Friday, February 10, 2012

A New World Record -- for Hypocrisy

Here’s what Mitt Romney said to CPAC today.
“This is a moment when our country needs serious change and dramatic reform. So let me tell you exactly what kind of president I will be. To get America back on track, and to get Americans back to work we need bold and sweeping reforms. These aren’t managerial issues of changing this department or that agency. To change Washington we are going to have to change the very relationship between the government and the citizen. And these are moral choices that will define our nation and define us for generations to come. Let me mention a few of them. Today, as you know we borrow 40 cents of every dollar we spend. That’s unconscionable; it is unsustainable; it is reckless; it is immoral. And it will end under my presidency.”
Let’s examine the world class hypocrisy of this statement.

Romney is able to compete, not because he is popular, but rather because he is so fabulously wealthy that he can outspend any competitor, and crush them. Even still, he lost every county in Minnesota, every county is Missouri, and Colorado, to the incredibly underfunded campaign of Rick Santorium.

I wouldn’t normally be concerned about how another person made his or her money, although when a guy has Swiss bank accounts, and money stashed in other off-shore tax havens, I admit my curiosity is piqued. But what makes Romney’s wealth acquisition the subject of my interest is the fact that he is running for President. He made his money in business, and the idea that he is promoting is that what he did for the companies that he did not cannibalize, he can do for the country.

So bear with me for a moment while we talk about leveraged buyouts.

A leveraged buyout (LBO) is a way that one company takes over another. Let’s call the company doing the hostile takeover Bain Capital. And let’s call the other company Victims’R’Us. What Bain does is put some of its money at risk, and tries to buy the entire company. But it doesn’t want to spend too much of its money because, you see, it’s not really that committed to the long term success of the Victims’R’Us. 

So, what to do? Bain borrows the money to buy the rest of Victims’R’Us, and secures it with the assets of the target company. As the founder of the Republican party said, “It may seem strange that any men should dare to ask a just God’s assistance in wringing their bread from the sweat of other men’s faces, but let us judge not, that we be not judged.” And so, in that spirit, let us forebear to judge those who wring corporations from the sweat of their owner’s brow.

Except that Mitt Romney won’t forebear to judge. He tells us that to borrow 40% of what you spend is immoral, and, I call that judgmental. But I will accept his judgment.

Here’s a little fun-fact: In a typical LBO, the ratio of debt to equity is 9:1. That means that 90% of the assets are paid for with borrowed money. And, depending on the company’s financial health, it will usually be financing spending by much more than 100%. Much more.

Now, this is what Romney did. This is the record that he is running on. This is the raison d’être for his candidacy, and its entire rationale. It may seem strange that Romney would call it unconscionable, unsustainable, reckless, and immoral. But let us judge not, that we be not judged.

And here’s another fun-fact: a lot of what Victims’R’Us spend money on is consulting fees for Bain Capital. I mean a lot of money! They are not just wringing their bread from the sweat of Victims’R’Us. They are wringing the neck of Victims’R’Us. But due to a little catch in the Tax Code, the paycheck that they get as consultants, is not taxed as if it were a paycheck. Instead, it is called “carried interest,” That’s why Mitt Romney pays less that 15% on the 21.6 million dollars of income that he admitted to on his 2010 tax return.

It’s good work if you can get it.

“… and tell ’em Big Mitch sent ya!”

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