Friday, November 02, 2012

Republicans and The Greater Fool

I didn't realize that pretending to be charitable could save a person millions of dollars in taxes every year. But it's worked for Romney. He can promise to give to charity and take the deduction and then not give as much or at all, as this article in Bloomberg News explains.

Fuzzy Math? Voodoo Economics? Flim-Flam? Senate Republicans prove that math that you refuse to look at doesn't actually exist. At what point can you prosecute a political party for covering up the truth? Or for lying? There's a non-partisan report that shows clearly that cutting tax on the very rich doesn't help the economy at all. No wonder they're hiding it.

Information is power. Hiding it gives power to the powerful, who tend to be Republicans and their clients. Republicans prefer the public didn't listen to Nobel Prize economists like Joseph Stiglitz and Paul Krugman. Listen anyway. Make them mad. And vote accordingly.

There is a weird consistency to Republican thought (if I can call it that.) They prefer Americans believe bad science and non-science rather than the best science. They want Americans to ignore what NASA and our top atmospheric scientists have been saying about climate change. They want us to ignore the evidence of Hurricane Sandy. Republicans persist in trusting numbers that don't add up, plans that their candidate won't show, voodoo economic policies that failed disastrously during the Bush years.

There is, in economics, something called the "Greater Fool Theory", which says that you can always sell a product, no matter how bogus, no matter how foul and dangerous, simply by finding someone more foolish than you are, or more ill-informed or gullible, to buy it. To increase the number of greater fools you can also lie.

(As Romney is doing in Ohio and Michigan right now with his ads falsely claiming Obama somehow forced Jeep to send American jobs to China. Obama saved Jeep and Jeep is increasing its hiring in Ohio and Michigan.)

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Thursday, October 18, 2012

Vast Income Disparity is Bad for Business (Someone Tell Mitt)

In yesterday's New York Times, Annie Lowrey wrote about new findings by the International Monetary Fund economists (not a radical or lefty bunch by any means), laying out the clear and present danger the current disparity in incomes and wealth presents to the American economy and the global economy.

This is what the president was addressing during the debate the other night, and Romney was denying. Romney has built his fortune on the basis of income inequality, squeezing pay and benefits out of company after company, loading them with debt and looting pensions to enrich his small group of investors.

Turns out it's bad for business and bad for the broader economy––no real surprise––because employees of one company are the customers of other companies. It doesn't help the economy when one man's wealth is derived from another man's poverty. It's against the American grain.

Lowrey writes:

Since the 1980s, rich households in the United States have earned a larger and larger share of overall income. The 1 percent earns about one-sixth of all income and the top 10 percent about half, according to statistics compiled by the respected economists Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics.

For years, economists have thought of such inequality in part as a side effect of policies that fostered the country’s economic dynamism — its tax preferences for investment income, for instance. And organizations like the World Bank and the I.M.F., which is based in Washington, have generally not tackled inequality in the world head on.

But economists’ thinking has changed sharply in recent years. The Organization for Economic Cooperation and Development this year warned about the “negative consequences” of the country’s high levels of pay inequality, and suggested an aggressive series of changes to tax and spending programs to tackle it.

The I.M.F. has cautioned the United States, too. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” a commentary by fund economists said. “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”


But it's worse than "Oh well, bad things happen to some people". Maybe the investor class that is backing Governor Romney will pay attention when the numbers people spell out how their pet tax cuts and cozy pay deals actually harm their outlook. Shouldn't businessmen be concerned when their own behavior is bad for business?

The concentration of income in the hands of the rich might not just mean a more unequal society, economists believe. It might mean less stable economic expansions and sluggish growth.

That is the conclusion drawn by two economists at the fund, Mr. Ostry and Andrew G. Berg. They found that in rich countries and poor, inequality strongly correlated with shorter spells of economic expansion and thus less growth over time.

And inequality seems to have a stronger effect on growth than several other factors, including foreign investment, trade openness, exchange rate competitiveness and the strength of political institutions.


And the kicker...

“What worries me is the idea that we’re in a vicious cycle,” said Joseph E. Stiglitz, a Nobel laureate in economics who has studied inequality extensively. “Increasing inequality means a weaker economy, which means increasing inequality, which means a weaker economy. That economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.”

Unfortunately, wrongheadedness is a habit with some people. Paying taxpayer funded tribute to rich people is a behavior that's hard to unlearn. It took a long time to convince people the world isn't flat.


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Thursday, July 05, 2012

The Anti-American Business Model of Mitt Romney

Tom Hamburger, reporting in the Washington Post, tells how Mitt Romney earned his millions. He did it pushing the sharp end of the job exporting business model that's destroyed our jobs base in the last few decades. He continues to earn millions a year from his anti-working-man investments in Bain Capital. Tom Hamburger:

"Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.

"During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission."

Hamburger's carefully reported article describes Romney's harshly anti-American business model. He made his pile by impoverishing and unemploying thousands of American workers, and, perhaps more importantly, by showing other business leaders how to do it. What other business leaders hesitated to do, Romney did. If other businesses were too patriotic to ship American jobs overseas, Romney and his like would beat them by doing so. A very cynical kind of leadership. A race to the bottom, toward the ultimate business model based upon fearful, impoverished workers with no rights and no voice.

Worse still, once Romney has earned his millions where do those millions go to live? He carefully shields them from taxation that might build roads and schools here in the U.S., hiding them in secretive offshore banks in the Cayman Islands, the Bahamas and Switzerland, as reported in the August Vanity Fair magazine. Not only has he offshored American jobs, he has offshored the wealth he earned by breaking down the American industrial base.

"To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it.

"That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers."

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