Kevin Drum - January 2012

The Washington Post Says Mitt Romney Outsourced Jobs....Or Maybe Not

| Thu Jun. 21, 2012 9:40 PM EDT

Glenn Kessler of the Washington Post dings the Obama campaign today for claiming that Bain Capital "shipped jobs to China and Mexico" while Mitt Romney was CEO:

Upon hearing this ad was under consideration for a tough rating, the Obama campaign supplied reams of additional SEC documents regarding Romney’s ownership in Bain after he left for the Olympics, most of which we had examined previously when we first looked at this question. The campaign also supplied SEC documents showing that two of these companies, Modus and SMTC, as well as one called Stream International (a predecessor of Modus), earned money in part by helping other companies subcontract work overseas. Some of this business predated Romney’s departure from Bain, but thus far it seems a slim case for this particular ad.

Twelve hours later, Tom Hamburger of the Washington Post filed a story suggesting the case isn't so slim at all:

A Washington Post examination of securities filings shows the extent of Bain’s investment in firms that specialized in helping other companies move or expand operations overseas.

....Bain’s foray into outsourcing began in 1993 when the private equity firm took a stake in Corporate Software Inc., or CSI....Two years after Bain invested in the firm, CSI merged with another enterprise to form a new company called Stream International Inc. Stream immediately became active in the growing field of overseas calls centers....By 1997, Stream was running three tech-support call centers in Europe and was part of a call center joint venture in Japan, an SEC filing shows.

....The corporate merger that created Stream also gave birth to another, related business known as Modus Media Inc., which specialized in helping companies outsource their manufacturing....According to a news release issued by Modus Media in 1997, its expansion of outsourcing services took place in close consultation with Bain.

....Another Bain investment was electronics manufacturer SMTC Corp....The company said that communications and networking companies “are dramatically increasing the amount of manufacturing they are outsourcing and we believe our technological capabilities and global manufacturing platform are well suited to capitalize on this opportunity.”

So who's right, the Washington Post or the Washington Post? I excerpt, you decide.

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Maybe It's Time to Shut Down the Commerce Department

| Thu Jun. 21, 2012 4:54 PM EDT

Kevin Williamson reacts to the news that John Bryson has resigned as Secretary of Commerce:

The existence of the Commerce Department, a.k.a. the Department of Corporate Welfare, suggests that Washington has little institutional confidence in free markets and believes that markets must be guided by the sorts of geniuses who end up working in the Commerce Department.

Possible reactions:

A. Agitate for better personnel at the Commerce Department.

B. Abolish the Commerce Department.

I’m voting for B.

This is our lucky day! It turns out that back in January President Obama asked Congress for the authority to do just that, so all we have to do is put together a bipartisan consensus of National Review pundits and Mother Jones pundits and we should be all set.

Of course, there are some details to work out here, just like there always are when people suggest getting rid of cabinet departments. The Commerce Department, for example, includes the Census Bureau. Can't get rid of that. BEA produces some pretty useful statistics. NOAA does good work on that whole hurricane prediction thing. NIST is handy to have around so we know what time it is and how long an inch is supposed to be. Patents and trademarks really need to be kept going. And someone has to negotiate trade agreements.

Anyway, it turns out Obama wants to keep all that stuff and just put it into a new agency with a different name, which means that even his optimistic estimate is that deep-sixing Commerce would only save $3 billion per year. Nothing wrong with that, but it's not exactly earth-shaking stuff. Williamson might want the ax to swing a little harder, but I'm not sure how much harder it can really swing.

In any case, this is a good example of the problem with people — usually people running for president — using the elimination of cabinet departments as conservative applause lines. It sounds good, but it's like taking potshots at the visible parts of icebergs. What you really want to do is look below the waterline and ask which agencies all those presidential wannabes are planning to get rid of. After all, just shuffling them around into other departments doesn't save much money.

Mitt Romney Kinda Sorta Takes a Stand on Immigration

| Thu Jun. 21, 2012 1:21 PM EDT

Surprise! Mitt Romney, who was immigration's most strident foe during the primaries, has suddenly discovered that "we can find common ground here, and we must." Also unsurprisingly, he's still declining to take a firm stand on President Obama's mini-DREAM order:

“Some people have asked if I will let stand the president’s executive action,” he said. “The answer is that I will put in place my own long-term solution that will replace and supersede the president’s temporary measure.”

Okey dokey. More mush from the wimp, I guess.

UPDATE: More detail here from Adam Serwer.

Philly Fed Says Business Outlook Has Plummeted

| Thu Jun. 21, 2012 12:10 PM EDT

Joe Weisenthal points us to the Philadelphia Fed's monthly Business Outlook Survey, which he terms a "disaster." Here's what the Philly Fed says:

The survey’s indicators for general activity, new orders, shipments, and average work hours were all negative this month, suggesting overall declines in business....Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity. Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively.

Presumably Ben Bernanke and the other Fed governors knew this yesterday, when they met and decided not to do much about the economy. Perhaps they were swayed by the fact that the future outlook remained "positive." Perhaps they don't think there's anything more they can do. I don't know.

Today's High School Grads Are Just as Good as Yesterday's

| Thu Jun. 21, 2012 10:59 AM EDT

Tyler Cowen recommends a post from Steve Postrel attempting to explain why students are willing to pay ever higher amounts for a college degree. Unfortunately, it starts like this:

Typical graduate business school education has indeed become less rigorous over time, as has typical college education. But typical high school education has declined in quality just as much. As a result, the human capital difference between a college and high-school graduate has increased.

If anyone wants to present some evidence that high school education has declined over the past 30 years, I'm all ears. But as far as I know, there isn't any such evidence because it isn't true. I'm willing to buy the idea that there are specific things that high schools don't do as well as they used to — though if you have examples please provide some real evidence that they're true! — but overall? Most of the data I've seen suggests that today's high school grads know at least as much, and occasionally even more, than high school grads of the past.

The One-Sided War Against Obamacare

| Thu Jun. 21, 2012 12:58 AM EDT

Abby Goodnough of the New York Times explains why misinformation and fear of Obamacare is increasingly widespread. It's the money, stupid:

In all, about $235 million has been spent on ads attacking the law since its passage in March 2010, according to a recent survey by Kantar Media’s Campaign Media Analysis Group....Here in the suburbs of Philadelphia, which, according to the Campaign Media Analysis Group, is one of the top five media markets for ad spending against the health care law, it is apparent how such messaging is playing out. (The other top markets are Orlando, Fla.; Tampa, Fla.; Pittsburgh; and Denver, all in swing states.) In interviews with about two dozen residents who were mostly opposed to the law, certain worries, resentments and dark predictions about it came up time and again.

By contrast, only $69 million has been spent on pro-Obamacare ads, most of it bland public-service spots from HHS. Add to that the fact that most Democrats seem petrified of actually defending the law, and it's no surprise that the Fox News portrayal of Obamacare has been steadily gaining ground. That's what happens when you slink into a corner when the other guys declare war.

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Quote of the Day: Government Cutbacks are Hurting the Recovery

| Wed Jun. 20, 2012 6:42 PM EDT

From Fed chairman Ben Bernanke, answering a question about the "choke points" holding back the economy:

In the last year or two and going forward, we have been seeing fiscal consolidation, particularly at the state and local level....I understand these are necessary steps from the perspective of individual states and localities; I'm not criticizing that. It's just a fact, though, that these contractions are affecting the pace of growth in the broader economy.

Bernanke said that other things affecting the pace of recovery included problems in Europe and a sluggish U.S. housing market.

Surprise! Paul Ryan Wants to Cut Taxes on the Rich

| Wed Jun. 20, 2012 3:45 PM EDT

UPDATE: This post originally said that the analysis in the linked report came from the Tax Policy Center. That was an error on my part. It's actually a report from the chairman's staff of the Joint Economic Committee, which relied in part on a previous analysis from TPC. I've corrected the post throughout. Apologies to all, especially TPC, for the mistaken attribution.


The Joint Economic Committee released an analysis today of the tax implications of Paul Ryan's "Path to Prosperity," based partly on work from the Tax Policy Center, and you will be unsurprised at their conclusions. The chart on the right, a rough conversion from JEC's raw numbers into percentages, tells the tale: if you're part of the middle class, your taxes will probably go up. If you're rich, your taxes will go way, way down.

Ryan and his fans will say that this analysis is unfair because they've never released any details about which tax expenditures they plan to eliminate to make up for their reductions in the base tax rate. And it's true: they haven't. But that's pure politics: they know perfectly well that eliminating deductions and tax credits is wildly unpopular, and if they actually fessed up to these details, even the most ardent tea partier would suddenly become a pitchfork-wielding foe of Ryan's plan.

Still, Ryan's reduction in tax rates costs about $4.5 trillion over ten years, and there are only so many places you can make up that kind of dough. So JEC made some educated guesses about what deductions would have to be cut, and then gamed out the net effect of the whole thing. If Ryan had the courage to release his own plan, it would differ in detail from the JEC estimate, but probably not by a lot. The JEC numbers are almost certainly in the right ballpark.

In any case, if Ryan thinks this is unfair, all he has to do is release a plan of his own that can be scored in the normal way. The fact that he consistently refuses to do so tells you all you need to know about how serious he really is about this stuff. Answer: not at all.

A Conservative Suggests We Raise the Capital Gains Tax

| Wed Jun. 20, 2012 2:33 PM EDT

James Pethokoukis asks:

Should we eliminate corporate income taxes and raise capital gains taxes?

Hmmm. I'm guessing he thinks the answer is no. But wait! Maybe not:

I have already suggested that Mitt Romney propose axing the corporate tax. Combining that with an increase in the capital gains tax—a tax hike on Romney himself—might be a doable compromise....How about this: A top tax of 28%—back to where it was in 1986 under bipartisan tax reform and close to Obama’s Buffett Rule—on all income along with an elimination of corporate income taxes? Any takers? Any suggested modifications?

Although I'm not ready to jump on this specific bandwagon quite yet, I'd be willing to talk. There are a bunch of practical problems with eliminating the corporate income tax, but it's possible they could be overcome. As for the 28% top rate — well, let's just take that as an opening bid. I doubt you could lower it that much. In fact, I'm not sure you could lower it at all, since higher taxes on investment income might not make up for the loss of corporate income tax revenue. What's more, capital gains and dividend taxes are going to be raised automatically at the end of the year if the Bush tax cuts aren't extended, so offering to raise them now isn't really much of a concession.

Despite all that, I continue to think this has possibilities. The corporate income tax isn't just insanely complicated, it's also impossible to prevent it from becoming an endless honeypot of corporate subsidies and payoffs. Getting rid of it entirely is probably the only way to put an end to this.

Politically, the biggest problem with this proposal is that once the corporate income tax is gone, it would be gone forever. It's just too hard to bring it back to life. Conversely, reducing the capital gains tax is simplicity itself. So a likely outcome of all this is that the corporate income tax would go away, and ten years from now we'd be back to the same old low rates on capital gains and dividends because — oh, you know the drill. High investment taxes are hurting capital formation, punishing the job creators, stifling investment, crushing the economy, blah blah blah.

Still, it's worth a conversation even if it is pie in the sky. I'd be pretty interested in seeing some neutral revenue and distributional analysis of the whole thing.

Fast and Furious Inanity Reaches New Heights

| Wed Jun. 20, 2012 12:53 PM EDT
GOP attack dog and media hound Rep. Darrell Issa (R-Calif.)

I'm pretty sure I've never blogged anything about the Fast and Furious program, which has long struck me as a fairly ridiculous invented controversy that Republicans care about only because (a) it involves guns, and (b) it involves the Obama administration. Darrell Issa, one of the GOP's star attack dogs, more or less admitted the fever swamp origins of tea party outrage over Fast and Furious when he told Sean Hannity that Obama was using the program to "somehow take away or limit people's Second Amendment rights."

Sigh. Nonetheless, the latest round of responses from Attorney General Eric Holder is troublesome. Issa has been demanding piles of documents from Holder for months, and Holder has been declining for months to produce them. Issa is now threatening to hold Holder in contempt of Congress, and yesterday Holder met with Issa to make one last offer, which Issa declined:

Holder said after the brief session that Issa rejected his proposal to allow the committee to "review" the documents first, predicting that it would persuade them to not go ahead with the contempt vote.

Today, the White House asserted executive privilege to justify withholding the documents. Is this legitimate? It might be, but if the documents are truly covered by executive privilege, it's a little hard to believe that Holder was willing to let the committee "review" them yesterday. Something doesn't add up.

On the flip side, of course, it's a little hard to understand why Issa wouldn't take him up on the deal if he was sincerely interested in understanding what happened. After all, he could always restart the contempt proceedings if the review didn't convince him to back down.

Conclusion: This whole thing is completely ridiculous, just a pointless piece of political theater. I shall now try to return to my previous policy of ignoring it. Anybody got a problem with that?