The reason Republicans are lukewarm (Cartoon, Economist, March10, 2012:
14) toward Romney is that his business experience is irrelevant to the
problems being faced by the nation (Economist, March 10, 2012: 18).
Romney was very successful at the leveraged buyout. He made a lot of
money from firms that amassed, at his instigation, a lot of debt, some
of which was used to payoff the investors.
The problem, as Republicans see it, is that America has already amassed
and is continuing to amass a lot of debt.
The Republicans would like to support a candidate who is skilled at
paying down the debt.
Sent to the Economist
Tuesday, March 27, 2012
Tuesday, March 20, 2012
Dialog on Campaign Financing
Dialog
It is hard to argue that more speech is not better than less speech; yet that is what the Supreme Court decided last year in the case of Arizona Free Enterprise Club's Freedom PAC v Bennett. This disallowed an Arizona law that would have provided public financing to candidates who were competing against heavily self-financed opponents.
The problem with the flood of PAC money is that the volume of speech that it generates drowns out the speech of ordinary people who cannot compete in the advertising market. If there was some method for generating countervailing speech then Mr. Weinstock's competitive elections might well come into being (New York Times, March 6, 2012: A26). At present big money alone talks.
Sent to New York Times
It is hard to argue that more speech is not better than less speech; yet that is what the Supreme Court decided last year in the case of Arizona Free Enterprise Club's Freedom PAC v Bennett. This disallowed an Arizona law that would have provided public financing to candidates who were competing against heavily self-financed opponents.
The problem with the flood of PAC money is that the volume of speech that it generates drowns out the speech of ordinary people who cannot compete in the advertising market. If there was some method for generating countervailing speech then Mr. Weinstock's competitive elections might well come into being (New York Times, March 6, 2012: A26). At present big money alone talks.
Sent to New York Times
Tuesday, March 6, 2012
Romney
Like Brian McGrory, I think that the post-big dig disaster period was
Governor Romney's finest hour (Shrinking Candidate, Boston Globe, March 2, 2012: B1).
It was however, the exception.
During his candidacy and during his time in office, Romney was characterized by the triumph of style (or photo-op) over substance.
When a candidate he worked for a day as a burger flipper and a fish processor so he could understand what ordinary folk were like. Great photo-ops but little gain in understanding. To gain that, he should have read "Nickled and Dimed" or "When Work Disappears" to understand the struggles that low income people go through day by day in the struggle to get work, to get to work, to get a home, and to get from and to home.
As Governor, he rode for one stop on the Red Line to show how safe the subway was after the London bombings -- again a great photo-op that was marred by his failure to know the exact fare.
Alas, I think the Romney we see in this campaign is the Romney that is. That is surprising given his vaunted analytic and managerial competence.
It was however, the exception.
During his candidacy and during his time in office, Romney was characterized by the triumph of style (or photo-op) over substance.
When a candidate he worked for a day as a burger flipper and a fish processor so he could understand what ordinary folk were like. Great photo-ops but little gain in understanding. To gain that, he should have read "Nickled and Dimed" or "When Work Disappears" to understand the struggles that low income people go through day by day in the struggle to get work, to get to work, to get a home, and to get from and to home.
As Governor, he rode for one stop on the Red Line to show how safe the subway was after the London bombings -- again a great photo-op that was marred by his failure to know the exact fare.
Alas, I think the Romney we see in this campaign is the Romney that is. That is surprising given his vaunted analytic and managerial competence.
Saturday, February 18, 2012
A Better Way to Buy Politicians
Lindsay Mark Lewis aims at the wrong target in the op-ed, "A Better Way to Buy Politicians" (New York Times, February 17th., 2012: A23).
The question is not how to buy politicians, but who does the buying?
Right now, corporations and their surrogates (Trade Associations, the US Chamber of Commerce) do the buying -- but they do it with our money!
It is the corporate cash flows that we contribute through our purchases of the goods and services they provide that enable the corporations to swamp the political field with money.
We should be able to eliminate the middleman (the Corporation). Individuals should have the right to make contributions to politicians and to political parties. But the favored few, corporate executives and members of Boards of Directors, should not have the right to use a second channel for unlimited contributions.
It is time to amend the constitution so that political contributions can be limited by law.
Sent to New York Times
The question is not how to buy politicians, but who does the buying?
Right now, corporations and their surrogates (Trade Associations, the US Chamber of Commerce) do the buying -- but they do it with our money!
It is the corporate cash flows that we contribute through our purchases of the goods and services they provide that enable the corporations to swamp the political field with money.
We should be able to eliminate the middleman (the Corporation). Individuals should have the right to make contributions to politicians and to political parties. But the favored few, corporate executives and members of Boards of Directors, should not have the right to use a second channel for unlimited contributions.
It is time to amend the constitution so that political contributions can be limited by law.
Sent to New York Times
Monday, January 30, 2012
Romney at Bain Capital
MetroWest OpEd
No longer on website.
Here it is
Mitt Romney, Debt, and
what America needs
Martin G. Evans
818 words
It is not difficult to understand the far right wing
Republican's distaste for Mitt Romney. Even though former Vice-President Dick
Cheney told us that deficits id not matter, the right wing has been screaming
for the past three years that deficits did mater.. Their opposition to
previously uncontroversial legislation to the raising of the the US debt
limited was a warning that the party took debt seriously.
How then could they support a man who has made his whole
career in management in the leveraged buyout business? The word “leveraged'
gives the clue to what this business is all about: buying a firm with money belonging
to someone else. Using that debt to improve the operations of the firm and to
acquire additional firms where there might be synergy, paying management fees
and dividends, and depending on the success in these endeavors, either selling
the firm off, or allowing it to fall into bankruptcy where the losers would be
the debt holders, not the instigators of the leveraged buyout.
In either case the instigators did well – either through fees
and the money they received when the company was sold or just through the fees
if the company failed. Romney was a star in this business at Bain Capital. He
could analyze a company's operations and finances, he could clearly see where
there was success and where there was slack. He could negotiate the appropriate
level of debt for company operations and for ensuring that Bain Capital
received its due reward.
What Romney and the leveraged buyout business did was good
for for Bain and its investors. It is less clear whether this activity
benefited the economy as a whole. It is
incredibly difficult to get data on the impact of the leveraged buyout
business. The firms are very secretive. Nevertheless, writing in the New York
Times on January 25th., 2011, Steven Davidoff summarized the limited
research on the impact of private equity and leveraged buyouts on firm
outcomes. The picture is mixed:
•
Private equity firms were equally likely to file
for bankruptcy as similar firms with the same level of debt.
•
But Private equity firms might have had more
debt than necessary to fund their operations in order to pay dividends and fees
to their owners
•
However a second study suggested that the size
of these payments was unrelated to a firm's financial distress
•
Private equity firms were less likely to default
than other firms.
•
Private equity firms shrank payroll by about 6%
but this was little different from what other firms did in similar
circumstances.
•
Private equity firms were good at developing new
lines of business
•
Private equity firms invested more efficiently
because of the new owners access to cheaper capital.
•
The performance of private equity firms was
closely monitored by the new owners
•
Two thirds of private equity firms replaced the
top managers within four years of being bought, suggesting that there was an
opportunity, taken by the new owners,
for better management of the operations.
If these results hold for Bain Capital (and we do not know
whether they do), the conclusion is that in doing well for Bain Capital, Romney
inflicted minimal downside on the economy as a whole; though his activities at
Bain Capital could be devastating for the individual managers and employees who
lost their jobs.
One wonders whether he fought as hard for the survival of the
troubled firms held by Bain Capital as he did when he returned to his former
company, Bain & Company, the consulting firm. He was brought back from Bain
Capital to head up Bain and Company which was in dire distress due to excessive
debt after its earnings fell.
He convinced the partners that they had extracted too much in dividends and
fees out of the company and forced them to pay back a considerable fraction of
what they had extracted which was used to pay down the debt and convince
bankers to give Bain more time to service the debt.
The question is why didn't he exhibit the same behavior when companies owned by
Bain Capital faced similar problems: excessive debt caused by transfers of
funds from the operating companies to Bain Capital?
I can see this wouldn't have been possible for all companies in the portfolio;
but surely it would have been possible for those companies making a product for
which there was demand, where operating costs were low. and where the only
problem was servicing the excessive debt.
Mr. Romney is well known for his inconsistent behavior (aka flip
flops). If he had fought as hard as he did for Bain for the companies owned by
Bain Capital he might have saved jobs,
investor capital, and lenders' capital.
Mitt Romney has made a career of increasing debt. Is he
really the person we can trust to reduce the US debt?
Saturday, January 28, 2012
Dont Mind the Gap
I do mind the gap.
In his op-ed piece, Andrew Kohut ignores the problems that both rich and poor have in countries and other jurisdictions with high inequality (Don't mind the Gap. New York Times, January 27, 2012: A21).
In their book, The Spirit Level, Richard Wilkinson and Kate Pickett enumerate the problems:
In developed countries, there is a strong negative relationship between inequality and life expectancy; though only a very weak relationship with average wealth. Similar results when we compare inequality and life expectancy across the states in the USA: a strong negative relationship. Again little relationship with the average wealth of the state.
A whole set of other indicators (trust, negative; infant mortality, positive; incarceration rates, positive; well-being, negative).
So inequality matters and it is important to note that it is both rich and poor who suffer from these negative effects. Undoubtedly the poor suffer more.
In the light of the 15% tax rates paid by some of the very rich, we need to thoroughly reform the income tax system to bring back an equitable distribution
Sent to New York Times relevant to Don't Mind the Gap
In his op-ed piece, Andrew Kohut ignores the problems that both rich and poor have in countries and other jurisdictions with high inequality (Don't mind the Gap. New York Times, January 27, 2012: A21).
In their book, The Spirit Level, Richard Wilkinson and Kate Pickett enumerate the problems:
In developed countries, there is a strong negative relationship between inequality and life expectancy; though only a very weak relationship with average wealth. Similar results when we compare inequality and life expectancy across the states in the USA: a strong negative relationship. Again little relationship with the average wealth of the state.
A whole set of other indicators (trust, negative; infant mortality, positive; incarceration rates, positive; well-being, negative).
So inequality matters and it is important to note that it is both rich and poor who suffer from these negative effects. Undoubtedly the poor suffer more.
In the light of the 15% tax rates paid by some of the very rich, we need to thoroughly reform the income tax system to bring back an equitable distribution
Sent to New York Times relevant to Don't Mind the Gap
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