Ed Conard, a former Bain partner, was on Chris Hayes' show today, and Sal Gentile gamely leads off a roundup of the interview by writing that Conard "acknowledged" that Mitt Romney remained CEO of Bain all the way through 2002 — thus implying that he was at least partly responsible for decisions made at Bain between 1999 and 2002. And perhaps he was. But honestly, the key quote from Conard is this one:

“He’d created a lot of franchise value, and we were going to pay him for that,” Conard said, adding: “We had a very complicated set of negotiations that took us about two years for us to unwind. During that time a management committee ran the firm, and we could hardly get Mitt to come back to negotiate the terms of his departure because he was working so hard on the Olympics.”

If Conard is right, Romney not only wasn't involved in Bain's business during this period, he was up to his neck in so many alligators that he could barely spare the time to negotiate his own retirement package. I have to say, that doesn't sound like a person who was keeping himself aware of what was happening at Bain, let alone taking even a modest hand in making management decisions.

Politically, I understand why this story has gotten so much oxygen. And it's worth digging into, since Romney has inexplicably opened himself up to it by insisting over and over that he had literally zero involvement with Bain during the 1999-2002 period, something that seems unlikely for a CEO and sole shareholder. But honestly, as Dave Weigel says, there's nothing all that new about this story. Romney took a leave from Bain in 1999, probably had a bit of contact with Bain's management during the next few years, and was involved in both strategic and daily decisionmaking only tangentially. In other words, not very involved, but not quite zero either. Beyond that, the details hardly matter. Here's more from the interview:

Asked if the factory closures and lay-offs that occurred between 1999 and 2002 were characteristic of Bain Capital’s record before 1999, Conard said, “I believe that’s true, yes. I think that Bain Capital does what Bain Capital does, which is try to make companies stronger and grow them faster.”

Conard also said that he did not believe Romney was “ashamed” of any part of Bain Capital’s record. “You say ashamed, I see great pride,” Conard said of Romney's position on Bain Capital's entire record. He added that he believed Romney would embrace Bain Capital’s record rather than try to distance himself from it once the campaign intensifies in the fall. “When the debate really starts, in August, September and October, we’ll see. I think he’ll own it.”

Bain is Bain. Even if Romney wasn't much involved in management after 1999, it was still the company he built. The only problem is that back during the primaries he became so desperate to avoid being tainted by the unpopular aspects of running a ruthless private equity firm that he panicked when the inevitable attacks came and started insisting that he shouldn't be held responsible at all for anything Bain-related after precisely February 1999. This has since been followed by increasingly wobbly towers of nonsense, like Ed Gillespie's claim today that Romney "retired retroactively." This was never really tenable from the start, and all of Romney's problems have flowed from that original miscalculation. He can't run from Bain, and he shouldn't have tried.

I'm excited this morning. It's a geeky kind of excitement, but around here we take what we can get. Here's why: yesterday we got a bit of deregulation in the financial world, and it's a bit of deregulation that I've long wanted to see. So now I get to find out what happens.

You probably saw the headlines: Visa and MasterCard finally settled a lawsuit over charges that they colluded to charge high swipe fees on credit cards. As a result, they have to cough up $6 billion to the merchants who sued them. That's good news for merchants, but not for me. Frankly, in a war between Visa and Walmart, I can't get very excited about who wins.

No, you have to read down a bit to get to the exciting news:

Under the credit-card settlement on Friday, worked out over months of negotiations, merchants can charge higher prices to consumers who decide to pay for their purchases with credit cards. A customer, for example, who buys a $100 item with a credit card might be charged an additional $2.50. A judge still needs to approve the settlement.

Until now, credit card companies used their monopoly power to prohibit this. Merchants could discount for cash, but their contracts with Visa and MasterCard flatly prohibited them from charging credit card customers more to cover the swipe fee — and card companies have been adamant about enforcing this prohibition. There's an obvious reason for this: they're afraid that if merchants are allowed to do this, people will use credit cards less. And if people use credit cards less, then banks and credit card companies make less money.

But here's why this is interesting in a geeky kind of way: it's not clear who, if anybody, gets screwed by hidden swipe fees. After all, there's nothing wrong with swipe fees per se: it costs money to run an electronic payment network, and credit card companies need some way to recoup those costs. Swipe fees are a reasonable way of doing this.

What's more, consumers and merchants get a lot of benefits from credit cards: consumers get convenience and merchants get guaranteed payment. No more bounced checks! Maybe a 2.5% fee is a reasonable price for those benefits.

Maybe. But there are two big questions about swipe fees. First: are they abusively high? Second: who really pays them? Do they get passed on entirely to consumers? Do they get split between merchants and consumers? Or do they primarily end up balancing the costs of running a payment network between merchant and purchaser banks?

The empirical evidence on this is hazy. No one knows for sure. So I say: let's find out. Instead of allowing card companies to unilaterally hide the fees by banning surcharges, or allowing regulators to unilaterally cap swipe fees, bring them out in the open and let the market decide. Give merchants the option to pass along swipe fees to consumers and see what happens. If they end up doing it, it's pretty good evidence that fees were too high and were being paid at least partly by unwitting consumers, many of whom prefer the option of switching to cash once they realize the real price of using plastic. If they don't, and things stay pretty much the same as they are today, it's pretty good implicit evidence that everyone was getting a tolerably reasonable deal already. To semi-quote myself on this subject:

Although there's no definitive evidence on this score, there are some reasons for thinking that fees are too high and that consumers do end up paying at least part of them. There's a Boston Fed study showing that the net result of swipe fees is to transfer money from the poor to the rich. There's an ECB report suggesting (unsurprisingly) that in a monopoly environment interchange fees will always be set too high. And there's this New York Times piece about swipe fees in the debit card market, which makes it pretty clear that Visa's fees are simply egregious abuses of its monopoly power. And if they're abusive in the debit card market, they're probably abusive in the credit card market too. Finally, there's the fact that current fees are so high that card issuing banks can afford to rebate a big chunk of them in rewards programs, something that flatly makes no sense in a sane world.

That's all suggestive, but it's not proof. So now we get to see. Some merchants will almost certainly start charging more for credit card purchases, and after a period of experimentation we'll end up in a new equilibrium. What will it be? Perhaps consumers will start avoiding stores that charge for using credit cards, and those stores will lose enough business that they'll give up. Or maybe they'll gain enough cash business that everyone else will follow suit. Maybe merchants will end up charging higher prices for small items but routinely waive the fees for larger purchases. Maybe stores in competitive markets will swallow the fees while other stores don't. Or vice versa. Or maybe it will end up putting pressure on banks and card companies to lower swipe fees and then everything will revert to the status quo, but with no more ridiculous rewards programs. (This is my preferred outcome: keep the convenience of electronic payment, but with swipe fees basically covering the cost of running the network, not acting as a hidden profit center.)

Who knows? But one way or another, the market will figure this out, not the monopoly position of the credit card companies. And in a geeky kind of way, it's going to be very interesting to see what happens.

EXTRA SUPER GEEKY NOTE: I think that credit card surcharges are still banned by law in some states. This won't be affected by the settlement, which means merchants will be allowed to pass along the fees in some states but not in others. This should provide an immense amount of grist for natural experiments along state borders. I expect many doctoral dissertations on this subject in the years to come.

On the left, Inkblot is conked out on a scratching pad that's recently been recharged with fresh catnip. On the right, Domino wants someone to let her in the front door. I never get tired of this routine of hers.

(Inkblot has never been bright enough to figure this out, though. He'll wander around outside the door and occasionally make piteous sounds, but it's never occurred to him to stare in the window. Not to worry, though. As president, he'll be the big picture guy, leaving the details of how to get humans to open doors up to his staff.)

Need more cats? My sister passes along video of this adorable gray kitten and its fur-raising green apples, perfect for Friday the 13th.

I'm going to argue with Bob Somerby some more today. I was a bit astounded at the first of three reasons he gave for believing that the Democratic focus on Mitt Romney's Swiss bank account is a bad idea:

First, we’re unconvinced that these character attacks will work. Although of course they could.

The reason I was taken aback is that it was Bob himself who's done the most to convince me that these kinds of character attacks work like gangbusters. They worked on Al Gore! They worked on John Kerry! So why wouldn't they work on Mitt Romney?

Then he goes on to make the perfectly sensible point that Romney is such a bad candidate we shouldn't need to resort to this kind of stuff regardless. After all, Romney's tax plan would raise taxes on 18 million working families at the same time that it lowers taxes on millionaires. This is almost cartoonishly ridiculous:

Especially given the state of income inequality, those highlighted proposals are astounding. Almost surely, these are the craziest basic proposals in modern campaign history....They fly in the face of the need for more revenue. They fly in the face of the very low tax rates currently paid by high earners. We’ll guarantee you that very few voters are familiar with these proposals. Even fewer understand the surrounding facts which make them so astounding.

Bob laments that liberals seem unable to swat Romney like a fly with stuff like this. And he's got a point. What kind of movement is so lame that it can't make hay with tax plans seemingly delivered straight from a 19th-century robber baron's sneering countenance?

And yet, as near as I can tell, the plain fact is that attacks like this don't seem to work all that well. They aren't useless, but they aren't silver bullets either. They're too wonky. Viewers aren't sure they believe them. It sounds like the usual he-said-she-said nonsense. And anyway, everyone assumes that Republicans aren't really serious about the looniest of the stuff they spout. It's just red meat for the true believers, right?

It's crazy. It's astounding. It is, perhaps, a long-term abject failure on the part of both the media and the liberal project. But that doesn't matter for the next four months. In campaign terms, you run with the attacks that work, not the attacks you wish would work. The Obama team has apparently decided that Swiss bank accounts and dodgy tax avoidance schemes and offshoring at Bain are better bets right now, and it's hard to say they're wrong about that.

UPDATE: Then again, maybe the tax stuff works better than I think. That's what a usually reliable friend tells me, anyway. I guess we'll just have to see how things play out over the next four months.

Four Point Six

Somebody fed BuzzFeed a recording of a stemwinding speech Condoleezza Rice gave at a Romney fundraiser in June, and apparently her criticism of President Obama's "narrative" has conservatives everywhere cheering:

It is a narrative that is being pushed by our current president, that "I'm doing poorly because you're doing well." That has never been the American narrative. Ours has never been a narrative of aggrievement, and ours has never been a narrative of entitlement.

I just want everyone to be absolutely clear on what this "narrative of aggrievement" is all about. It's about Obama's proposal that the marginal tax rate on income over $400,000 should rise from 35% to 39.6%.

That's your aggrievement. That's your entitlement. That's your socialism. That's your class warfare. An increase in the top marginal tax rate of 4.6 percentage points.

Four. Point. Six.

This is what America's most prosperous citizens are up in arms about. This is why Barack Obama is an enemy of capitalism. These are the spiteful shackles he proposes to use to subjugate America's engines of job creation. It's the reason America's wealthiest citizens are so frightened about the future of their country.

4.6 percentage points. Just let that sink in.

Did you hear that the city of San Bernardino recently followed the city of Stockton into bankruptcy? Did you also hear that it was mostly because of skyrocketing pension costs doled out to union workers in years past? I've been meaning to write about this, but it's local stuff and I never got around to it. Luckily, Harold Meyerson did, so I can just steal from him:

That’s really not what caused the crises of Stockton and San Bernardino....What sets Stockton and San Bernardino apart is that they were at the epicenter of the California housing bubble and the California housing bust....Of the 372 federally designated metropolitan areas in the United States, Stockton ranks first in foreclosures, while Riverside-San Bernardino-Ontario ranks third.

....Both Stockton and San Bernardino depend on property and sales taxes for their revenues. With the value of their housing stock and the disposable income of their residents both in free-fall, the cities saw their revenues hemorrhage. That’s why they filed for bankruptcy—not because of rising costs.

I should note that I'm not sanguine about public sector pensions. They're growing, and they're a problem. We can argue forever about how justified they were, whether they were simply a quid pro quo for low salaries, and about the fact that cowardly public officials were full partners in eagerly pushing off costs into the future when they'd no longer be in office. But they're still a problem.

However, Harold is right: Stockton is practically the poster child for the housing bust "ghost town," a city where entire neighborhoods were all but abandoned mere years after they were built. That's the proximate cause of their bankruptcy, and San Bernardino's too. Public sector pensions were just a bit player.

NOTE: You might also have heard of a third California city that recently declared bankruptcy, Mammoth Lakes. But that's a unique case, not caused by housing or pensions or anything related. They lost a big lawsuit, and they can't pay the judgment. It's sui generis.

David Brooks writes about the problem with today's leaders:

Christopher Hayes of MSNBC and The Nation believes that the problem is inherent in the nature of meritocracies. In his book, “Twilight of the Elites,” he argues that meritocratic elites may rise on the basis of grades, effort and merit, but, to preserve their status, they become corrupt. They create wildly unequal societies, and then they rig things so that few can climb the ladders behind them. Meritocracy leads to oligarchy.

....It’s a challenging argument but wrong. I’d say today’s meritocratic elites achieve and preserve their status not mainly by being corrupt but mainly by being ambitious and disciplined....As a result, today’s elite lacks the self-conscious leadership ethos that the racist, sexist and anti-Semitic old boys’ network did possess....The best of the WASP elites had a stewardship mentality, that they were temporary caretakers of institutions that would span generations. They cruelly ostracized people who did not live up to their codes of gentlemanly conduct and scrupulosity. They were insular and struggled with intimacy, but they did believe in restraint, reticence and service. Today’s elite is more talented and open but lacks a self-conscious leadership code.

I enjoyed Twilight of the Elites, but I had a big problem with it, and it's the same problem I have with Brooks's competing thesis: I think they both view the past with unjustifiably rose-colored glasses. Hayes does a good job of describing all the pathologies of today's meritocratic aristocracy, but his book never seriously addresses all the pathologies of past aristocracies, meritocratic or otherwise. You're left thinking that cheating and corruption and nepotism are somehow unique to the 21st century West. But not only is none of that stuff unique, it's not clear that it's even any worse than it used to be. The scale is bigger than it used to be, because there's just more money sloshing around the system than ever before in history, but if you let your memory wander back a century, two centuries, or two millennia, it's pretty obvious that today's meritocracies not only aren't any more corrupt than past elites, they aren't even much better at it. Past aristocracies might not have had the high SAT scores of today's elites, but apparently their animal cunning was every bit as well developed.

Brooks, if anything, is worse on this score. He's careful to admit the problem with the elites of the 19th century, but even so he idealizes them. Sure, the best of the old WASP elites were good people in a noblesse oblige sort of way, but the best of any set of elites are good people. Today's meritocracy is loaded with fine, upstanding citizens. The problem is that they're a minority. But the upstanding folks were a minority back in the days of the WASP aristocracy too.

I'd like to understand better why Hayes and Brooks don't just believe that today's elites are corrupt, but apparently believe that they're uniquely corrupt. I'm not sure I see it, but I'm open to argument. Just be sure to think long and hard about all the corruption and cruelty and nepotism of the past first.

Earlier this week I wrote about the long-standing hope of Democrats that demographic changes are working in their favor and will soon create a durable national Dem majority. There are several moving parts to this theory, but the two big ones are (a) young people are trending Democratic, and (b) the Dem-leaning nonwhite population is getting bigger and bigger. As far as I know, Republicans don't really deny that these things are happening. After all, the trend in the youth vote jumps out in every poll, and the growing nonwhite share of the population is regularly front-page news. George Bush and Karl Rove, who desperately wanted to pass a comprehensive immigration bill in 2006 in order to stanch the flow of Hispanic votes into the Democratic column, knew perfectly well how important this was.

So what's the Republican response to all this? They have two options:

  1. Start to move leftward on social issues, especially gay marriage, in order to win back their share of the youth vote; tone down the anti-immigration rhetoric from the tea partiers; and stop tolerating casual racism among their core supporters.

  2. Double down on the demographic groups who already support them. This is basically the South, angry white men, the rich, and the elderly.

Eventually, they might be forced to adopt Option 1, but for now they seem to have abandoned the idea of pushing back against their base (as Democrats eventually did in the late '80s), and instead have gone all in on Option 2. There are two elements to this. The first is to push ever harder for higher turnout among the Fox News set. That was pretty successful in 2010, when the "enthusiasm gap" powered a Republican landslide that year.

But there's only so far that can go. At some point, turnout is high enough that you're pushing against a wall. So the second element of the strategy is to mount a last-ditch effort to reduce turnout among the young and the nonwhite. This has mostly taken the form of a decadelong campaign to pass photo ID laws, a campaign I wrote about in "The Dog That Voted," part of a package in our current issue. These laws disproportionately affect turnout among the young, the poor, and minorities, and have been passed almost exclusively in states controlled by Republicans. The latest example is Pennsylvania, which recently passed a photo ID law and then suddenly discovered—four months before an election!—that nearly 10 percent of their residents have no photo ID. But that's just an average number and doesn't apply equally to all groups. If other states are any guide, it's something like 20 percent for the young, the poor, and the nonwhite. Attorney General Eric Holder, for one, is finally calling this what it is, saying this about Texas's proposed voter ID law:

Under the proposed law, concealed handgun licenses would be acceptable forms of photo ID, but student IDs would not. Many of those without IDs would have to travel great distances to get them, and some would struggle to pay for the documents they might need to obtain them. We call those poll taxes.

So how well will the GOP's turnout strategy work? In the short term, fairly well. Cranking up the demagoguery can probably increase turnout among Republican-leaning groups by a couple of points, and photo ID laws might suppress the vote among Democratic-leaning groups by a point or so. But once that's done, it's done. There's nothing more Republicans can do to affect turnout. At that point, they can rely a bit on demographic trends of their own (the Sun Belt is growing, the elderly share of the population is growing), but that probably won't be enough. They'll also have more and more money on their side, but that's not enough either. After all, there are only so many ad spots available to buy.

So does that mean that demography is destiny and Republicans will eventually fade away? Of course not, and anyone who seriously thinks so needs to wise up. Republicans will try to hold on to their current base as long as they can, but when that finally starts to wear thin, they'll do what they have to do to appeal to some new demographic groups. It seems barely conceivable now, but it's inevitable. It's what all political parties do when the chips are down and they no longer have any choice.

At least, that's what I want to believe. Because the alternative is worse: ever-worsening racial polarization as whites continue fleeing to the Republican Party. If both parties tacitly accept this, with Republicans gaining more and more of the white vote and Democrats gaining more and more of the nonwhite vote, we could end up with one party almost exclusively representing whites and another party almost exclusively representing nonwhites. That's not much of a recipe for problem solving or social harmony. But it could happen.

Henry Blodget says he doesn't think Mitt Romney is trying to hide anything illegal by refusing to release his tax returns. Rather, he thinks Romney simply doesn't want it to become clear just how carefully he's structured his income over the years. If it did, everyone would learn that:

  • This "structuring" of income has likely taken full advantage of things like the ludicrous "carried interest" tax exemption that allows private-equity investors to pay capital gains taxes on income that is actually fees [This tax treatment is one of the most outrageous and unfair elements in the entire tax code. There is no logical basis for it, and it benefits only the richest people in the country.]
  • This "structuring" has also likely taken advantage of offshore accounts, the contribution of hard-to-value securities at low valuations to Romney's IRA (whereupon they exploded in value), and other sophisticated tools. These tools are, theoretically, available to anyone, but, in practice, are available only to those with tens of thousands of dollars to spend every year on tax-and-estate planning.
  • This structuring, which (let's be honest) is done primarily to avoid paying taxes, will look bad to most Americans, who will know instinctively that it's done to avoid paying taxes and that it's not something they will ever be able to afford to do — and, therefore, will seem unfair.

Maybe. Like Blodget, I also doubt that Romney has done anything illegal, and probably not anything that's even too close to the line. And yet, it somehow seems as though there must be a little more there than just evidence of aggressive tax avoidance. Blodget thinks that would outrage the American public, but I'm not sure I buy that unless there's some pretty shady stuff there. But then again, I'm not exactly plugged into the id of the average American. Maybe Blodget is right.

Charlie Stross writes today about an organizing/writing tool called Scrivener that he now uses instead of a word processor. Here's a tiny excerpt:

I've used it before on several novels, notably ones where the plot got so gnarly and tangled up that I badly needed a tool for refactoring plot strands....My suspicion is that if this sort of tool spreads, the long-term result may be better structured novels with fewer dangling plot threads and internal inconsistencies.

Wait a second. The author of the novel, the guy who's spent months immersed in the world he's created, is sometimes unable to follow his own plot without the help of a monster piece of project coordination software? Seriously? So how are the rest of us, who merely have a long stream of words to cajole us along, supposed to follow it?

But I suppose I should be grateful regardless. I'm reading Anna Karenina right now, and either my edition was put together by an ADHD nine-year-old or else Leo Tolstoy badly needed a Cyrillic version of Scrivener. Either way, I'm rapidly coming to the conclusion that I just don't care much for Tolstoy and I might as well admit it. War and Peace didn't especially keep me riveted to my seat either. But at least the Kindle editions are free.