Kevin Drum - October 2012

David Stockman Explains How Mitt Romney Got Rich

| Mon Oct. 15, 2012 12:14 PM EDT

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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Quote of the Day: Mitt Romney's Nonexistent Foreign Policy

| Mon Oct. 15, 2012 11:00 AM EDT

From an anonymous Romney advisor talking about his candidate's approach to international affairs:

The Bush foreign policy is a terrible brand 

Roger that. The whole piece is worth a read. Romney has been pretty cagey about domestic policy, declining to take firm stands on healthcare, taxes, financial regulation, or, really, much of anything. But that's nothing compared to his slipperiness on foreign policy, which sounds increasingly like something out of an HBO sitcom. Romney wants to sound more like Reagan — but with a "more cautious view of where and when we use force." He wants to sound more forceful than Obama — but without actually suggesting he'd use force anywhere. He'll provide arms to the Syrians — but no, it turns out he won't. He has a different red line on Iran — but not really, it turns out. He'd handle the Arab Spring differently from Obama — except that he'd pretty much do exactly the same thing as Obama.

"The idea that Romney is following the George W. Bush approach is a caricature the Democrats want to draw," the anonymous advisor said. "We're not going to help them with that." Apparently not. Instead, they're just going to take so many different positions that nobody has any idea what approach they'd take.

Obama Wins the 3 a.m. Phone Call Test

| Mon Oct. 15, 2012 12:57 AM EDT

A new ABC/Washington Post poll is out, and it shows Obama ahead nationally among likely voters 49 percent to 46 percent. That's not too surprising, but what is surprising is that the poll shows no post-debate surge for Romney. Obama was ahead by two points on September 29 and he's ahead by three points today.

More interesting is the chart below, showing that Obama outpolls Romney on every specific issue except for the deficit—which certainly attests to the power of brand management, since there's really no good reason to think that Romney would be any better at reducing the deficit than Obama. Quite the contrary, in fact: Romney has given us every reason to think that his real priorities are cutting taxes and raising defense spending. Aside from that, though, what I found most intriguing was the very strong belief that Obama would be better at handling an unexpected crisis. The "no-drama Obama" schtick might not work so well in a national debate, but in real life it sure seems to be a winner.

Conservatives Need to Put Up or Shut Up on Syria

| Sun Oct. 14, 2012 9:59 PM EDT

In the Washington Post today, Jackson Diehl writes that President Obama's approach to Syria has been a serial failure. He tried engaging with Bashar al-Assad. That didn't work. When war broke out, he tried brokering a settlement via the United Nations. That didn't work. Then he tried to get Vladimir Putin on his side. That didn't work either. So what now?

For the past three months, Obama’s policy has become a negative: He is simply opposed to any use of U.S. power. Fixed on his campaign slogan that “the tide of war is receding” in the Middle East, Obama claims that intervention would only make the conflict worse — and then watches as it spreads to NATO ally Turkey and draws in hundreds of al-Qaeda fighters.

No doubt it’s easier for Romney and the Republicans to talk about the death of an ambassador in a terrorist attack than to ask war-weary Americans to think about this. But it is Syria that is Obama’s greatest failure; it will haunt whomever occupies the Oval Office next year.

These kinds of columns always stonker me. The reason is that nothing comes after these two paragraphs. Diehl spends 800 words disparaging Obama's failure in Syria — which is fair enough, up to a point — but won't tell us what he thinks Obama should have done. It's just like Paul Ryan's painfully evasive answer about Syria in last week's debate. After Ryan went through the same stale bill of particulars that Diehl did, Joe Biden smiled and asked, "What would my friend do differently? If you notice, he never answers the question." That was true, and after a bit more filibustering Martha Raddatz asked Ryan three times, "What’s your criteria for intervention?" He wouldn't answer.

Nobody ever does. Sure, we could provide arms directly to the rebels — though the failure so far of indirect arms transfers should give everyone pause for thought on that front. We could provide them with a bit more intelligence. We can keep trying to beef up sanctions. But that's penny ante stuff. It wouldn't make a big difference and everyone knows it. You'd need a sustained ground action or, at the least, a sustained bombing campaign to really make a dent.

We could do that, of course. We could send in ground troops. We could provide air cover for the rebels. We could lob cruise missiles into Damascus. But look. Since he took office, Obama has doubled our presence in Afghanistan. He's participated in an armed intervention in Libya. He's ramped up the drone campaign in Pakistan and Somalia by 10x. That's three wars. Do Ryan and Romney and Diehl and their friends really think we need yet another one? If they do, they should speak up plainly instead of pretending that if only Obama had waved his magic wand, Assad would already be out of power.

If you want us to go to war in Syria, have the guts to say so. If you don't, say that too. But if that's the case, at least have the grace to put a lid on the bluster and the fatuous recriminations. It's contemptible stuff.

The 2012 Election in Three Sentences

| Sun Oct. 14, 2012 10:57 AM EDT

Ezra Klein sums up the election:

Romney can tell you exactly what he wants to do, but barely a word about how he’ll do it. Obama can’t describe what he wants to achieve, but he can tell you everything about how he’ll get it done. It’s a campaign without real policies against a campaign lacking a clear vision.

There's a lot of truth in that.

Hating on Software Companies

| Sun Oct. 14, 2012 12:30 AM EDT

This is from an LA Times article titled "Top 10 features in Apple iOS 6":

By far the coolest new feature in iOS 6 is the ability to set your alarm clock to play any of the songs in your music library.

Seriously? That's the best feature in the new operating system? And you still expect me to bother reading about features 2-10?

Speaking of which, here's a question for all of you who aren't hopeless Apple fanboys: are there any large-ish software companies you like? I hate Microsoft, of course. I hate Adobe. I hate Symantec. I hate Intuit. I don't even remember why anymore. It's all buried so deep in my psyche that it's like asking why the Hatfields hated the McCoys. And now that I've been using Apple products for a while, I've developed an almost unreasoning hatred of Apple. Microsoft always just seemed big and clumsy and power hungry to me: I hated them, but mostly the way I hate earthquakes and hurricanes and bad drivers. Apple, on the other hand, has a corporate attitude carefully and cunningly designed to be as arrogant, unhelpful, and control freakish as it's possible for a corporation to be, all wrapped up in a marketing persona that's almost Orwellian in its winsomeness. It drives me crazy. One result of this newfound enmity has been an improbable infatuation with the current series of Galaxy S III ads, especially the one I've embedded on the right. I suppose I'll get over it soon. After all, I don't own any Samsung products and don't plan to.

On the other hand, I am thinking about getting an Android tablet. If I do, will I soon come to hate Google?

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Obama's Problems Didn't Start With the Debate

| Sat Oct. 13, 2012 4:58 PM EDT

What's going on with the polls? I wrote something about this a few days ago, but I think it might have gotten buried, so I want to repeat it. According to both Pollster and Real Clear Politics, Mitt Romney began his big surge well before last week's debate. In the ten days before the debate, Pollster shows Romney gaining 2.4 points and RCP shows Romney gaining 1.8 points

Romney has continued gaining since then, and Obama has continued falling, but this isn't solely a reaction to Obama's lousy debate performance. It started in late September. But why? Nothing special happened during that week to benefit Romney. Their ad buys remained about the same as always. The only thing I can think of is that it was just the inevitable rebound from the hit Romney took over the 47% video.

In any case, there's more going on here than just the debate that everyone's been obsessing about. Anyone have any good guesses about what happened during that last week of September?

A Look Behind the Handle: Two Trolls in Real Life

| Fri Oct. 12, 2012 10:57 PM EDT

Are you curious about what makes a troll tick? Not your garden-variety rude commenter, mind you, but the real, raging jackasses who explicitly get their jollies by harassing other people online. What are they really like IRL?

Recently we've gotten up-close-and-personal looks at two of these creatures. Both accounts are fascinating, and both are quite different. And both are recommended. Here they are:

Leo Traynor: The day I confronted my troll

Adrian Chen: Unmasking Reddit’s Violentacrez, The Biggest Troll on the Web

Friday Cat Blogging - 12 October 2012

| Fri Oct. 12, 2012 2:58 PM EDT

My attempt to create a whole new genre of post-cubist catblogging last week didn't meet with the rapturous critical reception I had hoped for, so this week we'll try a more traditional action shot. In this one, Domino looks a bit like she's up in the space station rolling around in weightlessness, but in reality she's here in the living room chasing a piece of string — widely accepted by scholars as the best cat toy ever invented. I'm not sure who invented string, but cats everywhere probably celebrate its anniversary every year.

In other news, temps here in Southern California have recently plummeted into the low 70s, which means that Domino is suddenly becoming a lap cat once again. We didn't get much of that during the 90-degree summer we just went through, but with winter approaching we human beings are once again fulfilling our sacred duties as feline hot rocks.

Mitt Romney's $2 Trillion Defense Increase Explained

| Fri Oct. 12, 2012 2:40 PM EDT

President Obama says that Mitt Romney wants to increase defense spending by $2 trillion over the next ten years, something that Romney didn't deny in last week's debate. But although I've heard this before, I never really knew where that number came from. Today, via Steve Benen, I learned that it comes from defense budget analyst Travis Sharp, and it's based on a pretty simple extrapolation of Romney's desire to increase the Pentagon budget to 4% of GDP. Here it is:

Romney's an amazing guy, no? When it comes to things that bust the deficit, he's got lots of big ticket items he's happy to share with us. He wants to cut tax rates by $5 trillion. He wants to increase defense spending by $2 trillion. He wants to eliminate Obama's $716 billion in reduced Medicare payments to hospitals.

But when it comes to things that would cut the deficit, he's suddenly Mr. Small Ball. He'll defund PBS. He'll eliminate some tax deductions but won't say which ones. He'll cap Medicare growth, but then backs away from that. Has he ever even come close to owning a spending cut that would be anything other than peanuts compared to the budget busters he's already hung his hat on? Aside from his quiet determination to slash medical care for poor people and the elderly — aka Medicaid —I can't think of one.