2012 - %3, January

Mitt Romney is Doing Pretty Well For Himself

| Tue Jan. 24, 2012 1:35 AM EST

Mitt Romney has released his two most recent tax returns:

Mitt Romney offered a partial snapshot of his vast personal fortune late Monday, disclosing income of $21.7 million in 2010 and $20.9 million last year — virtually all of it profits, dividends or interest from investments.

That's pretty impressive. Not the fact that Romney paid a 13.9% tax rate on this haul — we already pretty much knew that. No, I'm talking about the fact that he made $21 million each year. Most public reports put Romney's wealth in the neighborhood of $250 million, which means he got a return of about 8.4% both years. That's a real return of around 7% during a generally slow-growth period when most people are scrounging around just to find safe investments that pay a point or two more than treasuries. When it comes to managing big pots of money, it looks like Romney hasn't lost his old magic.

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Romney's Tax Rate in 2010: 13.9 Percent

| Tue Jan. 24, 2012 1:08 AM EST
Mitt Romney (center) celebrates being rich.

Mitt Romney released his his 2010 tax return on Monday night, and it turns out he actually paid an effective tax rate of 13.9 percent that year, according to the Washington Post:

They sent somewhat less to Washington over that period, paying an estimated $6.2 million in federal income taxes. According to his 2010 tax return, Romney paid about $3 million to the IRS, for an effective tax rate of 13.9 percent.

For 2011, Romney estimates that he will pay about $3.2 million, for an effective rate of 15.4 percent. That’s in line with his earlier estimates, but sharply lower than the rates paid by President Obama and Romney’s closest Republican rival, Newt Gingrich.

Previously Romney had estimated his tax rate as being "around" 15 percent. To put this in perspective, Romney, who according to the Post makes about twenty million dollars a year mostly through capital gains and investments, pays a lower effective tax rate than American households making an average pretax income of $64,500 a year. Those middle-income folks pay an effective tax rate of 14.2 percent, according to the Congressional Budget Office. Romney's tax plan would cut his tax rate even further.

If that doesn't quite seem fair to you, that's probably what the Obama administration hopes you're thinking. We still don't know what tax rates Romney paid before 2010, but he did release his estimated taxes for 2011, for which he expects to pay an effective rate of 15.4 percent.

"Self-Deportation": It's a Real Thing, and It Isn't Pretty

| Mon Jan. 23, 2012 10:59 PM EST

Mitt Romney unveiled a novel solution for illegal immigration during Tuesday night's GOP debate, saying that he'd rely on "self-deportation" to reduce the number of unauthorized immigrants in the US. 

Or at least it sounded novel. As my colleague Clara Jeffery notes, while "self-deportation" might sound like something you don't want your parents to catch you doing, it's actually an old euphemism for an immigration strategy of "attrition through enforcement." What "self-deportation"—the favored approach to immigration of the GOP's right-wing—actually means is making life so miserable for unauthorized immigrants that they "voluntarily" leave. Here's Mark Krikorian of the Center for Immigration Studies (the anti-immigrant think tank that tried to mainstream the "terror baby" conspiracy theory) explaining the concept in 2005:

Among the other measures that would facilitate enforcement: hiring more U.S. Attorneys and judges in border areas, to allow for more prosecutions; passage of the CLEAR Act, which would enhance cooperation between federal immigration authorities and state and local police; and seizing the assets, however modest, of apprehended illegal aliens.

These and other enforcement measures would enable the government to detain more illegal aliens; additional measures would be needed to promote self-deportation. Unlike at the visa office or the border crossing, once aliens are inside the United States, there's no physical site to exercise control, no choke point at which to examine whether someone should be admitted. The solution is to create "virtual choke points"—events that are necessary for life in a modern society but are infrequent enough not to bog down everyone's daily business. Another analogy for this concept to firewalls in computer systems, that people could pass through only if their legal status is verified. The objective is not mainly to identify illegal aliens for arrest (though that will always be a possibility) but rather to make it as difficult as possible for illegal aliens to live a normal life here.

This is the right-wing's answer to the question of how you deport 11 million unauthorized immigrants: You don't. You force them to "deport themselves." Although immigration reform advocates would prefer a solution that involves a path to citizenship for unauthorized immigrants already here, Romney and his top immigration advisers believe they can remove millions of people through heavy-handed enforcement that makes life for unauthorized immigrants intolerable. This approach is notable for its complete lack of discretion and flexibility. Unauthorized immigrant parents with citizen children who need to go to school? Americans who are married to an undocumented immigrant who needs medical treatment? "Self-deportation" hits them all with the same mailed fist. 

We can see how this concept has been applied in states like Arizona and Alabama, where local authorities have been empowered to act as enforcers of immigration law. Alabama takes the choke point theory even more seriously than Arizona—everything from enrolling in school to seeking health treatment has been turned into a so-called choke point. The moral, social, and economic consequences of the strategy are secondary to inflicting enough suffering on unauthorized immigrants in order to force them out of the country. 

Kris Kobach, the Kansas Attorney General secretary of state who helped write both restrictive immigration laws and recently endorsed Romney, bragged about the impact of the Alabama law after it passed last year:

"There haven't been mass arrests. There aren't a bunch of court proceedings. People are simply removing themselves. It's self-deportation at no cost to the taxpayer. I'd say that’s a win."

Alabama's immigration law has actually been such a disaster that the state is trying to figure out a way to repeal parts of the law. But make no mistake, when Romney is discussing "self-deportation," he's talking about creating a United States where parents are afraid to register their kids for school or get them immunized because they might be asked for proof of citizenship. He's talking about the type of country where local police can demand your immigration status based on mere suspicion that you don't belong around here. "Self-deportation" is just a cleaner, less cruel-sounding way of endorsing harsh, coercive government polices in order to make life for unauthorized immigrants so unbearable that they have no choice but to find some way to leave. The human cost of such an approach, let alone what it might do to American society, is viewed as a price worth paying.

Romney's Crony Capitalism

| Mon Jan. 23, 2012 10:57 PM EST

In Monday night's NBC debate, Mitt Romney continued to peddle the myth that he's a titan of free enterprise—the sort of master of the private sector who has never once benefited from tax breaks or government subsidies.

Yet Romney's time at Bain Capital was ridden with numerous episodes of Bain-acquired companies leaning heavily on state tax packages, as the Los Angeles Times reported just a few weeks ago: 

Bain Capital began looking at investing in the steel start-up [called Steel Dynamics] in late 1993. At the time, Steel Dynamics was weighing where to locate its first plant, based in part on which region offered the best tax incentives. In June 1994, Bain put $18.2 million into Steel Dynamics, making it the largest domestic equity holder. It sold its stake five years later for $104 million, a return of more than $85 million.

As Bain made its investment, the state and county pledged $37 million in subsidies and grants for the $385-million plant project. The county also levied a new income tax to finance infrastructure improvements to benefit the steel mill over the heated objections of some county residents. . . .

Another steel company in which Bain invested, GS Industries, went bankrupt in 2001, causing more than 700 workers to lose their jobs, health insurance and a part of their pensions. Before going under, the company paid large dividends to Bain partners and expanded its Kansas City plant with the help of tax subsidies. It also sought a $50-million federal loan guarantee.

"This is corporate welfare," said Tad DeHaven, a budget analyst with the Washington-based Cato Institute, which encourages free-market economic policies. DeHaven, who is familiar with corporate tax subsidies in Indiana and other states, called the incentives Steel Dynamics received "an example of the government stepping into the marketplace, picking winners and losers, providing profits to business owners and leaving taxpayers stuck with the bill."

On the campaign trail, Romney's made a habit of denouncing "crony capitalism" and government intervention in the private sector. He's tried to convince Republican voters that he's never engaged in it, doesn't like it, and that real American businessmen won't practice it.

But there's plenty of evidence in Romney's record that the fine art of crony capitalism is a crucial piece of making it big in the sort-of free market. In other words: it's part of doing business in a democracy.

What Is "Self-Deportation"?

| Mon Jan. 23, 2012 10:50 PM EST

When Mitt Romney was asked how he'd fight illegal immigration in Monday night's GOP debate, he said he advocated "self-deportation." His comment was met with jeers from journalists and pols in my tweet stream—my favorite came from  : "Self-deport. I saw that on Star Trek one time"—but it's a real term, the phrase of art, in fact, for the strategy behind the wave of anti-immigration bills introduced across the country in the last two years. The brainchild of anti-immigration groups like the Immigration Law Reform Institute, and its counsel, Kansas Secretary of State Kris Kobach (who recently endorsed Romney), self-deportation is the intended effect of laws and requirements (such as those passed in Arizona and Alabama) that would make it so difficult for undocumented immigrants to work, rent, or go to school that they will simply "choose" to leave. Anti-immigration advocates like this for several reasons: It has a free-market/free-will gloss to it. It purports to save money on deportation costs. And, most importantly, because it relies on states enforcing immigration via passing draconian laws rather than federal law enforcement/border efforts. It's a conservative trifecta!

Update: Adam Serwer elaborates. Read it!

Santorum Loves Drilling More than Floridians

| Mon Jan. 23, 2012 10:34 PM EST

Rick Santorum was asked at Monday night's NBC debate about oil spills and tourism—an issue of vital interest to Florida, where the tourism-based economy was severely injured by the massive Gulf spill in 2010.

Rather than deal with the threat of oil spills, Santorum first blamed the state's economic collapse on high gas prices in 2008. After making an appeal for the unrelated Keystone XL pipeline through the Midwest, Santorum argued that pipelines are better than tankers—another point that's doesn't have much to do with the Gulf spill, which came from neither a pipeline nor a tanker, but an exploratory drilling rig. 

Oil, Santorum concluded, is "the best way to create a good economy for the state of Florida."

Most people in Florida—even many Republicans—would not agree with that assessment. The Republican-controlled state legislature has pledged that it has no plans to pursue drilling of Florida's coasts. Florida has been less enthusiastic than many other states about offshore drilling because spills in the Gulf of Mexico directly imperil the very heart of its economy.

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Romney Rips Gingrich for $1.6 Million Freddie Mac Deal

| Mon Jan. 23, 2012 10:13 PM EST
Mitt Romney.

At the NBC presidential debate Monday night, former Massachusetts governor Mitt Romney wasted no time attacking his main competitor, Newt Gingrich. In particular, Romney took aim at the former speaker's $1.6 million contract with government housing corporation Freddie Mac, blasting Gingrich as an "influence peddler."

Gingrich rejected Romney's attacks, saying he made only $35,000 a year from his Freddie gig. (The rest, he said, went to his firm.) As for the "influence peddler" claim, Gingrich went on, "I have never, ever gone and done any lobbying."

Hours before the debate, Gingrich's campaign released one of the candidate's contracts with Freddie. The contract, dated February 8, 2006, called for paying the Gingrich Group $25,000 a month that year, and lists Freddie's top lobbyist at the time, Craig Thomas, as Gingrich's main contact at the housing corporation. The contract raises fresh questions about whether Gingrich traded on his network of Capitol Hill contacts or engaged in actual lobbying.

After Gingrich's campaign released the 2006 contract, a top Romney aide, Eric Fehrnstrom, tweeted, "Newt's K Street firm finally released the Freddie contract, but only for 2006. Where are missing years? He started there in 99."

Here is Newt's 2006 contract:

 

Some Context on the Gold Standard

| Mon Jan. 23, 2012 10:08 PM EST

During Monday night's GOP presidential primary debate on NBC, Rep. Ron Paul (R-Tex.), a prominent advocate of pegging the value of the US dollar to the price of gold, praised Newt Gingrich, the former speaker of the House, for promising to appoint a federal gold commission to "look at the whole concept of how do we get back to hard money." Since there was little actual discussion of the gold standard as policy (President Richard Nixon took the US off gold in August 1971), it's worth examining what top economists think about it. In short, they don't think it's a great idea. The University of Chicago's business school recently asked several dozen top economists whether they agreed with the following statement:

If the US replaced its discretionary monetary policy regime with a gold standard, defining a "dollar" as a specific number of ounces of gold, the price-stability and employment outcomes would be better for the average American.

Every single one of the economists surveyed disagreed with the statement; i.e., they unanimously embraced the anti-gold standard view, differing only on the degree to which they disagreed with it. 

Gold standard advocates will point out that many top economists missed things like the housing bubble and the financial crisis, and that establishment support for a view doesn't necessarily mean it's correct. That's true, but context is important, too.

The Real Reason Larry Summers Didn't Advocate a $1 Trillion Stimulus

| Mon Jan. 23, 2012 9:31 PM EST

At this point, it's not clear to me how useful it is to keep re-litigating the role Larry Summers played in deciding how big the 2009 stimulus package should be. Lots of different participants have given their views, and there's simply a limit to how much we're ever going to know.

Still, a contemporaneous memo is different. If we had a copy of the written advice Summers gave to President-elect Obama in December 2008, that would tell us a lot, wouldn't it? Well, now we do, thanks to Ryan Lizza. And guess what? I'm still not sure it will help produce any consensus on Summers' role. Paul Krugman, for example, comes away from it with this:

The key thing I took away from the memo is that it does not read at all like the current story the administration gives for the inadequate size of the stimulus, which is that they knew it should be larger but had to face political reality. Instead, the memo argues that a bigger stimulus would be counterproductive in economic terms, because of the "market reaction." That is, Summers et al were afraid of the invisible bond vigilantes. And to the extent that there is a political judgment, it's all in the opposite direction: if the stimulus is too big, we'll have trouble scaling it back, but if it's too small, we can always go back to Congress for more. That was deeply naive—and I said so in real time.

But that's not at all what I came away with after reading the memo. It's true that political reality (i.e. Congress) gets only a few brief mentions, but at the same time Summers is pretty clearly not worried about bond vigilantes and doesn't believe that going back to Congress for more money would be easy. Quite the opposite. After spelling out the case for a big stimulus, Summers lists some "considerations on the other side," as any honest advisor would. However, he specifically argues that those other considerations are wrong. The bond market isn't likely to react badly, he says, and "we do not believe this should deter escalation well above $600 billion." And while some may believe that we can always do more later if we need to, Summers argues instead that "this is a key moment to get ahead of the curve in responding to economic distress."

Now, it's clear from the memo that Summers and others underestimated the depth of the coming recession, though perhaps not by as much as everyone thinks. In fact, he's clear that an $850 billion stimulus would close only half the output gap, and then makes his primary argument for not trying to close the whole thing:

But it is important to recognize that we can only generate about $225 billion of actual spending on priority investments over next two years…This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectives—minimally the 2.5 million job goal—will require other sources of stimulus including state fiscal relief, tax cuts for individuals or tax cuts for businesses. All three of these areas, however, raise tradeoffs because they are not as economically effective as stimulus, do not represent a down payment on a campaign promise (with the exception of the Making Work Pay credit), and do not have a lasting impact on the economy beyond protecting against a deep recession.

Emphasis in the original. Summers believed that it was only possible to come up with $225 billion in direct spending that had a high stimulus value. Further money could be targeted at tax cuts and aid to states, but it had a lower stimulus value. So there was a sense of diminishing returns here.

Now, that might have been wrong, but it's a fairly defensible position. And it has nothing to do with bond vigilantes or bad political judgments. So even with a contemporaneous memo available to read, the Rashomon effect is still strong. All of us read the same words and we all come away with different interpretations.

"I Am Obamacare": A Meme is Born?

| Mon Jan. 23, 2012 7:48 PM EST

This seems strikingly meme-worthy: 

"I Am Obamacare": Miss M. Turner"I Am Obamacare": Miss M. TurnerThe photo was taken by "Miss M. Turner," a "34 year old Pagan female who lives in Florida," who posted it to her blog and on Facebook. She writes that she was inspired by last fall's "We Are the 99 Percent" meme to "do my spin on it because this is what is going on in MY life." What's going on, she explains, is that she was diagnosed with several large uterine tumors and didn't have health insurance. Private insurers turned her away for having an expensive pre-exisiting condition, but she was able to buy into a Pre-Existing Condition Insurance Plan. This high-risk insurance pool was one of the first elements of health-care reform to take effect after it was signed into law in March 2010. Miss M.'s surgery still wasn't cheap, but she writes, "it was this or cash. And this is a HELL of a lot better."

The image has been out there since October, but was recently reposted on Facebook, where it's been shared more than 19,000 times. If it inspires copycats, there's already an I Am Obamacare Tumblr, just waiting for submissions. Considering how little the White House has done to promote its health care policies, you'd think the Obama campaign would be quick to share, encourage, or outright co-opt this nascent meme. Of course, it first would have to embrace the tag "Obamacare."