Posts Tagged ‘Mitt Romney’

 

Just Who On Earth Do You Suppose You Are Kidding?!?

Wednesday, November 28th, 2012

So the campaign manager for the Mitt Romney campaign wrote a full scale apologia in the Washington Post today. Too bad that it’s premised on insane lies. I’m just going to fisk the relevant paragraph here:

I appreciate that Mitt Romney was never a favorite of D.C.’s green-room crowd or, frankly, of many politicians.

Seriously? Now that may have been true when he ran in 2008, but by 2012 he had lined up every conceivable endorsement imaginable. He had the full backing of the RNC from the get go. Remember how they kept screaming that this guy was electable? For Romney’s handlers to now claim that he was some sort of outsider to the RNC political circuit just compounds the rank dishonesty that mired the candidate and his campaign.

That’s why, a year ago, so few of those people thought that he would win the Republican nomination.

No, that’s why he was being called Mr Electable by every pundit and RNC consultant that Romney’s money paid for. The claim is especially rich when the Washington Post’s own Jennifer Rubin was perhaps the single biggest Romney apologist in print. Perhaps the author believes that the Post’s readers will have forgotten her incessant whining and defense of the man with whom she was smitten.

But that was indicative not of any failing of Romney’s but of how out of touch so many were in Washington and in the professional political class. Nobody liked Romney except voters.

Except when tehy had an opportunity to vote for someone else, anyone else, sure, the voters. That’s why they lurched form one “not Romney” to another “not Romney” until they all had fallen by the wayside in scandal or due to a lack of money. But yeah, they liked him, they really liked him…

What began in a small field in New Hampshire grew into a national movement. It wasn’t our campaign, it was Romney. He bested the competition in debates, and though he was behind almost every candidate in the GOP primary at one time or the other, he won the nomination and came very close to winning the presidency.

He may have bested Obama in the debates, but that’s not saying much. It certainly can’t be said he decisively won any of the primary debates.

Romney was a rotten candidate, who convinced many libertarian minded voters that he wasn’t substantively any different than Obama, and that they thus shouldn’t vote for him or the party apparatus that demanded he be nominated. That is why so many house seats were lost to Republicans, but could have been won had the Libertarian candidate’s votes gone to the Republican. Seats like those lost by Mia Love and Richard Tsei. Romney not only lost, he had negative coattails.

There is nothing to crow about in the Romney candidacy, either with respect to the candidate or with respect to the campaign. His campaign manager should be ashamed of what he did, and certainly shouldn’t be publishing defenses of it. What we need is not an apologia, but an apology.

 
 

The Giving Of Thanks

Wednesday, November 21st, 2012

And so it was, yea verily, when some 5,000 years ago, or so, as there are some disputed among theologians, the Earth was born. And some seven days after the birth of the Earth, all the plants and animals had been born. Mankind was vegetarian, of course. And by mankind we mean the only two of the human species who cohabited the Earth with every animal that ever existed, dinosaurs included. They lived in Missouri. At some point, the first man and woman decided that they wanted knowledge of how the world worked, which the acquired not by observation of the world around them, nor by hunting and eating meat and growing their brains, but rather by eating from a magic tree. And upon gaining said knowledge, they noticed that their genitals were exposed, and that they enjoyed eating meat. So they set forth, and populated the Earth.

A small tribe of people, who existed at the nexus of three major continents, Asia, Africa and Europe, was made up of some 13 tribes, some of whom departed from their homeland never to return. As it turns out, those very people were the original settlers of the American continents. In their homeland they were known as the Jews. In their new land, they became the Nephites and the Lamanites. One of them was white, and they got eliminated by the dark skinned Jews, who had completely lost their way with the Lord. At some point, the last white man alive in North America (before the arrival of Columbus) wrote down the history of these lost Jews on gold tablets, ad buried them in the hills of upstate New York.

Some 128 years after Columbus became the first non-Jewish white man to set foot in the Americas, religious zealots from England landed in Massachusetts. They nearly died in their first winter, but the Jews, who the pilgrims thought were from India, helped show them how to farm the land, and thus they had a bounteous feast that year. The centerpiece of their meal was a bird that the English speaking peoples had mistakenly named believing it has originated in the Ottoman Empire. This is the bird that we typically eat this time each year.

Some 210 years after the pilgrims arrived in North America, a man named Joseph Smith discovered the tablets buried by the last white North American Jew/Indian, and he launched the only true church according to the wished of Jesus Christ, all others being an abomination. Joseph Smith himself ran for President of the United States, as sort of a theocratic candidate. He lost obviously, but not before he made a prophecy: that someday the US Constitution would be “hanging by a thread” and that it would be a member of his Church who would become president, and set things right.

Almost 200 years later, the US Supreme Court declared that the power to tax includes the power to tax not for the purpose of raising revenue to act upon its enumerated powers (as the constitution says), but rather that it can be used to compel behavior in the citizenry. The case which was being decided was over a bill designed to eventually socialize the medical care industry, such socialism being well outside the framework of the Constitution or the thinking of any of the framers.

And so it came to pass that a Mormon was running for president, just at that moment, when the constitution was hanging by a thread. But alas, something was amiss. This Mormon had himself implemented a miniature version of this form of socialism in the state in which he was governor. And when running in the primaries, he had said that he didn’t want to repeal the offensive law, but just to fix the most offensive portions of it. And after obtaining the nomination, rather than going hard against the man after whom the legislation is colloquially named, he went hard after the most strict constitutionalist in the Republican party, the Ron Paul acolytes, who were playing by the rules to gain positions in the party to prepare for an eventual Rand Paul presidential run. Got that? Going against the man who is eviscerating the constitution, use kid gloves. Going against the Ron Paul folks, go for blood. Perhaps they weren’t white and delightsome enough for him.

Eric Fehrnstrom, the Mormon candidate’s campaign manager or whatever you want to call him, was so devoted to the Mormon candidate that he was fond of saying to the rest of the staff that they should all feel privileged, thankful even, to have had the opportunity to work with such a great man.

Whatever.

So what am I thankful for this year? That we’re rid of that douchebag once and for all.

 
 

Election Pre-Mortem

Monday, November 5th, 2012

Obviously, Romney is going to win handily tomorrow. The question is why? More specifically, how did I get it so wrong:

If Republicans lose the independent vote 58% to 42%, they will lose. And that’s not even considering the fact that Mihos in fact took 7% of the vote for himself. I think we could expect similar results if Gingrich goes rogue and runs third party.

So I hope you’re a bit more informed about Mitt Romney’s electability now. Nominating Mitt Romney will, I believe, lead to a massive loss in November. My hope is that is doesn’t have an effect down ticket.

More or less, Obama ran the entirely wrong race in all the wrong ways.

Back in 2004, when Bush beat Kerry, I was in a car with some liberal friends who asked me what I thought of the election. I told them that I thought Howard Dean would have had a better chance of beating Bush, a thought which intrigued them. They asked me to elaborate, which I did. I told them that in an election between someone who believes in something, and someone who believes in nothing or whom at least appears to believe in nothing, the something will win every time. I told them that Bush was a poor President who was very beatable. But Kerry, rightly or wrongly, came across as a guy who believed in nothing. And as a result he was seen as unfit to lead, and so voters stuck with what they knew, despite their reservations about the current President.

Given the poor state of the economy and the generally poor performance of Obama as President, the best he could have hoped for was a scenario similar to 2004, in which the challenger is deemed unacceptable for some reason. In some sense, the Obama camp knew this, which is why they went so negative so early in the campaign. But the way in which they did it was completely idiotic, to put it mildly.

Evidently, the Obama camp lives inside its own echo chamber. Instead of going after Romney as a man who changes his views on a whim, who apparently believes in nothing, an accurate and potent criticism of the man, they decided to try to portray him as a right wing extremist.

Because the Republicans spent the entire primary season wringing their hands over Romney because they were concerned about nominating someone too right wing.

Romney was the quintessential politician who believed in nothing, who ought to have been beaten by anybody who believes in something. Instead he was portrayed by the Obama camp as someone who believed in something, just something different from Obama.

This blunder more or less handed the election to Romney. But that was only the beginning.

It would seem as if the Obama team really spent the election shitting its pants over the Tea Party. In case you were unaware the Tea Party is more or less un by middle aged middle class women. This marks a very dangerous fissure in the Democratic coalition. If middle class women peel away as a reliable source of votes, the Democrats are in trouble. So they spent their entire convention screaming about birth control and abortion. It was absurd and certainly didn’t convince anyone of anything. More importantly, it squandered another opportunity to show how Romney is a guy who believes in nothing.

Finally, for reasons that puzzle me, they failed to go after the Mormon angle in the way I assumed they would, namely by pointing out that Romney proselytized what was then a racist religion for two years. Obama surrogate Andrew Sullivan has only just mow started asking those questions, way too late.

So say hello to President Romney. I don’t hold out much hope that he’ll be any good as president. But he certainly can’t be as bad as Obama has been.

UPDATE: So obviously, I shouldn’t have written this, and should have just stuck with my original prediction. I certainly appears that Obama simply had a better ground game in the battleground states, and got turnout that was at or near 2008 levels, something that I wasn’t considering could seriously take place. Now we all have to brace ourselves, for the implementation of Obamacare and the debasement of the currency. It’s gonna get ugly.

UPDATE 2: Ira Stoll mirrors my thoughts.

 
 

More on Romney

Saturday, July 14th, 2012

Or should it be, Moron Romney?

So you may or may not be aware, but a lot of the Ron Paul folks have been organizing to become delegates for the Republican National Convention in Tampa in August. Why are they doing this? Well, they have no illusions about who the nominee is or who they will be voting for. What they are doing is making a long term play: they are attempting to grab control of the party apparatus so that they can help pave the way for a Rand Paul nomination for President. They assume that Romney will lose in this election cycle, but on the off chance that he wins, they’re prepping for Rand Paul’s nomination in 2020.

So this caused something of a minor embarrassment for Romney when his delegates all LOST the delegate elections in his home state of Massachusetts. So what did Romney do in response? Well, he cheated, changed the rules, and got the delegates booted. You can read the full story here and here.

I seem to remember him having done something similar to this before, to a gubernatorial candidate, Christy Mihos…

Look, Romney is an imperious prick, who thinks very short term and is entirely risk averse in all the wrong ways. Instead of trying to win these new delegates over, instead of welcoming them to the Republican party, he tried bullying them and then cheated and got them thrown out of the party.

It may not have occurred to you or those of you in the Romney camp, but the left is already cooking up a plan to delegitimize the election should Romney manage to pull a rabbit out of the hat. Just google “republican voter suppression” and see what comes up (UPDATE: in fact, here’s an article from today’s paper!). And in the midst of this plan, Romney goes ahead and does what? Suppresses the votes of Ron Paul Republicans trying to win delegate seats. This after having previously done much the same thing with regards to Christy Mihos. Way to establish a pattern and throw fuel on the fire. Does it not occur to him that he’s playing right into this meme?

Oh forget it.

I was giving some thought to voting for Romney after the Roberts decision. Now I’ll prolly just stick to my plan to vote for Gary Johnson.

 
 

My New Persona: @MrElectable

Sunday, March 11th, 2012

Please follow my new Twitter persona, @MrElectable

 
 

A Repeat of 2006 – Mitt Romney is NOT Electable

Thursday, February 23rd, 2012

Mitt Romney has been running on the idea that he is “electable”. The idea is that he’s so clean cut and well spoken that he was able to win the governorship in one of the most liberal states in the country. And while his narrative has taken a bruising lately, it still holds because he’s claiming to just be more electable than the other candidates. This is utter nonsense, and the notion needs to be dispelled.

Mitt Romney is in fact the least electable candidate in the race. His past performance in Massachusetts indicates as much. The only thing required to understand this is a touch of knowledge about Massachusetts political history.

When Mike Dukakis left government after attempting to run for President, he left state government in shambles. He lied about having balanced the budget, and the people of Massachusetts were fed up with him and the Democrats. Into this environment, the people of Massachusetts elected Republican Bill Weld as governor, and gave him enough of a minority in the legislature so as to be able to sustain a veto. That was in 1990. Bill Weld was re-elected in 1994, and grew bored with being governor, and resigned in 1997, leaving the office to his Lt. Governor Paul Cellucci. Cellucci was a real local (locals would call his sort a “townie”), who ran up an extraordinary amount of personal credit card debt, calling into his question his ability to be a good manager. Nevertheless, he managed to get elected to the governorship in his own right in 1998. Cellucci resigned in 2001 to become the US ambassador to Canada, leaving the office to Jane Swift, who gave birth to twins while serving as acting governor, and chose not to run for the office herself.

It was into this string of Republican wins that Mitt Romney threw his hat into the ring. In other words, he was the third Republican governor in 12 years of continuous Republican governors in the state. So his win was not nearly as impressive as he made it sound. Massachusetts had Republican governors for 12 years running before he showed up. So they were used to it.

But really, he provided no reason for people to vote for him in 2002. He ran a similar campaign to what he’s running now, that he’s a good manager who can help fix problems. The real reason why he won was because his opponent, Shannon O’Brien imploded after likening teenage abortions to getting a tattoo, and then tried to make light of it by offering to show her tattoos on the campaign trail. In light of such rank idiocy, Massachusetts opted for Romney.

I’m going to skip over how he governed, except to point out that Romney made a real effort to get Republicans elected to the state legislature, and his effort was a complete and utter failure. Republicans lost seats while he was governor.

After being governor for four years, Romney could see the writing on the wall. he would lose re-election. And so he made the preposterous argument that he’d accomplished everything he’d wanted to accomplish as governor and that as a result he was going to go. And he set up his Lt. Governor to be the next Republican nominee, a woman named Kerry Healey.

Now Kerry Healey was someone few had heard of prior to Romney picking her to be his Lt. Governor. She’d never held political office before, but she’d had a good showing in some race or another before Romney tapped her. She held a PhD in criminology and married a centimillionaire. She was a caricature of herself and of a pearl wearing country club Republican. In fact, she was such a caricature that she was donned the nickname “Muffy”, not from her adversaries, but from the state’s premier right-of-center columnist, Howie Carr.

But that is not all, oh no that is not all. See Muffy had what would have been a primary challenger, a man by the name of Christie Mihos. Mihos was a self made businessman in Massachusetts, having started a chain of convenience stores from scratch. And he had been active in Republican politics for some time. He deserved a spot on the primary ballot. but Romney’s henchmen played games with the Massachusetts State Republican convention, refusing to let Mihos’ supporters in. As a result, he didn’t get the requisite 15% of the vote required to get on the ballot. In response, Mihos went apoplectic.

But before we get to Mihos’ response, let us recall that much the same thing has been happening in this current race. Romney’s cronies got the FLorida primary moved up in contravention of Republican Party rules, as a firewall of sorts to stop any possible challengers. And they are rumored to have had a hand in keeping Perry and Gingrich off the ballot in Virginia.

When you win a primary legitimately, opposing candidates tend to get in line and endorse you. But when you win by dirty tricks, you engender permanent opposition. Which brings us to Christie Mihos’ justified jihad against Mitt Romney.

Mihos ran an independent candidacy, running exclusively against Muffy, ignoring the Democrat in the race (whom we’ll get back to). Mihos ran what has to be one of the most outrageous ad campaigns in the history of televised politics. His ad literally depicted Beacon Hill politicians sticking their heads up their own asses, in cartoon form. And not just generic representations of politicians, literally, Mitt Romney and Muffy. See for yourself:

I shudder to think what newt Gingrich is going to do to this man in the general election once he has nothing left to lose.

So back to our story. Muffy’s real opponent in the general election was a man named Deval Patrick. He was a well spoken black lawyer, who had served on some major corporate boards and has been in Clinton’s justice department for a period of time. He ran on a theme of “Yes We Can!” If that sounds familiar, it should. His campaign manager was David Axelrod and the campaign he ran for Deval Patrick was a dry run for the one he would eventually run for Barack Obama. Which is to say, 2012 will not be the first time that the Romney and Obama teams will have faced off. They faced off in 2006, and the result was NOT pretty.

The key to understanding Massachusetts politics is to know how much of the vote is really up for grabs in any election. In Massachusetts, 30% of the voters will vote for the Republican candidate no matter what, and 40% for the Democrat. This leaves 30% up for grabs, the independent vote so to speak. While at first glance it doesn’t seem like that big of a difference, if you do the math you will see that a Republican needs to win 2/3 of the independent vote to win an election. This is what Scott Brown did. So that fact that Muffy lost and Deval won shouldn’t be a serious concern, at least if the independent vote was reasonably split.

But it wasn’t.

Here’s how the vote broke down:

  • Muffy: 779,807 35%
  • Mihos: 161,012 7%
  • Patrick: 1,230,065 56%
  • Green: 43,032 2%

Let’s translate this. Assume that Mihos’ votes were really republican votes, and the Green Party’s votes were Democrats and run the percentages. We get:

  • Muffy/Mihos: 42.5%
  • Patrick/Green: 57.5%

And to get the independent vote breakdown, we subtract 30% from the right and 40% from the left:

  • Independents voting right: 12.5%
  • Independents voting left: 17.5%

Or put differently, the independent voters split as follows:

  • Independents voting right: 41.6%
  • Independents voting left: 58.3%

If Republicans lose the independent vote 58% to 42%, they will lose. And that’s not even considering the fact that Mihos in fact took 7% of the vote for himself. I think we could expect similar results if Gingrich goes rogue and runs third party.

So I hope you’re a bit more informed about Mitt Romney’s electability now. Nominating Mitt Romney will, I believe, lead to a massive loss in November. My hope is that is doesn’t have an effect down ticket.

 
 

Mitt Romney: Strip Mining The US Economy

Saturday, January 21st, 2012

So Newt Gingrich’s allies have funded a movie attacking Mitt Romney’s record at Bain Capital, called “When Mitt Romney Came To Town.” You can watch it here. It scratches the surface and shows a lot about the toll that Bain Capital took on the people who worked for the companies that Bain would purchase. It’s worth viewing.

But I wanted to delve into a bit more detail about what private equity is, how it works, and why it bears so little resemblance to what people think of as building a business. Private equity, fueled by massive debt, is much more akin to strip mining than to growing a business. And it is fueled by the easy money available from the Federal Reserve. So I think it’s worth taking a moment to understand it, and how it applies to Mitt Romney’s record as a businessman, a record that is mixed at best.

Private equity generally buys companies by way of a mechanism called an LBO, which stands for “Leveraged Buy Out”. This is not significantly different from how a person might by a small business normally. As the buyer, you would make your down payment, and use a bank to borrow money using all the hard assets of the business as collatoral. Finally, you would obtain a note from the seller for the remainder of the business. Obtaining a note from the seller is necessary because few parties if anybody will loan money against the future cash flows of a business. And the buyer needs some assurances that the business is functioning as presented by the seller. Therefore, making the seller take a note puts him in a positon where he loses if he’s lying about the cash flows of the business, and he has every interest to make sure the business is running profitably after he’s gone. Finally, oftentimes a bonus will be paid to the seller if certain financial milestones are met after the transactions take place. That bonus is called an “earnout”.

When a private equity firm buys a company, they will utilize all of these methods as well, but they have access to much deeper reservoirs of cash, which affords them the opportunity to outbid other potential buyers. Buyers tend to come in two varities, financial and strategic. A financial buyer is someone like a private equity firm. Their interest is in the cash flows of the enterprise. A strategic buyer, on the other hand, typically is already in the same business or an adjacent business as the company that is for sale. Under normal circumstances, a strategic buyer should be able to offer the highest price for a company, because they will integrate the new company’s product lines into their own, and cut out nearly all the management and overhead. Moreover, they strategic buyer will often need to make the purchase in order to be competitive in their industry, which can incent them to bid even higher for the company being sold.

So why does a financial buyer such a private equity firm even have a chance? The answer, I’m afraid, stems from loose money flowing from the Federal Reserve spigot. Here’s how it works: The private equity firm issues bonds to conduct the buyout. These bonds are underwritten by the major banks, the ones with the free access to the Fed spigot. These banks have asset to loan ratios that they need to maintain, and they also are “too big to fail”. The loan ratio limits how many loans they can make, which incents them to make the highest yield loans they can possibly find (and ironically, eschew loans that are more conventional, safer bets).  And because they are too big to fail, they worry little about the consequences in loading up on these risky loans.  Not that they want to fail, but having that backstop makes them feel like they can take risks that they would not otherwise take.

So the banks find buyers for the bonds, and buy the remainding bonds themselves. Because these bonds are incredibly risky (because the financial buyer is likely overpaying for the comapany) they pay astronomical interest rates. In polite parlance, these bonds are termed “high yield”. In common parlance, they are called “junk”.

So using these bonds, the private equity firm acquires the company. But they still have money stuck in the company. So they do something that would never be possible for a small business to do: they take on more debt in order to pay themselves a dividend. In technical parlance this is called a “dividend recap”. In common parlance, it’s called “completely insane.”

Can you imagine being a small business owner, say with a small chain of restaurants, or a couple of gas stations, what have you, and asking the bank to loan your business money so that you can take your own equity out? Every small business owner knows full well what kind of reaction they would get from the bank. That’s because the small business owner is dealing with a bank that is not “too big to fail”. And if they are dealing with a bank that large, they still won’t take on that kind fo risk for a penny ante player.

So how does the private equity firm do it? Well, part of how they do it is by cutting fat They call in the consulting firms of the world, names such as Bain, Boston Consulting Group, and McKinsey, to come in and find fat to cut. Since no business in the world operates at 100% efficiency, they invariably find some, which generates more cash flows to borrow against. But that’s not the whole story. Invariably, they mess with the company’s product pipeline.

In a normal company, products have a certain life cycle.  It goes something like this:  in conception the company spends money on research and development, while earning no money from the product, only earning money from older products.  They launch the new product, which is priced high to recoupe development costs.  Over time, the price drops as the cost of producing the product drops, and the volume of sales increases.  Profits increase as well, as the product goes mainstream.  But then, the product becomes commonplace, copy cats are out in the market, and with increased competition sales drop, as do prices.  Eventually, the product dies.  If you’ve managed your product pipeline correctly, you will have a new product coming out before your existing product begins dieing its natural death, and you will have steady increasing profits over time.  Companies like Apple and Gillette are masters at this sort of thing.  If you fail, then your company may die, and a rival company will take your place.  This process, of replacing old products with new products, was described by Josef Schumpeter as “creative destruction”.

But if you’re looking to do a dividend recap, then you need to find additional cash flows with which to pay the back the money you’re borrowing.  So if you’ve already cut out all your fat, you now need to start cutting muscle.  And there are two sources for this: you can degrade the quality of your current product lines by cutting corners, or you can cut R&D for future products, or both.  Either way, what you wind up doing is juicing the numbers today at the expense of future productivity.  Farmers might call this “eating one’s seed corn”.  

Now sometimes, shenanigans like this occur at the small business level as well.  A business owner looking to sell his business “juices” his numbers by cutting out repair and maintenance expenses, in the hopes he can sell his business for slightly more than it’s worth by faking a higher profit margin that he really has.  But to be sure, no small business owner cuts his own repairs and maintenance with the hopes of retaining ownership in his business.  It’s just not a long term strategy for success.

In the private equity world, some number of companies so abused by the methods described above do in fact survive.  Those companies reap enormous rewards for their private equity owners.  This is more common in good times than in bad, of course.  But nevertheless, it does happen.  But what concerns people is what happens when times aren’t so good, when the enormous risks taken do not in fact pay off.

Corporate bonds are typically issued for 5 years, after which time they must be paid back.  Now a company that is levered by 70-80% is not going to be able to pay back that much in 5 years.  So they are accepting a refinancing risk when they issue the bonds.  That is, they are risking that they can roll over their debt at the end of the five year period.  Their chances may be quite good if times are good in 5 years, or they could be poor.  But this is the risk that companies owned by private equity firms take.

As time progresses, the bank holding the company’s debt will make a judgment call as to whether or not it thinks the debt can be refinanced.  Based on this and its own portfolio management strategy, they may offload their bonds onto other parties.  In polite company these parties are typically called “foreigners” and “municipal pension funds”.  In common parlance, they are known as “suckers”.  But they may also be another kind of private equity firm, one that behaves as more of a vulture.

This second kind of private equity firm loves to buy up distressed debt.  They too are making a judgment call, as to whether or not the company is likely able to refinance its debt, and whether or not the private equity firm that owns it is likely to walk away from the company it owns and let it slide into bankruptcy.  They are also making a judgment that the assets of the company are worth more than the price of the debt on the open market.  If it is, then they buy in.

Let’s use some concrete numbers to illustrate.  Say a small manufacturing company is owned by a private equity firm.  They are purchased for $100 million.  They have assets in the form of their factory and inventory worth $25 million.  And they are levered by the private equity firm for $75 million.  While the bonds have a face value of $75 million, they are heavily discounted by the market, which believes are unlikely to be able to be refinanced or paid back.  So the second private equity firm buys on the open market for a steep 80% discount.  If you do the math, you will note that they paid $15 million for a debt worth $75 million, backed by a company with $25 million in hard assets.  If the company goes bankrupt, the new private equity firm will have earned at least a 60% profit on the deal, for essentially doing nothing, just for selling off the equipment.  Not that they will always opt for this route.  Sometimes they will in fact endeavor to turn the company around, and sell the company for the $100 million that it was worth at one time.  But that entails more risk, risk that the firm may just not want to take on.

As you can see, it is entirely inappropriate to describe the process outlined above as “creative destruction”.  In a scenario of creative destruction, there is some creation occurring that is causing the destruction: the iPhone kills the iPod, the Fusion kills the Mach III.  But here, there is no creation going on whatsoever.  Just reckless risk taking that didn’t pay off.  It is inconcievable that the economy as a whole is benefitted by overlevering profitable, working companies, and then selling the carcasses off to vultures for a profit.  It’s not creative destruction, but just plain destruction.  Or “destructive destruction” if you will.

To be sure, Mitt Romney’s record appears to be a mixed one.  He did some venture capitalism early in his career.  In particular his investment in Staples appears to be a true example of creative destruction, causing the demise of many smaller stationary stores.  And even in his private equity investing, he surely wasn’t the worst of the bunch.  From what I’ve read, he appeared to be the private equity guy with a conscience as opposed to the soulless villian.  Think Darth Vader instead of Voldemort.  Still, I have trouble wanting to vote for Darth Vader, no matter how effective he was a blowing up Alderan.

The point here though is much larger than any one candidate.  The point is that allowing for loose money from the Fed, coupled with a corporate income tax system that encourages firms to lever up, overlaid onto an economy that still has plenty of manufacturing assets to be sold off, run and operated by a banking class that seems incredibly dishonest is a recipe for looting every last bit of manufacturing out of the US economy.  And it is that that we should be concerned about if we are to survive and prosper into the future.

 
 

Why Mitt Romney is Completely Unacceptable

Thursday, January 12th, 2012

In my earlier post detailing the Republican candidates for the nomination, I didn’t say some things about Romney that I meant to. So consider this post a further declaration of why Romney is unfit to be the nominee. Should he get the nomination, and I think he likely will, then I will be casting my vote for Libertarian Gary Johnson.

  • Family Legacy: I don’t take any issue with Romney’s religion or ethnic background. But I do take issue with the fact that his father ran for president. Given that Mitt Romney doesn’t appear to stand for anything specific, I can only guess that he is running for office to somehow satisfy his father’s legacy. For those not in the know, George Romney was a serious contender for the 1968 Republican nomination, until he claimed he had been brainwashed by US military officials into supporting the Vietnam war. This is the worst of all possible reasons to run – to restore a lost family legacy. We elected a president like that in 2000 and look what it earned us. No, anybody running for president should be doing so because they have convictions or experience that they bring to the table. They should run because they believe they are uniquely positioned to make the country better, not because they need to slay family demons.
  • He Stands For Nothing: Mitt Romney appears to have no core beliefs whatsoever. His flip flopping has been covered in many places before and I feel no need to revisit the details here. But not only is it the case that he appears to have no core beliefs, but he is running a campaign that feels like an empty “Morning in America” campaign. Romney wants to make America great again, or something. Romney is incapable of arguing against the greatest abomination to come out of the last 4 years, Obamacare, because he masterminded the precursor program in Massachusetts. And despite his eloquence, he says nothing about the decade of bad legislation that has led us down this economic path, and what might be required to get us out. That’s in part because he supported TARP. He’s an establishment politician who supports establishment views at the precise moment when the establishment needs to be sent packing. As a result, he is incapable of expressing anything substantive. The result will be that he gets defined by Obama and the media, and gets run roughshod over in November.
  • He Is A Liar: Romney is fond of pointing out that we have “50 laboratories of innovation” in the country. He’s right about that. But typically, when a governor runs for president, he is running on the notion that he developed in his laboratory a successful formula that should be brought to the nation as a whole to either cure its ills or propel its growth forward. Romney is the first governor to my knowledge who is running for president while claiming that what he did for his state should NOT be propagated into the nation as a whole. This alone causes too much cognitive dissonance for most people, myself included. But it is also a giant lie. Romney instituted Romneycare because the Heritage Foundation published a paper in the early 90′s, when Hillarycare was being debated, suggesting that a preferable means to achieving universal coverage would be to mandate that citizens purchase catastrophic medical insurance for themselves. Romney viewed this suggestion as a classroom assignment, and raced to be the first in the nation to institute such a thing (ignoring for the moment that what Romney mandated was comprehensive insurance be purchased, not catastrophic). This alone is problematic enough, and suggests a lack of proper thinking ability. But what’s worse is he has been lying about it the entire campaign. In his book, he wrote that what he did in Massachusetts could be a model for the nation. And in 2004 he campaigned on the fact that he implemented Romneycare in Massachusetts. Now he claims to have never said that Romneycare could be good for the country.

    It is difficult to stomach that level of dishonesty generally. But when you couple it with the fact that the issue in question is bound to be the main issue of the campaign, it becomes impossible. Especially when you couple it with the fact that nearly everyone gets a creepy sleezebag vibe from the guy. He has shifty eyes, and he looks like he’s gauging the audience while he speaks. And people from all walks I encounter say he just seems dishonest. This is a massive handicap, especially for a Republican nominee going up against a Democrat who is well regarded on a personal level.
  • He will be a steward of the Status Quo: If you think that the problem with Democratic governance is that they don’t know how to balance the budget and keep the ship of state afloat, then Romney is a great pick. He will not likely repeal Obamacare, but will change it to make it more workable and less costly. At least that is what he was claiming early on in the campaign, saying he would repeal “the worst aspects of Obamacare”. Indeed, even now he promises to issue 50 waivers to every state to let them out of the requirements of Obamacare. But this is not repeal. And worse yet, it undermines the rule of law, which should apply equally to everybody. If Romney truly wanted to see Obamacare repealed, he would immediately revoke all waivers on day one of his administration. That would motivate people who got waivers to lobby for Obamacare’s repeal. But I would not expect to see a repeal of Obamacare should Romney become president, which he won’t. What we will see is the institutionalization of everything the Democrats have put into place, just run smoother. If your problem with Democrat governance is the governance, then Romney is the last guy you want to succeed Obama.
  • Romney will be a Racially Charged Candidate: Mitt Romney is a Mormon, and the Mormon religion was predicated on some racist beliefs, the totality of which were not repudiated until 1978. The Mormon church taught that American Indians were descended from white Jews, and that as those jews lost their faith and ceased to be monotheists, their skin darkened. It also taught that the mark of Cain was being black. And there are no shortage of appalling quotes from Brigham Young confirming that this was a core doctrine of the early church. As a result of this, the church refused blacks full membership, under the guise that they were not worthy by virtue of their race. Moreover, they did not reverse these policies until 1978, at which time they also revised the Book of Mormon to change all the references to skin color to references about purity of one’s soul.

    The issue here is that Mitt Romney had already completed his 2 year missionary work prior to 1978, meaning that he spent two years of his adult life proselytizing what was at the time a racist religion. If you don’t think that Barack Obama isn’t going to confront Mitt Romney about that point blank on stage at a debate, you’re nuts. Romney may retort by playing clips of Reverend Wright, but the end result will be a scorched earth campaign at the end of which race relations in this country will be markedly worsened, regardless of who wins. If that idea appeals to you, by all means vote for Mitt Romney. If it doesn’t, then you should choose a different candidate.

I am going to address Mitt Romney’s record at Bain in another blog post. But suffice it to say, it bears little relation to capitalism or even creative destruction as commonly understood. But that is a long post unto itself. Suffice it to say that Mitt Romney is not the guy we should have standing up and defending capitalism either.

UPDATE: Clearly Squared brings up Shannon O’Brien, whom I forgot to mention previously. Everyone should understand that Mitt Romney only ever became governor of Massachusetts because the Democrat nominee, Shannon O’Brien, was a townie who literally was offering to show off her tattoos on the campaign trail. In other words, Romney only won in Massachusetts because the Democratic nominee imploded, not because the state ever really liked Mitt. Furthermore, once elected, Romney was such an asshole in office that mayors and town managers soon refused to take his calls, requiring Romney to hire an ambassador of sorts to communicate with the cities and towns of the state. Remember that when you cast your vote as well.

 
 

The Republican Race

Friday, January 6th, 2012

I think I’ve figured out what’s going on.

What we have is a three way race between the libertarian wing of the party, the religious wing of the party, and the asshole wing of the party, otherwise known as the establishment. Ron Paul is the libertarian in the race. He was hoping to bridge the gap between the libertarians and the religionists by virtue of his libertarian policies and personal religious conviction. Unfortunately, the religionists seem to be demanding a candidate who begins every sentence with reference to God and/or family. Hence the rise of Rick Santorum. However, Santorum makes no bones about his disdain for the libertarian wing of the party and their policies, and hence is incapable of attracting their votes. Romney represents the wing of the party that is bought and paid for by crony capitalist lobbyists. He is unacceptable to the majority of the grassroots. He is still the likely nominee.

One question remains: can a fusion candidate emerge in time to unite the libertarians and religionists to defeat Romney? This is why Rick Perry is staying in the race. Also Gingrich I suppose. I would guess that it is possible for one of them to emerge and unite the base against Romney, but time is running out. I still think Romney will be the nominee, but anything is possible.

 
 

The Republican Candidates

Sunday, December 18th, 2011

Every four years since starting this blog, I’ve done a rundown of the presidential candidates before the first primary/caucus votes are cast. So it’s time to maintain that tradition, giving you my opinion and recommendations. This year, there are only Republicans running in the primary, so that is who we will run down. This election year we may wind up seeing third party candidates run, and if the Republicans nominate a dope, then those third party candidates may deserve a close look. But for now, we’ll just stick to the Republicans. I’ve been debating whether or not to include dropout Herman Cain in this analysis, and I guess I’ll include him at the end if I have enough time. Otherwise, it’s on to the candidates. I’m addressing them in roughly the order of their appearance in recent polling data:

Willard Mitt Romney:

Mitt Romney has been the presumptive nominee for some time, and given Republicans propensity to nominate the guy next in line, it would be foolhardy to dismiss Romney’s chances at securing the nomination. Having said that, it is my opinion that Romney would be a disaster for the party if nominated, and would likely lose handily to President Obama.

There are two main issues that this campaign will hinge on: 1) Obama’s handling of the economic crisis and failure to take us out of it, and 2) Obamacare. One may even argue that Obamacare should be #1 because it was Obama’s signature legislative achievement during his first four years And certainly, many people, myself included, would argue that the two issues are intimately related, that businesses are refusing to hire because they want to see the fallout from Obamacare come first.

Moreover, Republicans have been fighting the Democratic urge to socialize medicine since at least the Truman administration. And despite Democrats fighting for this for the better part of half a century, Democrats still didn’t have a consensus to socialize medicine, nor did they really have the votes. But they passed it anyway, adding fuel to the fire of teh Tea Party movement, which helped to usher in the Republican house and nearly the Senate in 2010.

So given that, it would seem odd indeed to select Mitt Romney as the Republican nominee in 2012. Romney had implemented a pre-cursor type program in Massachusetts, dubbed Romneycare, and had written in his book (first edition) that he thought it could act as a template for the nation. His current stance, that it was good for Massachusetts but would be bad for the country, rings hollow.

What’s worse, perhaps, is that Romney blew what could have been a prime opportunity to rectify this situation when Obamacare was undergoing passage. Had Romney stood up, and said, “Look, I tried this in Massachusetts, and look what it’s done. I learned from my mistake, don’t repeat it.” he could have been a potent voice for stopping Obamacare, and he could have become a hero to the Tea Party folk. But instead, he tried to be “consistent” by removing the passage from his book where he said that Romneycare could be a model for the nation.

It’s also important to note that Romney has never held a controversial position in his life. Rather, throughout his political career, he has tries to alter his views, or undergo change of hearts, to develop new positions that would appeal to the group of people whose votes he was trying to get. As a result, he has never held a difficult or controversial position and tried to stick with it. In every debate, Romney always tries to say that his opponents just don’t understand his positions, but he never says “Look, I’m right and you’re wrong and here’s why.” I can’t imagine that this pattern will change during the general election.

And it is during the general election when that will matter most. If Erik Erickson is to be believed, Obama is planning to run an election challenging the “moral basis of capitalism”. He is itching to run against Romney because he believes that Romney personifies the cartoon greedy capitalist who steals from the working class. While Romney certainly built companies up, like most private equity players, Romney almost certainly took dividend recaps out of companies only to let them go bankrupt, a practice that is rather widespread today and which infuriates the employees of the companies so raped. Romney seems unlikely to have either the stamina or the ability to defend himself from the planned attack, let alone to defend the entire free enterprise system. For that we will need someone else. Hence, I cannot vote for Romney in the primary.

(I will likely not vote for him in the general election either if nominated. This is because the Republican leadership really needs to be taught a lesson, and voting for Romney teaches them that I’m willing to vote for whatever POS candidate they shove in front of me. I’m not, so I won’t.)

Newt Gingrich:

There will always be a soft spot in the hearts of rank and file Republicans for Newt Gingrich, if only because of the upset he architected in 1994. This is partly why he finds himself at the head of the pack in the Republican primary.

The other reason why he finds himself where he is is that Republicans have not had an articulate presidential nominee since 1984, 27 years ago. Let us review:

  • 1988 and 1992: George HW Bush. He could put a complete sentence together, but admitted to having had no “vision thing”. And what little of it he did have involved “1000 points of light” which was another way of saying “I think Reagan was a meanie and I aim to return the Republican party over to the old guard again”. He was largely successful in doing that, but utterly demoralized the rank and file of the party in so doing.
  • 1996: Bob Dole. Septuagenarian Bob Dole spoke about himself in the third person on the campaign trail, when he was capable of putting a sentence together. He won the nomination largely by trashing Steve Forbes flat tax plan with the help of Alphonse D’Amato, thus demoralizing fiscal conservatives. With no platform on which to differentiate himself from Clinton, and coming across as a crank and an old coot, Bob Dole lost.
  • 2000 and 2004: George W Bush. Bush could barely put a sentence together, and proved to be very similar to his father when he adopted as his vision thing something called “compassionate conservatism”, which was another way of saying “I think Reagan was a meanie and I aim to return the Republican party over to the old guard again”. Except that George W Bush had become born again, and was thus able to hoodwink the evangelical religious right into voting for him. He barely beat John F Kerry for reelection, which is a frightening thought. George Bush demoralized the base with programs like No Child Left Behind and the Harriet Miers nomination. And he ended his administration “Abandoning capitalism in order to ‘save’ it”. Once again, the base was demoralized, embarrassed and a bit enraged.
  • 2008: John McCain. Another septuagenarian nominated, another disaster. John McCain made his name in politics by being the Republican continually willing to stick his thumb in the eye of his party in exchange for media accolades. And boy, did he ever get media accolades. Unfortunately, McCain expected these accolades to keep up when he got the nomination. Silly him. He didn’t understand that parading Republicans who criticize their own party serves the media’s interests, namely, helping the Democrats win. When John McCain became the nominee, he no longer served the media’s purpose, and was dispensed with. McCain seemed surprised by this turn of events, and hasn’t been heard from since.

So in light of that horrible train wreck of nominees, it is understandable why the Republicans should so yearn for somebody who can make the Republican case articulately. Unfortunately, Newt Gingrich’s words do not really mirror his actions. Ron Paul has been running an ad showing Gingrich’s many transgressions, including:

  • His support for an individual mandate (aka Obamacare)
  • His work for Freddie Mac as a “historian” netting $1.6 million on the eve of the company’s collapse
  • Calling Paul Ryan’s plan to reform medicare “right wing social engineering”
  • Appearing in an ad with Nancy Pelosi calling for a curb on carbon emissions due to man made global warming.

The first point should be an automatic disqualifier for attaining the Republican nomination. The second point is idiotic, but something I could live with. The third and fourth points are his efforts to be welcomed into the cocktail circuit around Washington DC, also something that should be a disqualifier. And finally, despite all his articulate talk, going on to Newt Gingrich’s website reveals very little regarding policy positions. Now I know that all the candidates do this, put up pithy paragraphs instead of real position papers, but Newt’s argument is that he alone has the intellectual heft to carry us through the current crises. Yet his website indicates none of it, leading me to believe that it’s all bluster.

The only reason why I’m considering voting for Newt Gingrich is that for some reason, probably stemming from his personality, Newt utterly appalls the Washington establishment. And the thought of forcing them to deal with someone they don’t like brings me great pleasure. So if he is the nominee, I will consider voting for him. But I may still vote Libertarian as I did in 2008.

Ron Paul:
Ron Paul may well win the Iowa primary this year, and it is conceivable that he could be the nominee. Ron Paul is known as Dr. No in the house, because he’s a medical doctor and he votes no on just about every piece of legislation that comes before the house. He’s been calling for an end to the Federal Reserve and a return to the gold standard for decades, and his warnings about the country’s profligate spending have proved prescient. Paul ran for president as the nominee for the Libertarian party in 1988, and he ran again in 2008 for the Republican nomination coming in fourth place. This year, polls have him coming close to winning in Iowa.

The appeal of Ron Paul is that he is the original libertarian Republican. Iowan Republicans like him because he’s genuinely pro-choice, and Tea Partiers like him because he understands economics the best of the candidates. The reservation people have with respect to Ron Paul is that his foreign policy is essentially isolationist, and thus unrealistic for a global economic power. I’ve written previously about Ron Paul’s foreign policy views, and I too have reservations regarding them. But there are reasons to overlook them.

First, Ron Paul isn’t completely insane. He did vote to authorize action in Afghanistan after 9-11. And one would imagine he wouldn’t hesitate to kill Osama Bin Laden and his ilk either. Second, we’re broke. We really are, and we don’t have the resources to keep invading places. And finally, does anyone doubt that the entire source of our recent foreign policy problems, including 9-11, stems from our decision to invade Kuwait in 1990? We invaded to protect nobody worth protecting, and Saddam Hussein surely would have sold us all the oil we could have ever wanted, and if Saddam had gone in and taken Saudi Arabia as well, we’d likely have been rid of the Wahhabists a long time ago, or at a minimum Osama Bin Laden would have had local issues to contend with, instead of plotting against the United States. After witnessing all the foreign policy blunders of my lifetime, I find it difficult to say that Ron Paul is the dangerous one running for president. And besides which, Ron Paul is 76 years old. He is likely a one term president anyway. if you believe in his economic ideas but dislike his foreign policy, ask yourself, can I live with his foreign policy for just four years?

More importantly, ask yourself if the country can survive for four years without Ron Paul’s economic prescriptions. I would wager that it may not. The country will most assuredly survive four years of Ron Paul’s foreign policy.

If Ron Paul is the Republican Nominee, I will most assuredly vote for him.

Rick Perry:
Rick Perry appeared to be the perfect fusionist candidate, a blend of Ron Paul’s economics with standard Republican foreign policy with some evangelical stuff thrown into the mix as well. Unfortunately, Rick Perry’s opening debate performances were inarticulate, and at times confused. I wouldn’t count Perry out yet, he could stage a comeback. But I believe the Republicans are so starved for an articulate nominee, that Perry has likely screwed up his candidacy beyond repair.

Rick Santorum and Michelle Bachmann:
I’m grouping these two together as they are more or less one in the same candidate. These are what I call religious identity-poltics candidates. More or less their message is, “vote for me, I go to the same church you go to”. As a result, I find both their campaigns distasteful in the extreme. Rick Santorum especially. Santorum seems to believe that rights stem from families, or some such nonsense. The word family doesn’t even appear in the constitution. It’s just bizarre and misinformed.

Needless to say, there are no circumstances where I vote for either of these two people to be the next president.

Gary Johnson:
What a great candidate running a spectacularly bad campaign. For those not in the know, Gary Johnson is the other libertarian candidate in the race, a two term governor of New Mexico who vetoed over 700 bills and brought the state’s budget into balance. Gary Johnson also was a successful businessman, starting his own company up and selling it for a 7 figure sum. He also is an athlete, and has climbed Mt. Everest.

Johnson has run a terrible campaign, however. He has way overemphasized his stance on legalizing marijuana, and his foreign policy views which are more or less in line with Ron Paul’s. What he should have been saying is this: “Republicans have been searching for a governor who has a real record a reforming a state, and who can bring that experience to Washington. You wanted Mitch Daniels and Chris Christie, but they wouldn’t run. But here I am. I vetoed over 700 bills, I actually shrank headcount in state government in my two terms as governor, and I did it all in a predominantly Democratic state. And when I left office, it was because I was term limited. I’m still well regarded in my home state, and unlike one other governor standing on stage here, if nominated I’ll carry my home state with me.” That would have brought down the house.

Oh well. Maybe in 2016.

Buddy Roemer:
Buddy Roemer was a former house member and governor of Louisiana. His views as expressed on his website seem reasonable, and he looks articulate in his videos. I suppose he would have been a reasonable choice for nominee, but he wasn’t allowed in any debates. At least Johnson was allowed in one or two. More on the debate issue later. Suffice it to say, if Roemer somehow defies all expectations and becomes the nominee, I’ll prolly vote for him.

Jon Huntsman:
Totally forgot about that guy. Why is he running? Anyhow, Jon Huntsman began his campaign by sticking his thumb in the eye of rank and file Republicans, something which is more or less unforgivable, especially coming off as ambassador to China under Obama. I’ve been impressed with him in the debates, and I guess his record is pretty conservative. But he certainly doesn’t excite me. And I think that Republicans have had enough of candidates who thumb their nose at the rank and file (see John McCain).

Jon Huntsman won’t be the nominee, but I suppose I’d vote for him if he were, maybe.

The Debates:
As I noted above, Gary Johnson and Buddy Roemer were excluded from all of nearly all of the debates. Given that every candidates rise and fall has been solely based upon each candidates debate performances, such exclusion is tantamount to keeping these candidates off the ballot entirely. I believe that Gary Johnson was excluded because the media absolutely loathes libertarians (and yes, I’m including the conservative media in this too). I’m not sure why Buddy Roemer was excluded. But it’s absolutely clear why Rick Santorum and Michelle Bachman were included when their poll numbers were more or less the same as Johnson’s and Roemer’s. The reason they were included is that they are caricatures of themselves, and with their brand of religious identity-politics they make the Republicans look like kooks. This serves the interests of the media well. It does not serve the interests of the Republican party.

In the future, Republicans need to either insist that all declared candidates be included, or otherwise have a lottery for the low polling candidates to get a slot on the debate stage. But allowing the media to decide who debates and who doesn’t is ceding way too much power to a class of people who are generally hostile to our interests as Republicans. I should hope that this would change in the future.

Also, I think we all need to thank Newt Gingrich for holding one on one debates with other candidates. Those debates have been the most informative and best debates we’ve had. I wish each of the candidates had been willing to hold one on ones with each of the other candidates. Hosted on YouTube, those debates would have been far more informative than the group debates we’ve had.

Endorsement:
Look, there’s no two ways about it. I will be voting for Ron Paul in the primary because of the candidates we have, he seems to me to be the only one who understands our fiscal and economic situation. So if I am to have any hope of having this resolved within my lifetime, I have to vote for Ron Paul. Also as I’ve said before, a government that repeatedly violates your rights isn’t one worth keeping. And Ron Paul is the only candidate who wants to end the Patriot Act and respect our civil liberties.

I had toyed with the idea of voting for Herman Cain. Cain’s 9-9-9 plan was pretty good, and he seemed to understand that we shouldn’t be assassinating American citizens abroad, and he was the only candidate other than Ron Paul who wanted to roll back the Patriot Act. And as a black man, he had the potential to break the Democratic stranglehold on the black vote in America, without which Democrats would stand no chance for winning on the national stage, and probably in many states as well. But alas, he proved to be ignorant of too many issues and unable to discuss things in an off the cuff way. And he finally succumbed to the smear campaign against him.

So it’s Ron Paul for me. Ron Paul has a chance at the nomination this time. So I’m rooting for him to win it. If he doesn’t win it, I’m not sure how I’m going to vote. But more importantly, I’m not sure how bright the outlook for the United States will be either.