Bain is still the bane of Romney’s existence

July 17, 2012

Karl Singer is writing Wonkbook while Ezra is traveling.

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RCP Obama vs. RomneyObama +2.1%; 7-day change: Obama -0.5%.

RCP Obama approval47.3%; 7-day change: +0.3%.

Top story: Bain is still the bane of Romney's existence

Romney said he went through a 'transition' period after leaving Bain. "Last week, the Huffington Post reported that Romney, in sworn testimony during a 2002 Massachusetts hearing to determine if he met the residency requirement to run for governor, declared that he had remained on the board of a company in which Bain was an investor. This scoop received much attention. Still, the Romney camp did not directly respond to it, and in interviews with the major television networks on Friday, Romney insisted, as he told ABC News' Jonathan Karl, that he had 'no role with regards to Bain Capital after February 1999.' He maintained that all the questions regarding his stint at Bain were merely part of the Obama campaign's 'kill Romney' strategy. Yet during that 2002 hearing—in a remark that has not been previously reported—Romney said that after he departed Bain in February 1999 he went through a transition period regarding his work in Boston." David Corn in Mother Jones.

YGLESIAS: Romney should defend Bain's record. "The timing of the kerfuffle distracts from the actual substantive question about Romney’s Bain tenure: Did Bain’s management team do anything wrong by shipping jobs overseas when they thought doing so would be profitable? The answer is almost certainly no. Nothing that occurred during the Bain transition period was out of step with the fundamental orientation of the company Romney created and hadn’t yet left. If Romney were a less pathologically risk-averse politician, he would defend what Bain did after 1999 and point out that there’s nothing wrong with companies shifting production offshore." Matthew Yglesias in Slate.

KLEIN: Romney played by the rules of the rich. "There is an increasing sense in the United States that the rich play by different rules than the poor or the middle class — rules that make it easier for them to get even richer. Romney’s problem is that he seems to have taken unusually aggressive advantage of those different rules. Most Americans don’t get to stay on as 'sole stockholder, chairman of the board, chief executive officer and president' while they try other things...They don’t get to pay a 13.9 percent tax rate because their money comes from investments rather than wages. They don’t get to shelter cash overseas, or keep between $21 million and $102 million in an IRA. When people question these elements of Romney’s history, Romney says they’re attacking his success. They’re not. They’re attacking the fact that once people become successful, they get to play by a set of rules, and fall back on a set of advantages, that make it a lot easier for them to remain successful." Ezra Klein in The Washington Post.

KESSLER: Bain was a jobs machine. "Did Mitt Romney and Bain Capital help office-supply retailer Staples create 88,000 jobs? 43,000? 252? Actually, Staples probably destroyed 100,000 jobs while creating millions of new ones. Since 1986, Staples has opened 2,000 stores, eliminating the jobs of distributors and brokers who charged nasty markups for paper and office supplies. But it enabled hundreds of thousands of small (and not so small) businesses to stock themselves cheaply and conveniently and expand their operations." Andy Kessler in The Wall Street Journal.

COHN: Romney's response to the human costs of outsourcing is to do nothing. "The question isn’t is whether outsourcing can be a sound, legitimate business practice. The question is how we, as a society, react to it, given that outsourcing inevitably causes a lot of very real, very serious human pain...The conservative answer to outsourcing—the answer Romney has long espoused—is essentially to do nothing. Remember, Romney’s economic policy is to weaken the safety net, to reduce regulations on what corporations can do, and to give the wealthiest Americans huge tax breaks. The theory behind this is that, by eliminating government meddling in the market and letting the rich keep more of their money, the economy as a whole will grow faster. But experience, here and abroad, suggests otherwise. In the end, the issue with Romney isn’t his business practices. It’s his governing strategy, which fails to blunt the harsh impact those business practices have on ordinary Americans." Jonathan Cohn in The New Republic.

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Top op-eds

1) BAKER: Technology doesn't cause inequality, policy does. "The people who have been the winners in the massive upward redistribution of income over the last three decades have a happy story that they like to tell themselves and the rest of us: technology did it. The reason why this is a happy story is that technology develops to a large extent beyond our control...There is another story that can be told. In this story the upward redistribution of income was a conscious policy by those in power. This story points to a number of different policies that had the effect of redistributing income upward. For example, exposing manufacturing workers to direct competition with low-paid workers in the developing world, while protecting highly educated professionals (e.g. doctors and lawyers), would be expected to lower the wages of both manufacturing workers and the large number of workers who will compete for jobs with displaced manufacturing workers." Dean Baker in The Guardian.

2) SEIB: Both parties need to break the policy paralysis. "The real problem is that America's economy simply isn't the high-growth, jobs-producing machine it once was. As just the latest indication, the International Monetary Fund on Monday lowered its forecast of U.S. and global growth for the next two years...That's the bad news. The good news is that, with a new attitude and a sense of urgency in Washington, this is doable. Most sensible people in Washington know exactly what kinds of compromises on the deficit, taxes, trade and entitlement programs are within reach to change the economic trajectory." Gerald Seib in The Wall Street Journal.

3) PONNURU: Republicans' defense of the defense budget is misguided. "The Republican position on federal spending could not be clearer: It doesn’t create jobs. Except when it goes to defense contractors...Needless to say, on the theory that the Republicans are advancing, the federal budget can never be cut. The U.S. Conference of Mayors will be able to say that cuts in social spending will devastate the economy of our cities with at least as much justice as defense-heavy areas can complain about cuts to the military. Rural areas can say the same thing about farm subsidies. Reductions in federal spending, whether for defense or social programs, will, of course, be disruptive to the people, businesses and communities who have come to rely on it. The cuts should not, however, hurt the broader economy. When federal spending falls and jobs tied to that spending disappear, private-sector spending should normally increase and create jobs tied to it." Ramesh Ponnuru in Bloomberg.

4) TETT: The eurozone could learn from the FDIC. "The most important lesson is that having a simple message and purpose is crucial for building trust. The FDIC 'works' because it does what it says: kills ailing banks, while protecting depositors. If the eurozone could build similar clarity, with whatever regulatory structure it chooses, it might start building a better financial world. Or, put another way, if the eurozone could kill 450-odd Spanish, Greek or French banks without a consumer or market panic, the euro might have a more viable future. Politicians take note." Gillian Tett in The Financial Times.

5) BUTLER: Criminals, not companies, should pay for rule-breaking. "Fining companies for malpractice is not enough. Fraud and incompetence undermines the whole market system. And it damages real people, like the pensioners robbed of interest by the low Libor number and cities like Baltimore that lost millions on interest-rate swaps. Wrongdoing should be investigated: not by regulators, or panels of posturing politicians, or costly and long-winded public inquiries—but by the police and the Serious Fraud Office. And if it turns out that junior executives acted fraudulently and senior executives let them, or if regulators and politicians actually encouraged it, offenders should face fines and long-term disqualification." Eamonn Butler in The Wall Street Journal.

Jack White interlude: Jack White plays "Freedom at 21" on Later with Jools Holland.

Got tips, additions, or comments? E-mail me.

Still to come:Economic data release reformentum; criticism over dual eligible changes; disclosure is filibustered; the worst drought in recent history; and a watermelon will explode if you put enough rubber bands around it.

Economy

The sequester is coming into focus on Capitol Hill. "The showdown over the sequester is at full force on Capitol Hill this week. With former Vice President Dick Cheney set to arrive in Congress on Tuesday for a rare talk with House Republicans about looming cuts to the Pentagon, partisan sparring continued to escalate: Democrats repeated their hard line on the sequester and expiration of the Bush tax cuts for the rich as Republicans accused their counterparts of inviting another recession. The House this week will vote on a defense spending bill as well as a plan ordering the Obama administration to say how it would go about implementing the $500 billion in defense cuts set to kick in on Jan. 2." Seung Min Kim and Stephanie Gaskell in Politico.

@hillhulse: House Repubs up in arms this week about a sequester they passed. 174 GOP ayes on the budget deal, 66 nos. Evidently some regret those ayes.

The U.S. is overhauling its economic data releases. "On Tuesday morning at precisely 8:30, after a 10-second countdown synchronized to the Naval Observatory’s atomic clock, a Labor Department official will flip a master switch in the agency’s battened-down pressroom and computers will blurt out the monthly Consumer Price Index. Until that moment, the market-sensitive data will be guarded with launch-code secrecy...Yet for all the rituals of high security, government officials have become increasingly nervous that their process is vulnerable, and are now overhauling it. After a yearlong review that included scrutiny by anti-hacking specialists from Sandia National Laboratories, officials at the Labor Department revoked the credentials of a few little-known news organizations that appeared to serve financial clients rather than the public at large. The government has also ordered other media groups to replace their computers in the lockup room with new computers under tighter controls." John Cushman Jr. in The New York Times.

@rebeccagberg: This fascinating story from @jackcushnytreads like a spy novel...but it's about the Consumer Price Index

Growth is slowing in developing countries. "An economic slowdown in China and other major developing countries has pulled one of the few remaining props from the world economy, which is already threatened by the financial crisis in Europe and a sluggish U.S. growth. Strong growth among developing countries, particularly the so-called BRIC nations — Brazil, Russia, India and China — as well as Mexico and South Africa, had been a bright spot in an otherwise tepid world recovery. No longer. Growth is now slowing among those nations as well. And for a variety of reasons, they may not be able to respond with the same intensity as they did after the U.S. financial collapse in 2008, when they pumped hundreds of billions of dollars into government projects and other measures to stimulate their economies." Howard Schneider in The Washington Post.

Retail sales dropped for the third month in a row. "Americans reined in their spending for the third straight month in June, fueling fears that the economy is stalling after gathering steam early this year. Retail sales dropped 0.5% in June, the government said Monday, falling short of the 0.2% rise that most economists were expecting. Retail sales haven't fallen three months in a row since 2008. April's figures were revised down." Neil Shah and Jie Jenny Zou in The Wall Street Journal.

@bencasselman: Ugly retail sales report. Top-line down three straight months. Restaurants down two in a row. Revisions bad too.

The IMF cut its global growth forecast for 2013. "The International Monetary Fund, unimpressed with the policy actions taken to stem the European sovereign debt crisis, on Monday cut its forecast of growth in 2013. In a periodic update of its economic forecast, the Washington-based institution warned that the measures taken in Europe have not done enough to quiet markets and restore growth. The fund maintained its forecast of 2012 economic growth at 3.5 percent, but it cut its forecast of growth in 2013 to 3.9 percent, down from the estimate of 4.1 percent it made in April. In 2010, the world economy expanded 5.3 percent. " Annie Lowrey in The New York Times.

Short documentary interlude: PBS' Off Book on the art of logo design.

Health Care

The CMS' efforts to change how dual eligibles get care is coming under fire. "Health care providers and policy analysts broadly agree that the current care environment for dual eligible beneficiaries needs to change — and fast. The approximately 9 million people on both Medicare and Medicaid tend to have multiple health problems, and their care is both highly fragmented and very expensive. There’s general agreement on what has to change: improve care coordination among the doctors, physicians and nursing homes — and make sure they share in any resulting savings. But criticism toward a Centers for Medicare & Medicaid Services-led effort to do just that has been rising. MedPAC recently raised a number of concerns over the size, scope and rapid pace of the program. Sen. Jay Rockefeller (D-W.Va.), who helped shape the effort, has called for its immediate halt." Matt Dobias in Politico.

Some are worried about what will happen to get states to participate in Medicaid expansion. "Medicaid advocates, unsurprisingly, would like see the program expand to cover 17 million additional Americans, as it is expected to do by 2019. The concern stems the demands that governors are already starting to make in return for their participation, which have the potential to cut into the coverage that Medicaid currently provides. At the National Governor’s Association meeting this past weekend, a handful mulled the idea of pursuing a block grant — a lump sum budget to spend on Medicaid with fewer requirements from the federal government on how it had to be spent. At least six are mulling the idea of demanding a block grant in exchange for participating in the Medicaid expansion. Block grants worry Medicaid advocates because they tend to mean less money for the program. The congressional Republicans proposal to block grant the program for all 50 states would, for example, cut $180 billion in Medicaid funding." Sarah Kliff in The Washington Post.

@petersuderman: Medicaid fight kind of reminds me of the comic-creator brawls of the early 90s. Only governors can't go off and start Image.

Domestic Policy

Senate Republicans filibustered the DISCLOSE Act again. "Senate Democrats on Monday lost another attempt to pass legislation forcing donors of groups that bankroll most election ads to be revealed. But Democrats, led by New York Sen. Charles Schumer, pledged to hold the Senate floor hostage and continue the debate well into the night. The DISLCOSE Act, which was dealt the same fate in the Senate in 2010, failed to overcome a key procedural vote on entirely partisan lines, 51-44. Democrats will push for another vote as early as Tuesday after holding a 'midnight vigil' to protest the GOP filibuster of the measure...The new, stripped down version of the bill sponsored by Sen. Sheldon Whitehouse (D-R.I.) no longer required sponsors of electioneering ads to have a disclaimer at the end and pushed the effective date to 2013." Tarini Parti in Politico.

@jonathanweisman: Aaaand predictably, DISCLOSE Act is going down to a filibuster in the Senate along party lines. Don't worry though, Dems plan 2nd try Tues

Science experiment interlude: It takes a lot of rubber bands to explode a watermelon.

Energy

Drought in the U.S. is reaching levels not seen in more than 50 years. "A drought gripping the Corn Belt and more than half the United States has reached proportions not seen in more than 50 years, the government reported Monday, jacking up crop prices and threatening to drive up the cost of food. Though agriculture is a small part of the U.S. economy, the shortfall comes as the nation struggles to regain its economic footing. Last week, the Agriculture Department declared more than 1,000 counties in 26 states as natural-disaster areas. About 55 percent of the continental United States is now designated as in moderate drought or worse, the largest percentage since December 1956, according to the National Climatic Data Center, and the outlook is grim." Peter Whoriskey and Michael Fletcher in The Washington Post.

Gas prices haven't spiked. "Remember the $6 we were all supposed to be paying for a gallon of gasoline about now? It didn’t happen, despite the dramatic predictions from armchair pundits, political candidates and some in the media. Instead, gasoline has settled around $3.40 a gallon as of Monday — rising for the moment, although perhaps nearing what some fuel-price experts consider a plateau of sorts. But credible analysts concede that too many variables are at play for any certainty." Bob King in Politico.

The fracking boom is being felt in India. "Sohan Singh’s shoeless children have spent most of their lives hungry, dirty and hot. A farmer in a desert land, Mr. Singh could not afford anything better than a mud hut and a barely adequate diet for his family. But it just so happens that when the hard little bean that Mr. Singh grows is ground up, it becomes an essential ingredient for mining oil and natural gas in a process called hydraulic fracturing. Halfway around the world, earnings are down for an oil services giant, Halliburton, because prices have risen for guar, the bean that Mr. Singh and his fellow farmers raise. Halliburton’s loss was, in a rather significant way, Mr. Singh’s gain — a rare victory for the littlest of the little guys in global trade." Gardiner Harris in The New York Times.

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

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Sarah Kliff | July 16, 2012