David Stockman Explains How Mitt Romney Got Rich

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David Stockman has a brutal piece in the Daily Beast today about Mitt Romney’s years as head of Bain Capital:

Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses….That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.

So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise. I know this from 17 years of experience doing leveraged buyouts at one of the pioneering private-equity houses, Blackstone, and then my own firm. I know the pitfalls of private equity. The whole business was about maximizing debt, extracting cash, cutting head counts, skimping on capital spending, outsourcing production, and dressing up the deal for the earliest, highest-profit exit possible. Occasionally, we did invest in genuine growth companies, but without cheap debt and deep tax subsidies, most deals would not make economic sense.

The rest of the piece is mostly a detailed rundown of Bain’s failures and successes, and it’s interesting enough. But I wish Stockman had gone into more detail on the highlighted bits above. He’s right that the Bain model — along with so much that Wall Street does — provides very little in the way of either social value or genuine economic growth. Only the tax preferences for both debt and capital gains make most private equity deals worth doing, something that’s yet another argument for taxing capital gains more heavily than we do now. It’s too bad Stockman doesn’t provide chapter and verse on that to go along with his Mitt bashing. I guess it must have seemed a little too esoteric for the Daily Beast to be interested in.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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