Monday, January 23, 2012 12:25:09 AM
The roots of Bain Capital in El Salvador’s civil war
Mitt Romney
(Credit: Jessica Rinaldi / Reuters)
Romney tapped El Salvador's wealthy families, including one linked to right-wing death squads
By Justin Elliott
Friday, Jan 20, 2012 2:00 PM 15:33:51 CST
A significant portion of the seed money that created Mitt Romney’s private equity firm, Bain Capital, was provided by wealthy oligarchs from El Salvador, including members of a family with a relative who allegedly financed rightist groups that used death squads during the country’s bloody civil war in the 1980s
Bain, the source of Romney’s fabulous personal wealth, has been the subject of recent attacks in the Republican primary over allegations that Romney and the firm behaved like, in Rick Perry’s words, “vulture capitalists.” One TV spot [ http://www.salon.com/2012/01/12/newts_killer_attack_ad/singleton/ ] denounced Romney for relying on “foreign seed money from Latin America” but did not say where the money came from. In fact, Romney recruited as investors wealthy Central Americans who were seeking a safe haven for their capital during a tumultuous and violent period in the region.
Like so much about Bain, which is known for secrecy and has been dubbed [ http://www.politico.com/news/stories/0112/71344.html ( http://dyn.politico.com/printstory.cfm?uuid=857C3466-4505-482C-9AA6-EBA0FF2C2C24 )] a “black box,” all the names of the investors who put up the money for the initial fund in 1984 are not known. Much of what we do know was first reported [ http://www.highbeam.com/doc/1P2-8291177.html ] by the Boston Globe in 1994 when Romney ran for U.S. Senate against Ted Kennedy.
In 1984, Romney had been tapped by his boss at Bain & Co, a consulting firm, to create a spin-off venture capital fund, Bain Capital.
A Costa Rica-born Bain official named Harry Strachan invited friends and former clients in Central America to a presentation about the fund with Romney in Miami. The group was impressed and “signed up for 20% of the fund,” according to Strachan’s memoir [ http://www.amazon.com/Finding-Path-Stories-My-Life/dp/146204199X ]. That was about $6.5 million, according to the Globe. Bain partners themselves were putting up half the money, according to Strachan. Thus the Central American investors had contributed 40 percent of the outside capital.
Back in 1984, wealthy Salvadoran families were looking for safe investments as violence and upheaval engulfed the country. The war, which pitted leftist guerrillas against a right-wing government backed by the Reagan administration, ultimately left over 70,000 people dead in the tiny nation before a peace deal was brokered by the United Nations in 1992. The vast majority of violence, a UN truth commission later found [ http://www.usip.org/publications/truth-commission-el-salvador ], was committed by rightist death squads and the military, which received U.S. training and $6 billion in military and economic aid. The Reagan administration feared that El Salvador could become a foothold for Communists in Central America.
The notorious death squads were financed by members of the Salvadoran oligarchy and had close links to the country’s military. The death squads kidnapped, tortured, and killed suspected leftists in urban areas fueling an insurgency that retreated to rural areas and waged war on the government from the countryside. The war, which lasted 12 years, triggered an exodus that brought more than 1 million Salvadorans to the United States.
There is no evidence that any of Bain Capital’s original investors were involved in these sorts of activities. But the identities of some of the investors remain secret, and there are family names that raise questions.
Four members of the de Sola family were among the original Bain investors, or “limited partners” in the company, the Globe reported. Their relative and “one-time business partner,” Orlando de Sola, was an important figure in El Salvador. A well-known [ http://www.nytimes.com/1989/08/11/world/san-salvador-journal-he-s-a-rightist-no-doubt-about-it.html?pagewanted=all&src=pm ] right-wing coffee grower with an (in his words) “authoritarian” vision for the country, de Sola spent time living in Miami but was also a founding member of the right-wing Arena party, lead by a U.S.-trained former intelligence officer named Roberto D’Aubuisson.
Craig Pyes, an investigative reporter then with the Albuquerque Journal, wrote a series on the rightist death squads based on extensive on-the-ground reporting in El Salvador in the early 1980s with Laurie Becklund of the Los Angeles Times, while the death squads were still active.
Pyes, who has since won two Pulitzer Prizes and is now a private investigator in California, says that no one has produced any proof that de Sola directly funded death squads.
“However,” Pyes says, “he was in the inner circle of the group around D’Aubuisson at the time that D’Aubuisson was well known to be involved in the death squads. De Sola’s name appears in a December 1983 FBI cable as one of 29 people suspected by State Department officials of furnishing funds and weapons to Salvadoran death squads.”
De Sola’s name also turned up in a notebook, seized from an aide to D’Aubuisson named Saravia, that detailed the finances of D’Aubuisson’s terrorist network, according to Pyes.
The Saravia notebook [ http://www.nytimes.com/1987/12/02/world/picture-of-death-squads-seen-in-key-salvadoran-notebook.html?pagewanted=all&src=pm ], reviewed by U.S. officials, listed weapons purchases, payments, and what appear to be descriptions of violent plots by rightists, including the assassination of El Salvador’s Archbishop Oscar Arnulfo Romero in 1980. Asked about [id.] the notebook by the New York Times in the late 1980s, de Sola denied that he had ever helped finance political violence. De Sola could not be reached for comment for this story.
Romney, for his part, who was much more accessible to the press in 1994, told the Globe that year that “we investigated the individuals’ integrity and looked for any obvious signs of illegal activity and problems in their background, and found none. We did not investigate in-laws and relatives.” He also said that Bain had checked the names of the Bain investors with the U.S. government. Given the policy of the Reagan administration at the time, though, it’s not clear going to the government would have been the most effective vetting mechanism.
It’s impossible to fully explore the backgrounds of the original Bain investors because we don’t know all their identities, including the names of the four members of the de Sola family mentioned by the Globe. Neither the Romney camp, Bain Capital, nor Strachan — the Bain executive who recruited the Central Americans — responded to requests for comment.
During his first presidential bid in 2007, Romney more than once touted the Central American investors in Bain while trying to woo Hispanic voters. In a speech [ http://www.presidency.ucsb.edu/ws/index.php?pid=77265 ] in March of that year to the Miami-Dade Lincoln Day Dinner, Romney actually specified five of the original “partners” in Bain Capital — but the de Sola family was not among those he named.
And that August he told [ http://www.signonsandiego.com/uniontrib/20070807/news_lz1e7oppenhei.html ] the Miami Herald, “The investments for the company that I started, Bain Capital, came largely from Latin America. My largest single investors came from El Salvador, Ecuador, Colombia and Guatemala. And so I feel a deep kinship to people in Latin America.”
Copyright © 2012 Salon Media Group, Inc.
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Bain & Co. to New Hires: We're Not the Romney Bain!
We love him, but . . .
Frederick E. Allen, Forbes Staff
1/20/2012 @ 6:08PM
Graham Rose, a partner at Bain & Co., the big Boston consulting company Mitt Romney left to co-found Bain Capital, has sent an e-mail to new hires from the Wharton School of Business making sure they understand that the two Bains are separate institutions. The e-mail explains that it’s the other Bain that Mitt Romney co-founded and where he made his millions, and that Romney doesn’t work at either today. In other words, let’s all be clear that Bain & Co. is not the place that took over companies where workers lost their jobs.
The e-mail, obtained by the website Talking Points Memo, begins
“Wharton Bainies,
As you are probably aware, one of our alums, Mitt Romney, is running for the Republican nomination for President of the United States. We are very proud to see our alumni fulfill their aspirations and contribute to global business and government affairs.
With Mitt’s continued success in the US primaries, there has been much confusion in the media between Bain & Company and Bain Capital, both shortened to just “Bain” in headlines, articles and social media, even though the two companies are completely separate entities with no sharing of governance or ownership.
The e-mail goes on to explain that Romney worked at Bain & Co. from 1977 to ’85, left to start Bain Capital, and then came back “to play a key role in our turnaround” before leaving for Bain Capital again. It assures the new hires that “Mitt Romney has no current relationship to Bain & Company, aside from being among its most prominent alumni,” and that Bain does not and cannot support candidates for political office. It also contains this nugget:
“Q. Is the confusion between Bain & Company and Bain Capital causing any issues?
“A. We have to explain more frequently the distinction between the firms. Our clients know who we are and what we do. They know that we develop practical insights for them to act on, and share a passion for their results.
Well, yes, that is very different from doing leveraged buyouts.
See a fuller version of the memo and Talking Points Memo’s report on it here [ http://tpmdc.talkingpointsmemo.com/2012/01/romney-candidacy-creates-intra-bain-headaches.php ].
2012 Forbes.com LLC™
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Taxes at the Top
By PAUL KRUGMAN
Published: January 19, 2012
Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils — partly out of voyeurism, of course, but also because it’s about time that we had this discussion.
The theme of his dance, for those who haven’t been paying attention, is taxes — his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.
Even then, however, he will face pressure to release previous returns, too — like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled “carried interest” tax break.
But the larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes — major burdens on middle-class families — this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains — three-quarters of which go to the top 1 percent of the income distribution — warrant such special treatment.
Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.
When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.
Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.
Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.
So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.
And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.
So Mr. Romney’s tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
*
Related in Opinion
Editorial: The 1% and That 15% (January 19, 2012)
http://www.nytimes.com/2012/01/19/opinion/the-1-and-that-15.html
*
© 2012 The New York Times Company
http://www.nytimes.com/2012/01/20/opinion/krugman-taxes-at-the-top.html [with comments]
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Watch Mr. 1 Percent snap at a 99 percenter
Mitt Romney
(Credit: MSNBC)
By Joan Walsh
Thursday, Jan 19, 2012 1:51 PM 22:45:07 CST
Sometimes Mitt Romney’s animatronic persona can be a political liability. It’s why the story of strapping his dog Seamus to the top of the family car for a 12-hour drive continues to, well, dog him: Who could be that callous? But most of the time I’d argue it’s a virtue, especially in a farcical GOP campaign that Paul Krugman calls the “FOF primary [ http://krugman.blogs.nytimes.com/2012/01/18/the-fof-theory-of-the-gop-primary/ ],” for “fools and frauds.” The moderately intelligent Romney rarely seems rattled by the insanity around him; he goes through the meet and greet motions day after day, knowing his piles of money will eventually tumble out of a dump truck and crush his rivals. His stoic mien also helps Romney lie with impunity.
But Thursday we saw a different Mitt Romney, a man apparently rattled by Newt Gingrich’s rise in the South Carolina polls. Romney’s troubles have partly to do with Gingrich’s nonpareil race-baiting, but they’re also about an unfolding story line that depicts the man from Bain Capital, destroyer of jobs, dodger of taxes, as the perfect frontman for the top 1 percent in a time of rising (and long overdue) national concern with economic inequality. So when a man on a rope line outside Romney headquarters in Charleston asked him today, “What will you do to support the 99 percent even though you are part of the 1 percent?” Mitt snapped. He sounded a little more Chris Christie than Richie Rich, which is what so many of his GOP friends have been urging, but I’m not sure it’s going to play well. Here’s what he said, his face getting redder as he closed:
Lemme tell ya something. America is a great nation, because we’re a united nation and those who are trying to divide the nation as you’re trying to do here and as the president is doing are hurting this country, seriously. The right course for America is not to divide America, and try and divide us between one and another, it’s for us to come together as a nation. And if you’ve got a better model, if you think China is better, or Russia is better, or Cuba’s better, or North Korea’s better, I’m glad to hear all about it. But you know what? America’s right, and you’re wrong!
On MSNBC, Andrea Mitchell praised Romney for sounding “Reaganesque,” which left Ron Fournier aghast. “I’d say he built a straw man. That protester didn’t say he thought Cuba and Russia had a better economic system, what he said was that Romney’s part of the 1 percent, and which is true. Romney talked about the politics that divide, the fact is, it’s not politics that divides us, we are divided. There is a huge and growing gap between the rich and the middle class and the poor – and by the way, that’s an anxiety shared by blue-collar Republicans and blue-collar Democrats.”
They’re both right. Romney did sound Reaganesque – the nasty, bitter Reagan who was California’s governor more than the genial “morning in America” president most people remember (although both Reagans could play the politics of resentment when they had to). But I’d say he was more Nixon than Reagan. And that redbaiting, wow. “America’s right, and you’re wrong” is just as angry and divisive as “America, love it or leave it.” Fournier’s commonsense answer also ought to remind working-class fence-sitters that even supposed GOP populists like Chris Christie actually carry water for guys like Richie Rich. It really shouldn’t matter if you sound like Christie but push policies that enrich the Romneys. The South Carolina primary keeps getting more interesting.
Still, I stand behind my post last night [ http://www.salon.com/2012/01/19/if_dismissing_newt_is_wrong_i_dont_want_to_be_right/singleton/ ] refusing to take this new Gingrich surge seriously. For establishment Republicans, this second Newt surge has to feel like acid reflux; there is no way the thrice-married, disgraced House speaker will ever be president. But let’s give a hand to Rick Perry, who bumbled his way out of the race the way he bumbled through it, handing his endorsement to Gingrich on the very same morning Newt’s second wife told ABC News that he asked her for an open marriage so he could go on romancing his mistress Callista without the political stain of another divorce. You might say Perry was trying to help his buddy distract the media from the Marianne story. You would be wrong.
Poor Rick Santorum. Mr. blue-collar family values from Pennsylvania keeps getting jilted for the Tiffany’s-shopping serial adulterer from Georgia. Even the news that he actually won Iowa comes too late to produce another Santorum surge. (Sorry.) He’s probably under enormous pressure to follow Perry out the door, but on Thursday he looked too angry to consider that. It’s down to Romney and Gingrich in South Carolina.
Here’s the Romney video. He starts his tirade about a minute in [longer Andrea Mitchell segment embedded; the following http://www.youtube.com/watch?v=YcVA4ZACoEk (also http://www.youtube.com/watch?v=g1kotsFYizs ) is the key clip, courtesy of Mitt].
Copyright © 2012 Salon Media Group, Inc.
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Mitt Romney
(Credit: Jessica Rinaldi / Reuters)
Romney tapped El Salvador's wealthy families, including one linked to right-wing death squads
By Justin Elliott
Friday, Jan 20, 2012 2:00 PM 15:33:51 CST
A significant portion of the seed money that created Mitt Romney’s private equity firm, Bain Capital, was provided by wealthy oligarchs from El Salvador, including members of a family with a relative who allegedly financed rightist groups that used death squads during the country’s bloody civil war in the 1980s
Bain, the source of Romney’s fabulous personal wealth, has been the subject of recent attacks in the Republican primary over allegations that Romney and the firm behaved like, in Rick Perry’s words, “vulture capitalists.” One TV spot [ http://www.salon.com/2012/01/12/newts_killer_attack_ad/singleton/ ] denounced Romney for relying on “foreign seed money from Latin America” but did not say where the money came from. In fact, Romney recruited as investors wealthy Central Americans who were seeking a safe haven for their capital during a tumultuous and violent period in the region.
Like so much about Bain, which is known for secrecy and has been dubbed [ http://www.politico.com/news/stories/0112/71344.html ( http://dyn.politico.com/printstory.cfm?uuid=857C3466-4505-482C-9AA6-EBA0FF2C2C24 )] a “black box,” all the names of the investors who put up the money for the initial fund in 1984 are not known. Much of what we do know was first reported [ http://www.highbeam.com/doc/1P2-8291177.html ] by the Boston Globe in 1994 when Romney ran for U.S. Senate against Ted Kennedy.
In 1984, Romney had been tapped by his boss at Bain & Co, a consulting firm, to create a spin-off venture capital fund, Bain Capital.
A Costa Rica-born Bain official named Harry Strachan invited friends and former clients in Central America to a presentation about the fund with Romney in Miami. The group was impressed and “signed up for 20% of the fund,” according to Strachan’s memoir [ http://www.amazon.com/Finding-Path-Stories-My-Life/dp/146204199X ]. That was about $6.5 million, according to the Globe. Bain partners themselves were putting up half the money, according to Strachan. Thus the Central American investors had contributed 40 percent of the outside capital.
Back in 1984, wealthy Salvadoran families were looking for safe investments as violence and upheaval engulfed the country. The war, which pitted leftist guerrillas against a right-wing government backed by the Reagan administration, ultimately left over 70,000 people dead in the tiny nation before a peace deal was brokered by the United Nations in 1992. The vast majority of violence, a UN truth commission later found [ http://www.usip.org/publications/truth-commission-el-salvador ], was committed by rightist death squads and the military, which received U.S. training and $6 billion in military and economic aid. The Reagan administration feared that El Salvador could become a foothold for Communists in Central America.
The notorious death squads were financed by members of the Salvadoran oligarchy and had close links to the country’s military. The death squads kidnapped, tortured, and killed suspected leftists in urban areas fueling an insurgency that retreated to rural areas and waged war on the government from the countryside. The war, which lasted 12 years, triggered an exodus that brought more than 1 million Salvadorans to the United States.
There is no evidence that any of Bain Capital’s original investors were involved in these sorts of activities. But the identities of some of the investors remain secret, and there are family names that raise questions.
Four members of the de Sola family were among the original Bain investors, or “limited partners” in the company, the Globe reported. Their relative and “one-time business partner,” Orlando de Sola, was an important figure in El Salvador. A well-known [ http://www.nytimes.com/1989/08/11/world/san-salvador-journal-he-s-a-rightist-no-doubt-about-it.html?pagewanted=all&src=pm ] right-wing coffee grower with an (in his words) “authoritarian” vision for the country, de Sola spent time living in Miami but was also a founding member of the right-wing Arena party, lead by a U.S.-trained former intelligence officer named Roberto D’Aubuisson.
Craig Pyes, an investigative reporter then with the Albuquerque Journal, wrote a series on the rightist death squads based on extensive on-the-ground reporting in El Salvador in the early 1980s with Laurie Becklund of the Los Angeles Times, while the death squads were still active.
Pyes, who has since won two Pulitzer Prizes and is now a private investigator in California, says that no one has produced any proof that de Sola directly funded death squads.
“However,” Pyes says, “he was in the inner circle of the group around D’Aubuisson at the time that D’Aubuisson was well known to be involved in the death squads. De Sola’s name appears in a December 1983 FBI cable as one of 29 people suspected by State Department officials of furnishing funds and weapons to Salvadoran death squads.”
De Sola’s name also turned up in a notebook, seized from an aide to D’Aubuisson named Saravia, that detailed the finances of D’Aubuisson’s terrorist network, according to Pyes.
The Saravia notebook [ http://www.nytimes.com/1987/12/02/world/picture-of-death-squads-seen-in-key-salvadoran-notebook.html?pagewanted=all&src=pm ], reviewed by U.S. officials, listed weapons purchases, payments, and what appear to be descriptions of violent plots by rightists, including the assassination of El Salvador’s Archbishop Oscar Arnulfo Romero in 1980. Asked about [id.] the notebook by the New York Times in the late 1980s, de Sola denied that he had ever helped finance political violence. De Sola could not be reached for comment for this story.
Romney, for his part, who was much more accessible to the press in 1994, told the Globe that year that “we investigated the individuals’ integrity and looked for any obvious signs of illegal activity and problems in their background, and found none. We did not investigate in-laws and relatives.” He also said that Bain had checked the names of the Bain investors with the U.S. government. Given the policy of the Reagan administration at the time, though, it’s not clear going to the government would have been the most effective vetting mechanism.
It’s impossible to fully explore the backgrounds of the original Bain investors because we don’t know all their identities, including the names of the four members of the de Sola family mentioned by the Globe. Neither the Romney camp, Bain Capital, nor Strachan — the Bain executive who recruited the Central Americans — responded to requests for comment.
During his first presidential bid in 2007, Romney more than once touted the Central American investors in Bain while trying to woo Hispanic voters. In a speech [ http://www.presidency.ucsb.edu/ws/index.php?pid=77265 ] in March of that year to the Miami-Dade Lincoln Day Dinner, Romney actually specified five of the original “partners” in Bain Capital — but the de Sola family was not among those he named.
And that August he told [ http://www.signonsandiego.com/uniontrib/20070807/news_lz1e7oppenhei.html ] the Miami Herald, “The investments for the company that I started, Bain Capital, came largely from Latin America. My largest single investors came from El Salvador, Ecuador, Colombia and Guatemala. And so I feel a deep kinship to people in Latin America.”
Copyright © 2012 Salon Media Group, Inc.
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Bain & Co. to New Hires: We're Not the Romney Bain!
We love him, but . . .
Frederick E. Allen, Forbes Staff
1/20/2012 @ 6:08PM
Graham Rose, a partner at Bain & Co., the big Boston consulting company Mitt Romney left to co-found Bain Capital, has sent an e-mail to new hires from the Wharton School of Business making sure they understand that the two Bains are separate institutions. The e-mail explains that it’s the other Bain that Mitt Romney co-founded and where he made his millions, and that Romney doesn’t work at either today. In other words, let’s all be clear that Bain & Co. is not the place that took over companies where workers lost their jobs.
The e-mail, obtained by the website Talking Points Memo, begins
“Wharton Bainies,
As you are probably aware, one of our alums, Mitt Romney, is running for the Republican nomination for President of the United States. We are very proud to see our alumni fulfill their aspirations and contribute to global business and government affairs.
With Mitt’s continued success in the US primaries, there has been much confusion in the media between Bain & Company and Bain Capital, both shortened to just “Bain” in headlines, articles and social media, even though the two companies are completely separate entities with no sharing of governance or ownership.
The e-mail goes on to explain that Romney worked at Bain & Co. from 1977 to ’85, left to start Bain Capital, and then came back “to play a key role in our turnaround” before leaving for Bain Capital again. It assures the new hires that “Mitt Romney has no current relationship to Bain & Company, aside from being among its most prominent alumni,” and that Bain does not and cannot support candidates for political office. It also contains this nugget:
“Q. Is the confusion between Bain & Company and Bain Capital causing any issues?
“A. We have to explain more frequently the distinction between the firms. Our clients know who we are and what we do. They know that we develop practical insights for them to act on, and share a passion for their results.
Well, yes, that is very different from doing leveraged buyouts.
See a fuller version of the memo and Talking Points Memo’s report on it here [ http://tpmdc.talkingpointsmemo.com/2012/01/romney-candidacy-creates-intra-bain-headaches.php ].
2012 Forbes.com LLC™
http://www.forbes.com/sites/frederickallen/2012/01/20/bain-co-to-new-hires-were-not-the-romney-bain/ [no comments yet]
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Taxes at the Top
By PAUL KRUGMAN
Published: January 19, 2012
Call me peculiar, but I’m actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils — partly out of voyeurism, of course, but also because it’s about time that we had this discussion.
The theme of his dance, for those who haven’t been paying attention, is taxes — his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return.
Even then, however, he will face pressure to release previous returns, too — like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled “carried interest” tax break.
But the larger question isn’t what Mitt Romney’s tax returns have to say about Mitt Romney; it’s what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, he’s actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes — major burdens on middle-class families — this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains — three-quarters of which go to the top 1 percent of the income distribution — warrant such special treatment.
Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false.
When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasn’t always thus — and the days when the superrich paid much higher taxes weren’t that long ago. Back in 1986, Ronald Reagan — yes, Ronald Reagan — signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clinton’s first term.
Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Children’s Health Insurance Program. And today’s ultralow rates — the lowest since the days of Herbert Hoover — date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq.
Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clinton’s first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut.
So is it essential that the rich receive such a big tax break? There is a theoretical case for according special treatment to capital gains, but there are also theoretical and practical arguments against such special treatment. In particular, the huge gap between taxes on earned income and taxes on unearned income creates a perverse incentive to arrange one’s affairs so as to make income appear in the “right” category.
And the economic record certainly doesn’t support the notion that superlow taxes on the superrich are the key to prosperity. During that first Clinton term, when the very rich paid much higher taxes than they do now, the economy added 11.5 million jobs, dwarfing anything achieved even during the good years of the Bush administration.
So Mr. Romney’s tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
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Related in Opinion
Editorial: The 1% and That 15% (January 19, 2012)
http://www.nytimes.com/2012/01/19/opinion/the-1-and-that-15.html
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© 2012 The New York Times Company
http://www.nytimes.com/2012/01/20/opinion/krugman-taxes-at-the-top.html [with comments]
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Watch Mr. 1 Percent snap at a 99 percenter
Mitt Romney
(Credit: MSNBC)
By Joan Walsh
Thursday, Jan 19, 2012 1:51 PM 22:45:07 CST
Sometimes Mitt Romney’s animatronic persona can be a political liability. It’s why the story of strapping his dog Seamus to the top of the family car for a 12-hour drive continues to, well, dog him: Who could be that callous? But most of the time I’d argue it’s a virtue, especially in a farcical GOP campaign that Paul Krugman calls the “FOF primary [ http://krugman.blogs.nytimes.com/2012/01/18/the-fof-theory-of-the-gop-primary/ ],” for “fools and frauds.” The moderately intelligent Romney rarely seems rattled by the insanity around him; he goes through the meet and greet motions day after day, knowing his piles of money will eventually tumble out of a dump truck and crush his rivals. His stoic mien also helps Romney lie with impunity.
But Thursday we saw a different Mitt Romney, a man apparently rattled by Newt Gingrich’s rise in the South Carolina polls. Romney’s troubles have partly to do with Gingrich’s nonpareil race-baiting, but they’re also about an unfolding story line that depicts the man from Bain Capital, destroyer of jobs, dodger of taxes, as the perfect frontman for the top 1 percent in a time of rising (and long overdue) national concern with economic inequality. So when a man on a rope line outside Romney headquarters in Charleston asked him today, “What will you do to support the 99 percent even though you are part of the 1 percent?” Mitt snapped. He sounded a little more Chris Christie than Richie Rich, which is what so many of his GOP friends have been urging, but I’m not sure it’s going to play well. Here’s what he said, his face getting redder as he closed:
Lemme tell ya something. America is a great nation, because we’re a united nation and those who are trying to divide the nation as you’re trying to do here and as the president is doing are hurting this country, seriously. The right course for America is not to divide America, and try and divide us between one and another, it’s for us to come together as a nation. And if you’ve got a better model, if you think China is better, or Russia is better, or Cuba’s better, or North Korea’s better, I’m glad to hear all about it. But you know what? America’s right, and you’re wrong!
On MSNBC, Andrea Mitchell praised Romney for sounding “Reaganesque,” which left Ron Fournier aghast. “I’d say he built a straw man. That protester didn’t say he thought Cuba and Russia had a better economic system, what he said was that Romney’s part of the 1 percent, and which is true. Romney talked about the politics that divide, the fact is, it’s not politics that divides us, we are divided. There is a huge and growing gap between the rich and the middle class and the poor – and by the way, that’s an anxiety shared by blue-collar Republicans and blue-collar Democrats.”
They’re both right. Romney did sound Reaganesque – the nasty, bitter Reagan who was California’s governor more than the genial “morning in America” president most people remember (although both Reagans could play the politics of resentment when they had to). But I’d say he was more Nixon than Reagan. And that redbaiting, wow. “America’s right, and you’re wrong” is just as angry and divisive as “America, love it or leave it.” Fournier’s commonsense answer also ought to remind working-class fence-sitters that even supposed GOP populists like Chris Christie actually carry water for guys like Richie Rich. It really shouldn’t matter if you sound like Christie but push policies that enrich the Romneys. The South Carolina primary keeps getting more interesting.
Still, I stand behind my post last night [ http://www.salon.com/2012/01/19/if_dismissing_newt_is_wrong_i_dont_want_to_be_right/singleton/ ] refusing to take this new Gingrich surge seriously. For establishment Republicans, this second Newt surge has to feel like acid reflux; there is no way the thrice-married, disgraced House speaker will ever be president. But let’s give a hand to Rick Perry, who bumbled his way out of the race the way he bumbled through it, handing his endorsement to Gingrich on the very same morning Newt’s second wife told ABC News that he asked her for an open marriage so he could go on romancing his mistress Callista without the political stain of another divorce. You might say Perry was trying to help his buddy distract the media from the Marianne story. You would be wrong.
Poor Rick Santorum. Mr. blue-collar family values from Pennsylvania keeps getting jilted for the Tiffany’s-shopping serial adulterer from Georgia. Even the news that he actually won Iowa comes too late to produce another Santorum surge. (Sorry.) He’s probably under enormous pressure to follow Perry out the door, but on Thursday he looked too angry to consider that. It’s down to Romney and Gingrich in South Carolina.
Here’s the Romney video. He starts his tirade about a minute in [longer Andrea Mitchell segment embedded; the following http://www.youtube.com/watch?v=YcVA4ZACoEk (also http://www.youtube.com/watch?v=g1kotsFYizs ) is the key clip, courtesy of Mitt].
Copyright © 2012 Salon Media Group, Inc.
http://www.salon.com/2012/01/19/watch_mr_one_percent_snap_at_a_99_percenter/singleton/ [with comments]
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