he figured he could get away with his claims about leaving Bain in early 1999 at the presidential level.  Politicians believe this at their peril.  National politics is a whole other level of scrutiny.  Sleeping dogs wake up, and sometimes they bark very loudly demanding attention.