Now that Mitt Romney is the presumed Republican candidate, it's fair to ask how he made so much money ($21 million in 2010 alone) and paid such a low rate of taxes (only 13.9 percent).
Not only fair to ask, but instructive to know. Because the magic of private equity reveals a lot about how and why our economic system has become so distorted and lopsided -- why all the gains are going to the very top while the rest of us aren't going anywhere.
The magic of private equity isn't really magic at all. It's a magic trick -- and it's played on you and me.
Jake Kornbluth and I have made this 2 minute video that explains it all in eight simple steps. (Thanks to MoveOn.org for staking us.)
By the way, the "other people's money" that private equity fund managers (as well as other so-called "hedge" fund managers) play with often comes from pension funds that contain the savings of millions of average Americans.
The pension fund managers who dole out our savings to private equity and hedge-fund guys also take a hefty slice in bonuses. And like the others, they bear no risk if their bets later turn bad. They get their bonuses regardless.
Nor are any of them -- private-equity, hedge-fund, or pension-fund managers -- personally liable for doing adequate due diligence. They can bet our money on the basis of no more information than what they had for breakfast.
But if these funds lose, you lose. That's what happened in 2008 and 2009. Some of the losses are also shifted to the government's Pension Benefit Guaranty Corporation -- which means taxpayers lose.
It's a giant con game, and it continues to this day.
Here's what has to be done to stop it:
1. End the "carried interest" loophole that allows private-equity managers like Mitt Romney to treat their income as capital gains, taxed at 15 percent, even though they don't risk a dime of their own income. Their earnings should be treated as ordinary income.
2. Hold the managers of private-equity funds, hedge funds, and pension funds to a "due diligence" standard. So if the funds lose money and these managers didn't exercise due diligence, the Pension Guaranty Corporation can claw back their bonuses.
3. Raise the capital-gains rate to match the tax rate on ordinary income - especially for short-term investments. Give a tax preference only to "patient capital" - that is, for investments held for, say, five years or more.
4. Resurrect Glass-Steagall.
Mitt and others like him won't like any of these reforms. They'd eliminate the humongous profits they've enjoyed at the expense of the rest of us.
But these reforms are necessary if we're to take back our economy.
Get #BeyondOutrage.
Robert Reich, one of the nation's leading experts on work and the economy, is Chancellor's Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, "Aftershock: The Next Economy and America's Future;" "The Work of Nations," which has been translated into 22 languages; and his newest, an e-book, "Beyond Outrage." His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen's group Common Cause. His widely-read blog can be found at www.robertreich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
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 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
Add:
10 year income averaging.
Inflation adjusted Basis.
Indeed, the GOP intends to surrender our entire governing system to the private equity class of crony capitalists. Mitt represents their quintessential hero, at least from a financial perspective.
They've succeeded in convincing a vast portion of the US population that this is the best economic solution through the simplistic mantra of ‘let the people keep more of their hard earned money.’ Even though their ‘policies’ will effectually accomplish the exact opposite for the vast majority of US citizens, it sounds good.
As far as the banks, corporations, Wall St, and the GOP are concerned, there primary goal is to “...take back our economy.” Take it back for themselves. Completely. Reestablish the roaring twenties. The only thing an US citizen is ‘entitled’ to is what they can claw away from their fellow human beings through the rigged system of crony capitalism.
We are beginning to debate the concept of social darwinism and asking ourselves whether we think we should surrender ourselves to its monkey embrace. The problem is, we are already unknowingly walking around with monkeys on our backs and haven’t noticed them.
Our financial class run this nation like a gigantic casino, and the house always wins. The US citizenry are forced to gamble with their lives, because they exist within that system. We can’t afford to lose, and the house will never let us win.
Just a little curious though...why didn't democrats take your advice back when they held the trifecta?
The bottom line is this folks.....the vast number of the wealthy in this country are NOT this investment sector Robert wants to porttray as representing the entire group. Most who earn a healthy income do so the old fashioned way...they earn it through hard work, risk and investment in their people and products. And they gladly pay their taxes to extent the law permits them to reduce it.
Those that democrats always paint as the evil rich guys that never pay their fair share may very well be deserving of scrutiny! But let's not take a mob mentality and rush to raise taxes across the board so it effects all of us.
The American financial infrastructure depends on much more than gambling for success and those benefiting from the gambling need to pay the same freight as those putting in an 8 hour day.
Unfortunately, none of this will ever change. Our elected officials use the tax code to reward their friends and punish us. It is the true source of their power and just try to take that from them.
... a mere 2,700 pages will do just as well...
You are naive if you think that resistance to re-instating Glass/Steagall would come entirely from Republicans. A majority of our party, in both houses of Congress, voted to repeal Glass/Steagall and a Democrat President (Clinton) signed it into law. That said, let's pursue it as a legitimate curative to our economic woes. Re-instate Glass/Stegall, repeal Dodd/Frank and eliminate all tax loopholes, deductions and incentives. The tax code is almost 80,000 pages and that's where the unfairness in the system is enshrined.
And it will continue for a long time, as long Wall Street paid handsomely for our government and there are no term limit in congress.
There are many people here, who can help explain it to you
but you'll never understand anything with such a negative attitude.