海角大神

The election of 2012 raises two perplexing questions. The first is how the GOP could put up someone for president who so brazenly epitomizes the excesses of casino capitalism that have nearly destroyed the economy and overwhelmed our democracy. The second is why the Democrats have failed to point this out.

The White House has criticized Mitt Romney for his years at the helm of Bain Capital, pointing to a deal that led to the bankruptcy of GS Technologies, a Bain investment in Kansas City that went belly up in 2001 at the cost of 750 jobs. But the White House hasn鈥檛 connected Romney鈥檚 Bain to the larger scourge of casino capitalism. Not surprisingly, its criticism has quickly degenerated into a 鈥渉e said, she said鈥� feud over what proportion of the companies that Bain bought and loaded up with debt subsequently went broke (it鈥檚 about 20 percent), and how many people lost their jobs relative to how many jobs were added because of Bain鈥檚 financial maneuvers (that depends on when you start and stop the clock). And it has invited a Republican countercharge that the administration gambled away taxpayer money on its own bad bet, the Solyndra solar panel company.

But the real issue here isn鈥檛 Bain鈥檚 betting record. It鈥檚 that Romney鈥檚 Bain is part of the same system as Jamie Dimon鈥檚 JPMorgan Chase, Jon Corzine鈥檚 MF Global and Lloyd Blankfein鈥檚 Goldman Sachs鈥攁 system that has turned much of the economy into a betting parlor that nearly imploded in 2008, destroying millions of jobs and devastating household incomes. The winners in this system are top Wall Street executives and traders, private-equity managers and hedge-fund moguls, 鈥╝nd the losers are most of the rest of us. The system is largely responsible for the greatest concentration of the nation鈥檚 income and wealth at the very top since the Gilded Age of the nineteenth century, with the richest 400 Americans owning as much as the bottom 150 million put together. And these multimillionaires and billionaires are now actively buying the 2012 election鈥攁nd with it, American democracy.

The biggest players in this system have, like Romney, made their profits placing big bets with other people鈥檚 money. If the bets go well, the players make out like bandits. If they go badly, the burden lands on average workers and taxpayers. The 750 people at GS Technologies who lost their jobs thanks to a bad deal engineered by Romney鈥檚 Bain were a small foreshadowing of the 15 million who lost jobs after the cumulative dealmaking 鈥╫f the entire financial sector pushed the whole economy off a cliff. And relative to the cost to taxpayers of bailing out Wall Street, Solyndra is a rounding error.

Connect the dots of casino capitalism, and you get Mitt Romney. The fortunes raked in by financial dealmakers depend on special goodies baked into the tax code such as 鈥渃arried interest,鈥� which allows Romney and other partners in private-equity firms (as well as in many venture-capital and hedge funds) to treat their incomes as capital gains taxed at a maximum of鈥�15 percent. This is how Romney managed to pay an average of 14 percent on more than $42 million of combined income in 2010 and 2011. But the carried-interest loophole makes no economic sense. Conservatives try to justify the tax code鈥檚 generous preference for capital gains as a reward to risk-takers鈥攂ut Romney and other private-equity partners risk little, if any, of their personal wealth. They mostly bet with other investors鈥� money, including the pension savings of average working people.

Another goodie allows private-equity partners to sock away almost any amount of their earnings into a tax-deferred IRA, while the rest of us are limited to a few thousand dollars a year. The partners can merely low-ball the value of whatever portion of their investment partnership they put away鈥攅ven valuing it at zero鈥攂ecause the tax code considers a partnership interest to have value only in the future. This explains how Romney鈥檚 IRA is worth as much as $101 million. The tax code further subsidizes private equity and much of the rest of the financial sector by making interest on debt tax-deductible, while taxing profits and dividends. This creates huge incentives for financiers to find ways of substituting debt for equity and is a major reason America鈥檚 biggest banks have leveraged America to the hilt. It鈥檚 also why Romney鈥檚 Bain and other private-equity partnerships have done the same to the companies they buy.

These maneuvers shift all the economic risk to debtors, who sometimes can鈥檛 repay what they owe. That鈥檚 rarely a problem for the financiers who engineer the deals; they鈥檙e sufficiently diversified to withstand some losses, or they鈥檝e already taken their profits and moved on. But piles of debt play havoc with the lives of real people in the real economy when the companies they work for can鈥檛 meet their payments, or the banks they rely on stop lending money, or the contractors they depend on go broke鈥攐ften with the result that they can鈥檛 meet their own debt payments and lose their homes, cars and savings.

It took more than a decade for America to recover from the Great Crash of 1929 after the financial sector had gorged itself on debt, and it鈥檚 taking years to recover from the more limited but still terrible crash of 2008. The same kinds of convulsions have occurred on a smaller scale at a host of companies since the go-go years of the 1980s, when private-equity firms like Bain began doing leveraged buyouts鈥攖aking over a target company, loading it up with debt, using the tax deduction that comes with the debt to boost the target company鈥檚 profits, cutting payrolls and then reselling the company at a higher price.

Sometimes these maneuvers work, sometimes they end in disaster; but they always generate giant rewards for the dealmakers while shifting the risk to workers and taxpayers. In 1988 drugstore chain Revco went under when it couldn鈥檛 meet its debt payments on a $1.6 billion leveraged buyout engineered by Salomon Brothers. In 1989 the private-equity firm of Kohlberg, Kravis, Roberts completed the notorious and ultimately disastrous buyout of RJR Nabisco for $31 billion, much of it in high-yield (鈥渏unk鈥�) bonds. In 1993 Bain Capital became a majority shareholder in GS Technologies and loaded it with debt. In 2001 it went down when it couldn鈥檛 meet payments on that debt load. But even as these firms sank, Bain and the other dealmakers continued to collect lucrative fees鈥攖ransaction fees, advisory fees, management fees鈥攕ucking the companies dry until the bitter end. According to a review by the New York Times of firms that went bankrupt on Romney鈥檚 watch, Bain structured the deals so that its executives would always win, even if employees, creditors and Bain鈥檚 own investors lost out. That鈥檚 been Big Finance鈥檚 MO.

By the time Romney co-founded Bain Capital in 1984, financial wheeling and dealing was the most lucrative part of the economy, sucking into its Gordon Gekko鈥搇ike maw the brightest and most ambitious MBAs, who wanted nothing more than to make huge amounts of money as quickly as possible. Between the mid-1980s and 2007, financial-sector earnings made up two-thirds of all the growth in incomes. At the same time, wages for most Americans stagnated as employers, under mounting pressure from Wall Street and private-equity firms like Bain, slashed payrolls and shipped jobs overseas.

The 2008 crash only briefly interrupted the bonanza. Last year, according to a recent Bloomberg Markets analysis, America鈥檚 top fifty financial CEOs got a 20.4 percent pay hike, even as the wages of most Americans continued to drop. Topping the Bloomberg list were two of the same private-equity barons who did the RJR Nabisco deal a quarter-century ago鈥�Henry Kravis and George Roberts, who took home $30 million each. According to the 2011 tax records he released, Romney was not far behind.

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We鈥檝e entered a new Gilded Age, of which Mitt Romney is the perfect reflection. The original Gilded Age was a time of buoyant rich men with flashy white teeth, raging wealth and a measured disdain for anyone lacking those attributes, which was just about everyone else. Romney looks and acts the part perfectly, offhandedly challenging a GOP primary opponent to a $10,000 bet and referring to his wife鈥檚 several Cadillacs. Four years ago he paid $12 million for his fourth home, a 3,000-square-foot villa in La Jolla, California, with vaulted ceilings, five bathrooms, a pool, a Jacuzzi and unobstructed views of the Pacific. Romney has filed plans to tear it down and replace it with a home four times bigger.

We鈥檝e had wealthy presidents before, but they have been traitors to their class鈥�Teddy Roosevelt storming against the 鈥渕alefactors of great wealth鈥� and busting up the trusts, Franklin Roosevelt railing against the 鈥渆conomic royalists鈥� and raising their taxes, John F. Kennedy appealing to the conscience of the nation to conquer poverty. Romney is the opposite: he wants to do everything he can to make the superwealthy even wealthier and the poor even poorer, and he justifies it all with a thinly veiled social Darwinism.

Not incidentally, social Darwinism was also the reigning philosophy of the original Gilded Age, propounded in America more than a century ago by William Graham Sumner, a professor of political and social science at Yale, who twisted Charles Darwin鈥檚 insights into a theory to justify the brazen inequality of that era: survival of the fittest. Romney uses the same logic when he accuses President Obama of creating an 鈥渆ntitlement society鈥� simply because millions of desperate Americans have been forced to accept food stamps and unemployment insurance, or when he opines that government should not help distressed homeowners but instead let the market 鈥渉it the bottom,鈥� or enthuses over a House Republican budget that would cut $3.3 trillion from low-income programs over the next decade. It鈥檚 survival of the fittest all over again. Sumner, too, warned against handouts to people he termed 鈥渘egligent, shiftless, inefficient, silly, and imprudent.鈥�

When Romney simultaneously proposes to cut the taxes of households earning over $1 million by an average of $295,874 a year (according to an analysis of his proposals by the nonpartisan Tax Policy Center) because the rich are, allegedly, 鈥渏ob creators,鈥� he mimics Sumner鈥檚 view that 鈥渕illionaires are a product of natural selection, acting on the whole body of men to pick out those who can meet the requirement of certain work to be done.鈥� In truth, the whole of Republican trickle-down economics is nothing but repotted social Darwinism.

The Gilded Age was also the last time America came close to becoming a plutocracy鈥攁 system of government of, by and for the wealthy. It was an era when the lackeys of the very rich literally put sacks of money on the desks of pliant legislators, senators bore the nicknames of the giant companies whose interests they served (鈥渢he senator from Standard Oil鈥�), and the kings of finance decided how the American economy would function.

The potential of great wealth in the hands of a relative few to undermine democratic institutions was a continuing concern in the nineteenth century as railroad, oil and financial magnates accumulated power. 鈥淲ealth, like suffrage, must be considerably distributed, to support a democratick republic,鈥� wrote Virginia Congressman John Taylor as early as 1814, 鈥渁nd hence, whatever draws a considerable proportion of either into a few hands, will destroy it. As power follows wealth, the majority must have wealth or lose power.鈥� Decades later, progressives like Louis Brandeis saw the choice starkly: 鈥淲e may have democracy, or we may have wealth concentrated in the hands of a few, but we can鈥檛 have both.鈥�

The reforms of the Progressive Era at the turn of the twentieth century saved American democracy from the robber barons, but the political power of great wealth has now resurfaced with a vengeance. And here again, Romney is the poster boy. Congress has so far failed to close the absurd carried-interest tax loophole, for example, because of generous donations by Bain Capital and other private-equity partners to both parties.

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In the 2012 election, Romney wants everything Wall Street has to offer, and Wall Street seems quite happy to give it to him. Not only is he promising lower taxes in return for its money; he also vows that, if elected, he鈥檒l repeal what鈥檚 left of the Dodd-Frank financial reform bill, Washington鈥檚 frail attempt to prevent the Street from repeating its 2008 pump-鈥╝nd-dump. Unlike previous elections, in which the Street hedged its bets by donating to both parties, it鈥檚 now putting most of its money behind Romney. And courtesy of a Supreme Court majority that seems intent on magnifying the political power of today鈥檚 robber barons, that鈥檚 a lot of dough. As of May, thirty-one billionaires had contributed between $50,000 and鈥�$2 million each to Romney鈥檚 super-PAC, and in June another鈥攁ppropriately enough, a casino magnate鈥攇ave $10 million, with a promise of $90 million more. Among those who have contributed at least $1 million are former associates from Romney鈥檚 days at Bain Capital and prominent hedge-fund managers.

To be sure, Romney is no worse than any other casino capitalist of this new Gilded Age. All have been making big bets鈥攃ollecting large sums when they pay off and imposing the risks and costs on the rest of us when they don鈥檛. Many have justified their growing wealth, along with the growing impoverishment of much of the rest of the nation, with beliefs strikingly similar to social Darwinism. And a significant number have transformed their winnings into the clout needed to protect the unrestrained betting and tax preferences that have fueled their fortunes, and to lower their tax rates even further. Wall Street has already all but eviscerated the Dodd-Frank Act, and it has even turned the so-called Volcker Rule鈥攁 watered-down version of the old Glass-Steagall Act, which established a firewall between commercial and investment banking鈥攊nto a Swiss cheese of 鈥╨oopholes and exemptions.

But Romney is the only casino capitalist who is running for president, at the very time in our nation鈥檚 history when these views and practices are a clear and present danger to the well-being of the rest of us鈥攋ust as they were more than a century ago. Romney says he鈥檚 a job-creating businessman, but in truth he鈥檚 just another financial dealmaker in the age of the financial deal, a fat cat in an era of excessively corpulent felines, a plutocrat in this new epoch of plutocrats. That the GOP has made him its standard-bearer at this point in American history is astonishing.

So why don鈥檛 Democrats connect these dots? It鈥檚 not as if Americans harbor great admiration for financial dealmakers. According to the newly released twenty-fifth annual Pew Research Center poll on core values, nearly three-quarters of Americans believe 鈥淲all Street only cares about making money for itself.鈥� That鈥檚 not surprising, given that many are still bearing the scars of 2008. Nor are they pleased with the concentration of income and wealth at the top. Polls show a majority of Americans want taxes raised on the very rich, and a majority are opposed to the bailouts, subsidies and special tax breaks with which the wealthy have padded their nests.

Part of the answer, surely, is that elected Democrats are still almost as beholden to the wealthy for campaign funds as the Republicans, and don鈥檛 want to bite the hand that feeds them. Wall Street can give most of its largesse to Romney this year and still have enough left over to tame many influential Democrats (look at the outcry from some of them when the White House took on Bain Capital).

But I suspect a deeper reason for their reticence is that if they connect the dots and reveal Romney for what he is鈥攖he epitome of what鈥檚 fundamentally wrong with our economy鈥攖hey鈥檒l be admitting how serious our economic problems really are. They would have to acknowledge that the economic catastrophe that continues to cause us so much suffering is, at its root, a product of the gross inequality of income, wealth and political power in America鈥檚 new Gilded Age, as well as the perverse incentives of casino capitalism.

Yet this admission would require that they propose ways of reversing these trends鈥攑roposals large and bold enough to do the job. Time will tell whether today鈥檚 Democratic Party and this White House have the courage and imagination to do it. If they do not, that in itself poses almost as great a challenge to the future of the nation as does Mitt Romney and all he represents.