2012 - %3, July

Romney Defended By...Romney Policy Aide Who Worked for Bain

| Wed Jul. 25, 2012 9:45 AM PDT

Over at National Review Online, Avik Roy takes issue with my scoop on Romney's investment in a Chinese appliance-manufacturing firm that sought to profit from US outsourcing. Roy says he used to work at Brookside Capital, the Bain-affiliated entity that made this investment, but he doesn't indicate whether he was around (or in a senior position) at the time of this particular deal in 1998. (On his Google+ page, by the way, Roy notes he was at Bain Capital, not Brookside. Yeah, I suppose, this stuff can be confusing.) Moreover, Roy now serves on Romney's health care policy advisory group. Thus, he has a stake in this venture.

His argument is basically this: Romney did not make the decisions regarding Brookside's investments, and, consequently, cannot be held accountable for these deals.

If Roy was not an eyewitness to internal Bain/Brookside deliberations in the late 1990s, his testimony is less than compelling. Can he say that Romney took no interest in how Brookside was being managed? Had no discussions with those Bain colleagues who were in charge of these decisions?

All that aside, Roy is promoting a classic corporate dodge. He writes:

Which of Bain Capital’s investments is it fair to hold Mitt Romney accountable for?

The answer: He is accountable for the investments in which he actually made the decisions. If I have my 401(k) invested in the Fidelity Select Health Care Fund, am I responsible for every decision made by the portfolio manager at Fidelity? Obviously not. The same goes for Mitt Romney.

This was hardly equivalent to a retirement fund investment. Romney "wholly owned" Brookside, according to a SEC filing. He created this entity. No doubt, he had a say regarding who was managing it. It was part of the Bain world he oversaw. He bears a degree of responsibility—perhaps Romney can calculate the precise percentage—for this venture.

Imagine this scenario: Romney owned a coal mining company. He decided to open a particular mine. He placed that project in the hands of other executives. Would he hold no responsibility if the mine generated profits because the execs he put in charge operated it well—or if the mine became the site of a horrendous accident because those same execs purposefully overlooked safety rules?

Did Romney literally have nothing to do with Brookside—a $559 million venture by early 1999—though he owned it? Did he never look at its lists of investments? Never have a chat with the guys running it? Or did he just let them run free and not pay attention to the direction of their investments—which in itself would be significant?

The Romney camp keeps insisting on a narrative that allows Romney to take credit for the positive aspects of his Bain days (thousands of low-wage Staples jobs!) and to sidestep all else (outsourcing, bankruptcies, politically-inconvenient investments). But in the world of high-and-complicated finance, it's not that simple.

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Sandy Weill Joins Occupy Wall Street Movement

| Wed Jul. 25, 2012 8:23 AM PDT

In 1985, after he was forced out of American Express, Sandy Weill went on an acquisitions tear. He took over a consumer finance company, then acquired an insurance company, then a retail brokerage, then Travelers Insurance, then another brokerage, an investment bank, and finally a merger of his entire empire with Citigroup. But that last step required more than money. Merging an investment bank with a commercial bank required a repeal of Glass-Steagall, the New Deal law that had broken up commercial and investment banks in the first place. So Weill went to work, and a year later Glass-Steagall was gone. Sandy Weill was, in a very real sense, the midwife of repeal, or, as he preferred to call himself at the time, "The Shatterer of Glass-Steagall."

For years Weill has denied that repeal played any role in the 2008 financial crisis. Today, it appears that he's changed his mind:

Weill did a 180 on CNBC's Squawk Box this morning, saying that he now believes big banks — like, presumably, Citigroup — should be broken up:

What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.

Sandy Weill advocating for the reinstatement of Glass-Steagall is among the biggest flip-flops imaginable. (In political terms, it would be akin to Rick Santorum announcing he was becoming a GLAAD spokesman.) And when Weill called for a bank breakup this morning, CNBC's incredulous anchors gave him a chance to walk back what they assumed was a spur-of-the-moment gaffe. But Weill didn't budge:

I’m suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable.

To some, Weill's sudden about-face reeks of hypocrisy. Others are picking it over for evidence of ulterior motives. (Could Weill be trying to undermine his former protégé and another too-big-to-fail banker, JPMorgan CEO Jamie Dimon?)

Who knows? It's actually not all that uncommon for elder statesmen who are no longer running things to have a change of heart, and it seems likely that's what's happened here. And like other similar U-turns, it probably won't have any impact at all. Nonetheless, it's pretty intriguing. When even Sandy Weill thinks banks have gotten too big to fail, is there anyone left to disagree?

GOP Candidate: Rep. Keith Ellison Is "Militantly Anti-America"

| Wed Jul. 25, 2012 8:08 AM PDT
Rep. Keith Ellison (D-Minn.)

Since being sworn in—on Thomas Jefferson's Koran, no less—as the country's first Muslim congressman five years ago, Minnesota Democrat Keith Ellison has been a magnet for conservative criticism. Florida Rep. Allen West told an interviewer in 2011 that Ellison, because his faith undermines America's Judeo-Christian foundation, represents "the antithesis of the principles upon which this country was established." Just last week, his Minnesota colleague Michele Bachmann accused Ellison of supporting the Muslim Brotherhood.

Now, the Republican nominee to take Ellison on in November has gotten in on the action. On Tuesday, Chris Fields, a Marine Corps veteran with no prior political experience, sent out a fundraising appeal asking for help defeating his "militantly anti-America" opponent":

While I was fighting on a battlefield in Iraq, my opponent was doing everything he could to cut funding for the war and the soldiers fighting it.

Keith Ellison is militantly anti-America. He attacked the Pledge of Allegiance, voted countless times to throw our troops serving in harm's way to the wolves and teamed up with Barney Frank to destroy the banking industry. Not surprisingly, he's the proud co-chairman of the radical Congressional Progressive Caucus.

(Emphasis his). Fields doesn't stand a chance against Ellison; Democrats hold a 22-point edge in the distict and Cook Political Report rates the seat a "solid D." But he's still the representative of the state GOP in this race, and was endorsed by the party convention.

On the other hand, it could have been worse. Fields won his party's nomination by beating Lynne Torgerson, who was running to expose Ellison's plot to spread Islamic Shariah law. Torgerson blamed Fields' victory on a plot by Ron Paul activists to take over the state, citing as evidence my 2011 magazine piece on the New Hampshire Free State Project. As Shep Smith said, politics is weird.

We're Still at War: Photo of the Day for July 25, 2012

Wed Jul. 25, 2012 7:29 AM PDT

Lance Cpl. Kyle Hankins, a combat engineer with Charlie Company, Battalion Landing Team 1st Battalion, 2nd Marine Regiment, 24th Marine Expeditionary Unit, provides rear security during a patrolling exercise at Udairi Range in Kuwait. US Marine Corps photo by Cpl. Michael Petersheim.

Twiddling While the World Burns

| Wed Jul. 25, 2012 7:25 AM PDT

Britain is now in its third straight quarter of GDP shrinkage. Spanish bond rates have rocketed past 7.5%. German ministers are talking openly about letting Greece exit the euro. American Republicans are threatening yet another debt ceiling standoff. And the Fed and the ECB are still twiddling their thumbs, "standing ready" to act if they need to.

Can anyone explain this? Anyone?

4 of Obama's Worst Food and Ag Wimp-Outs

| Wed Jul. 25, 2012 3:00 AM PDT

Right-wing critics like to denounce President Obama's supposed penchant for "job-killing regulations." Just last month, Republican National Committee chairman Reince Priebus complained on the conservative blog Red State that "instead of pursuing policies that would help job creators put Americans back to work, he's burdened them with ObamaCare, regulations, and continued threats of higher taxes."

Meanwhile, back here on Planet Earth, the government keeps making industry-friendly regulatory decisions, at least in the food and ag field that I cover. Here's a list of four recent Obama administration bows to the agrichemical and meat industries.

1. It allowed factory farms to remain on the DL.

Last week, the Environmental Protection Agency withdrew its own proposed rules that would have required operators of factory-scale livestock operations to report basic information to the agency, such as the number of animals kept, whether manure from the facility is applied on surrounding land, and, if so, how much land is available for manure application.

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Right-Wing Gun Group: Was Aurora an Inside Job?

| Wed Jul. 25, 2012 3:00 AM PDT
Larry Pratt

Here's the first right-wing conspiracy theory about the shootings that killed 12 people and injured dozens more at a midnight screening of the latest Batman movie in Aurora, Colorado, over the weekend.

All indications from the Aurora Police Department are that Batman gunman James Holmes acted alone, for reasons that have yet to be established. But Larry Pratt—the president of Gun Owners of America, a far-right Second Amendment group that's backed by prominent people like Sen. Rand Paul (R-Ky.)—has a different theory. Pratt believes the timing of Holmes' rampage, which left 12 people dead and 58 wounded, seemed designed to coincide with the upcoming negotiation of the United Nations Small Arms Treaty. A press release sent out to radio bookers on Tuesday advertising Pratt's availability noted that, "In an article posted at The New American…one expert even outlined a theory that Holmes didn't act alone, but was possibly 'enlisted' to carry out his violent act." Pratt, the publicist stated, was free for interviews on Holmes' "impeccable" timing.

The email sources the claim to a blog post by a writer for the New American, the official publication of the John Birch Society—which, in turn, directs readers further down the rabbit hole to a website called Natural News, which breaks it down:

All this looks like James Holmes completed a "mission" and then calmly ended that mission by surrendering to police and admitting everything. The mission, as we are now learning, was to cause as much terror and mayhem as possible, then to have that multiplied by the national media at exactly the right time leading up the UN vote next week on a global small arms treaty that could result in gun confiscation across America.

…In other words, this has all the signs of Fast & Furious, Episode II. I wouldn't be surprised to discover someone in Washington was behind it all. After all, there's no quicker way to disarm a nation and take total control over the population than to stage violence, blame it on firearms, then call for leaders to "do something!" Such calls inevitably end up resulting in gun confiscation, and it's never too long after that before government genocide really kicks in like we saw with Hitler, Stalin, Pol Pot, Mao and other tyrants.

(Emphasis theirs.) This is total baloney, both because Holmes acted alone according to every report we have, and because the United Nations Small Arms Treaty that Pratt and Co. are so concerned about doesn't exist. The treaty is still in the drafting stage, it's not supposed to focus solely on small arms, and, as I reported last summer, Secretary of State Hillary Clinton has actually taken steps to ensure that any version of the treaty wouldn't infringe on American interests. Besides, even if President Obama did sign off on a massive United Nations power grab, there's still the Senate.

Gun Owners of America is a fringe group. More mainstream groups like the National Rifle Association tend to stick to more mainstream conspiracy theories—like that Obama is secretly pushing lax gun laws as part of a "massive Obama conspiracy" to ban guns altogether.

Short Takes: "Ai Weiwei: Never Sorry"

| Wed Jul. 25, 2012 3:00 AM PDT

Ai Weiwei: Never Sorry

SUNDANCE SELECTS

91 minutes

Knowing what fate has in store for the Chinese dissident artist gives Ai Weiwei: Never Sorry a foreboding air. At the outset, we see Ai, revered for his work at the Beijing Olympics, fearlessly tallying kids killed in the Sichuan earthquake thanks to shoddily built schools. He sues a cop who hits him on the head, documenting each bureaucratic step with cameras and tweets. And when the authorities demolish his studio, he holds a public "celebration." With each act, you wonder if this will be the one that lands him in solitary, where he will spend 81 days for "tax evasion." Lockup costs Ai some of his swagger, but the deluge of donations to pay his fine speaks to his inspirational clout and social-media mojo.

This review originally appeared in our July/August issue of Mother Jones. 

How Much Will the Supreme Court's Obamacare Decision Cost the Federal Government?

| Tue Jul. 24, 2012 7:58 PM PDT

Several states have said that they don't plan to sign up for Obamacare's expansion of Medicaid now that the Supreme Court says they don't have to. Assuming they stick to their guns, what are the likely budgetary implications of this?

On the one hand, the federal government saves money if there are fewer people enrolled in Medicaid. So that would bring the cost of Obamacare down. On the other hand, some of the people who are no longer going to be eligible for Medicaid will probably choose to buy subsidized private insurance via the exchanges. That's more expensive than Medicaid would have been, which raises the projected cost of Obamacare.

So what's the net cost? Today the Congressional Budget Office weighed in:

  • Decreased cost of Medicaid: -$289 billion
  • Increased cost of subsidies: $210 billion
  • Miscellaneous changes: -$5 billion
  • Net difference between 2012-2022: -$84 billion

So we're saving money. But wait!  The American Action Forum also released an estimate today, just for the six states that have already promised to opt out, and it looks like this:

  • Decreased cost of Medicaid: -$120 billion
  • Increased cost of subsidies: $195 billion
  • Miscellaneous changes: -$3 billion to +$5 billion
  • Net difference between 2014-2021: $72-80 billion

There are some different assumptions at work in these two estimates. But what's important isn't the difference in amount, but the difference in sign. CBO projects a net cost decrease for each state that opts out, while AAF projects a net cost increase.

In other words, we still don't know how this will play out. Stay tuned.

The Value of Pre-K Education, Take 2

| Tue Jul. 24, 2012 2:07 PM PDT

Matt Yglesias isn't sold on my idea that if we were forced to make a tradeoff, we'd be better off reducing our K-12 funding and putting the money into increased funding of pre-K programs:

I think a lot of the thinking about the efficacy of pre-K education is based on looking at the best performing programs while thinking about K-12 tends to be informed by thinking about the typical program. But in both cases quality matters. The best charter school networks in America really do seem to be incredibly effective at teaching children, but as charter school critics point out the average charter school's performance is merely average. The pre-K results look pretty similar to me. The best programs get amazing results, but lots of programs are non-amazing in practice.

I don't want to write a long post about this, but I do want to briefly explain the two beliefs that inform my thinking about this:

  • First, I don't believe that K-12 education is in a crisis. This doesn't mean that I think we should listlessly accept the status quo. I'm very much in favor of more experimentation with charter schools, more research into effective teaching methods, and so forth. Nonetheless, there's very little reason to think that K-12 education has been sliding into an abyss over the past few decades. In fact, on the NAEP, the best regarded national test of math and reading, the evidence is pretty clear. No matter how you cherry pick the data, today's kids are either doing substantially better than kids of the 70s or, at worst, doing about the same. I don't actively favor reduced funding for K-12, but I don't think it would be any kind of disaster either.
  • Second, the problem with pre-K isn't a scarcity of super high quality programs. It would be great to have those, of course, and we should work on getting there. But for now, our immediate problem is a scarcity of even mediocre pre-K programs. The evidence on pre-K doesn't suggest to me that small children need exceptional programs, it suggests that they need something more than sitting around watching The Lion King all day. That's where we need to focus our attention. Too many poor and working class kids get virtually no pre-K care at all, and there's now a ton of research showing that this is permanently devastating to cognitive development. Simply putting them into decent programs would have a huge effect.

It's possible I'm wrong on either of both of these points. I'm happy to hear arguments. But if I were starting from scratch and you gave me the following two options:

  1. $500 billion per year on K-12 education and $50 billion per year on pre-K.
  2. $400 billion per year on K-12 education and $150 billion per year on pre-K.

I would choose Door #2 without any hesitation. By the time they finished high school, kids in the second system would almost certainly be better off on average — better educated and better prepared for life, with fewer behavioral problems, fewer drug problems, and fewer teen pregnancies — than the kids in the first system.