Monday, September 10, 2012 4:46:20 AM
FACTS MATTER: The Ultimate Guide To Mitt Romney’s Convention Speech
Aug 30, 2012
http://thinkprogress.org/romney-facts-matter/
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Facts Take a Beating in [Ryan and Romney] Acceptance Speeches
August 31, 2012
http://www.nytimes.com/2012/08/31/us/politics/ryans-speech-contained-a-litany-of-falsehoods.html
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Fact-Checking Ryan’s Convention Speech
August 30, 2012
http://thecaucus.blogs.nytimes.com/2012/08/30/in-ryan-critique-of-obama-omissions-help-make-the-case/ [with comments]
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Speech, Lies and Apathy
August 30, 2012
http://opinionator.blogs.nytimes.com/2012/08/30/speech-lies-and-apathy/ [with comments]
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Beyond Factual Dishonesty
August 30, 2012
http://takingnote.blogs.nytimes.com/2012/08/30/beyond-factual-dishonesty/ [with comments]
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Brad Dutcher, Former Janesville GM Plant Employee, Says Paul Ryan 'Should Be Ashamed Of Himself' For Misleading Claim (VIDEO)
09/01/2012
[...]
Brad Dutcher, the former GM employee, told MSNBC's Ed Schultz [ http://leanforward.msnbc.com/_news/2012/08/31/13597416-ex-janesville-gm-plant-employee-paul-ryan-ought-to-be-ashamed-of-himself ] on Friday that he was at the Janesville plant during Obama's visit and that Ryan had told an "outright lie" by implying that Obama had been responsible for the plant's closure.
Dutcher said that Obama "had nothing to do with the decision to close our factory." He added that "there was never a promise made...to keep our plant open. That is completely false."
[...]
http://www.huffingtonpost.com/2012/09/01/brad-dutcher-paul-ryan-janesville-gm-plant_n_1848928.html [with video of the Ed Show segment embedded (also embedded at the link included in the excerpt), and comments]
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GOP Governor Acknowledges That Romney’s Welfare Attack Ads Are False
http://thinkprogress.org/economy/2012/08/29/766141/brownback-romney-ads-fals/ with comments] [embedded YouTube of Brownback (above) at http://www.youtube.com/watch?v=osUq7Q8Ol-8 ]
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Eric Cantor 'Probably Can't Speak' To Why Paul Ryan Included Obama Medicare Cuts In His Budget
08/31/2012
House Majority Leader Eric Cantor (R-Va.) couldn't address why vice-presidential nominee Rep. Paul Ryan (R-Wis.) attacked a $716 billion Medicare reduction from the Affordable Care Act during his acceptance speech after Ryan included the cuts in his own budget.
In an interview with Fortune magazine published Thursday [ http://features.blogs.fortune.cnn.com/2012/08/30/cantor-says-romney-ryan-offer-detailed-plan-but-cant-name-details/ ], Cantor was asked about Ryan proposing his own budget to turn Medicare into a quasi-voucher system, using the same cuts he called a cold "power play" by Democrats during his Republican National Convention speech on Wednesday.
"The assumption was that, um, the, the, ah, again — I probably can't speak to that in an exact way so I better just not," he said.
[...]
http://www.huffingtonpost.com/2012/08/31/eric-cantor-paul-ryan-medicare_n_1846693.html [with comments]
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The Medicare Killers
By PAUL KRUGMAN
Published: August 30, 2012
Paul Ryan’s speech Wednesday night may have accomplished one good thing: It finally may have dispelled the myth that he is a Serious, Honest Conservative. Indeed, Mr. Ryan’s brazen dishonesty left even his critics breathless.
Some of his fibs were trivial but telling, like his suggestion that President Obama is responsible for a closed auto plant in his hometown, even though the plant closed before Mr. Obama took office. Others were infuriating, like his sanctimonious declaration that “the truest measure of any society is how it treats those who cannot defend or care for themselves.” This from a man proposing savage cuts in Medicaid, which would cause tens of millions of vulnerable Americans to lose health coverage.
And Mr. Ryan — who has proposed $4.3 trillion in tax cuts over the next decade, versus only about $1.7 trillion in specific spending cuts — is still posing as a deficit hawk.
But Mr. Ryan’s big lie — and, yes, it deserves that designation — was his claim that “a Romney-Ryan administration will protect and strengthen Medicare.” Actually, it would kill the program.
Before I get there, let me just mention that Mr. Ryan has now gone all-in on the party line that the president’s plan to trim Medicare expenses by around $700 billion over the next decade — savings achieved by paying less to insurance companies and hospitals, not by reducing benefits — is a terrible, terrible thing. Yet, just a few days ago, Mr. Ryan was still touting his own budget plan, which included those very same savings.
But back to the big lie. The Republican Party is now firmly committed to replacing Medicare with what we might call Vouchercare. The government would no longer pay your major medical bills; instead, it would give you a voucher that could be applied to the purchase of private insurance. And, if the voucher proved insufficient to buy decent coverage, hey, that would be your problem.
Moreover, the vouchers almost certainly would be inadequate; their value would be set by a formula taking no account of likely increases in health care costs.
Why would anyone think that this was a good idea? The G.O.P. platform says that it “will empower millions of seniors to control their personal health care decisions.” Indeed. Because those of us too young for Medicare just feel so personally empowered, you know, when dealing with insurance companies.
Still, wouldn’t private insurers reduce costs through the magic of the marketplace? No. All, and I mean all, the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers (if you can’t believe this, you’ve never had to deal with an insurance company) and greater bargaining power, are better than the private sector at controlling costs.
I know this flies in the face of free-market dogma, but it’s just a fact. You can see this fact in the history of Medicare Advantage, which is run through private insurers and has consistently had higher costs than traditional Medicare. You can see it from comparisons between Medicaid and private insurance: Medicaid costs much less. And you can see it in international comparisons: The United States has the most privatized health system in the advanced world and, by far, the highest health costs.
So Vouchercare would mean higher costs and lower benefits for seniors. Over time, the Republican plan wouldn’t just end Medicare as we know it, it would kill the thing Medicare is supposed to provide: universal access to essential care. Seniors who couldn’t afford to top up their vouchers with a lot of additional money would just be out of luck.
Still, the G.O.P. promises to maintain Medicare as we know it for those currently over 55. Should everyone born before 1957 feel safe? Again, no.
For one thing, repeal of Obamacare would cause older Americans to lose a number of significant benefits that the law provides, including the way it closes the “doughnut hole” in drug coverage and the way it protects early retirees.
Beyond that, the promise of unchanged benefits for Americans of a certain age just isn’t credible. Think about the political dynamics that would arise once someone born in 1956 still received full Medicare while someone born in 1959 couldn’t afford decent coverage. Do you really think that would be a stable situation? For sure, it would unleash political warfare between the cohorts — and the odds are high that older cohorts would soon find their alleged guarantees snatched away.
The question now is whether voters will understand what’s really going on (which depends to a large extent on whether the news media do their jobs). Mr. Ryan and his party are betting that they can bluster their way through this, pretending that they are the real defenders of Medicare even as they work to kill it. Will they get away with it?
© 2012 The New York Times Company
http://www.nytimes.com/2012/08/31/opinion/Krugman.html [with comments]
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Paul Ryan’s bogus budget rules
Paul Ryan
(Credit: Reuters/Mike Segar)
His first action as Budget Committee chairman proved his reputation as a deficit hawk was a sham
By Andrew Leonard
Friday, Aug 31, 2012 12:15 PM CDT
The always-cogent Greg Ip reminds us [ http://www.economist.com/blogs/freeexchange/2012/08/paul-ryan-vice-presidency ] that the very first thing Paul Ryan did after ascending to the position of chairman of the House Budget Committee in January 2011 was to make a key change in the rules governing how the committee approached its business.
One of his first acts in that job was to replace the old Paygo budget rule, which required any new spending increase or tax cut to be offset to neutralize the deficit impact, with “Cutgo,” which applied that condition only to spending. In other words, tax cuts that blow up the deficit were fine.
The new rules immediately made Ryan’s reputation as a “deficit hawk” risible, but when I went back to look at what I wrote about the changes [ http://www.salon.com/2011/01/06/house_gop_breaks_its_own_rules/ ] when they happened, I recalled that the scandal went even deeper.
The Congressional Budget Office is the authority that the House Budget Committee depends on to decide what exactly is a spending increase. And the CBO had ruled that Obamacare reduced the deficit. This created a problem. House Republicans had sworn to repeal Obamacare. But under their own new rules, repealing Obamacare would technically result in adding to the deficit.
So what did Ryan do? He made sure the new rules [ http://www.rules.house.gov/RulesRepMedia/file/PDF_112_1/112th-Rules_xml.pdf ] included an exemption for repealing Obamacare.
There’s your Republican vice-presidential nominee, in all his glory. He may claim that it was a miserable experience to be forced to go along with the Bush administration and vote for all those budget-busting wars and tax cuts and social welfare net expansions, but as soon as he achieved a position of real power, he made it abundantly clear that he too really doesn’t care about the deficit at all.
Copyright © 2012 Salon Media Group, Inc.
http://www.salon.com/2012/08/31/paul_ryans_bogus_budget_rules/ [with comments]
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Aware of 'no options,' woman dies fighting for medical coverage
Leslie Elder participates in the 2010 Race for the Cure. She was diagnosed with cancer four separate times.
By Stephanie Smith and Nadia Kounang, CNN
updated 8:06 AM EDT, Sun September 2, 2012
(CNN) -- Leslie Elder was always a fighter. But in a message to a friend in the waning days of her life, she seemed exhausted.
The note, written at a time of spiritual darkness, suggested defeat after a decades-long struggle for medical coverage.
"I honestly don't know how much more I can endure," Elder wrote earlier this year in a Facebook message to her friend Liz Jacobs. "I am fighting for (Medicaid) and disability. I can't work I sit in bed I cry a lot. I am still fighting for healthcare and still fighting foreclosure.
"I am so upset but perhaps it was not meant to be. I don't know anything anymore," said Elder, who died in July at age 63 without insurance coverage.
As she typed the note, Elder could scarcely breathe. Her lungs had filled with fluid over several months; her respiratory system was shutting down. After visits to the emergency room and several free clinics, Elder was finally diagnosed with Hodgkin's lymphoma.
But what makes her family bristle: Elder did not have to die.
If she had had health care, "Absolutely she'd still be here," said Jacquelyn Elder, Leslie's daughter, adding that Hodgkin's lymphoma has a high survival rate. "That is something really hard to deal with."
"I know she felt scared because there were no options. Why do something (about illnesses) when you know you can't get proper care to fix it?"
Except there were options.
The Affordable Care Act, which takes full effect in 2014, was supposed to save people like Elder (with pre-existing conditions and no medical coverage) in the interim by way of high-risk pools, also known as the Pre-Existing Condition Insurance Plan [ https://www.pcip.gov/ ] or PCIP.
The pools are supposed to be a safety net, but many, like Elder, are falling through the cracks.
Elder's family spent her final months fighting for Medicaid, with no clue that they qualified for Florida's high-risk pool. They are not alone: Of the estimated 200,000-375,000 people expected to enroll in PCIP in the first year, less than one-third have done it, according to the Department of Health and Human Services.
Leslie's husband, Jim Elder, admitted that he did not know many details of the program, and much of the conversation about health care has been confusing.
"I was under the impression that pre-existing (PCIP) didn't start until 2014," said Jim Elder in a recent interview with CNN.
"I'm puzzled. Since this act was passed, to us, people with pre-existing, we were hoping and searching for some sort of way to get health care. The way it has divided the country, some states suing to try and stop it, it's just confused everybody. It certainly confused us."
Jacobs, a nurse who met Leslie Elder in her role as a health care advocate and spokeswoman for the group National Nurses United, fears the Elders' story will be echoed repeatedly, even with ACA's passage.
"In a humane health care system, as much of the rest of the world has, no one would have to know the arcane minutiae of how to apply for a high risk pool," said Jacobs. "Everyone would have (coverage) that qualifies you for health care when and where you need it."
That sort of access is promised to many through the ACA, but stories like the Elders' suggest the act -- at least as it relates to high-risk pools -- still has some kinks.
In the midst of the family's confusion, Elder was unwittingly suffering from cancer again -- her fourth diagnosis. During a 2009 interview with CNN she quipped, "I don't get a cold, I get cancer, and cancer, and cancer."
That terrifying litany of cancer diagnoses began in 1988 with a bulging tumor found in her right breast. Thirteen years later, the same diagnosis, this time in her left breast.
And in 2005, it was kidney cancer. The doctor's grim pronouncement, according to Elder: " 'Your right kidney ... it's breaking apart. You have a tumor ... and you also have a tumor in your left kidney.'"
By then, the Elders had been on a roller coaster, going from what they describe as the best medical coverage to having none. In between came skyrocketing insurance premiums, high deductibles, and stacks of unpaid medical bills following each cancer diagnosis.
At a certain point, feeling like her pre-existing conditions were to blame for her soaring and unaffordable insurance rates, Elder gave up on coverage.
Her insurance company Aetna later said Elder's previous cancer diagnoses were not the culprit for the rate increases.
Although the company did not cite a specific reason for the increased rate, Cynthia Michener, an Aetna spokeswoman said: "There can be other contributing factors to rate increases for small business policies, including, for example, the aggregate cost of the entire pool of small business policies in the state."
During the interview with CNN three years ago, Elder admitted to volleying between fear of the unknown and acceptance of her fate, even though without insurance, she had no idea whether she had cancer again. But telling her story enlivened her, according to friends.
"When she was interviewed for CNN originally, it was one of the most hopeful periods of her years-long struggle," said Donna Smith, Elder's friend, an advocate and community organizer with National Nurses United. "Most recently, as her health grew even worse and she faced the loss of her home and the final parts of her savings, Leslie just yearned for dignity and some sort of peace that never seemed to come."
And nearly three years later, as her death approached, the pendulum had swung decidedly toward fear.
"And me, Ms. Healthcare CNN interview tough person now a scared little girl who after beating cancer 4x now sits in bed with oxygen and breathing treatments," Elder wrote to Jacobs.
"I was always able to stand up to whatever hit me. I'm not so sure about things anymore and maybe not so tough. I am scared."
To see if you qualify for PCIP, or to apply, visit PCIP.gov [ https://www.pcip.gov/ ].
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Related
Crush of cancer, medical bills snares family
http://articles.cnn.com/2009-10-13/health/cancer.insurance.finances_1_health-insurance-premiums-policyholders
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© 2012 Cable News Network. Turner Broadcasting System, Inc.
http://www.cnn.com/2012/09/01/health/elder-insurance/index.html [with comments]
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With Medicaid, Long-Term Care of Elderly Looms as a Rising Cost
Rena Lull and her daughter, also named Rena, at Otsego Manor nursing home near Cooperstown, N.Y. Mrs. Lull, 92, spent the last of her life savings on $250-a-day nursing home care.
Niko J. Kallianiotis for The New York Times
Graphic
The Other Medicaid Beneficiaries
[ http://www.nytimes.com/interactive/2012/09/07/us/the-other-medicaid-beneficiaries.html ]
Wendy James, 37, at the Dumont nursing home in New Rochelle, N.Y., with her mother, Elaine, 76, who has dementia.
Niko J. Kallianiotis for The New York Times
By NINA BERNSTEIN
Published: September 6, 2012
Medicaid [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicaid/index.html ] has long conjured up images of inner-city clinics jammed with poor families. Its far less-visible role is as the only safety net for millions of middle-class people whose needs for long-term care, at home or in a nursing home, outlast their resources.
With baby boomers and their parents living longer than ever, few families can count on their own money to go the distance. So while Medicare [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html ] has drawn more attention in the election campaign, seniors and their families may have even more at stake in the future of Medicaid changes — those proposed, and others already under way.
Though former President Bill Clinton overstated in his convention speech on Wednesday how much Medicaid spends on the elderly in nursing homes [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/nursing_homes/index.html ] — they account for well under a third, not nearly two-thirds, of spending — Medicaid spends more than five times as much on each senior in long-term care as it does on each poor child, and even more per person on the disabled in long-term care.
Seniors like Rena Lull, 92, who spent the last of her life savings on $250-a-day nursing home care near Cooperstown, N.Y., last year, will face uncharted territory if Republicans carry out their plan to replace Medicaid with block grants that cut spending by a third over a decade.
The move would let states change minimum eligibility, standards of care, and federal rules that now protect adult children from being billed for their parents’ Medicaid care.
Now, like a vast majority of the nation’s 1.8 million nursing home residents, Mrs. Lull, a retired schoolteacher with dementia [ http://health.nytimes.com/health/guides/disease/dementia/overview.html ], counts on Medicaid to cover most of her bill. But her daughter Rena, 66, also a retired schoolteacher with a lifetime of savings, no longer knows what she can count on in her own old age.
“I get choked up thinking about this,” she said, recalling how her widowed mother had depleted $300,000 on five years of care in the community and one year in the Otsego Manor nursing home, before qualifying for Medicaid. “I’m so scared about what’s going to happen to me.”
The presidential election may decide Medicaid’s future. But many states faced with rising Medicaid costs and budget deficits are already trying to cut the cost of long-term care by profoundly changing Medicaid coverage, through the use of federal waivers.
Waivers sought [ http://dualsdemoadvocacy.org/ ] or obtained by 26 states, including New York, California, Illinois and Texas, would affect some three million people, most of them eligible for both Medicaid and Medicare. Plans vary, but typically they try to cut costs by giving private managed-care organizations a fixed sum for a lifetime of care, from doctor and hospital visits to help at home to nursing home placement, expecting that more care will take place in less expensive settings.
Over all, 31.5 percent of Medicaid’s $400 billion in shared federal and state spending [ http://statehealthfacts.org/comparetable.jsp?ind=178&cat=4 ] goes to long-term care for the elderly and the disabled. That ranges from less than 8 percent in Hawaii, where nursing home use is low, to more than 60 percent in North Dakota.
Many people assume that Medicare will cover long-term care, but at most it covers 100 days of rehabilitation, not so-called custodial care — the help with activities of daily life, like eating and bathing, that the aged can need for years.
To be eligible for Medicaid, however, a person typically can have no more than $14,800 in assets, and though some lawyers specialize in setting up trusts that shelter certain assets, the federal government has periodically closed loopholes that allowed it.
Mrs. Lull, who married her Ithaca College sweetheart, also a teacher, when he was in the Air Force in 1944, and carried their twin girls home in a laundry basket, is required to pay all but $50 a month of her $969 income from Social Security [ http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html ] and a pension toward the Medicaid cost of her shared room. Her case is typical, in that she cared for her husband before his death at home at 83.
Few Americans buy private long-term care insurance, and such insurance was dropped from the Affordable Care Act last year as actuarially unsound or unaffordable.
“More than $80,000 a year on average for a nursing home — who can sustain that?” said Robyn Grant, director of public policy and advocacy for the National Consumer Voice for Quality Long Term Care [ http://www.theconsumervoice.org/ ]. “We’re forced, most of us, to go onto Medicaid. People don’t realize this.”
No state has a more ambitious plan to overhaul Medicaid than New York, which has the biggest Medicaid budget in the country — $54 billion — and spends about 41 percent of it for long-term care, almost half on nursing homes. Jason A. Helgerson [ http://www.nytimes.com/2011/01/26/nyregion/26medicaid.html?pagewanted=all ], the state’s Medicaid chief, calls the redesign “a multiyear march away from fee-for-service” that he says will flatten the spending rate even as the population ages.
By 2015, New York will start requiring some 78,000 nursing home residents to choose one of several managed care plans or be enrolled randomly. The plans are already enrolling tens of thousands of elderly and disabled New York City residents who now receive more than 120 hours a week of government-paid help at home, with those in other downstate counties next.
“We in New York are committed to using this as a force for good,” Mr. Helgerson said, noting that such services, including the largest home care program in the country, have long been exempted from managed care. “By keeping people healthy, by keeping them out of unnecessarily restrictive, institutional settings, we can keep the program sustainable in the long run.”
Around the country, however, some health policy analysts doubt that managed care will save money, and advocates for the aging and disabled worry that the sickest and most vulnerable people may be hurt in the process.
“Managed care isn’t going to help — it’s just more money going off the top,” said Toby Edelman, senior policy attorney in the Washington office of the Center for Medicare Advocacy [ http://www.medicareadvocacy.org/ ], who has written on the importance of Medicaid to Medicare beneficiaries and their middle class relatives. “The managed care company has to take its cut.”
There is too little evidence available to evaluate whether managed care itself really saves money in long-term care, said H. Stephen Kaye, a professor at the Institute on Health and Aging at the University of California, San Francisco.
“One of the problems with the rush to do this is there isn’t a lot of knowledge about what measures should be used or how to track this,” Dr. Kaye said, noting that his analysis of 15 years of data from many states concluded that the gradual expansion of home and community services saves modest amounts, but that a rapid expansion can actually cost a state more.
While home care is generally much cheaper than nursing homes, Dr. Kaye said, states may wind up unleashing a pent-up demand for home care from eligible people who would never have entered a nursing home anyway. And, he added, the financial incentives for home care do not guarantee quality.
“It needs to be monitored with a lot of oversight,” he said.
In July, John D. Rockefeller IV, the Democratic senator from West Virginia who came up with the language allowing some of the most ambitious waivers, wrote Kathleen Sebelius, the secretary of health and human services, asking her to “take immediate steps to halt this initiative.” He complained that instead of rigorous demonstrations aimed at improving care, some states were shifting whole populations into untried programs.
A spokeswoman for the federal Center for Medicare and Medicaid Services [ http://www.cms.gov/ ] said it was “working carefully to develop new ideas to better coordinate care with appropriate safeguards to protect beneficiaries.”
Under the block grant vision of Medicaid, that federal role in oversight would end. Richard J. Herrick, president of the New York State Health Facilities Association, a trade group, says that since Medicaid rates have been cut well below cost, he would welcome a change in rules that would let nursing homes bill families for their elders’ care, in addition to what Medicaid pays.
Advocates for the elderly say that such a change would increase the burden of care already carried by many families.
Wendy James spent nine years and thousands of dollars struggling to keep her mother safe at home with her in Yonkers, in Westchester County. Her big mistake, she says now, was not filing a Medicaid application sooner.
Her mother, Elaine, 76, formerly a secretary in a doctor’s office in Manhattan, had to quit work when she developed symptoms of Alzheimer’s disease [ http://health.nytimes.com/health/guides/disease/alzheimers-disease/overview.html ]. As the illness worsened, Ms. James’s father, now 80, retired from his job in a department store to help care for his wife. When she needed an adult day program in a nursing home, which rose to $2,400 a month, the family paid out of pocket. And Ms. James, 37, who works for a medical billing company, paid up to $1,000 a month for her mother’s medications when she hit her Medicare prescription “doughnut hole.”
A 2009 analysis by the Kaiser Family Foundation found that direct, out-of-pocket spending by individuals and families accounts for 22 percent of the $178 billion spent on nursing homes.
Mrs. James is now in a New Rochelle nursing home, where Medicaid pays the bill. Her husband travels daily to spoon-feed lunch to her in the nursing home’s chaotic day room. Ms. James feeds her mother every evening after work, rubbing her cheek to remind her to swallow.
“I did what I had to do for her,” said Ms. James, the youngest of three siblings. “She was the best mom before she got sick.”
© 2012 The New York Times Company
http://www.nytimes.com/2012/09/07/health/policy/long-term-care-looms-as-rising-medicaid-cost.html [ http://www.nytimes.com/2012/09/07/health/policy/long-term-care-looms-as-rising-medicaid-cost.html?pagewanted=all ] [with comments]
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Ayn Rand and Modern Politics
Paul Ryan (left) and Ayn Rand (right)
By David Sloan Wilson
Posted: 09/06/2012 6:39 pm
Years ago, I conducted an analysis of Ayn Rand's thought that can help explain why it exerts such influence over politicians such as Paul Ryan. I didn't start out studying Rand. I was exploring how people use words such as "selfish" and "altruistic," which refer to the effects of actions on self and others. Most people would define selfishness as benefiting oneself without regard to the welfare of others and altruism as benefitting others, often at the expense of oneself. To help categorize these and other words, I created a simple table with "effect on self" as the columns and "effect on others" as rows.
.jpg)
Every time I encountered the use of a word referring to the effect of an act on self and others, I placed it in one of the four quadrants. Usually, it was easy to make a judgment call on the basis of the text containing the word. For example, in a letter that William James wrote to his mother asking for money, he expressed fear that she would regard him as selfish, meaning that he was trying to benefit himself at his family's expense. This particular usage of the word "selfish" would be placed in the right column (positive for self) and bottom row (negative for others).
In the real world, our actions can result in any of the four outcomes. There are win-win situations where everyone gains, lose-lose situations where everyone suffers, win-lose situations where I gain at the expense of others, and lose-win situations where I must sacrifice to benefit others. In a realistic description of the world, words referring to our actions would therefore be placed in all four quadrants. When I started to analyze some fundamentalist religious texts, however, a different picture emerged. All the words ended up in either the top right (win-win) or bottom left (lose-lose) quadrants, as shown for this example from an Anabaptist text written in the 17th century.
This gave me an insight into fundamentalist religions. It's not just that religious fundamentalists believe in God. They also believe in a world without tradeoffs. According to their beliefs, if they behave in a certain way, everyone will win. If they behave otherwise, everyone will lose. There are no messy tradeoffs where some win and others lose. Their world has been simplified to the point that their only choice is to head toward glory and away from ruin.
That's where Ayn Rand came into the picture. Her book of essays written with Nathanial Branden titled The Virtue of Selfishness caught my eye. Rand regarded herself as a serious philosopher in addition to a novelist and The Virtue of Selfishness outlined her doctrine of Objectivism. As I read through the essays categorizing words and phrases that referred to the effects of actions on self and others, another world without tradeoffs emerged. In Rand's world, the pursuit of self-interest was invariably good for everyone and the traditional virtues were disastrous for all. Rand also had a lexicon of words and phrases for stupid forms of selfishness (e.g., "blind desires," "hedonism," "irrational values") that were bad for both self and others. Not a single word or phrase ended up in the quadrants that reflect a tradeoff between the welfare of self and others. She even stated explicitly that "there are no conflicts of interest among rational men (p. 50)."
In other words, Rand created a system of thought that is just like religious fundamentalism in portraying a world without tradeoffs. This begins to explain her enduring appeal. She offers a world that has been simplified to the point where the only choice is to head toward glory (the pursuit of self-interest) and away from ruin.
Nathaniel Branden, Rand's disciple who also became her lover and eventually left the faith, provides a vivid example of the spell that she was able to cast, as he described in his memoir Judgment Day. As a teenager growing up in a culture that emphasized conformity, he recalls that Rand's "constructions, images, rhythms, all took hold of me in some profound way." He read her novels repeatedly and described them as like a "shield" and "fortress" that allowed him to pursue his own goals. When he first met Rand, he described her writing as a "stylized universe," a phrase that delighted her. Here is how he describes Rand's inner circle: "This is how we were back then, Ayn and I and all of us -- detached from the world -- intoxicated by the sensation of flying through the sky in a vision of life that made ordinary existence unendurably dull." If that doesn't sound like a fundamentalist religious experience, what would?
The problem with visions of life that are detached from the world -- no matter how intoxicating -- is that they crash and burn when they encounter the real world. The real world includes win-lose and lose-win situations that must be managed, and pretending that they don't exist doesn't make them go away.
Paul Ryan's fascination with Ayn Rand sounds a lot like Nathaniel Branden's. The fact that he is also drawn to religious fundamentalism might seem like a contradiction, until we realize that both portray worlds without tradeoffs in which the only choice is to head toward glory and away from ruin. How simple. How compelling. How easy to communicate to others. And how disastrous for solving the problems of modern human existence.
This piece was originally posted [(and the images in the post here taken from) http://www.thisviewoflife.com/index.php/magazine/articles/ayn-rand-and-modern-politics (with comments)] at Evolution: This View of Life [ http://www.thisviewoflife.com/ ].
Copyright © 2012 Evolution: This View of Life
http://www.huffingtonpost.com/david-sloan-wilson/ayn-rand-and-modern-polit_b_1859442.html [with comments]
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Experts say economy should grow despite who wins White House in Nov.
09/02/12
[...]
Republican presidential nominee Mitt Romney and his running mate Paul Ryan each pledged in their speeches during the GOP convention that they would create 12 million jobs over the next four years with a series of familiar policies that include reducing regulatory and tax burdens on small businesses and ramping up international trade.
[...]
"Most forecasts for employment growth are very close to 12 million over the next four years regardless of who wins the presidency," Mark Zandi, chief economist with Moody's Analytics, told The Hill.
[...]
http://thehill.com/blogs/on-the-money/economy/247081-experts-say-economy-should-grow-despite-who-wins-white-house-in-november [with comments]
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Factchecker: Romney’s ’12 million jobs’ promise
Posted by Glenn Kessler on August 30, 2012 at 11:03 pm
“And unlike the president, I have a plan to create 12 million new jobs.” — Mitt Romney
This sounds like a pretty bold statement, especially considering that only two presidents—Ronald Reagan and Bill Clinton—created more than 12 million jobs. Romney, in fact, says he can reach this same goal, in just four years, though the policy paper [ http://www.scribd.com/fullscreen/102687937?access_key=key-tvcla8fht0g06taehfj ] issued by his campaign contains few details. It is mostly a collection of policy assertions, such as such as reducing debt, overhauling the tax code, fostering free trade and so forth.
But, in fact, the number is less impressive than it sounds. This pledge amounts to an average of 250,000 jobs a month, a far cry from the 500,000 jobs a month that Romney claimed [ http://www.washingtonpost.com/blogs/fact-checker/post/mitt-romneys-new-normal-for-job-creation/2012/05/08/gIQAybrABU_blog.html ] would be created in a “normal recovery.” In recent months, the economy has averaged about 150,000 jobs a month.
The Congressional Budget Office is required to consider the effects of the so-called “fiscal cliff” if a year-end budget deal is not reached, which many experts believe would push the country into a recession. But even with that caveat, the nonpartisan agency assumes [ http://www.cbo.gov/publication/43542 ] 9.6 million jobs will be created in the next four years. (This is a revision downward; CBO had estimated [ http://www.cbo.gov/publication/42909 ] 11 million in January.)
But Moody’s Analytics, in an August forecast, predicts 12 million jobs will be created by 2016, no matter who is president. (See page 51 [ https://mail-attachment.googleusercontent.com/attachment/u/0/?ui=2&ik=bd9d03a590&view=att&th=1397a52ef81105bd&attid=0.1&disp=inline&safe=1&zw&saduie=AG9B_P-W2dqidfj1DwWfjx1DLq4v&sadet=1346377169016&sads=wCD9kJMERtpqVIp7cNiC02B5vIs&sadssc=1 (this link does not work for me as I do not use Gmail; related press release, with a link that leads to another that apparently leads to the subscription-required outlook itself, at http://www.businesswire.com/news/home/20120809005884/en/Moody%E2%80%99s-Analytics-Macro-Outlook-Economy-Growing-Slowly )].) And Macroeconomic Advisors in April also predicted a gain of 12.3 million jobs.
In other words, this is a fairly safe bet by Romney, even if he has a somewhat fuzzy plan for action. We have often noted that presidents are often at the mercy—or the beneficiary—of broad economic trends, and Romney’s pledge appears to be an effort to take advantage of that.
© 2012 The Washington Post
http://www.washingtonpost.com/blogs/election-2012/wp/2012/08/30/factchecker-romneys-12-million-job-promise/ [with comments]
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Politicians To Blame For Weak Job Growth, Economists Say
People wait in line for a job fair in Portland, Ore. The Labor Department reported on Friday that the economy added only 96,000 jobs in August.
By Bonnie Kavoussi
Posted: 09/07/2012 4:46 pm Updated: 09/08/2012 10:17 am
Five years after the economic downturn began, the unemployment rate is nearly double [ http://www.bls.gov/news.release/empsit.nr0.htm ] what it was in 2007 [ http://www.bls.gov/news.release/history/empsit_09072007.txt ]. According to some economists, politicians are to blame.
"It's a failure of leadership," said Joseph Brusuelas, senior economist at Bloomberg LP. "After close to four years of Obama administration policy and two years of GOP rule, there's enough blame to go around."
After stabilizing [ http://krugman.blogs.nytimes.com/2012/09/07/the-employment-situation/ ] in 2009, the job market has been adding only enough jobs to keep up with population growth [ http://www.huffingtonpost.com/2012/09/07/august-jobs-report_n_1864001.html#27_job-growth-is-just-barely-keeping-up-with-population-growth ]. Friday's jobs report [ http://www.huffingtonpost.com/2012/09/07/august-jobs-report_n_1864001.html?utm_hp_ref=business ] proved no different: The economy added only 96,000 jobs in August.
Both conservative [ http://online.wsj.com/article/SB10001424052702303657404576363984173620692.html ] and liberal [ http://www.nytimes.com/2010/09/03/opinion/03krugman.html ] economists agree that elected politicians have the ability to change the situation, but are failing to do so.
"Two years of Congressional inaction in the face of high unemployment and with interest rates at the zero lower bound is inexcusable," said Justin Wolfers, an economics professor at the University of Michigan.
President Barack Obama can take credit for implementing a $787 billion stimulus [ http://projects.nytimes.com/44th_president/stimulus ] that saved or created more than 3 million jobs, according to the Congressional Budget Office. But many economists argue that the hurried law did not go far enough. Obama made another attempt at job creation last year [ http://www.americanjobsact.com/ ] when he introduced a jobs bill to Congress that economists estimated [ http://thinkprogress.org/economy/2012/09/07/812251/republicans-blocked-jobs-act-one-year/ ] would create roughly 2 million jobs if passed. Congressional Republicans have blocked the bill, advocating austerity instead.
Some economists highlighted what they see as the government's failure to take action as the economy continues to struggle. Wolfers said that the government should unleash another round of fiscal stimulus and retrain the long-term unemployed. He also said that the Federal Reserve should tolerate higher inflation and make a credible statement that it will do whatever it takes to bring down the unemployment rate. Such policies, he said, would spur hiring by creating "confidence that this recession won't be allowed to continue."
In terms of its own hiring practices, the government has been cutting jobs largely at the state and local levels. Though the government typically adds jobs [ http://www.huffingtonpost.com/2012/08/03/government-employment-recovery-_n_1737915.html ], there now are [ http://www.bls.gov/news.release/empsit.t17.htm ] 639,000 fewer government workers than in January 2009 [ http://www.bls.gov/news.release/archives/empsit_02062009.htm ], when Obama took office, according to the Labor Department.
"What we’re doing is a radical departure from historical practice," Wolfers said. "We've ended up with Tea Party economic policy."
Businesses are not hiring because there is no clear sign that the economy will improve, according to some economists.
Brusuelas said that both political parties need to make sacrifices, but they have been unwilling to meet halfway to address the jobs crisis and make the budget more sustainable. As a result, Brusuelas said, $1.7 trillion in corporate cash is sitting on the sidelines.
"Growth has to be part of the strategy. It can't just be austerity," Brusuelas said, referring to Republicans. He said that meanwhile, Democrats need to stem the long-term growth of entitlement spending. "Regardless of anyone's political preference, it is a lack of policy leadership," he said.
Copyright © 2012 TheHuffingtonPost.com, Inc.
http://www.huffingtonpost.com/2012/09/07/job-growth-2012_n_1864930.html [with comments]
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Majority of New Jobs Pay Low Wages, Study Finds
A waitress at Arco Iris Restaurant in Tampa, Fla., last week. The food industry has added 300,000 low-paying jobs in the recovery.
Brian Blanco for The New York Times
By CATHERINE RAMPELL
Published: August 30, 2012
While a majority of jobs lost during the downturn were in the middle range of wages, a majority of those added during the recovery have been low paying, according to a new report [ http://www.nelp.org/index.php/content/content_about_us/tracking_the_recovery_after_the_great_recession ] from the National Employment Law Project.
The disappearance of midwage, midskill jobs is part of a longer-term trend that some refer to as a hollowing out of the work force, though it has probably been accelerated by government layoffs.
“The overarching message here is we don’t just have a jobs deficit; we have a ‘good jobs’ deficit,” said Annette Bernhardt, the report’s author and a policy co-director at the National Employment Law Project, a liberal research and advocacy group.
The report looked at 366 occupations tracked by the Labor Department and clumped them into three equal groups by wage, with each representing a third of American employment in 2008. The middle third — occupations in fields like construction, manufacturing and information, with median hourly wages of $13.84 to $21.13 — accounted for 60 percent of job losses from the beginning of 2008 to early 2010.
The job market has turned around since then, but those fields have represented only 22 percent of total job growth. Higher-wage occupations — those with a median wage of $21.14 to $54.55 — represented 19 percent of job losses when employment was falling, and 20 percent of job gains when employment began growing again.
Lower-wage occupations, with median hourly wages of $7.69 to $13.83, accounted for 21 percent of job losses during the retraction. Since employment started expanding, they have accounted for 58 percent of all job growth.
The occupations with the fastest growth were retail sales (at a median wage of $10.97 an hour) and food preparation workers ($9.04 an hour). Each category has grown by more than 300,000 workers since June 2009.
Some of these new, lower-paying jobs are being taken by people just entering the labor force, like recent high school and college graduates. Many, though, are being filled by older workers who lost more lucrative jobs in the recession and were forced to take something to scrape by.
“I think I’ve been very resilient and resistant and optimistic, up until very recently,” said Ellen Pinney, 56, who was dismissed from a $75,000-a-year job in which she managed procurement and supply for an electronics company in March 2008.
Since then, she has cobbled together a series of temporary jobs in retail and home health care and worked as a part-time receptionist for a beauty salon. She is now working as an unpaid intern for a construction company, putting together bids and business plans for green energy projects, and has moved in with her 86-year-old father in Forked River, N.J.
“I really can’t bear it anymore,” she said, noting that her applications to places like PetSmart and Target had gone unanswered. “From every standpoint — my independence, my sense of purposefulness, my self-esteem, my life planning — this is just not what I was planning.”
As Ms. Pinney’s experience shows, low-wage jobs have not been growing especially quickly in this recovery; they account for such a big share of job growth mostly because midwage job growth has been so slow.
Over the last few decades, the number of midwage, midskill jobs has stagnated or declined as employers chose to automate routine tasks or to move them offshore.
Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.
Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.
This “polarization” of skills and wages has been documented meticulously by David H. Autor, an economics professor at the Massachusetts Institute of Technology. A recent study found that this polarization accelerated in the last three recessions, particularly the last one, as financial pressures forced companies to reorganize more quickly.
“This is not just a nice, smooth process,” said Henry E. Siu, an economics professor at the University of British Columbia, who helped write the recent study about polarization and the business cycle. “A lot of these jobs were suddenly wiped out during recession and are not coming back.”
On top of private sector revamps, state and local governments have been shedding workers in recent years. Those jobs lost in the public sector have been primarily in mid and higher-wage positions, according to Ms. Bernhardt’s analysis.
“Whenever you look at data like these, there is this tendency to get overwhelmed, that there are these inevitable, big macro forces causing this polarization and we can’t do anything about them. In fact, we can,” Ms. Bernhardt said. She called for more funds for states to stem losses in the public sector and federal infrastructure projects to employ idled construction workers. Both proposals have faced resistance from Republicans in Congress.
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Related
Who Wears the Pants in This Economy? (September 2, 2012)
http://www.nytimes.com/2012/09/02/magazine/who-wears-the-pants-in-this-economy.html
*
© 2012 The New York Times Company
http://www.nytimes.com/2012/08/31/business/majority-of-new-jobs-pay-low-wages-study-finds.html
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The Great Jobs Mystery: Why Are So Many Men Dropping Out of the Workforce?
By Derek Thompson
Sep 7 2012, 12:40 PM ET
The August jobs report set two records that we need to talk about. Both involve the labor participation rate -- the share of the working-age population that has a job or is looking for a job. First, men's participation rate fell to its lowest point on record (since 1948). Second, the overall participation rate fell to its lowest point since 1981.
[...]
But why is this happening? There are two reasons. The first is that America is getting older, and more workers are entering that age where they are less likely to be employed. Imagine the enormous Boomer generation moving along this graph below, from left to right, as they age into their 60s and 70s. You can see how the labor participation rate would fall automatically, good economy or bad.
That's exactly what demographers have expected: A gradual decline in the participation rate as the Boomers retired and smaller generations beneath them struggled to replenish the working population. The dotted lines in the graph below are projected declines from before the Great Recession. The red line is what's actually happened. The hill has been steeper than we foresaw.
So, one interpretation of the Great Recession is that it has accelerated our labor participation fall-off by five to ten years. Older workers, who have faced the worst long-term unemployment crisis (they're more expensive; harder to train; and possibly subject to ageism) might be retiring early. As we've reported, the recession has also coincided with a sharp increase in applications for disability benefits and it's clear that, in addition to the one million older Americans who have been looking for work unsuccessfully for more than six months, hundreds of thousands have dropped out and retired early.
And that brings up the second reason why more people aren't participating in the work force: They don't think there's any work for them.
There has been a long debate over whether the recession is pulling down participation stronger than demographics. A February 2012 study found that the aging workforce accounted for 75% of the decline. But in the last few months, the Great Recession's impact might have strengthened. The share of people not in the labor force who say they do want a job has turned sharply up since March, hitting a post-recession high. Here's that graph:
To review: The combination of an aging workforce (which we cannot control) and a weak economy (which we can control) has tugged down the participation rate, which in turn has tugged down the unemployment rate ...
Oh, and what about the guys? Men's participation hit an all-time low in August. This is a record, but it's not a surprise. Male participation has been in outright decline since the 1950s, as the share of working-age women who are actually working has practically doubled since the late 1940s. Here's that picture, with men in BLUE, women in RED, and total participation in GREEN.
Most of this decline has come from older men's participation dropping dramatically since the 1950s. It's same factors we talked about above are in play. The the male population is getting older, making them less likely to work, and the economy is discouraging many from seeking a job, anyway.
[...]
Copyright © 2012 by The Atlantic Monthly Group (emphasis in original)
http://www.theatlantic.com/business/archive/2012/09/the-great-jobs-mystery-why-are-so-many-men-dropping-out-of-the-workforce/262100/ [with comments] [a couple of dear Derek's gratuitous, beyond beside the point, chirps of neo-liber-whatever inanities excised]
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Mitt Romney and Consumer Protection Regulation
Republican presidential nominee Mitt Romney addresses delegates before speaking at the Republican National Convention in Tampa, Fla., on Thursday, Aug. 30, 2012.
(Jae C. Hong/AP Photo)
Column by ADAM LEVIN [ http://www.credit.com/blog/author/adam-levin/ ], Credit.com [ http://www.credit.com/ ]
Sep. 1, 2012
The people who brought you the Great Economic Meltdown of 2008 have a new idea for you --- although if they get their way, you'll never hear about it. In fact, one of the most striking things about the new push to undo [ http://www.credit.com/blog/2012/07/6-birthday-wishes-for-the-cfpb/ ] the consumer-friendly financial reforms that followed the crash is the open contempt its backers show for American democracy.
Since this week's Republican National Convention will present their carefully orchestrated vision of a perfect unregulated, untaxed world, this might be a good time to revisit America's recent nightmare on Elm Street.
In the waning months of the George W. Bush administration, as American voters were about to choose between Barack Obama and John McCain, the U.S. economy hit a reef the size of Manhattan --- or, more precisely, Wall Street. In the wake of that disaster, two questions were repeated over and over, from coast to coast: How did this happen? How can we make sure it never happens again?
One of the most notable responses to that second question was the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in 2010. Dodd-Frank brought about the most profound changes in U.S. financial regulation since the Depression-era reforms of the Roosevelt administration. And the comparison is apt --- because without this and other strong corrective measures taken in response to the crisis, the damage to the American economy could have been far worse than it was.
Nevertheless, Dodd-Frank came under heavy attack from the beginning, with some arguing that it goes too far and others insisting that it doesn't go far enough. Dodd-Frank was enacted despite those objections, and with good reason: without it, the foxes on Wall Street were guarding the henhouse --- and the rest of America was getting eaten alive.
But now the regulation-be-damned camp --- represented by the Romney campaign --- has come up with a "fix" that avoids the messiness of political discussion and debate by sidestepping the democratic process entirely. Never mind the inconvenient fact that Dodd-Frank is the law of the land [ http://www.credit.com/blog/2011/07/what-the-governments-new-consumer-watchdog-means-for-you/ ], and that it is the constitutional duty of the executive branch --- to which Republican candidate Mitt Romney aspires --- to put it into practice.
Under the would-be president's plan [ http://thinkprogress.org/economy/2012/08/17/705491/romney-wall-street-repeal-how/ ], agencies would have to eliminate existing regulations in order to implement new ones. Specifically, agencies issuing new regulations would be required to balance the costs of new regulations by identifying offsetting cost reductions in existing regulations. In addition, Congress would have new powers to block regulations that are proposed by the agencies. As Governor Romney's economic plan affirms, "President Romney will issue an executive order instructing all agencies that they must invite Congress to vote up or down on their major regulations and forbidding them from putting those regulations into effect without congressional approval."
Sizing up the probable outcome of such a move, American Banker said [ http://www.americanbanker.com/issues/177_159/romney-plan-could-undo-dodd-frank-without-repealing-1051907-1.html ]: "Even if the courts eventually struck down Romney's proposals --- the policies would likely spark legal challenges --- they could force delays at agencies such as the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau."
Now, the Consumer Financial Protection Bureau, or CFPB, has been a particular target of the deregulation mafia. The CFPB, a watchdog agency created as part of the Dodd-Frank financial reform, has set out to create a protective buffer against the wave of frauds and abuses inflicted by scammers on struggling homeowners and other consumers --- whether those scammers be fly-by-night con artists or Fortune 500 bankers. Its mandate is to stand up for homeowners [ http://www.huffingtonpost.com/2012/08/10/consumer-financial-protection-bureau-mortgage_n_1762715.html ] and for the elderly [ http://www.baltimoresun.com/business/money/bs-bz-ambrose-elder-fraud-20120826,0,6676720.story ], for the middle class and the working poor --- in short, for all those Americans who were being shredded in the post-crash meat-grinder [ http://www.credit.com/blog/2011/08/wall-street-boosts-lobbying-spending-again/ ] while the Wall Street vultures were lining their own pockets.
You might wonder how this could be even slightly controversial. Curbing fraud, promoting financial literacy, stopping predatory lenders, protecting seniors from financial abuse, and keeping hard-working families from being thrown out of their homes --- the mandate of the CFPB sounds like a no-brainer for any democratic society with a commitment to fairness, free markets, and the rule of law.
Then again, if your success depends on back-room deals, insider trading, rigging markets, skirting the law, and flouting the will of the American people, I can see how you might have a problem with it.
And that's where the proposals embedded in Governor Romney's economic plan come in. The Wall Street grave dancers couldn't win fair and square, so they're doing what they do so well: protecting their profits by gaming the system --- then trying to pass off their slash-and-burn practices and over-the-top greed as "conservative."
This is, in reality, nothing but an end-run around democracy --- winning by cheap and probably illegal tactics what was lost in the realm of American political institutions. In my opinion, it shows blatant disdain for the Constitution and spits in the face of the American people.
Romney's economic plan sees it differently: "While not a panacea for the problem of over-regulation, implementation of this conservative principle would go some distance toward halting the relentless growth of the regulatory state."
It's true that "the regulatory state" is not something that Wall Street has ever really warmed up to. Indeed, the ideologues who profited most from the unfettered excesses that led to the crash --- many of whom continue to profit from its aftermath --- have done their best to go on as though nothing had happened. If something did happen, they expect us to believe that it happened on President Obama's watch, probably as a result of his "job-killing" policies. They maintain today --- as they always have and apparently always will --- that the solution to this and every other economic problem is to abandon regulation [ http://www.credit.com/blog/2012/01/lawsuits-may-come-for-cfpb-head/ ], screw scrutiny, and give "market forces" (i.e., them) free rein.
In other words, they think we're idiots. They expect us to forget that we were nearly eight years into the George W. Bush presidency when catastrophe hit the U.S. economy. They expect us to forget that Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG either failed, were acquired under duress, or were taken over by the government --- all before President Bush left office. They expect us to trust them when they tell us that the cure for the economic crisis that hit us like a freight train in 2008 is --- wait for it --- to return to the same laissez-faire insanity that got us into this mess in the first place.
The truth is that for the past twenty years, under the negligent stewardship of both Republican and Democratic leadership, the American economy, and the investment and credit markets in particular, were heading at top speed into uncharted territory with no one at the wheel. While ideologues of various stripes now repeat ad infinitum that "government is the problem," the truth is that huge firms were making massively risky moves --- with other people's money --- that no one but the insiders knew anything about. "Pay no attention to the man behind the curtain," they told us. What could go wrong?
Wall Street was at the wheel, with politicians and regulators riding shotgun and the American economy riding blithely in the back. It was one hell of a ride. But when you drive at full speed with your eyes closed, you're going to hit something eventually. We did, and we're living with the consequences.
Of course, when I say "we," I don't mean everyone. Some people wound up with very big bonus checks, not pink slips, in the wake of the 2008 crash. In fact, for the most part, Wall Street and the big banks --- the authors and architects of the crisis --- stepped out of the wreckage without a scratch.
The rest of the country didn't fare so well. Hard-working Americans lost their jobs, their homes, their savings, their health coverage, their retirement funds. Their kids put off going to college, or abandoned the idea entirely. Many of those people --- the lucky ones --- are just beginning to put their lives and their credit back together [ http://www.credit.com/blog/2012/07/how-credit-scores-actually-fared-in-the-recession/ ]; others are still looking for that fresh start. These are the people that Wall Street and the big banks sold out once. Now they want to do it again --- and once again, they want to do it in secret, behind our backs.
The open hostility of these people to the idea of a government "of the people, by the people, and for the people" really comes down to one thing: utter contempt for "you people." It's shameful. It's intolerable. It must be stopped.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
© 2011 Credit.com (emphasis in original)
http://abcnews.go.com/Business/mitt-romneys-rage-regulation/story?id=17128454 [with comments] [original, under title "Romney’s Rage Against Regulation", at http://www.credit.com/blog/2012/08/romneys-rage-against-regulation/ (with comment)]
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Romney’s Dodd-Frank Kill Pledge Collides With Wall Street Agenda
By Phil Mattingly - Aug 29, 2012 9:52 PM CT
Mitt Romney has pledged to repeal the Dodd-Frank Act. He won’t, and that’s just fine with Wall Street.
Instead, Romney may give the financial industry something it wants more: a revamped Dodd-Frank that would accommodate some of the most profitable and riskiest activities while preserving a patina of protection for investors and consumers.
“There’s this perception that banks hate everything in Dodd-Frank, and that’s just not true,” said Mark Calabria, a former top Republican aide on the Senate Banking Committee. “From a bank’s perspective, you’d rather have piecemeal reform of Dodd-Frank, not only because there are things in the law you want to keep, but also because you’re going to have more control over the process.”
Congressional Republicans have already laid out the roadmap.
“With Dodd-Frank, it’s not going to be repeal,” said Representative Scott Garrett, a senior Republican member of the House Financial Services Committee. “There might be repeals of sections, but there will be a piece-by-piece analysis. We’ll throw out some and reform others.”
U.S. bank executives have made no secret of their dislike of parts of President Barack Obama’s 2010 financial-regulatory overhaul. Yet those same bankers, including Goldman Sachs Group Inc. (GS)’s Lloyd Blankfein and JPMorgan Chase & Co. (JPM)’s Jamie Dimon pledged broad support for the law, leaving their lobbyists and lawyers to fight behind the scenes for revisions that may save millions, if not billions, of dollars for their companies.
‘Too Far’
“If I could push a button and eliminate Dodd-Frank would I do it? No, I would not,” Blankfein, the chief executive officer of Goldman Sachs, said in a July appearance before the Economic Club of Washington. Still, he said, there are “some parts that go too far.”
The sentiments of CEOs such as Blankfein and the political realities of Washington mean that Romney would have an easier path winning revisions than repeal.
The architecture that Wall Street wants has emerged in House and Senate hearings and proposed bills over the past two years. It includes loosening rules governing the swaps market, an area where U.S. banks reported $7 billion in revenue in the first quarter of 2012, according to the Office of the Comptroller of the Currency. Restrictions on bank investment in private equity and hedge funds, as well as their ability to trade for their own account, also have been targeted.
Change That Matters
For banks spending billions of dollars to comply with the rules dictated by the 2,300-page law -- and millions on lobbying to alter it -- these are the changes that really matter.
Romney and congressional Republicans argue that the new regulations have weakened the economic recovery, in part because banks must focus resources on compliance instead of lending that money. With hundreds of rules touching everything from mortgage underwriting to proprietary trading, revisions to the law present an opportunity to streamline or eliminate provisions that may reduce the annual pretax revenue of the largest eight banks, including Bank of America Corp. and Wells Fargo & Co. (WFC), by as much as $34 billion, according to Matthew Albrecht, a credit analyst with Standard & Poor’s.
Glenn Hubbard, an economic adviser to the Romney campaign, said in an Aug. 1 Wall Street Journal editorial that Romney would “work with Congress toward repealing and replacing the costly and burdensome Dodd-Frank legislation.” Cost-benefit analysis -- a fixture of congressional Republican proposals aimed at Dodd-Frank -- would be the Romney approach, he wrote.
Swaps Market
House and Senate Republicans have drafted dozens of changes to the law, which was put into place in the wake of the worst financial crisis since the Great Depression. Revised rules for governing the $648 trillion swaps market have been passed by the House, along with restrictions on the new Consumer Financial Protection Bureau.
Romney’s public comments track closely with the congressional Republicans’ yet have lacked detail. Until he comes forward with his plans, bank executives who assume they’ll get their wish lists are making a “roll of the dice,” said Calabria, now director of financial-regulation studies at the Cato Institute in Washington.
Calabria pointed to Republicans who have called for breaking up the largest banks or cutting back on parts of the law that give a funding edge to Wall Street firms. It’s “not necessarily always something bankers want,” he said.
Volcker Rule
The provisions that banks and their lobbyists have said go too far, such as bans or limits on trading activities including the so-called Volcker rule that bars banks from trading for their own account, have been specifically targeted by Republicans, who almost unanimously opposed the law in 2010.
The hit list also includes the consumer bureau, a regulator whose potential independence and power drew opposition as Dodd- Frank was being drafted from an array of interests, from the U.S. Chamber of Commerce to Dimon, JPMorgan’s chairman and chief executive officer. Dimon, in a 2011 letter to shareholders, said the bureau, which is housed within the Federal Reserve but maintains its independence, needed to be “effective for both consumers and banks.”
Representative Kevin McCarthy of California, the third- ranking Republican in the House, says a Romney administration will tip the balance for several House-passed bills that have been stalled by the Democratic-led Senate.
Seeing Progress
“A Romney administration will provide the opportunity for Congress to make progress with financial-services regulatory reform,” McCarthy said. “Senate Majority Leader Reid refuses to work with us in order to enhance the safety and soundness of our financial system.”
The stakes for the securities and investment firms and commercial banks far exceed the money they’ve given toward electing Romney, almost $13 million, according to the Center for Responsive Politics. Of the 10 companies whose employees gave the most money to Romney’s joint fundraising committee with the Republican National Committee, nine are Wall Street firms, according to a computer-assisted analysis by Bloomberg of Federal Election Commission data.
The eight largest banks stand to lose between $22 billion and $34 billion in pretax revenue annually as a result of the new law, according to Albrecht, the S&P analyst. The numbers, released in August, are an increase from the $19.5 billion to $26 billion initially projected by S&P.
Proprietary Trading
The “bulk of the higher projected costs” come from the Volcker rule, S&P said, citing the ban on proprietary trading that elicited more than 17,000 comment letters last year. The rule, which hasn’t been finalized by regulators, has the potential to increase the cost of borrowing for companies as it reduces liquidity in bond markets, according to Republicans.
The Dodd-Frank opponents say the Volcker Rule restricts an activity that had little to do with the financial crisis. New rules in the swaps market exposing commercial companies to extra collateral demands and allowing U.S. regulators to oversee activities in foreign jurisdictions have also drawn opposition from Republicans.
Many of the changes proposed by Republicans, though stalled in the Senate, have also received support in the House from Democrats. Lobbyists and analysts point to next year as a real opportunity.
Obama has touted the law as a necessary check on Wall Street excess, needed to protect homeowners and investors from a repeat of the failings that led up to the financial crisis.
Still Reeling
Many investors and consumers are still reeling in the wake of the near-collapse of the U.S. financial system.
The U.S. unemployment rate has stayed above 8 percent for more than 40 months and there have been 3.7 million completed foreclosures since September 2008, the peak of the financial crisis, according to data provider CoreLogic Inc. More than 11 million homeowners now owe more on their houses than they are worth and people have struggled to take advantage of interest rates that are at historic lows.
The public’s struggle is one reason wholesale repeal would be politically difficult. In the Senate especially, the rules make it much easier to block a bill than to pass one. Even if the Republicans were to gain a majority there in November, Democrats might have enough seats to sustain a filibuster to kill a repeal measure -- or even one that swings too far over toward Wall Street.
Still, if Romney wins, he’d have no shortage of allies on Capitol Hill. Plans are taking shape.
Piece by Piece
Senator Richard Shelby, the top Republican on the Senate Banking Committee, gave a speech in July outlining what he would do if he took the gavel in a Republican-led Senate in 2013.
Romney’s comments don’t rule out an option less than full appeal.
“I’d like to get rid of Dodd-Frank and go back and look at regulation piece by piece,” Romney told the guests at a London fundraiser last month. “I very much believe in updated regulation, but I believe Dodd-Frank has gone beyond what was appropriate for the sector.”
Representative Barney Frank, the Massachusetts Democrat who co-authored the law, had a simple response when asked what a Romney administration would mean for the law: “It would be the death of it,” he said.
To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net
To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-08-30/romney-s-dodd-frank-kill-pledge-collides-with-wall-street-agenda.html [with comments]
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Pruning Hedge Fund Regulation Without Cultivating Better Rules
September 5, 2012
http://dealbook.nytimes.com/2012/09/05/pruning-hedge-fund-regulation-without-cultivating-better-rules/ [with comments]
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Citigroup in $590 Million Settlement of Subprime Lawsuit
August 29, 2012
http://dealbook.nytimes.com/2012/08/29/citigroup-in-590-million-settlement-of-subprime-lawsuit/ [with comments]
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Citigroup, J&J: Real Reasons for Strong Regulation
August 31, 2012
Yesterday, two settlements were announced within hours of each other, both involving toxic products that have caused problems for Americans. In one case, Citigroup (C) announced it would pay $590 million to settle allegations by investors that it had misled them about the extent to which it had loaded its balance sheet with structured securities tied to subprime mortgages. In the other, New York’s Attorney General, Eric Schneiderman, announced that Janssen Pharmaceuticals and its corporate parent, Johnson & Johnson (JNJ), had reached an agreement with 37 states and the District of Columbia to fork over $181 million to settle claims it deceived consumers by marketing anti-psychotic drugs like Risperdal for “off-label” uses.
Two utterly different matters? Not at all. None of the companies admitted to any wrongdoing as part of the settlements, but in both cases, what is involved is mismanagement and poor governance on the part of the companies involved. Both cases point clearly to the need for effective governance – and for effective regulation to step in when governance fails.
[...]
http://www.thefiscaltimes.com/Columns/2012/08/31/Citigroup-JNJ-Real-Reasons-for-Strong-Regulation.aspx [with comments]
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[Student Loan] Debt Collector Misled Borrowers, Court Says
August 31, 2012
http://www.nytimes.com/2012/09/01/business/student-debt-collector-misled-borrowers-appeals-court-rules.html
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Last Plea on School Loans: Proving a Hopeless Future
August 31, 2012
http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html [ http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?pagewanted=all ] [with comments]
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Debt Collectors Cashing In on Student Loans
September 8, 2012
http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html [ http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?pagewanted=all ] [with comments]
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Mitt Romney exited Bain Capital with rare tax benefits in retirement
Mitt Romney barnstorms in Ohio, Florida:?The Republican presidential nominee delivers campaign speeches, saying the nation needs “a new coach,” in a nod to the start of college football season.
Read the full text of Mitt Romney's tax documents.
[ http://www.washingtonpost.com/wp-srv/politics/documents/mitt-romney-tax-documents.html ]
By Tom Hamburger, Published: September 2, 2012
Before Mitt Romney [ http://www.washingtonpost.com/mitt-romney-2012-presidential-candidate/gIQANxIecO_topic.html ] retired from Bain Capital [ http://www.washingtonpost.com/politics/mitt-romney-and-bain-capital/gJQAeUaOrW_topic.html ], the enormously profitable investment firm he founded, he made sure to lock in his gains, both realized and expected, for years to come.
He did so, in part, the way millions of other Americans do — with the tax benefits of an individual retirement account. But he was able to turbocharge the impact of those advantages and other tax breaks in his severance package from Bain in a way that few but the country’s super-rich can ever hope to do.
As a result, his IRA [ https://www.documentcloud.org/documents/411784-20120816-romney-form.html ] could be worth as much as $87 million, according to his estimates, and he can continue to earn tax-advantaged income from Bain more than a decade after he formally left the firm.
The Republican presidential nominee [ http://www.washingtonpost.com/politics/rallying-support-and-rounding-up-dollars/2012/07/18/gJQAVxZbsW_gallery.html ] has been “scrupulous” about observing the tax code, said Romney campaign spokeswoman Michele Davis. “His income is reported and taxed in full compliance with U.S. law, and he has paid 100 percent of what he has owed.” She added that the financial holdings of Romney and his wife, Ann [ http://www.washingtonpost.com/politics/ann-romneys-speech-offers-chance-to-define-mitts-appeal/2012/08/28/35f3f2ae-f129-11e1-892d-bc92fee603a7_story.html ], are managed by a blind trust the Romneys do not control.
Romney’s former colleagues say his retirement package is a well-justified reward for a chief executive who built Bain from scratch in 1984 into a financial powerhouse that backed business successes such as Staples and the Sports Authority.
The structure and tax treatment of his retirement, including the IRA, was legally sound and appropriate, they say, adding that he has earned less money over his career than some other top private-equity executives, who earned billions of dollars during the same period.
Details of Romney’s retirement assets are somewhat vague because he has released only one year of full tax returns and declined to provide additional specifics about his personal finances. But interviews with Bain executives and accounting professionals show that he was able to take advantage of tax benefits in innovative ways open only to a narrow slice of extremely affluent people — mostly those who work in private-equity firms and other investment partnerships.
His severance package, for instance, allowed him to continue sharing in the profits of the company as if he were still a partner managing it, according to his 2010 tax return and interviews with present and former Bain executives. And because he benefited from the firm’s investments as if he were an active Bain partner, he paid taxes at a lower rate on these earnings than if they were treated as ordinary retirement income. Romney negotiated the package when he was leaving the firm, Bain executives said, while he set up his IRA long before.
IRAs were established by Congress nearly 40 years ago to help people save for their retirement. Under the law today, individuals may contribute up to $5,000 per year and employers may contribute up to $50,000 a year to an employer-sponsored IRA. The money is invested, and the investments grow tax-free until retirement. There is no limit on how much money an IRA can earn tax-free.
What determines an IRA’s growth is the performance of the investments, and Bain enabled Romney, its other employees and its partners to score big on that front. It was not uncommon for senior Bain executives to accrue IRAs valued at tens of millions of dollars, according to former and present company employees, by buying into Bain investments at very low prices and then reinvesting the returns in other low-priced Bain investments after the initial investments appreciated.
When Romney was chief executive, Bain set up Simplified Employee Pension IRAs, or SEP-IRAs, under which the company contributed up to $30,000 a year to employees’ retirement accounts, according to people familiar with the program. Many of the employees decided to use this contribution to buy stock in the companies that Bain had acquired in the course of its business as a private-equity firm.
Bain executives encouraged such IRA investments. They demonstrated to Bain’s outside clients, who were also investing in the stock of these acquired companies, that Bain employees were putting their money where their mouth was and sharing in the risk with outside investors. The co-investment strategy was good for building relationships with clients. “Employee investing has always been an essential part of the culture of the firm,” said Bain spokesman Alex Stanton.
Like other IRA investors, Romney will pay a 35 percent tax on the funds in his account when he ultimately withdraws them, said Davis, the Romney campaign spokeswoman. Until then, he can use the money in the account to buy and sell stock and other assets, repeatedly reinvesting the money inside the IRA, without having to pay tax rates of up to 40 percent for short-term capital gains. That’s a huge benefit, tax experts say.
Romney’s IRA growth could be dramatic, in part, because he, like other Bain employees, was given access to a type of shares in Bain-backed companies that were often private and low-valued when the employees bought in and then were managed by Bain for growth and an eventual sale or public share offering that would maximize shareholder value.
These “A-shares” were priced by Bain at a fraction of another category of stock known as “L-shares,” which functioned like preferred stock, paying dividends and getting priority for payouts. The A-shares, or common shares, were riskier and thus priced lower, so it was possible that a relatively small IRA investment could buy significant amounts of the A-shares in some companies. The use of a dual-share structure is not unusual in the financial industry, and under financial accounting rules the A-shares must reflect a true market value of the underlying assets. Often, the value of these initially cheap A-shares soared, along with the company’s value.
Consider the example of Physio-Control, which was bought by Bain in 1994. The company, a maker of defibrillators, saw its business take off in the following years, with Bain’s initial investment multiplying 21 times. Under the dual-share structure, the rewards were heavily tilted toward the A-shares. The value of an A-share purchased in 1995 multiplied 445 times in just three years, according to a person familiar with the transaction who spoke on the condition of anonymity. In other words, a $10,000 investment in Physio-Control A-shares would in theory have returned $4.45 million.
Not all deals worked out so well. Bain bought US Synthetic, a maker of bits used in oil and gas exploration, in 1998. By the time the company was sold in 2004, the original Bain investment had multiplied a modest 1.2 times. Under the terms of the company’s dual-share structure, A-shares lost all their value.
By leveraging a series of successful A-share investments, taking profits and reinvesting the money into new A-shares, a Bain IRA fund could easily accumulate millions of dollars without any tax penalty. On the disclosure statements Romney files as a candidate for federal office, he reports his financial holdings and values them by assigning a dollar range to each one. By adding these values together, The Washington Post calculated that the holdings in his IRA were worth between $20 million and $102 million in 2011. The total range shifted downward this year, with Romney valuing the holdings in his IRA at between $17 million and $87 million.
Romney has not disclosed all the assets he used to build his IRA.
In explaining the growth of his account, Romney campaign officials do not dispute The Post’s analysis but note that he had been eligible to contribute to IRA accounts since he entered the work force in 1975 and that the years since then have often been times of strong economic growth.
That does not mean the size and growth of such IRAs are not controversial. Michael Graetz, who served in the Treasury Department under President George H.W. Bush, said massive IRAs such as Romney’s do not reflect the intent of the laws that created the accounts as a way to help working Americans reach financial security.
“One need not have $100 million in an IRA in order to accomplish retirement security,” said Graetz, who teaches tax and retirement policy at Columbia Law School. “The law deliberately set limits in order to restrict the revenue losses to the Treasury.”
Another tax expert, Edward Kleinbard of the University of Southern California, who reviewed the prices of some A- and L-shares, said Bain may have undervalued the A-shares, providing a benefit to insiders. Kleinbard, a Democrat and former chief of staff of the Congressional Joint Tax Committee, said the valuation of such shares should reflect real market prices.
But Jack Levin, a tax lawyer who has represented Bain, said the share prices at Bain were worked out “by all the investors at arm’s length based on the company’s prospects and economic condition at the time of the investment.”
He said the increase in the value of Romney’s IRA reflected business smarts, not questionable investment practices.
“There is nothing magical about it,” Levin said. In the years that Romney ran Bain, the company earned more than a 50 percent return on investment on average each year. Even a lower rate of return, 26 percent a year, combined with a regular investment of new funds in the account would give Romney “more than $100 million in his IRA account today,” according to Levin, a lawyer at Kirkland & Ellis.
He noted that there was nothing improper about amassing so much wealth. “There is nothing in the tax law that prohibits an IRA from earning as much as the sponsor’s investment acumen allows him or her to earn,” he said.
Another way in which tax rules have favored Romney’s post-Bain financial situation is through the treatment of his severance package from Bain. Again, he benefited from a tax break in a way that is available to very few. His retirement earnings receive what is called the “carried interest” deduction. That’s an accounting classification that treats certain income from private-equity firms and other partnerships as capital gains and taxes it at a rate of 15 percent, rather than as ordinary income at 35 percent.
Here’s how carried interest works: Most private-equity firms charge their clients fees known as “2 and 20” — 2 percent of an investment fund’s overall assets and 20 percent of any profits. Managers generally declare the 2 percent management fee as ordinary income, meaning they pay ordinary income and payroll taxes on the money. But most private-equity managers say the 20 percent share of profits, the “carry,” is an investment and thus should be taxed at the capital gains rate.
Defenders of carried interest say the lower tax rate provides fund managers with an incentive to take smart risks, because they share in the investment with their clients. Opponents say it is a loophole that ought to be closed.
Romney’s 1999 severance package was structured to take advantage of the carried-interest treatment. It took nearly a year of negotiations to arrange that package after he left Bain in 1999 to run the Salt Lake City Winter Olympics, Bain insiders say, and he did not formally resign as chief executive until he had negotiated the deal.
The result of the negotiations was a deal that allowed Romney to continue sharing in the profits of the company for 10 years in the same way that active managers received compensation. These carried-interest profits would be taxed at a 15 percent rate, less than half the rate that retirees might pay on other income, including payouts from pensions, IRAs and stock options.
Under the terms of the retirement package, as described by Romney and Bain executives, he would benefit from Bain business deals made through Feb. 11, 2009 — 10 years to the day after he left Boston to run the Olympics.
He would receive the 2 percent management fee as well as a share of the carried-interest profits that Bain made from acquiring and later reselling companies. Bain declined to say how large the share was, but a person familiar with the agreement said the share declined over time.
Ten-year retirement agreements such as this are unusual in the corporate world, but financial industry experts say such arrangements make sense for privately held investment partnerships such as Bain. Partnership shares are difficult to divide and, because the company is not publicly traded, it is difficult to offer a retiring founder an immediate payout, experts say.
In Romney’s case, however, the benefits did not stop when the 10 years were up, his disclosure statement and tax return show. As long as any of the Bain investment funds in which Romney invested before 2009 continued to make profits, Romney would continue to share in them. Since these funds often last five to seven years, Romney has continued to profit well beyond the termination of his severance package. Other top executives at Bain have negotiated similar retirement deals, according to a former partner.
Bain executives have said Romney is entitled to continue sharing in the profits, even in retirement, because he built Bain and led it during its most successful period. Romney helped pull together $37 million for the first investment fund, handpicked early partners, personally solicited potential investors, and presided over rigorous debates about firm strategy and acquisition decisions.
Yet some of the retirement benefits no longer flow to Romney individually but to a blind trust he established in the name of his wife, Ann.
In his 2010 tax return, Romney said the Ann Romney blind trust could receive carried-interest profits from a Bain fund based in the Cayman Islands called Bain Capital Partners (AM) X LP. To request the carried-interest tax deduction, which is typically taken by active fund managers, Romney’s attorney filed a tax form telling the IRS that Ann’s trust was “performing services” for the fund.
Tax experts say Romney can legally share in the carried-interest profits and take the deduction if Bain has agreed to the arrangement. Critics of the carried-interest deduction say this example highlights how the tax break can be abused.
“Carried interest was intended to motivate managers going forward,” said Victor Fleischer, an expert in carried interest at the University of Colorado law school. “In cases like the Romneys, it just shows it is really all about fancy tax planning. It’s not motivating managers going forward. Not only is Mitt not providing any future services, Ann never did.”
In recent years, the carried-interest deduction has proved controversial on Capitol Hill. There have been several unsuccessful efforts to eliminate the tax break, which critics say improperly treats profits like capital gains, and tax these earnings as ordinary income at 35 percent.
Some tax experts worry that the arrangements Romney benefits from set a bad precedent for a president. “He looks for every tax angle to a degree that is unbecoming in someone who would be the executive in command of the administrative apparatus that enforces the tax law,” said Lee Sheppard, a tax lawyer and contributing editor for Tax Analysts, a publication for accounting and legal professionals.
Gregory Thomas contributed to this report.
© 2012 The Washington Post
http://www.washingtonpost.com/politics/mitt-romney-exited-bain-capital-with-rare-tax-benefits-in-retirement/2012/09/02/1bddc8de-ec85-11e1-a80b-9f898562d010_story.html [with comments]
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More Tax Tricks, Private Equity Style
Editorial
Published: September 5, 2012
Gawker.com was onto something big [ http://gawker.com/5936394 (about 40% of the way down at {linked in} http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78916119 )] last month when it raised questions about Mitt Romney’s taxes by putting online confidential documents from Bain Capital, the private equity firm co-founded by Mr. Romney.
As The New York Times reported this week [ http://www.nytimes.com/2012/09/02/business/inquiry-on-tax-strategy-adds-to-scrutiny-of-finance-firms.html ], the attorney general of New York, Eric Schneiderman, has subpoenaed Bain and other private equity firms for documents that could reveal whether they have used abusive tax strategies to drastically cut their partners’ tax bills.
At issue is how private equity partners treat management fees for tax purposes. Such fees, generally 2 percent of the assets they manage, are normally considered ordinary income, like salaries. But through various machinations, several firms routinely re-brand the fees as capital gains from investing, which are taxed at 15 percent, far lower than the top rate of 35 percent for ordinary income.
Is that legal? Is it legal in some instances and not in others? Mr. Schneiderman apparently wants to find out. In the past, the Internal Revenue Service has said that converting management fees into capital gains is an area of “possible noncompliance,” but it is unclear whether the I.R.S. has audited the practice. Some tax experts have argued [ http://dealbook.nytimes.com/author/victor-fleischer/ ] that the practice is illegal, while others — including those who advise private equity firms — say it is not even aggressive. What is clear is that these tactics come on top of a huge existing loophole that allows private equity partners to pay the capital gains rate on a share of the profits earned by the funds, which comprises the bulk of their income and are separate from their management fees.
The upshot is that private equity partners, the deal makers who have become multimillionaires through debt-driven buyouts of public companies, pay a flat rate of 15 percent on all or most of their earnings, compared with top rates as high as 35 percent for wage and salary earners. If that’s not illegal, it should be.
The best way to end this problem is to get rid of the special rate for capital gains. As long as income from investments is taxed at a lower rate than income from work, there will be no stopping the search for ways, legal or otherwise, to pay the lower rate.
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Related in Opinion
Documents Show Details on Romney Family Trusts (August 24, 2012)
http://www.nytimes.com/2012/08/24/us/politics/documents-show-details-on-romney-family-trusts.html [about 40% of the way down at (linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78916119 ]
Taking Note: Two-and-Twenty Tax Dodges (August 24, 2012)
http://takingnote.blogs.nytimes.com/2012/08/24/two-and-twenty-tax-dodges/
Times Topic: United States Elections
http://topics.nytimes.com/top/opinion/united-states-politics/index.html
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© 2012 The New York Times Company
http://www.nytimes.com/2012/09/06/opinion/more-tax-tricks-private-equity-style.html
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Bain Capital Partners Deserve More Tax Breaks
By Steven Clifford
Posted: 09/06/2012 12:59 pm
My wife does not understand economics.
She read in Sunday's New York Times that Bain Capital partners had evaded income tax by converting management fees into fund investments. Bain partners saved at least $200 million in income taxes and more than $20 million in Medicare taxes.
"Why can't we do this?" she asked. "Why can't we evade taxes on income simply because we invest it?" she asked.
"We can't because we are individuals," I responded.
Judith: So are the partners at Bain Capital.
Steve: You don't understand economics. We need to give Bain Capital partners tax incentives to create jobs.
J: So when Bain Capital buys a company, the company then hires a lot of people?
S: No. The first thing Bain Capital does is to fire a bunch of people.
J: How does this create jobs?
S: The second thing Bain Capital does is to load up the company with massive debt. Then they pay themselves a dividend equal to their investment. That way they own the company without putting up a nickel.
J: And this creates jobs?
S: To gain control of a company without putting up a nickel, Bain Capital must pay a lot of lawyers, accountants, and bankers.
J: But those lawyers, bankers, and accountants already had jobs. This country does not need more work for $300 an hour parasites. It needs decent middle class jobs.
S: That is why we must give Bain Capital partners tax incentives to continue to invest.
J: Do they invest their own money?
S: Of course not. These are smart people. They invest other people's money, and get paid millions of dollars annually to do so.
J: If Bain Capital partners make millions by investing other people's money why do they need tax breaks? Wouldn't they do the same things even if they had to pay the 35 percent tax rate that everyone else does? This does not seem fair.
S: It's not a matter of fairness. It is a matter of incentives. Without a tax breaks these partners have little incentive to work. Why earn tens of millions if, like everyone else, you have to give a third of it to the government?
J: Doesn't the average worker need the same incentive?
S: Not at all. The average worker already has great incentives regardless of tax rate -- if she does not work, she starves. But the Bain Capital partners are very rich. We need to provide extra tax incentives to keep them working.
J: How does benefit anyone other than the Bain Capital partners?
S: You don't understand the economic theory of "Trickle Down." Trickle Down says we would all be better off if the rich paid less tax.
J: That's what the Bush tax cuts were supposed to do and we know how that turned out.
S: That's why Romney says we need more tax cuts. Then the rich will get more money to trickle, and there will be more poor and unemployed to get trickled on. It takes time for Trickle Down to work.
J: How long does it take?
S: In France the Bourbons tried it from 1589 until 1789. Two centuries wasn't quite long enough.
J: You're crazy. You say we must allow the Bain Capital partners to evade taxes so they will continue to invest other people's money to fire people so that the Bain partners can pay themselves a dividend and own a company for nothing, thereby making the rich richer. And if the Bain Capital partners quit tomorrow, Trickle Down might take four centuries rather than three centuries to work. Let the Partners quit tomorrow. What else would they do?
S: They could run for office?
J: Now I get it. We need to allow Bain Capital partners to evade taxes to keep them from running for office.
S: Precisely. I think you are beginning to understand economics.
Copyright © 2012 TheHuffingtonPost.com, Inc.
http://www.huffingtonpost.com/steven-clifford/bain-capital-partners-des_b_1852377.html [with comments]
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in addition to (linked in) the post to which this is a reply and preceding and (other) following, see also (linked in):
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78944571 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79158248 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79177116 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79191554 (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79195349 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79270059 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79352470 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79355319 and preceding and following;
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79355757 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79355905 (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79356259 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79356770 and preceding (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79368488 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79371020 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79372367 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79376769 and preceding and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79378873 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79380332 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79380384 (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79380911 (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79381255 (and any future following)
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79381262 and following
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=79383520 (and any future following)
Aug 30, 2012
http://thinkprogress.org/romney-facts-matter/
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Facts Take a Beating in [Ryan and Romney] Acceptance Speeches
August 31, 2012
http://www.nytimes.com/2012/08/31/us/politics/ryans-speech-contained-a-litany-of-falsehoods.html
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Fact-Checking Ryan’s Convention Speech
August 30, 2012
http://thecaucus.blogs.nytimes.com/2012/08/30/in-ryan-critique-of-obama-omissions-help-make-the-case/ [with comments]
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Speech, Lies and Apathy
August 30, 2012
http://opinionator.blogs.nytimes.com/2012/08/30/speech-lies-and-apathy/ [with comments]
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Beyond Factual Dishonesty
August 30, 2012
http://takingnote.blogs.nytimes.com/2012/08/30/beyond-factual-dishonesty/ [with comments]
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Brad Dutcher, Former Janesville GM Plant Employee, Says Paul Ryan 'Should Be Ashamed Of Himself' For Misleading Claim (VIDEO)
09/01/2012
[...]
Brad Dutcher, the former GM employee, told MSNBC's Ed Schultz [ http://leanforward.msnbc.com/_news/2012/08/31/13597416-ex-janesville-gm-plant-employee-paul-ryan-ought-to-be-ashamed-of-himself ] on Friday that he was at the Janesville plant during Obama's visit and that Ryan had told an "outright lie" by implying that Obama had been responsible for the plant's closure.
Dutcher said that Obama "had nothing to do with the decision to close our factory." He added that "there was never a promise made...to keep our plant open. That is completely false."
[...]
http://www.huffingtonpost.com/2012/09/01/brad-dutcher-paul-ryan-janesville-gm-plant_n_1848928.html [with video of the Ed Show segment embedded (also embedded at the link included in the excerpt), and comments]
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GOP Governor Acknowledges That Romney’s Welfare Attack Ads Are False
Aug 29, 2012
http://thinkprogress.org/economy/2012/08/29/766141/brownback-romney-ads-fals/ with comments] [embedded YouTube of Brownback (above) at http://www.youtube.com/watch?v=osUq7Q8Ol-8 ]
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Eric Cantor 'Probably Can't Speak' To Why Paul Ryan Included Obama Medicare Cuts In His Budget
08/31/2012
House Majority Leader Eric Cantor (R-Va.) couldn't address why vice-presidential nominee Rep. Paul Ryan (R-Wis.) attacked a $716 billion Medicare reduction from the Affordable Care Act during his acceptance speech after Ryan included the cuts in his own budget.
In an interview with Fortune magazine published Thursday [ http://features.blogs.fortune.cnn.com/2012/08/30/cantor-says-romney-ryan-offer-detailed-plan-but-cant-name-details/ ], Cantor was asked about Ryan proposing his own budget to turn Medicare into a quasi-voucher system, using the same cuts he called a cold "power play" by Democrats during his Republican National Convention speech on Wednesday.
"The assumption was that, um, the, the, ah, again — I probably can't speak to that in an exact way so I better just not," he said.
[...]
http://www.huffingtonpost.com/2012/08/31/eric-cantor-paul-ryan-medicare_n_1846693.html [with comments]
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The Medicare Killers
By PAUL KRUGMAN
Published: August 30, 2012
Paul Ryan’s speech Wednesday night may have accomplished one good thing: It finally may have dispelled the myth that he is a Serious, Honest Conservative. Indeed, Mr. Ryan’s brazen dishonesty left even his critics breathless.
Some of his fibs were trivial but telling, like his suggestion that President Obama is responsible for a closed auto plant in his hometown, even though the plant closed before Mr. Obama took office. Others were infuriating, like his sanctimonious declaration that “the truest measure of any society is how it treats those who cannot defend or care for themselves.” This from a man proposing savage cuts in Medicaid, which would cause tens of millions of vulnerable Americans to lose health coverage.
And Mr. Ryan — who has proposed $4.3 trillion in tax cuts over the next decade, versus only about $1.7 trillion in specific spending cuts — is still posing as a deficit hawk.
But Mr. Ryan’s big lie — and, yes, it deserves that designation — was his claim that “a Romney-Ryan administration will protect and strengthen Medicare.” Actually, it would kill the program.
Before I get there, let me just mention that Mr. Ryan has now gone all-in on the party line that the president’s plan to trim Medicare expenses by around $700 billion over the next decade — savings achieved by paying less to insurance companies and hospitals, not by reducing benefits — is a terrible, terrible thing. Yet, just a few days ago, Mr. Ryan was still touting his own budget plan, which included those very same savings.
But back to the big lie. The Republican Party is now firmly committed to replacing Medicare with what we might call Vouchercare. The government would no longer pay your major medical bills; instead, it would give you a voucher that could be applied to the purchase of private insurance. And, if the voucher proved insufficient to buy decent coverage, hey, that would be your problem.
Moreover, the vouchers almost certainly would be inadequate; their value would be set by a formula taking no account of likely increases in health care costs.
Why would anyone think that this was a good idea? The G.O.P. platform says that it “will empower millions of seniors to control their personal health care decisions.” Indeed. Because those of us too young for Medicare just feel so personally empowered, you know, when dealing with insurance companies.
Still, wouldn’t private insurers reduce costs through the magic of the marketplace? No. All, and I mean all, the evidence says that public systems like Medicare and Medicaid, which have less bureaucracy than private insurers (if you can’t believe this, you’ve never had to deal with an insurance company) and greater bargaining power, are better than the private sector at controlling costs.
I know this flies in the face of free-market dogma, but it’s just a fact. You can see this fact in the history of Medicare Advantage, which is run through private insurers and has consistently had higher costs than traditional Medicare. You can see it from comparisons between Medicaid and private insurance: Medicaid costs much less. And you can see it in international comparisons: The United States has the most privatized health system in the advanced world and, by far, the highest health costs.
So Vouchercare would mean higher costs and lower benefits for seniors. Over time, the Republican plan wouldn’t just end Medicare as we know it, it would kill the thing Medicare is supposed to provide: universal access to essential care. Seniors who couldn’t afford to top up their vouchers with a lot of additional money would just be out of luck.
Still, the G.O.P. promises to maintain Medicare as we know it for those currently over 55. Should everyone born before 1957 feel safe? Again, no.
For one thing, repeal of Obamacare would cause older Americans to lose a number of significant benefits that the law provides, including the way it closes the “doughnut hole” in drug coverage and the way it protects early retirees.
Beyond that, the promise of unchanged benefits for Americans of a certain age just isn’t credible. Think about the political dynamics that would arise once someone born in 1956 still received full Medicare while someone born in 1959 couldn’t afford decent coverage. Do you really think that would be a stable situation? For sure, it would unleash political warfare between the cohorts — and the odds are high that older cohorts would soon find their alleged guarantees snatched away.
The question now is whether voters will understand what’s really going on (which depends to a large extent on whether the news media do their jobs). Mr. Ryan and his party are betting that they can bluster their way through this, pretending that they are the real defenders of Medicare even as they work to kill it. Will they get away with it?
© 2012 The New York Times Company
http://www.nytimes.com/2012/08/31/opinion/Krugman.html [with comments]
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Paul Ryan’s bogus budget rules
Paul Ryan
(Credit: Reuters/Mike Segar)
His first action as Budget Committee chairman proved his reputation as a deficit hawk was a sham
By Andrew Leonard
Friday, Aug 31, 2012 12:15 PM CDT
The always-cogent Greg Ip reminds us [ http://www.economist.com/blogs/freeexchange/2012/08/paul-ryan-vice-presidency ] that the very first thing Paul Ryan did after ascending to the position of chairman of the House Budget Committee in January 2011 was to make a key change in the rules governing how the committee approached its business.
One of his first acts in that job was to replace the old Paygo budget rule, which required any new spending increase or tax cut to be offset to neutralize the deficit impact, with “Cutgo,” which applied that condition only to spending. In other words, tax cuts that blow up the deficit were fine.
The new rules immediately made Ryan’s reputation as a “deficit hawk” risible, but when I went back to look at what I wrote about the changes [ http://www.salon.com/2011/01/06/house_gop_breaks_its_own_rules/ ] when they happened, I recalled that the scandal went even deeper.
The Congressional Budget Office is the authority that the House Budget Committee depends on to decide what exactly is a spending increase. And the CBO had ruled that Obamacare reduced the deficit. This created a problem. House Republicans had sworn to repeal Obamacare. But under their own new rules, repealing Obamacare would technically result in adding to the deficit.
So what did Ryan do? He made sure the new rules [ http://www.rules.house.gov/RulesRepMedia/file/PDF_112_1/112th-Rules_xml.pdf ] included an exemption for repealing Obamacare.
There’s your Republican vice-presidential nominee, in all his glory. He may claim that it was a miserable experience to be forced to go along with the Bush administration and vote for all those budget-busting wars and tax cuts and social welfare net expansions, but as soon as he achieved a position of real power, he made it abundantly clear that he too really doesn’t care about the deficit at all.
Copyright © 2012 Salon Media Group, Inc.
http://www.salon.com/2012/08/31/paul_ryans_bogus_budget_rules/ [with comments]
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Aware of 'no options,' woman dies fighting for medical coverage
Leslie Elder participates in the 2010 Race for the Cure. She was diagnosed with cancer four separate times.
By Stephanie Smith and Nadia Kounang, CNN
updated 8:06 AM EDT, Sun September 2, 2012
(CNN) -- Leslie Elder was always a fighter. But in a message to a friend in the waning days of her life, she seemed exhausted.
The note, written at a time of spiritual darkness, suggested defeat after a decades-long struggle for medical coverage.
"I honestly don't know how much more I can endure," Elder wrote earlier this year in a Facebook message to her friend Liz Jacobs. "I am fighting for (Medicaid) and disability. I can't work I sit in bed I cry a lot. I am still fighting for healthcare and still fighting foreclosure.
"I am so upset but perhaps it was not meant to be. I don't know anything anymore," said Elder, who died in July at age 63 without insurance coverage.
As she typed the note, Elder could scarcely breathe. Her lungs had filled with fluid over several months; her respiratory system was shutting down. After visits to the emergency room and several free clinics, Elder was finally diagnosed with Hodgkin's lymphoma.
But what makes her family bristle: Elder did not have to die.
If she had had health care, "Absolutely she'd still be here," said Jacquelyn Elder, Leslie's daughter, adding that Hodgkin's lymphoma has a high survival rate. "That is something really hard to deal with."
"I know she felt scared because there were no options. Why do something (about illnesses) when you know you can't get proper care to fix it?"
Except there were options.
The Affordable Care Act, which takes full effect in 2014, was supposed to save people like Elder (with pre-existing conditions and no medical coverage) in the interim by way of high-risk pools, also known as the Pre-Existing Condition Insurance Plan [ https://www.pcip.gov/ ] or PCIP.
The pools are supposed to be a safety net, but many, like Elder, are falling through the cracks.
Elder's family spent her final months fighting for Medicaid, with no clue that they qualified for Florida's high-risk pool. They are not alone: Of the estimated 200,000-375,000 people expected to enroll in PCIP in the first year, less than one-third have done it, according to the Department of Health and Human Services.
Leslie's husband, Jim Elder, admitted that he did not know many details of the program, and much of the conversation about health care has been confusing.
"I was under the impression that pre-existing (PCIP) didn't start until 2014," said Jim Elder in a recent interview with CNN.
"I'm puzzled. Since this act was passed, to us, people with pre-existing, we were hoping and searching for some sort of way to get health care. The way it has divided the country, some states suing to try and stop it, it's just confused everybody. It certainly confused us."
Jacobs, a nurse who met Leslie Elder in her role as a health care advocate and spokeswoman for the group National Nurses United, fears the Elders' story will be echoed repeatedly, even with ACA's passage.
"In a humane health care system, as much of the rest of the world has, no one would have to know the arcane minutiae of how to apply for a high risk pool," said Jacobs. "Everyone would have (coverage) that qualifies you for health care when and where you need it."
That sort of access is promised to many through the ACA, but stories like the Elders' suggest the act -- at least as it relates to high-risk pools -- still has some kinks.
In the midst of the family's confusion, Elder was unwittingly suffering from cancer again -- her fourth diagnosis. During a 2009 interview with CNN she quipped, "I don't get a cold, I get cancer, and cancer, and cancer."
That terrifying litany of cancer diagnoses began in 1988 with a bulging tumor found in her right breast. Thirteen years later, the same diagnosis, this time in her left breast.
And in 2005, it was kidney cancer. The doctor's grim pronouncement, according to Elder: " 'Your right kidney ... it's breaking apart. You have a tumor ... and you also have a tumor in your left kidney.'"
By then, the Elders had been on a roller coaster, going from what they describe as the best medical coverage to having none. In between came skyrocketing insurance premiums, high deductibles, and stacks of unpaid medical bills following each cancer diagnosis.
At a certain point, feeling like her pre-existing conditions were to blame for her soaring and unaffordable insurance rates, Elder gave up on coverage.
Her insurance company Aetna later said Elder's previous cancer diagnoses were not the culprit for the rate increases.
Although the company did not cite a specific reason for the increased rate, Cynthia Michener, an Aetna spokeswoman said: "There can be other contributing factors to rate increases for small business policies, including, for example, the aggregate cost of the entire pool of small business policies in the state."
During the interview with CNN three years ago, Elder admitted to volleying between fear of the unknown and acceptance of her fate, even though without insurance, she had no idea whether she had cancer again. But telling her story enlivened her, according to friends.
"When she was interviewed for CNN originally, it was one of the most hopeful periods of her years-long struggle," said Donna Smith, Elder's friend, an advocate and community organizer with National Nurses United. "Most recently, as her health grew even worse and she faced the loss of her home and the final parts of her savings, Leslie just yearned for dignity and some sort of peace that never seemed to come."
And nearly three years later, as her death approached, the pendulum had swung decidedly toward fear.
"And me, Ms. Healthcare CNN interview tough person now a scared little girl who after beating cancer 4x now sits in bed with oxygen and breathing treatments," Elder wrote to Jacobs.
"I was always able to stand up to whatever hit me. I'm not so sure about things anymore and maybe not so tough. I am scared."
To see if you qualify for PCIP, or to apply, visit PCIP.gov [ https://www.pcip.gov/ ].
*
Related
Crush of cancer, medical bills snares family
http://articles.cnn.com/2009-10-13/health/cancer.insurance.finances_1_health-insurance-premiums-policyholders
*
© 2012 Cable News Network. Turner Broadcasting System, Inc.
http://www.cnn.com/2012/09/01/health/elder-insurance/index.html [with comments]
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With Medicaid, Long-Term Care of Elderly Looms as a Rising Cost
Rena Lull and her daughter, also named Rena, at Otsego Manor nursing home near Cooperstown, N.Y. Mrs. Lull, 92, spent the last of her life savings on $250-a-day nursing home care.
Niko J. Kallianiotis for The New York Times
Graphic
The Other Medicaid Beneficiaries
[ http://www.nytimes.com/interactive/2012/09/07/us/the-other-medicaid-beneficiaries.html ]
Wendy James, 37, at the Dumont nursing home in New Rochelle, N.Y., with her mother, Elaine, 76, who has dementia.
Niko J. Kallianiotis for The New York Times
By NINA BERNSTEIN
Published: September 6, 2012
Medicaid [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicaid/index.html ] has long conjured up images of inner-city clinics jammed with poor families. Its far less-visible role is as the only safety net for millions of middle-class people whose needs for long-term care, at home or in a nursing home, outlast their resources.
With baby boomers and their parents living longer than ever, few families can count on their own money to go the distance. So while Medicare [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html ] has drawn more attention in the election campaign, seniors and their families may have even more at stake in the future of Medicaid changes — those proposed, and others already under way.
Though former President Bill Clinton overstated in his convention speech on Wednesday how much Medicaid spends on the elderly in nursing homes [ http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/nursing_homes/index.html ] — they account for well under a third, not nearly two-thirds, of spending — Medicaid spends more than five times as much on each senior in long-term care as it does on each poor child, and even more per person on the disabled in long-term care.
Seniors like Rena Lull, 92, who spent the last of her life savings on $250-a-day nursing home care near Cooperstown, N.Y., last year, will face uncharted territory if Republicans carry out their plan to replace Medicaid with block grants that cut spending by a third over a decade.
The move would let states change minimum eligibility, standards of care, and federal rules that now protect adult children from being billed for their parents’ Medicaid care.
Now, like a vast majority of the nation’s 1.8 million nursing home residents, Mrs. Lull, a retired schoolteacher with dementia [ http://health.nytimes.com/health/guides/disease/dementia/overview.html ], counts on Medicaid to cover most of her bill. But her daughter Rena, 66, also a retired schoolteacher with a lifetime of savings, no longer knows what she can count on in her own old age.
“I get choked up thinking about this,” she said, recalling how her widowed mother had depleted $300,000 on five years of care in the community and one year in the Otsego Manor nursing home, before qualifying for Medicaid. “I’m so scared about what’s going to happen to me.”
The presidential election may decide Medicaid’s future. But many states faced with rising Medicaid costs and budget deficits are already trying to cut the cost of long-term care by profoundly changing Medicaid coverage, through the use of federal waivers.
Waivers sought [ http://dualsdemoadvocacy.org/ ] or obtained by 26 states, including New York, California, Illinois and Texas, would affect some three million people, most of them eligible for both Medicaid and Medicare. Plans vary, but typically they try to cut costs by giving private managed-care organizations a fixed sum for a lifetime of care, from doctor and hospital visits to help at home to nursing home placement, expecting that more care will take place in less expensive settings.
Over all, 31.5 percent of Medicaid’s $400 billion in shared federal and state spending [ http://statehealthfacts.org/comparetable.jsp?ind=178&cat=4 ] goes to long-term care for the elderly and the disabled. That ranges from less than 8 percent in Hawaii, where nursing home use is low, to more than 60 percent in North Dakota.
Many people assume that Medicare will cover long-term care, but at most it covers 100 days of rehabilitation, not so-called custodial care — the help with activities of daily life, like eating and bathing, that the aged can need for years.
To be eligible for Medicaid, however, a person typically can have no more than $14,800 in assets, and though some lawyers specialize in setting up trusts that shelter certain assets, the federal government has periodically closed loopholes that allowed it.
Mrs. Lull, who married her Ithaca College sweetheart, also a teacher, when he was in the Air Force in 1944, and carried their twin girls home in a laundry basket, is required to pay all but $50 a month of her $969 income from Social Security [ http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html ] and a pension toward the Medicaid cost of her shared room. Her case is typical, in that she cared for her husband before his death at home at 83.
Few Americans buy private long-term care insurance, and such insurance was dropped from the Affordable Care Act last year as actuarially unsound or unaffordable.
“More than $80,000 a year on average for a nursing home — who can sustain that?” said Robyn Grant, director of public policy and advocacy for the National Consumer Voice for Quality Long Term Care [ http://www.theconsumervoice.org/ ]. “We’re forced, most of us, to go onto Medicaid. People don’t realize this.”
No state has a more ambitious plan to overhaul Medicaid than New York, which has the biggest Medicaid budget in the country — $54 billion — and spends about 41 percent of it for long-term care, almost half on nursing homes. Jason A. Helgerson [ http://www.nytimes.com/2011/01/26/nyregion/26medicaid.html?pagewanted=all ], the state’s Medicaid chief, calls the redesign “a multiyear march away from fee-for-service” that he says will flatten the spending rate even as the population ages.
By 2015, New York will start requiring some 78,000 nursing home residents to choose one of several managed care plans or be enrolled randomly. The plans are already enrolling tens of thousands of elderly and disabled New York City residents who now receive more than 120 hours a week of government-paid help at home, with those in other downstate counties next.
“We in New York are committed to using this as a force for good,” Mr. Helgerson said, noting that such services, including the largest home care program in the country, have long been exempted from managed care. “By keeping people healthy, by keeping them out of unnecessarily restrictive, institutional settings, we can keep the program sustainable in the long run.”
Around the country, however, some health policy analysts doubt that managed care will save money, and advocates for the aging and disabled worry that the sickest and most vulnerable people may be hurt in the process.
“Managed care isn’t going to help — it’s just more money going off the top,” said Toby Edelman, senior policy attorney in the Washington office of the Center for Medicare Advocacy [ http://www.medicareadvocacy.org/ ], who has written on the importance of Medicaid to Medicare beneficiaries and their middle class relatives. “The managed care company has to take its cut.”
There is too little evidence available to evaluate whether managed care itself really saves money in long-term care, said H. Stephen Kaye, a professor at the Institute on Health and Aging at the University of California, San Francisco.
“One of the problems with the rush to do this is there isn’t a lot of knowledge about what measures should be used or how to track this,” Dr. Kaye said, noting that his analysis of 15 years of data from many states concluded that the gradual expansion of home and community services saves modest amounts, but that a rapid expansion can actually cost a state more.
While home care is generally much cheaper than nursing homes, Dr. Kaye said, states may wind up unleashing a pent-up demand for home care from eligible people who would never have entered a nursing home anyway. And, he added, the financial incentives for home care do not guarantee quality.
“It needs to be monitored with a lot of oversight,” he said.
In July, John D. Rockefeller IV, the Democratic senator from West Virginia who came up with the language allowing some of the most ambitious waivers, wrote Kathleen Sebelius, the secretary of health and human services, asking her to “take immediate steps to halt this initiative.” He complained that instead of rigorous demonstrations aimed at improving care, some states were shifting whole populations into untried programs.
A spokeswoman for the federal Center for Medicare and Medicaid Services [ http://www.cms.gov/ ] said it was “working carefully to develop new ideas to better coordinate care with appropriate safeguards to protect beneficiaries.”
Under the block grant vision of Medicaid, that federal role in oversight would end. Richard J. Herrick, president of the New York State Health Facilities Association, a trade group, says that since Medicaid rates have been cut well below cost, he would welcome a change in rules that would let nursing homes bill families for their elders’ care, in addition to what Medicaid pays.
Advocates for the elderly say that such a change would increase the burden of care already carried by many families.
Wendy James spent nine years and thousands of dollars struggling to keep her mother safe at home with her in Yonkers, in Westchester County. Her big mistake, she says now, was not filing a Medicaid application sooner.
Her mother, Elaine, 76, formerly a secretary in a doctor’s office in Manhattan, had to quit work when she developed symptoms of Alzheimer’s disease [ http://health.nytimes.com/health/guides/disease/alzheimers-disease/overview.html ]. As the illness worsened, Ms. James’s father, now 80, retired from his job in a department store to help care for his wife. When she needed an adult day program in a nursing home, which rose to $2,400 a month, the family paid out of pocket. And Ms. James, 37, who works for a medical billing company, paid up to $1,000 a month for her mother’s medications when she hit her Medicare prescription “doughnut hole.”
A 2009 analysis by the Kaiser Family Foundation found that direct, out-of-pocket spending by individuals and families accounts for 22 percent of the $178 billion spent on nursing homes.
Mrs. James is now in a New Rochelle nursing home, where Medicaid pays the bill. Her husband travels daily to spoon-feed lunch to her in the nursing home’s chaotic day room. Ms. James feeds her mother every evening after work, rubbing her cheek to remind her to swallow.
“I did what I had to do for her,” said Ms. James, the youngest of three siblings. “She was the best mom before she got sick.”
© 2012 The New York Times Company
http://www.nytimes.com/2012/09/07/health/policy/long-term-care-looms-as-rising-medicaid-cost.html [ http://www.nytimes.com/2012/09/07/health/policy/long-term-care-looms-as-rising-medicaid-cost.html?pagewanted=all ] [with comments]
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Ayn Rand and Modern Politics
Paul Ryan (left) and Ayn Rand (right)
By David Sloan Wilson
Posted: 09/06/2012 6:39 pm
Years ago, I conducted an analysis of Ayn Rand's thought that can help explain why it exerts such influence over politicians such as Paul Ryan. I didn't start out studying Rand. I was exploring how people use words such as "selfish" and "altruistic," which refer to the effects of actions on self and others. Most people would define selfishness as benefiting oneself without regard to the welfare of others and altruism as benefitting others, often at the expense of oneself. To help categorize these and other words, I created a simple table with "effect on self" as the columns and "effect on others" as rows.
.jpg)
Every time I encountered the use of a word referring to the effect of an act on self and others, I placed it in one of the four quadrants. Usually, it was easy to make a judgment call on the basis of the text containing the word. For example, in a letter that William James wrote to his mother asking for money, he expressed fear that she would regard him as selfish, meaning that he was trying to benefit himself at his family's expense. This particular usage of the word "selfish" would be placed in the right column (positive for self) and bottom row (negative for others).
In the real world, our actions can result in any of the four outcomes. There are win-win situations where everyone gains, lose-lose situations where everyone suffers, win-lose situations where I gain at the expense of others, and lose-win situations where I must sacrifice to benefit others. In a realistic description of the world, words referring to our actions would therefore be placed in all four quadrants. When I started to analyze some fundamentalist religious texts, however, a different picture emerged. All the words ended up in either the top right (win-win) or bottom left (lose-lose) quadrants, as shown for this example from an Anabaptist text written in the 17th century.
This gave me an insight into fundamentalist religions. It's not just that religious fundamentalists believe in God. They also believe in a world without tradeoffs. According to their beliefs, if they behave in a certain way, everyone will win. If they behave otherwise, everyone will lose. There are no messy tradeoffs where some win and others lose. Their world has been simplified to the point that their only choice is to head toward glory and away from ruin.
That's where Ayn Rand came into the picture. Her book of essays written with Nathanial Branden titled The Virtue of Selfishness caught my eye. Rand regarded herself as a serious philosopher in addition to a novelist and The Virtue of Selfishness outlined her doctrine of Objectivism. As I read through the essays categorizing words and phrases that referred to the effects of actions on self and others, another world without tradeoffs emerged. In Rand's world, the pursuit of self-interest was invariably good for everyone and the traditional virtues were disastrous for all. Rand also had a lexicon of words and phrases for stupid forms of selfishness (e.g., "blind desires," "hedonism," "irrational values") that were bad for both self and others. Not a single word or phrase ended up in the quadrants that reflect a tradeoff between the welfare of self and others. She even stated explicitly that "there are no conflicts of interest among rational men (p. 50)."
In other words, Rand created a system of thought that is just like religious fundamentalism in portraying a world without tradeoffs. This begins to explain her enduring appeal. She offers a world that has been simplified to the point where the only choice is to head toward glory (the pursuit of self-interest) and away from ruin.
Nathaniel Branden, Rand's disciple who also became her lover and eventually left the faith, provides a vivid example of the spell that she was able to cast, as he described in his memoir Judgment Day. As a teenager growing up in a culture that emphasized conformity, he recalls that Rand's "constructions, images, rhythms, all took hold of me in some profound way." He read her novels repeatedly and described them as like a "shield" and "fortress" that allowed him to pursue his own goals. When he first met Rand, he described her writing as a "stylized universe," a phrase that delighted her. Here is how he describes Rand's inner circle: "This is how we were back then, Ayn and I and all of us -- detached from the world -- intoxicated by the sensation of flying through the sky in a vision of life that made ordinary existence unendurably dull." If that doesn't sound like a fundamentalist religious experience, what would?
The problem with visions of life that are detached from the world -- no matter how intoxicating -- is that they crash and burn when they encounter the real world. The real world includes win-lose and lose-win situations that must be managed, and pretending that they don't exist doesn't make them go away.
Paul Ryan's fascination with Ayn Rand sounds a lot like Nathaniel Branden's. The fact that he is also drawn to religious fundamentalism might seem like a contradiction, until we realize that both portray worlds without tradeoffs in which the only choice is to head toward glory and away from ruin. How simple. How compelling. How easy to communicate to others. And how disastrous for solving the problems of modern human existence.
This piece was originally posted [(and the images in the post here taken from) http://www.thisviewoflife.com/index.php/magazine/articles/ayn-rand-and-modern-politics (with comments)] at Evolution: This View of Life [ http://www.thisviewoflife.com/ ].
Copyright © 2012 Evolution: This View of Life
http://www.huffingtonpost.com/david-sloan-wilson/ayn-rand-and-modern-polit_b_1859442.html [with comments]
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Experts say economy should grow despite who wins White House in Nov.
09/02/12
[...]
Republican presidential nominee Mitt Romney and his running mate Paul Ryan each pledged in their speeches during the GOP convention that they would create 12 million jobs over the next four years with a series of familiar policies that include reducing regulatory and tax burdens on small businesses and ramping up international trade.
[...]
"Most forecasts for employment growth are very close to 12 million over the next four years regardless of who wins the presidency," Mark Zandi, chief economist with Moody's Analytics, told The Hill.
[...]
http://thehill.com/blogs/on-the-money/economy/247081-experts-say-economy-should-grow-despite-who-wins-white-house-in-november [with comments]
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Factchecker: Romney’s ’12 million jobs’ promise
Posted by Glenn Kessler on August 30, 2012 at 11:03 pm
“And unlike the president, I have a plan to create 12 million new jobs.” — Mitt Romney
This sounds like a pretty bold statement, especially considering that only two presidents—Ronald Reagan and Bill Clinton—created more than 12 million jobs. Romney, in fact, says he can reach this same goal, in just four years, though the policy paper [ http://www.scribd.com/fullscreen/102687937?access_key=key-tvcla8fht0g06taehfj ] issued by his campaign contains few details. It is mostly a collection of policy assertions, such as such as reducing debt, overhauling the tax code, fostering free trade and so forth.
But, in fact, the number is less impressive than it sounds. This pledge amounts to an average of 250,000 jobs a month, a far cry from the 500,000 jobs a month that Romney claimed [ http://www.washingtonpost.com/blogs/fact-checker/post/mitt-romneys-new-normal-for-job-creation/2012/05/08/gIQAybrABU_blog.html ] would be created in a “normal recovery.” In recent months, the economy has averaged about 150,000 jobs a month.
The Congressional Budget Office is required to consider the effects of the so-called “fiscal cliff” if a year-end budget deal is not reached, which many experts believe would push the country into a recession. But even with that caveat, the nonpartisan agency assumes [ http://www.cbo.gov/publication/43542 ] 9.6 million jobs will be created in the next four years. (This is a revision downward; CBO had estimated [ http://www.cbo.gov/publication/42909 ] 11 million in January.)
But Moody’s Analytics, in an August forecast, predicts 12 million jobs will be created by 2016, no matter who is president. (See page 51 [ https://mail-attachment.googleusercontent.com/attachment/u/0/?ui=2&ik=bd9d03a590&view=att&th=1397a52ef81105bd&attid=0.1&disp=inline&safe=1&zw&saduie=AG9B_P-W2dqidfj1DwWfjx1DLq4v&sadet=1346377169016&sads=wCD9kJMERtpqVIp7cNiC02B5vIs&sadssc=1 (this link does not work for me as I do not use Gmail; related press release, with a link that leads to another that apparently leads to the subscription-required outlook itself, at http://www.businesswire.com/news/home/20120809005884/en/Moody%E2%80%99s-Analytics-Macro-Outlook-Economy-Growing-Slowly )].) And Macroeconomic Advisors in April also predicted a gain of 12.3 million jobs.
In other words, this is a fairly safe bet by Romney, even if he has a somewhat fuzzy plan for action. We have often noted that presidents are often at the mercy—or the beneficiary—of broad economic trends, and Romney’s pledge appears to be an effort to take advantage of that.
© 2012 The Washington Post
http://www.washingtonpost.com/blogs/election-2012/wp/2012/08/30/factchecker-romneys-12-million-job-promise/ [with comments]
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Politicians To Blame For Weak Job Growth, Economists Say
People wait in line for a job fair in Portland, Ore. The Labor Department reported on Friday that the economy added only 96,000 jobs in August.
By Bonnie Kavoussi
Posted: 09/07/2012 4:46 pm Updated: 09/08/2012 10:17 am
Five years after the economic downturn began, the unemployment rate is nearly double [ http://www.bls.gov/news.release/empsit.nr0.htm ] what it was in 2007 [ http://www.bls.gov/news.release/history/empsit_09072007.txt ]. According to some economists, politicians are to blame.
"It's a failure of leadership," said Joseph Brusuelas, senior economist at Bloomberg LP. "After close to four years of Obama administration policy and two years of GOP rule, there's enough blame to go around."
After stabilizing [ http://krugman.blogs.nytimes.com/2012/09/07/the-employment-situation/ ] in 2009, the job market has been adding only enough jobs to keep up with population growth [ http://www.huffingtonpost.com/2012/09/07/august-jobs-report_n_1864001.html#27_job-growth-is-just-barely-keeping-up-with-population-growth ]. Friday's jobs report [ http://www.huffingtonpost.com/2012/09/07/august-jobs-report_n_1864001.html?utm_hp_ref=business ] proved no different: The economy added only 96,000 jobs in August.
Both conservative [ http://online.wsj.com/article/SB10001424052702303657404576363984173620692.html ] and liberal [ http://www.nytimes.com/2010/09/03/opinion/03krugman.html ] economists agree that elected politicians have the ability to change the situation, but are failing to do so.
"Two years of Congressional inaction in the face of high unemployment and with interest rates at the zero lower bound is inexcusable," said Justin Wolfers, an economics professor at the University of Michigan.
President Barack Obama can take credit for implementing a $787 billion stimulus [ http://projects.nytimes.com/44th_president/stimulus ] that saved or created more than 3 million jobs, according to the Congressional Budget Office. But many economists argue that the hurried law did not go far enough. Obama made another attempt at job creation last year [ http://www.americanjobsact.com/ ] when he introduced a jobs bill to Congress that economists estimated [ http://thinkprogress.org/economy/2012/09/07/812251/republicans-blocked-jobs-act-one-year/ ] would create roughly 2 million jobs if passed. Congressional Republicans have blocked the bill, advocating austerity instead.
Some economists highlighted what they see as the government's failure to take action as the economy continues to struggle. Wolfers said that the government should unleash another round of fiscal stimulus and retrain the long-term unemployed. He also said that the Federal Reserve should tolerate higher inflation and make a credible statement that it will do whatever it takes to bring down the unemployment rate. Such policies, he said, would spur hiring by creating "confidence that this recession won't be allowed to continue."
In terms of its own hiring practices, the government has been cutting jobs largely at the state and local levels. Though the government typically adds jobs [ http://www.huffingtonpost.com/2012/08/03/government-employment-recovery-_n_1737915.html ], there now are [ http://www.bls.gov/news.release/empsit.t17.htm ] 639,000 fewer government workers than in January 2009 [ http://www.bls.gov/news.release/archives/empsit_02062009.htm ], when Obama took office, according to the Labor Department.
"What we’re doing is a radical departure from historical practice," Wolfers said. "We've ended up with Tea Party economic policy."
Businesses are not hiring because there is no clear sign that the economy will improve, according to some economists.
Brusuelas said that both political parties need to make sacrifices, but they have been unwilling to meet halfway to address the jobs crisis and make the budget more sustainable. As a result, Brusuelas said, $1.7 trillion in corporate cash is sitting on the sidelines.
"Growth has to be part of the strategy. It can't just be austerity," Brusuelas said, referring to Republicans. He said that meanwhile, Democrats need to stem the long-term growth of entitlement spending. "Regardless of anyone's political preference, it is a lack of policy leadership," he said.
Copyright © 2012 TheHuffingtonPost.com, Inc.
http://www.huffingtonpost.com/2012/09/07/job-growth-2012_n_1864930.html [with comments]
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Majority of New Jobs Pay Low Wages, Study Finds
A waitress at Arco Iris Restaurant in Tampa, Fla., last week. The food industry has added 300,000 low-paying jobs in the recovery.
Brian Blanco for The New York Times
By CATHERINE RAMPELL
Published: August 30, 2012
While a majority of jobs lost during the downturn were in the middle range of wages, a majority of those added during the recovery have been low paying, according to a new report [ http://www.nelp.org/index.php/content/content_about_us/tracking_the_recovery_after_the_great_recession ] from the National Employment Law Project.
The disappearance of midwage, midskill jobs is part of a longer-term trend that some refer to as a hollowing out of the work force, though it has probably been accelerated by government layoffs.
“The overarching message here is we don’t just have a jobs deficit; we have a ‘good jobs’ deficit,” said Annette Bernhardt, the report’s author and a policy co-director at the National Employment Law Project, a liberal research and advocacy group.
The report looked at 366 occupations tracked by the Labor Department and clumped them into three equal groups by wage, with each representing a third of American employment in 2008. The middle third — occupations in fields like construction, manufacturing and information, with median hourly wages of $13.84 to $21.13 — accounted for 60 percent of job losses from the beginning of 2008 to early 2010.
The job market has turned around since then, but those fields have represented only 22 percent of total job growth. Higher-wage occupations — those with a median wage of $21.14 to $54.55 — represented 19 percent of job losses when employment was falling, and 20 percent of job gains when employment began growing again.
Lower-wage occupations, with median hourly wages of $7.69 to $13.83, accounted for 21 percent of job losses during the retraction. Since employment started expanding, they have accounted for 58 percent of all job growth.
The occupations with the fastest growth were retail sales (at a median wage of $10.97 an hour) and food preparation workers ($9.04 an hour). Each category has grown by more than 300,000 workers since June 2009.
Some of these new, lower-paying jobs are being taken by people just entering the labor force, like recent high school and college graduates. Many, though, are being filled by older workers who lost more lucrative jobs in the recession and were forced to take something to scrape by.
“I think I’ve been very resilient and resistant and optimistic, up until very recently,” said Ellen Pinney, 56, who was dismissed from a $75,000-a-year job in which she managed procurement and supply for an electronics company in March 2008.
Since then, she has cobbled together a series of temporary jobs in retail and home health care and worked as a part-time receptionist for a beauty salon. She is now working as an unpaid intern for a construction company, putting together bids and business plans for green energy projects, and has moved in with her 86-year-old father in Forked River, N.J.
“I really can’t bear it anymore,” she said, noting that her applications to places like PetSmart and Target had gone unanswered. “From every standpoint — my independence, my sense of purposefulness, my self-esteem, my life planning — this is just not what I was planning.”
As Ms. Pinney’s experience shows, low-wage jobs have not been growing especially quickly in this recovery; they account for such a big share of job growth mostly because midwage job growth has been so slow.
Over the last few decades, the number of midwage, midskill jobs has stagnated or declined as employers chose to automate routine tasks or to move them offshore.
Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.
Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.
This “polarization” of skills and wages has been documented meticulously by David H. Autor, an economics professor at the Massachusetts Institute of Technology. A recent study found that this polarization accelerated in the last three recessions, particularly the last one, as financial pressures forced companies to reorganize more quickly.
“This is not just a nice, smooth process,” said Henry E. Siu, an economics professor at the University of British Columbia, who helped write the recent study about polarization and the business cycle. “A lot of these jobs were suddenly wiped out during recession and are not coming back.”
On top of private sector revamps, state and local governments have been shedding workers in recent years. Those jobs lost in the public sector have been primarily in mid and higher-wage positions, according to Ms. Bernhardt’s analysis.
“Whenever you look at data like these, there is this tendency to get overwhelmed, that there are these inevitable, big macro forces causing this polarization and we can’t do anything about them. In fact, we can,” Ms. Bernhardt said. She called for more funds for states to stem losses in the public sector and federal infrastructure projects to employ idled construction workers. Both proposals have faced resistance from Republicans in Congress.
*
Related
Who Wears the Pants in This Economy? (September 2, 2012)
http://www.nytimes.com/2012/09/02/magazine/who-wears-the-pants-in-this-economy.html
*
© 2012 The New York Times Company
http://www.nytimes.com/2012/08/31/business/majority-of-new-jobs-pay-low-wages-study-finds.html
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The Great Jobs Mystery: Why Are So Many Men Dropping Out of the Workforce?
By Derek Thompson
Sep 7 2012, 12:40 PM ET
The August jobs report set two records that we need to talk about. Both involve the labor participation rate -- the share of the working-age population that has a job or is looking for a job. First, men's participation rate fell to its lowest point on record (since 1948). Second, the overall participation rate fell to its lowest point since 1981.
[...]
But why is this happening? There are two reasons. The first is that America is getting older, and more workers are entering that age where they are less likely to be employed. Imagine the enormous Boomer generation moving along this graph below, from left to right, as they age into their 60s and 70s. You can see how the labor participation rate would fall automatically, good economy or bad.
That's exactly what demographers have expected: A gradual decline in the participation rate as the Boomers retired and smaller generations beneath them struggled to replenish the working population. The dotted lines in the graph below are projected declines from before the Great Recession. The red line is what's actually happened. The hill has been steeper than we foresaw.
So, one interpretation of the Great Recession is that it has accelerated our labor participation fall-off by five to ten years. Older workers, who have faced the worst long-term unemployment crisis (they're more expensive; harder to train; and possibly subject to ageism) might be retiring early. As we've reported, the recession has also coincided with a sharp increase in applications for disability benefits and it's clear that, in addition to the one million older Americans who have been looking for work unsuccessfully for more than six months, hundreds of thousands have dropped out and retired early.
And that brings up the second reason why more people aren't participating in the work force: They don't think there's any work for them.
There has been a long debate over whether the recession is pulling down participation stronger than demographics. A February 2012 study found that the aging workforce accounted for 75% of the decline. But in the last few months, the Great Recession's impact might have strengthened. The share of people not in the labor force who say they do want a job has turned sharply up since March, hitting a post-recession high. Here's that graph:
To review: The combination of an aging workforce (which we cannot control) and a weak economy (which we can control) has tugged down the participation rate, which in turn has tugged down the unemployment rate ...
Oh, and what about the guys? Men's participation hit an all-time low in August. This is a record, but it's not a surprise. Male participation has been in outright decline since the 1950s, as the share of working-age women who are actually working has practically doubled since the late 1940s. Here's that picture, with men in BLUE, women in RED, and total participation in GREEN.
Most of this decline has come from older men's participation dropping dramatically since the 1950s. It's same factors we talked about above are in play. The the male population is getting older, making them less likely to work, and the economy is discouraging many from seeking a job, anyway.
[...]
Copyright © 2012 by The Atlantic Monthly Group (emphasis in original)
http://www.theatlantic.com/business/archive/2012/09/the-great-jobs-mystery-why-are-so-many-men-dropping-out-of-the-workforce/262100/ [with comments] [a couple of dear Derek's gratuitous, beyond beside the point, chirps of neo-liber-whatever inanities excised]
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Mitt Romney and Consumer Protection Regulation
Republican presidential nominee Mitt Romney addresses delegates before speaking at the Republican National Convention in Tampa, Fla., on Thursday, Aug. 30, 2012.
(Jae C. Hong/AP Photo)
Column by ADAM LEVIN [ http://www.credit.com/blog/author/adam-levin/ ], Credit.com [ http://www.credit.com/ ]
Sep. 1, 2012
The people who brought you the Great Economic Meltdown of 2008 have a new idea for you --- although if they get their way, you'll never hear about it. In fact, one of the most striking things about the new push to undo [ http://www.credit.com/blog/2012/07/6-birthday-wishes-for-the-cfpb/ ] the consumer-friendly financial reforms that followed the crash is the open contempt its backers show for American democracy.
Since this week's Republican National Convention will present their carefully orchestrated vision of a perfect unregulated, untaxed world, this might be a good time to revisit America's recent nightmare on Elm Street.
In the waning months of the George W. Bush administration, as American voters were about to choose between Barack Obama and John McCain, the U.S. economy hit a reef the size of Manhattan --- or, more precisely, Wall Street. In the wake of that disaster, two questions were repeated over and over, from coast to coast: How did this happen? How can we make sure it never happens again?
One of the most notable responses to that second question was the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama in 2010. Dodd-Frank brought about the most profound changes in U.S. financial regulation since the Depression-era reforms of the Roosevelt administration. And the comparison is apt --- because without this and other strong corrective measures taken in response to the crisis, the damage to the American economy could have been far worse than it was.
Nevertheless, Dodd-Frank came under heavy attack from the beginning, with some arguing that it goes too far and others insisting that it doesn't go far enough. Dodd-Frank was enacted despite those objections, and with good reason: without it, the foxes on Wall Street were guarding the henhouse --- and the rest of America was getting eaten alive.
But now the regulation-be-damned camp --- represented by the Romney campaign --- has come up with a "fix" that avoids the messiness of political discussion and debate by sidestepping the democratic process entirely. Never mind the inconvenient fact that Dodd-Frank is the law of the land [ http://www.credit.com/blog/2011/07/what-the-governments-new-consumer-watchdog-means-for-you/ ], and that it is the constitutional duty of the executive branch --- to which Republican candidate Mitt Romney aspires --- to put it into practice.
Under the would-be president's plan [ http://thinkprogress.org/economy/2012/08/17/705491/romney-wall-street-repeal-how/ ], agencies would have to eliminate existing regulations in order to implement new ones. Specifically, agencies issuing new regulations would be required to balance the costs of new regulations by identifying offsetting cost reductions in existing regulations. In addition, Congress would have new powers to block regulations that are proposed by the agencies. As Governor Romney's economic plan affirms, "President Romney will issue an executive order instructing all agencies that they must invite Congress to vote up or down on their major regulations and forbidding them from putting those regulations into effect without congressional approval."
Sizing up the probable outcome of such a move, American Banker said [ http://www.americanbanker.com/issues/177_159/romney-plan-could-undo-dodd-frank-without-repealing-1051907-1.html ]: "Even if the courts eventually struck down Romney's proposals --- the policies would likely spark legal challenges --- they could force delays at agencies such as the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau."
Now, the Consumer Financial Protection Bureau, or CFPB, has been a particular target of the deregulation mafia. The CFPB, a watchdog agency created as part of the Dodd-Frank financial reform, has set out to create a protective buffer against the wave of frauds and abuses inflicted by scammers on struggling homeowners and other consumers --- whether those scammers be fly-by-night con artists or Fortune 500 bankers. Its mandate is to stand up for homeowners [ http://www.huffingtonpost.com/2012/08/10/consumer-financial-protection-bureau-mortgage_n_1762715.html ] and for the elderly [ http://www.baltimoresun.com/business/money/bs-bz-ambrose-elder-fraud-20120826,0,6676720.story ], for the middle class and the working poor --- in short, for all those Americans who were being shredded in the post-crash meat-grinder [ http://www.credit.com/blog/2011/08/wall-street-boosts-lobbying-spending-again/ ] while the Wall Street vultures were lining their own pockets.
You might wonder how this could be even slightly controversial. Curbing fraud, promoting financial literacy, stopping predatory lenders, protecting seniors from financial abuse, and keeping hard-working families from being thrown out of their homes --- the mandate of the CFPB sounds like a no-brainer for any democratic society with a commitment to fairness, free markets, and the rule of law.
Then again, if your success depends on back-room deals, insider trading, rigging markets, skirting the law, and flouting the will of the American people, I can see how you might have a problem with it.
And that's where the proposals embedded in Governor Romney's economic plan come in. The Wall Street grave dancers couldn't win fair and square, so they're doing what they do so well: protecting their profits by gaming the system --- then trying to pass off their slash-and-burn practices and over-the-top greed as "conservative."
This is, in reality, nothing but an end-run around democracy --- winning by cheap and probably illegal tactics what was lost in the realm of American political institutions. In my opinion, it shows blatant disdain for the Constitution and spits in the face of the American people.
Romney's economic plan sees it differently: "While not a panacea for the problem of over-regulation, implementation of this conservative principle would go some distance toward halting the relentless growth of the regulatory state."
It's true that "the regulatory state" is not something that Wall Street has ever really warmed up to. Indeed, the ideologues who profited most from the unfettered excesses that led to the crash --- many of whom continue to profit from its aftermath --- have done their best to go on as though nothing had happened. If something did happen, they expect us to believe that it happened on President Obama's watch, probably as a result of his "job-killing" policies. They maintain today --- as they always have and apparently always will --- that the solution to this and every other economic problem is to abandon regulation [ http://www.credit.com/blog/2012/01/lawsuits-may-come-for-cfpb-head/ ], screw scrutiny, and give "market forces" (i.e., them) free rein.
In other words, they think we're idiots. They expect us to forget that we were nearly eight years into the George W. Bush presidency when catastrophe hit the U.S. economy. They expect us to forget that Bear Stearns, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG either failed, were acquired under duress, or were taken over by the government --- all before President Bush left office. They expect us to trust them when they tell us that the cure for the economic crisis that hit us like a freight train in 2008 is --- wait for it --- to return to the same laissez-faire insanity that got us into this mess in the first place.
The truth is that for the past twenty years, under the negligent stewardship of both Republican and Democratic leadership, the American economy, and the investment and credit markets in particular, were heading at top speed into uncharted territory with no one at the wheel. While ideologues of various stripes now repeat ad infinitum that "government is the problem," the truth is that huge firms were making massively risky moves --- with other people's money --- that no one but the insiders knew anything about. "Pay no attention to the man behind the curtain," they told us. What could go wrong?
Wall Street was at the wheel, with politicians and regulators riding shotgun and the American economy riding blithely in the back. It was one hell of a ride. But when you drive at full speed with your eyes closed, you're going to hit something eventually. We did, and we're living with the consequences.
Of course, when I say "we," I don't mean everyone. Some people wound up with very big bonus checks, not pink slips, in the wake of the 2008 crash. In fact, for the most part, Wall Street and the big banks --- the authors and architects of the crisis --- stepped out of the wreckage without a scratch.
The rest of the country didn't fare so well. Hard-working Americans lost their jobs, their homes, their savings, their health coverage, their retirement funds. Their kids put off going to college, or abandoned the idea entirely. Many of those people --- the lucky ones --- are just beginning to put their lives and their credit back together [ http://www.credit.com/blog/2012/07/how-credit-scores-actually-fared-in-the-recession/ ]; others are still looking for that fresh start. These are the people that Wall Street and the big banks sold out once. Now they want to do it again --- and once again, they want to do it in secret, behind our backs.
The open hostility of these people to the idea of a government "of the people, by the people, and for the people" really comes down to one thing: utter contempt for "you people." It's shameful. It's intolerable. It must be stopped.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
© 2011 Credit.com (emphasis in original)
http://abcnews.go.com/Business/mitt-romneys-rage-regulation/story?id=17128454 [with comments] [original, under title "Romney’s Rage Against Regulation", at http://www.credit.com/blog/2012/08/romneys-rage-against-regulation/ (with comment)]
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Romney’s Dodd-Frank Kill Pledge Collides With Wall Street Agenda
By Phil Mattingly - Aug 29, 2012 9:52 PM CT
Mitt Romney has pledged to repeal the Dodd-Frank Act. He won’t, and that’s just fine with Wall Street.
Instead, Romney may give the financial industry something it wants more: a revamped Dodd-Frank that would accommodate some of the most profitable and riskiest activities while preserving a patina of protection for investors and consumers.
“There’s this perception that banks hate everything in Dodd-Frank, and that’s just not true,” said Mark Calabria, a former top Republican aide on the Senate Banking Committee. “From a bank’s perspective, you’d rather have piecemeal reform of Dodd-Frank, not only because there are things in the law you want to keep, but also because you’re going to have more control over the process.”
Congressional Republicans have already laid out the roadmap.
“With Dodd-Frank, it’s not going to be repeal,” said Representative Scott Garrett, a senior Republican member of the House Financial Services Committee. “There might be repeals of sections, but there will be a piece-by-piece analysis. We’ll throw out some and reform others.”
U.S. bank executives have made no secret of their dislike of parts of President Barack Obama’s 2010 financial-regulatory overhaul. Yet those same bankers, including Goldman Sachs Group Inc. (GS)’s Lloyd Blankfein and JPMorgan Chase & Co. (JPM)’s Jamie Dimon pledged broad support for the law, leaving their lobbyists and lawyers to fight behind the scenes for revisions that may save millions, if not billions, of dollars for their companies.
‘Too Far’
“If I could push a button and eliminate Dodd-Frank would I do it? No, I would not,” Blankfein, the chief executive officer of Goldman Sachs, said in a July appearance before the Economic Club of Washington. Still, he said, there are “some parts that go too far.”
The sentiments of CEOs such as Blankfein and the political realities of Washington mean that Romney would have an easier path winning revisions than repeal.
The architecture that Wall Street wants has emerged in House and Senate hearings and proposed bills over the past two years. It includes loosening rules governing the swaps market, an area where U.S. banks reported $7 billion in revenue in the first quarter of 2012, according to the Office of the Comptroller of the Currency. Restrictions on bank investment in private equity and hedge funds, as well as their ability to trade for their own account, also have been targeted.
Change That Matters
For banks spending billions of dollars to comply with the rules dictated by the 2,300-page law -- and millions on lobbying to alter it -- these are the changes that really matter.
Romney and congressional Republicans argue that the new regulations have weakened the economic recovery, in part because banks must focus resources on compliance instead of lending that money. With hundreds of rules touching everything from mortgage underwriting to proprietary trading, revisions to the law present an opportunity to streamline or eliminate provisions that may reduce the annual pretax revenue of the largest eight banks, including Bank of America Corp. and Wells Fargo & Co. (WFC), by as much as $34 billion, according to Matthew Albrecht, a credit analyst with Standard & Poor’s.
Glenn Hubbard, an economic adviser to the Romney campaign, said in an Aug. 1 Wall Street Journal editorial that Romney would “work with Congress toward repealing and replacing the costly and burdensome Dodd-Frank legislation.” Cost-benefit analysis -- a fixture of congressional Republican proposals aimed at Dodd-Frank -- would be the Romney approach, he wrote.
Swaps Market
House and Senate Republicans have drafted dozens of changes to the law, which was put into place in the wake of the worst financial crisis since the Great Depression. Revised rules for governing the $648 trillion swaps market have been passed by the House, along with restrictions on the new Consumer Financial Protection Bureau.
Romney’s public comments track closely with the congressional Republicans’ yet have lacked detail. Until he comes forward with his plans, bank executives who assume they’ll get their wish lists are making a “roll of the dice,” said Calabria, now director of financial-regulation studies at the Cato Institute in Washington.
Calabria pointed to Republicans who have called for breaking up the largest banks or cutting back on parts of the law that give a funding edge to Wall Street firms. It’s “not necessarily always something bankers want,” he said.
Volcker Rule
The provisions that banks and their lobbyists have said go too far, such as bans or limits on trading activities including the so-called Volcker rule that bars banks from trading for their own account, have been specifically targeted by Republicans, who almost unanimously opposed the law in 2010.
The hit list also includes the consumer bureau, a regulator whose potential independence and power drew opposition as Dodd- Frank was being drafted from an array of interests, from the U.S. Chamber of Commerce to Dimon, JPMorgan’s chairman and chief executive officer. Dimon, in a 2011 letter to shareholders, said the bureau, which is housed within the Federal Reserve but maintains its independence, needed to be “effective for both consumers and banks.”
Representative Kevin McCarthy of California, the third- ranking Republican in the House, says a Romney administration will tip the balance for several House-passed bills that have been stalled by the Democratic-led Senate.
Seeing Progress
“A Romney administration will provide the opportunity for Congress to make progress with financial-services regulatory reform,” McCarthy said. “Senate Majority Leader Reid refuses to work with us in order to enhance the safety and soundness of our financial system.”
The stakes for the securities and investment firms and commercial banks far exceed the money they’ve given toward electing Romney, almost $13 million, according to the Center for Responsive Politics. Of the 10 companies whose employees gave the most money to Romney’s joint fundraising committee with the Republican National Committee, nine are Wall Street firms, according to a computer-assisted analysis by Bloomberg of Federal Election Commission data.
The eight largest banks stand to lose between $22 billion and $34 billion in pretax revenue annually as a result of the new law, according to Albrecht, the S&P analyst. The numbers, released in August, are an increase from the $19.5 billion to $26 billion initially projected by S&P.
Proprietary Trading
The “bulk of the higher projected costs” come from the Volcker rule, S&P said, citing the ban on proprietary trading that elicited more than 17,000 comment letters last year. The rule, which hasn’t been finalized by regulators, has the potential to increase the cost of borrowing for companies as it reduces liquidity in bond markets, according to Republicans.
The Dodd-Frank opponents say the Volcker Rule restricts an activity that had little to do with the financial crisis. New rules in the swaps market exposing commercial companies to extra collateral demands and allowing U.S. regulators to oversee activities in foreign jurisdictions have also drawn opposition from Republicans.
Many of the changes proposed by Republicans, though stalled in the Senate, have also received support in the House from Democrats. Lobbyists and analysts point to next year as a real opportunity.
Obama has touted the law as a necessary check on Wall Street excess, needed to protect homeowners and investors from a repeat of the failings that led up to the financial crisis.
Still Reeling
Many investors and consumers are still reeling in the wake of the near-collapse of the U.S. financial system.
The U.S. unemployment rate has stayed above 8 percent for more than 40 months and there have been 3.7 million completed foreclosures since September 2008, the peak of the financial crisis, according to data provider CoreLogic Inc. More than 11 million homeowners now owe more on their houses than they are worth and people have struggled to take advantage of interest rates that are at historic lows.
The public’s struggle is one reason wholesale repeal would be politically difficult. In the Senate especially, the rules make it much easier to block a bill than to pass one. Even if the Republicans were to gain a majority there in November, Democrats might have enough seats to sustain a filibuster to kill a repeal measure -- or even one that swings too far over toward Wall Street.
Still, if Romney wins, he’d have no shortage of allies on Capitol Hill. Plans are taking shape.
Piece by Piece
Senator Richard Shelby, the top Republican on the Senate Banking Committee, gave a speech in July outlining what he would do if he took the gavel in a Republican-led Senate in 2013.
Romney’s comments don’t rule out an option less than full appeal.
“I’d like to get rid of Dodd-Frank and go back and look at regulation piece by piece,” Romney told the guests at a London fundraiser last month. “I very much believe in updated regulation, but I believe Dodd-Frank has gone beyond what was appropriate for the sector.”
Representative Barney Frank, the Massachusetts Democrat who co-authored the law, had a simple response when asked what a Romney administration would mean for the law: “It would be the death of it,” he said.
To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net
To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-08-30/romney-s-dodd-frank-kill-pledge-collides-with-wall-street-agenda.html [with comments]
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Pruning Hedge Fund Regulation Without Cultivating Better Rules
September 5, 2012
http://dealbook.nytimes.com/2012/09/05/pruning-hedge-fund-regulation-without-cultivating-better-rules/ [with comments]
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Citigroup in $590 Million Settlement of Subprime Lawsuit
August 29, 2012
http://dealbook.nytimes.com/2012/08/29/citigroup-in-590-million-settlement-of-subprime-lawsuit/ [with comments]
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Citigroup, J&J: Real Reasons for Strong Regulation
August 31, 2012
Yesterday, two settlements were announced within hours of each other, both involving toxic products that have caused problems for Americans. In one case, Citigroup (C) announced it would pay $590 million to settle allegations by investors that it had misled them about the extent to which it had loaded its balance sheet with structured securities tied to subprime mortgages. In the other, New York’s Attorney General, Eric Schneiderman, announced that Janssen Pharmaceuticals and its corporate parent, Johnson & Johnson (JNJ), had reached an agreement with 37 states and the District of Columbia to fork over $181 million to settle claims it deceived consumers by marketing anti-psychotic drugs like Risperdal for “off-label” uses.
Two utterly different matters? Not at all. None of the companies admitted to any wrongdoing as part of the settlements, but in both cases, what is involved is mismanagement and poor governance on the part of the companies involved. Both cases point clearly to the need for effective governance – and for effective regulation to step in when governance fails.
[...]
http://www.thefiscaltimes.com/Columns/2012/08/31/Citigroup-JNJ-Real-Reasons-for-Strong-Regulation.aspx [with comments]
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[Student Loan] Debt Collector Misled Borrowers, Court Says
August 31, 2012
http://www.nytimes.com/2012/09/01/business/student-debt-collector-misled-borrowers-appeals-court-rules.html
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Last Plea on School Loans: Proving a Hopeless Future
August 31, 2012
http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html [ http://www.nytimes.com/2012/09/01/business/shedding-student-loans-in-bankruptcy-is-an-uphill-battle.html?pagewanted=all ] [with comments]
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Debt Collectors Cashing In on Student Loans
September 8, 2012
http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html [ http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?pagewanted=all ] [with comments]
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Mitt Romney exited Bain Capital with rare tax benefits in retirement
Mitt Romney barnstorms in Ohio, Florida:?The Republican presidential nominee delivers campaign speeches, saying the nation needs “a new coach,” in a nod to the start of college football season.
Read the full text of Mitt Romney's tax documents.
[ http://www.washingtonpost.com/wp-srv/politics/documents/mitt-romney-tax-documents.html ]
By Tom Hamburger, Published: September 2, 2012
Before Mitt Romney [ http://www.washingtonpost.com/mitt-romney-2012-presidential-candidate/gIQANxIecO_topic.html ] retired from Bain Capital [ http://www.washingtonpost.com/politics/mitt-romney-and-bain-capital/gJQAeUaOrW_topic.html ], the enormously profitable investment firm he founded, he made sure to lock in his gains, both realized and expected, for years to come.
He did so, in part, the way millions of other Americans do — with the tax benefits of an individual retirement account. But he was able to turbocharge the impact of those advantages and other tax breaks in his severance package from Bain in a way that few but the country’s super-rich can ever hope to do.
As a result, his IRA [ https://www.documentcloud.org/documents/411784-20120816-romney-form.html ] could be worth as much as $87 million, according to his estimates, and he can continue to earn tax-advantaged income from Bain more than a decade after he formally left the firm.
The Republican presidential nominee [ http://www.washingtonpost.com/politics/rallying-support-and-rounding-up-dollars/2012/07/18/gJQAVxZbsW_gallery.html ] has been “scrupulous” about observing the tax code, said Romney campaign spokeswoman Michele Davis. “His income is reported and taxed in full compliance with U.S. law, and he has paid 100 percent of what he has owed.” She added that the financial holdings of Romney and his wife, Ann [ http://www.washingtonpost.com/politics/ann-romneys-speech-offers-chance-to-define-mitts-appeal/2012/08/28/35f3f2ae-f129-11e1-892d-bc92fee603a7_story.html ], are managed by a blind trust the Romneys do not control.
Romney’s former colleagues say his retirement package is a well-justified reward for a chief executive who built Bain from scratch in 1984 into a financial powerhouse that backed business successes such as Staples and the Sports Authority.
The structure and tax treatment of his retirement, including the IRA, was legally sound and appropriate, they say, adding that he has earned less money over his career than some other top private-equity executives, who earned billions of dollars during the same period.
Details of Romney’s retirement assets are somewhat vague because he has released only one year of full tax returns and declined to provide additional specifics about his personal finances. But interviews with Bain executives and accounting professionals show that he was able to take advantage of tax benefits in innovative ways open only to a narrow slice of extremely affluent people — mostly those who work in private-equity firms and other investment partnerships.
His severance package, for instance, allowed him to continue sharing in the profits of the company as if he were still a partner managing it, according to his 2010 tax return and interviews with present and former Bain executives. And because he benefited from the firm’s investments as if he were an active Bain partner, he paid taxes at a lower rate on these earnings than if they were treated as ordinary retirement income. Romney negotiated the package when he was leaving the firm, Bain executives said, while he set up his IRA long before.
IRAs were established by Congress nearly 40 years ago to help people save for their retirement. Under the law today, individuals may contribute up to $5,000 per year and employers may contribute up to $50,000 a year to an employer-sponsored IRA. The money is invested, and the investments grow tax-free until retirement. There is no limit on how much money an IRA can earn tax-free.
What determines an IRA’s growth is the performance of the investments, and Bain enabled Romney, its other employees and its partners to score big on that front. It was not uncommon for senior Bain executives to accrue IRAs valued at tens of millions of dollars, according to former and present company employees, by buying into Bain investments at very low prices and then reinvesting the returns in other low-priced Bain investments after the initial investments appreciated.
When Romney was chief executive, Bain set up Simplified Employee Pension IRAs, or SEP-IRAs, under which the company contributed up to $30,000 a year to employees’ retirement accounts, according to people familiar with the program. Many of the employees decided to use this contribution to buy stock in the companies that Bain had acquired in the course of its business as a private-equity firm.
Bain executives encouraged such IRA investments. They demonstrated to Bain’s outside clients, who were also investing in the stock of these acquired companies, that Bain employees were putting their money where their mouth was and sharing in the risk with outside investors. The co-investment strategy was good for building relationships with clients. “Employee investing has always been an essential part of the culture of the firm,” said Bain spokesman Alex Stanton.
Like other IRA investors, Romney will pay a 35 percent tax on the funds in his account when he ultimately withdraws them, said Davis, the Romney campaign spokeswoman. Until then, he can use the money in the account to buy and sell stock and other assets, repeatedly reinvesting the money inside the IRA, without having to pay tax rates of up to 40 percent for short-term capital gains. That’s a huge benefit, tax experts say.
Romney’s IRA growth could be dramatic, in part, because he, like other Bain employees, was given access to a type of shares in Bain-backed companies that were often private and low-valued when the employees bought in and then were managed by Bain for growth and an eventual sale or public share offering that would maximize shareholder value.
These “A-shares” were priced by Bain at a fraction of another category of stock known as “L-shares,” which functioned like preferred stock, paying dividends and getting priority for payouts. The A-shares, or common shares, were riskier and thus priced lower, so it was possible that a relatively small IRA investment could buy significant amounts of the A-shares in some companies. The use of a dual-share structure is not unusual in the financial industry, and under financial accounting rules the A-shares must reflect a true market value of the underlying assets. Often, the value of these initially cheap A-shares soared, along with the company’s value.
Consider the example of Physio-Control, which was bought by Bain in 1994. The company, a maker of defibrillators, saw its business take off in the following years, with Bain’s initial investment multiplying 21 times. Under the dual-share structure, the rewards were heavily tilted toward the A-shares. The value of an A-share purchased in 1995 multiplied 445 times in just three years, according to a person familiar with the transaction who spoke on the condition of anonymity. In other words, a $10,000 investment in Physio-Control A-shares would in theory have returned $4.45 million.
Not all deals worked out so well. Bain bought US Synthetic, a maker of bits used in oil and gas exploration, in 1998. By the time the company was sold in 2004, the original Bain investment had multiplied a modest 1.2 times. Under the terms of the company’s dual-share structure, A-shares lost all their value.
By leveraging a series of successful A-share investments, taking profits and reinvesting the money into new A-shares, a Bain IRA fund could easily accumulate millions of dollars without any tax penalty. On the disclosure statements Romney files as a candidate for federal office, he reports his financial holdings and values them by assigning a dollar range to each one. By adding these values together, The Washington Post calculated that the holdings in his IRA were worth between $20 million and $102 million in 2011. The total range shifted downward this year, with Romney valuing the holdings in his IRA at between $17 million and $87 million.
Romney has not disclosed all the assets he used to build his IRA.
In explaining the growth of his account, Romney campaign officials do not dispute The Post’s analysis but note that he had been eligible to contribute to IRA accounts since he entered the work force in 1975 and that the years since then have often been times of strong economic growth.
That does not mean the size and growth of such IRAs are not controversial. Michael Graetz, who served in the Treasury Department under President George H.W. Bush, said massive IRAs such as Romney’s do not reflect the intent of the laws that created the accounts as a way to help working Americans reach financial security.
“One need not have $100 million in an IRA in order to accomplish retirement security,” said Graetz, who teaches tax and retirement policy at Columbia Law School. “The law deliberately set limits in order to restrict the revenue losses to the Treasury.”
Another tax expert, Edward Kleinbard of the University of Southern California, who reviewed the prices of some A- and L-shares, said Bain may have undervalued the A-shares, providing a benefit to insiders. Kleinbard, a Democrat and former chief of staff of the Congressional Joint Tax Committee, said the valuation of such shares should reflect real market prices.
But Jack Levin, a tax lawyer who has represented Bain, said the share prices at Bain were worked out “by all the investors at arm’s length based on the company’s prospects and economic condition at the time of the investment.”
He said the increase in the value of Romney’s IRA reflected business smarts, not questionable investment practices.
“There is nothing magical about it,” Levin said. In the years that Romney ran Bain, the company earned more than a 50 percent return on investment on average each year. Even a lower rate of return, 26 percent a year, combined with a regular investment of new funds in the account would give Romney “more than $100 million in his IRA account today,” according to Levin, a lawyer at Kirkland & Ellis.
He noted that there was nothing improper about amassing so much wealth. “There is nothing in the tax law that prohibits an IRA from earning as much as the sponsor’s investment acumen allows him or her to earn,” he said.
Another way in which tax rules have favored Romney’s post-Bain financial situation is through the treatment of his severance package from Bain. Again, he benefited from a tax break in a way that is available to very few. His retirement earnings receive what is called the “carried interest” deduction. That’s an accounting classification that treats certain income from private-equity firms and other partnerships as capital gains and taxes it at a rate of 15 percent, rather than as ordinary income at 35 percent.
Here’s how carried interest works: Most private-equity firms charge their clients fees known as “2 and 20” — 2 percent of an investment fund’s overall assets and 20 percent of any profits. Managers generally declare the 2 percent management fee as ordinary income, meaning they pay ordinary income and payroll taxes on the money. But most private-equity managers say the 20 percent share of profits, the “carry,” is an investment and thus should be taxed at the capital gains rate.
Defenders of carried interest say the lower tax rate provides fund managers with an incentive to take smart risks, because they share in the investment with their clients. Opponents say it is a loophole that ought to be closed.
Romney’s 1999 severance package was structured to take advantage of the carried-interest treatment. It took nearly a year of negotiations to arrange that package after he left Bain in 1999 to run the Salt Lake City Winter Olympics, Bain insiders say, and he did not formally resign as chief executive until he had negotiated the deal.
The result of the negotiations was a deal that allowed Romney to continue sharing in the profits of the company for 10 years in the same way that active managers received compensation. These carried-interest profits would be taxed at a 15 percent rate, less than half the rate that retirees might pay on other income, including payouts from pensions, IRAs and stock options.
Under the terms of the retirement package, as described by Romney and Bain executives, he would benefit from Bain business deals made through Feb. 11, 2009 — 10 years to the day after he left Boston to run the Olympics.
He would receive the 2 percent management fee as well as a share of the carried-interest profits that Bain made from acquiring and later reselling companies. Bain declined to say how large the share was, but a person familiar with the agreement said the share declined over time.
Ten-year retirement agreements such as this are unusual in the corporate world, but financial industry experts say such arrangements make sense for privately held investment partnerships such as Bain. Partnership shares are difficult to divide and, because the company is not publicly traded, it is difficult to offer a retiring founder an immediate payout, experts say.
In Romney’s case, however, the benefits did not stop when the 10 years were up, his disclosure statement and tax return show. As long as any of the Bain investment funds in which Romney invested before 2009 continued to make profits, Romney would continue to share in them. Since these funds often last five to seven years, Romney has continued to profit well beyond the termination of his severance package. Other top executives at Bain have negotiated similar retirement deals, according to a former partner.
Bain executives have said Romney is entitled to continue sharing in the profits, even in retirement, because he built Bain and led it during its most successful period. Romney helped pull together $37 million for the first investment fund, handpicked early partners, personally solicited potential investors, and presided over rigorous debates about firm strategy and acquisition decisions.
Yet some of the retirement benefits no longer flow to Romney individually but to a blind trust he established in the name of his wife, Ann.
In his 2010 tax return, Romney said the Ann Romney blind trust could receive carried-interest profits from a Bain fund based in the Cayman Islands called Bain Capital Partners (AM) X LP. To request the carried-interest tax deduction, which is typically taken by active fund managers, Romney’s attorney filed a tax form telling the IRS that Ann’s trust was “performing services” for the fund.
Tax experts say Romney can legally share in the carried-interest profits and take the deduction if Bain has agreed to the arrangement. Critics of the carried-interest deduction say this example highlights how the tax break can be abused.
“Carried interest was intended to motivate managers going forward,” said Victor Fleischer, an expert in carried interest at the University of Colorado law school. “In cases like the Romneys, it just shows it is really all about fancy tax planning. It’s not motivating managers going forward. Not only is Mitt not providing any future services, Ann never did.”
In recent years, the carried-interest deduction has proved controversial on Capitol Hill. There have been several unsuccessful efforts to eliminate the tax break, which critics say improperly treats profits like capital gains, and tax these earnings as ordinary income at 35 percent.
Some tax experts worry that the arrangements Romney benefits from set a bad precedent for a president. “He looks for every tax angle to a degree that is unbecoming in someone who would be the executive in command of the administrative apparatus that enforces the tax law,” said Lee Sheppard, a tax lawyer and contributing editor for Tax Analysts, a publication for accounting and legal professionals.
Gregory Thomas contributed to this report.
© 2012 The Washington Post
http://www.washingtonpost.com/politics/mitt-romney-exited-bain-capital-with-rare-tax-benefits-in-retirement/2012/09/02/1bddc8de-ec85-11e1-a80b-9f898562d010_story.html [with comments]
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More Tax Tricks, Private Equity Style
Editorial
Published: September 5, 2012
Gawker.com was onto something big [ http://gawker.com/5936394 (about 40% of the way down at {linked in} http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78916119 )] last month when it raised questions about Mitt Romney’s taxes by putting online confidential documents from Bain Capital, the private equity firm co-founded by Mr. Romney.
As The New York Times reported this week [ http://www.nytimes.com/2012/09/02/business/inquiry-on-tax-strategy-adds-to-scrutiny-of-finance-firms.html ], the attorney general of New York, Eric Schneiderman, has subpoenaed Bain and other private equity firms for documents that could reveal whether they have used abusive tax strategies to drastically cut their partners’ tax bills.
At issue is how private equity partners treat management fees for tax purposes. Such fees, generally 2 percent of the assets they manage, are normally considered ordinary income, like salaries. But through various machinations, several firms routinely re-brand the fees as capital gains from investing, which are taxed at 15 percent, far lower than the top rate of 35 percent for ordinary income.
Is that legal? Is it legal in some instances and not in others? Mr. Schneiderman apparently wants to find out. In the past, the Internal Revenue Service has said that converting management fees into capital gains is an area of “possible noncompliance,” but it is unclear whether the I.R.S. has audited the practice. Some tax experts have argued [ http://dealbook.nytimes.com/author/victor-fleischer/ ] that the practice is illegal, while others — including those who advise private equity firms — say it is not even aggressive. What is clear is that these tactics come on top of a huge existing loophole that allows private equity partners to pay the capital gains rate on a share of the profits earned by the funds, which comprises the bulk of their income and are separate from their management fees.
The upshot is that private equity partners, the deal makers who have become multimillionaires through debt-driven buyouts of public companies, pay a flat rate of 15 percent on all or most of their earnings, compared with top rates as high as 35 percent for wage and salary earners. If that’s not illegal, it should be.
The best way to end this problem is to get rid of the special rate for capital gains. As long as income from investments is taxed at a lower rate than income from work, there will be no stopping the search for ways, legal or otherwise, to pay the lower rate.
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Related in Opinion
Documents Show Details on Romney Family Trusts (August 24, 2012)
http://www.nytimes.com/2012/08/24/us/politics/documents-show-details-on-romney-family-trusts.html [about 40% of the way down at (linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=78916119 ]
Taking Note: Two-and-Twenty Tax Dodges (August 24, 2012)
http://takingnote.blogs.nytimes.com/2012/08/24/two-and-twenty-tax-dodges/
Times Topic: United States Elections
http://topics.nytimes.com/top/opinion/united-states-politics/index.html
*
© 2012 The New York Times Company
http://www.nytimes.com/2012/09/06/opinion/more-tax-tricks-private-equity-style.html
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Bain Capital Partners Deserve More Tax Breaks
By Steven Clifford
Posted: 09/06/2012 12:59 pm
My wife does not understand economics.
She read in Sunday's New York Times that Bain Capital partners had evaded income tax by converting management fees into fund investments. Bain partners saved at least $200 million in income taxes and more than $20 million in Medicare taxes.
"Why can't we do this?" she asked. "Why can't we evade taxes on income simply because we invest it?" she asked.
"We can't because we are individuals," I responded.
Judith: So are the partners at Bain Capital.
Steve: You don't understand economics. We need to give Bain Capital partners tax incentives to create jobs.
J: So when Bain Capital buys a company, the company then hires a lot of people?
S: No. The first thing Bain Capital does is to fire a bunch of people.
J: How does this create jobs?
S: The second thing Bain Capital does is to load up the company with massive debt. Then they pay themselves a dividend equal to their investment. That way they own the company without putting up a nickel.
J: And this creates jobs?
S: To gain control of a company without putting up a nickel, Bain Capital must pay a lot of lawyers, accountants, and bankers.
J: But those lawyers, bankers, and accountants already had jobs. This country does not need more work for $300 an hour parasites. It needs decent middle class jobs.
S: That is why we must give Bain Capital partners tax incentives to continue to invest.
J: Do they invest their own money?
S: Of course not. These are smart people. They invest other people's money, and get paid millions of dollars annually to do so.
J: If Bain Capital partners make millions by investing other people's money why do they need tax breaks? Wouldn't they do the same things even if they had to pay the 35 percent tax rate that everyone else does? This does not seem fair.
S: It's not a matter of fairness. It is a matter of incentives. Without a tax breaks these partners have little incentive to work. Why earn tens of millions if, like everyone else, you have to give a third of it to the government?
J: Doesn't the average worker need the same incentive?
S: Not at all. The average worker already has great incentives regardless of tax rate -- if she does not work, she starves. But the Bain Capital partners are very rich. We need to provide extra tax incentives to keep them working.
J: How does benefit anyone other than the Bain Capital partners?
S: You don't understand the economic theory of "Trickle Down." Trickle Down says we would all be better off if the rich paid less tax.
J: That's what the Bush tax cuts were supposed to do and we know how that turned out.
S: That's why Romney says we need more tax cuts. Then the rich will get more money to trickle, and there will be more poor and unemployed to get trickled on. It takes time for Trickle Down to work.
J: How long does it take?
S: In France the Bourbons tried it from 1589 until 1789. Two centuries wasn't quite long enough.
J: You're crazy. You say we must allow the Bain Capital partners to evade taxes so they will continue to invest other people's money to fire people so that the Bain partners can pay themselves a dividend and own a company for nothing, thereby making the rich richer. And if the Bain Capital partners quit tomorrow, Trickle Down might take four centuries rather than three centuries to work. Let the Partners quit tomorrow. What else would they do?
S: They could run for office?
J: Now I get it. We need to allow Bain Capital partners to evade taxes to keep them from running for office.
S: Precisely. I think you are beginning to understand economics.
Copyright © 2012 TheHuffingtonPost.com, Inc.
http://www.huffingtonpost.com/steven-clifford/bain-capital-partners-des_b_1852377.html [with comments]
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Greensburg, KS - 5/4/07
"Eternal vigilance is the price of Liberty."
from John Philpot Curran, Speech
upon the Right of Election, 1790
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