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When did Romney step down from Bain?

Karl Singer is writing Wonkbook while Ezra is traveling.

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RCP Obama vs. RomneyObama +2.4%; 7-day change: Obama -0.3%.

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Top story: The outsourcing saga continues

When did Romney step down from Bain? Well... "President Obama and the Democrats are questioning whether Mr. Romney really left Bain in February 1999, when he took over the Olympics. And Mr. Romney and the Republicans are insisting that he ended his day-to-day management role at Bain after taking the Olympics job. At stake is whether Democrats can hold Mr. Romney responsible for a series of now-controversial investments Bain made during the period in question, including in companies that specialized in outsourcing, laid off some of their workers or declared bankruptcy...The complications arise in part from the ways in which Bain was organized. When Bain Capital was originally created, Mr. Romney was given full control of the private equity firm’s new management company, Bain Capital Inc. When Mr. Romney went on leave in 1999, he retained ownership of that entity -- and with it, in theory at least, the power to control Bain Capital’s funds." Nicholas Confessore and Michael Shear in The New York Times.

@JoshuaGreen: "All told, Mr. Romney's name appears on at least 142 forms" identifying him as Bain principal btwn '99-'02

@KagroX: Siri, who was the CEO of Bain Capital from 1999-2002?

Romney's account of his Bain departure has evolved. "Until his run for governor -- and even before that campaign was underway in earnest, when he needed to prove sustained connections to Massachusetts in order to ward off a ballot challenge -- Romney had characterized his departure from Bain Capital more as a 'leave of absence' in which he would be a 'part-timer,' and not as an absolute separation from the thriving business he built and solely owned. It was not until 2002 that Romney finalized a severance agreement with Bain, a 10-year deal with undisclosed terms that was retroactive to 1999...Financial disclosure forms Romney filed in Massachusetts indicate he earned at least $100,000 as a Bain 'executive' in 2001 and 2002, separate from investment earnings." Callum Borchers and Brian MacQuarrie in The Boston Globe.

@mollyesque: Apparently, as soon as Romney stopped running Bain in 1999, they were all, "WHEW, now we can do all that stuff he doesn't approve of."

KRUGMAN: Romney's history at Bain isn't a diversion from policy. "The equally true charge that he’s pushing policies that would benefit the rich at the expense of ordinary working Americans meshes with Bain’s record of earning big profits even when workers suffered -- a record so stark that Mr. Romney is attempting to distance himself from part of it by insisting that he had nothing to do with Bain’s operations after 1999, even though the company continued to list him as C.E.O. and sole owner until 2002. And so on. The point is that talking about Mr. Romney’s personal history isn’t a diversion from substantive policy discussion. On the contrary, in a political and media environment strongly biased against substance, talking about Bain and offshore accounts is the only way to bring the real policy issues into focus. And we should applaud, not condemn, the Obama campaign for standing up to the tut-tutters." Paul Krugman in The New York Times.

YGLESIAS: Neither Obama nor Romney opposes offshoring. "Lost in the shuffle here is the question of what it is Romney is denying he's responsible for. Stipulate that Romney somehow had nothing to do with running a company of which he was the CEO and sole shareholder. Does he think, in retrospect, that his subordinates did something wrong by offshoring jobs? Clearly he didn't, which highlights the absurdity of his claims not to have been responsible. It's true that he wasn't running the country on a day-to-day basis, but he really was titular CEO and had Bain been doing something he deemed outrageous he could and should have stepped in to stop them. But he doesn't believe that. And what's more, all indications are that Barack Obama also doesn't think Bain was doing anything wrong. As president he's made no moves to make it illegal for companies to shift production work abroad and has publicly associated himself with a wide range of American firms--from GE to Apple and beyond--who've done just that to varying extents." Matthew Yglesias in Slate.

GARDNER: Romney's Bain privatized gains and socialized losses. "Mitt Romney touts his business acumen and job-creation record as a key qualification for being the next U.S. president. What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses...Enriching investors by taking leveraged bets isn’t a qualification for a job requiring long-term vision and concern for public welfare. It is appropriate to point that out to voters." Anthony Luzzatto Gardner in Bloomberg.

PEARLSTEIN: Outsourcing offers tradeoffs. "If you want discretion and judgment, if you want workers who really understand and relate to customers, if you want the flexibility necessary to respond to individual needs or unforeseen circumstances, then you can go back to paying twice as much to have your own, longtime employees doing the work. That’s the outsourcing trade-off. It may be a good trade-off -- most of the time I suspect it is. But it is an unavoidable trade-off, no matter how good the contractors or their systems. You can see how this process bifurcates labor markets and increases income inequality. At the low end are the low-cost expendable cogs. At the high end are those whose experience and intelligence and training allow them to demand very good salaries for designing, creating and managing these systems. There’s not much in between -- or even much of a ladder for getting from one to the other." Steven Pearlstein in The Washington Post.

Top op-eds

1) SUMMERS: Education can help fight inequality. "The most important step that can be taken to enhance opportunity is to strengthen public education. For the past decade we have focused on ensuring no child is left behind, and this must continue. But if we are to ensure everyone has a real chance of great success, we must also ensure every child in the public system can learn as much and go as far as their talent permits. This means judging schools on measures beyond the fraction of students who exceed some minimum...It is time the best institutions undertook the kind of commitment to economic diversity that they have long mounted towards racial diversity. It is not realistic to expect that schools and universities dependent on charitable contributions will not be attentive to offspring of their supporters. Perhaps, though, the custom could be established that, for each 'legacy slot', room would be made for one 'opportunity slot'." Lawrence Summers in The Financial Times.

2) COWEN: Much of the mandate may fall with Medicaid. "The greater likelihood is that, over time, American voters will rebel against Medicaid and dismantle the subsidies that keep the states locked in, and will prefer instead to spend the money on other programs...There is one way this might work: by limiting the subsidies for insurance. Note that the law itself mandates cuts if those subsidies exceed a certain percentage of gross domestic product by 2018. Most likely, the reform could not stop there, because the insurance cost burden for many Americans would feel intolerably high without the subsidies. The next step, therefore, would lower costs by limiting the mandate to covering catastrophic conditions. Yet a further step would remove the mandate for noncatastrophic coverage, thus giving people more control over how much they want to spend on health care versus other priorities. We would then have government-subsidized and mandated catastrophic insurance, and a freer market for other health care expenditures." Tyler Cowen in The New York Times.

3) LUCE: America has become an energy producer. "America is rapidly turning from a consumer into a producer nation. On economic grounds, its expanding energy horizons are manna from heaven. When Mr Obama was elected, the US was importing almost two-thirds of its oil. That number is down to below almost half and falling. In 2008, King Coal still dominated US electricity production. Last month natural gas supplanted coal as the largest source of US power supply. So dramatic are America’s finds, analysts talk of the US turning into the world’s new Saudi Arabia by 2020, with up to 15m barrels a day of liquid energy production (against the desert kingdom’s 11m b/d this year)." Edward Luce in The Financial Times.

4) COBURN: Grover Norquist's tax pledge has the wrong focus. "The problem with the pledge is that it is powerless to prevent future automatic tax increases and has failed to restrain past spending. The 'starve the beast' strategy to shrink the size of the federal government by cutting revenue but not spending was a disaster. Every dollar we borrow is a tax increase on the next generation. And in a debt crisis, higher interest rates and the debasement of our currency would be additional tax hikes. In that sense, no one is doing more to violate the spirit of the pledge than Mr. Norquist himself, who is asking Republicans to reject the very type of agreement that could prevent future tax increases. What unifies Republicans is not Mr. Norquist’s tortured definition of tax purity but the idea of a Reagan- or Kennedy-style tax reform that lowers rates and broadens the tax base by getting rid of loopholes and deductions." Tom Coburn in The New York Times.

5) LAFFER AND SCUDDER: 2013 is going to be a tough year for the economy. "The United States faces an economic collapse thanks to massive tax increases on Jan. 1, and continued deficit spending for years on end. Keynesians worry about spending cuts and to some extent the expiration of the temporary 2% payroll tax cut. But the looming expiration of the Bush tax rate cuts along with new levies enacted as part of ObamaCare pose the greatest threat...America is going to get socked by a triple whammy on output, employment and income. No matter what happens from now on, 2013 will be a very tough year." Arthur Laffer and Ford Scudder in The Wall Street Journal.

Top long reads

Jason DeParle on how changes in family structure have exacerbated inequality: "Jessica Schairer has so much in common with her boss, Chris Faulkner, that a visitor to the day care center they run might get them confused. They are both friendly white women from modest Midwestern backgrounds who left for college with conventional hopes of marriage, motherhood and career. They both have children in elementary school. They pass their days in similar ways: juggling toddlers, coaching teachers and swapping small secrets that mark them as friends. They even got tattoos together. Though Ms. Faulkner, as the boss, earns more money, the difference is a gap, not a chasm. But a friendship that evokes parity by day becomes a study of inequality at night and a testament to the way family structure deepens class divides. Ms. Faulkner is married and living on two paychecks, while Ms. Schairer is raising her children by herself. That gives the Faulkner family a profound advantage in income and nurturing time, and makes their children statistically more likely to finish college, find good jobs and form stable marriages."

Zachary Goldfarb on Obama's effort to reverse manufacturing's decline:"Obama had witnessed the devastation of lost factory jobs from his earliest days as a community activist in Chicago and felt in his gut that there must be some way to help, but the president, a policy wonk and onetime professor, also wanted to know what the research showed. 'There’s a narrative that countries have to make things to be successful,' Obama said to his economic advisers. 'What’s the evidence?' His economists, top academics from schools like Harvard and MIT, replied that there wasn’t much evidence. In fact, they argued, manufacturing represented relatively few jobs in the nation’s economy. And governments had terrible records of investing in specific industries, anyway. The advisers, on both sides of the debate, looked to the president for resolution. 'It’s a draw,' Obama said, failing to resolve the split within his team -- or even within his own mind."

D.I.Y. pop interlude: Matt and Kim play "Daylight" on The Daily Habit.

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

Still to come:Democrats may be ready to jump off the fiscal cliff; the White House pushes implementation; students shoulder more of college costs; banks step up their oil trade role; and what Breaking Bad would be like as a sitcom.


Democrats may be willing to go over the fiscal cliff without higher taxes. "Democrats are making increasingly explicit threats about their willingness to let nearly $600 billion worth of tax hikes and spending cuts take effect in January unless Republicans drop their opposition to higher taxes for the nation’s wealthiest households. Emboldened by signs that GOP resistance to new taxes may be weakening, senior Democrats say they are prepared to weather a fiscal event that could plunge the nation back into recession if the new year arrives without an acceptable compromise." Lori Montgomery in The Washington Post.

Tax liens are driving more foreclosures. "When Elsa Dabreo inherited a house from her late father, she thought it was the best thing that ever happened to her. But now she is struggling to keep it. The house, in a suburb of Boston, was mortgage free and valued at about $330,000 when she received the deed in 2005. However, it was saddled with $20,000 in back taxes which Ms. Dabreo, now 54 years old, couldn't pay. In 2010, after the taxes and penalties had ballooned to $42,000, the city of Weymouth, Mass., sold the debt at a tax-lien auction. If Ms. Dabreo can't pay the debt, she could be subject to foreclosure...A report released this week by the National Consumer Law Center, says Ms. Dabreo's situation isn't unusual. Although mortgage default is behind most home foreclosures in the U.S., the number of foreclosures tied to delinquent tax payments is climbing. The NCLC, an advocacy group, estimates that $15 billion of tax-lien foreclosures happened in 2010, the latest year for which data are available." Kelsey Gee in The Wall Street Journal.

The U.S. is developing a criminal case over rate-fixing. "As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal. The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said. The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission." Ben Protess and Mark Scott in The New York Times.

Republican governors are warming up to online sales taxes. "Republican governors, eager for new revenue to ease budget strains, are dropping their longtime opposition to imposing sales taxes on online purchases, a significant political shift that could soon bring an end to tax-free sales on the Internet. Conservative governors, joining their Democratic counterparts, have been making deals with online retail giant to collect state sales taxes. The movement picked up an important ally when New Jersey Gov. Chris Christie--widely mentioned as a potential vice-presidential candidate--recently reached an agreement under which Amazon would collect sales taxes on his state's online purchases in exchange for locating distribution facilities there." Monica Langley in The Wall Street Journal.

@DukeStJournal: When I learn to sing and play an instrument and start a band, it will be called “Me and Half of Marty Feldstein.”

Robot dance interlude: Evolution Of Dance as performed by NAO Robot.

Health Care

The White House is pushing states to implement Obamacare. "The Obama administration is aggressively pushing states to implement the healthcare reform law now that the Supreme Court has upheld it. In the two weeks since the court issued its decision, the Health and Human Services Department has pushed out new grants, new policies and a new rhetorical standby: It’s time to get onboard...The day after the Supreme Court announced its decision, HHS unveiled new funding opportunities designed to help states plan for their insurance exchanges. HHS officials said they expected to receive funding requests from states that had previously resisted the idea of an exchange." Sam Baker in The Hill.

The next legal challenge could be over subsidies. "The next shot in the legal war over the health reform law isn’t another lawsuit but an academic paper that says federal exchanges can’t give people subsidies to help pay for their coverage. The paper, authored by Case Western Reserve University’s Jonathan Adler and the Cato Institute’s Michael Cannon, puts intellectual heft behind an argument that has been percolating among the law’s opponents...If the courts were to accept Adler’s and Cannon’s argument, that could effectively enable states to kill federal exchanges by empowering them to cut off the subsidies. Without subsidies, the federal exchanges would not be economically viable because they couldn’t get as many people to sign up for coverage." J. Lester Feder in Politico.

@davidfrum: Median wage now under $27,000. Individual health policy averages $2100. Hard to imagine universality w/out subsidy

Domestic Policy

Students are shouldering more of the burden of college costs. "Students are shouldering more of the burden of paying for college, increasing their borrowing and out-of-pocket contributions, according to a study from Sallie Mae to be released Monday. In its annual survey, the nation’s largest private student lender found that undergraduates covered 30 percent of the cost of college themselves during the most recent academic year -- the largest share in four years. They spent an average of $2,555 from their income and savings and took out $3,719 in loans, the report showed. Meanwhile, parents struggled to maintain their level of financial support. Though they still paid for more than a third of their children’s college costs, they relied more heavily on borrowing, according to the study. The portion covered by parents’ out-of-pocket contribution fell to 28 percent, down nine percentage points from its peak two years ago." Ylan Mui in The Washington Post.

Postal reform is stalled. "The House’s delay in considering a postal reform bill is sparking concerns that the rescue of the U.S. Postal Service could be delayed until after the November elections -- or even until the next Congress. Republicans signaled last week that the House would likely not vote before the August recess on a postal bill from Rep. Darrell Issa (R-Calif.), the Oversight Committee chairman, and Rep. Dennis Ross (R-Fla.)...That has left some observers concerned that, even if the House can pass its bill after it returns in September, final negotiations on a postal revamp could spill over into the lame-duck session after the election." Bernie Becker in The Hill.

The Obama administration gave states more control over their welfare programs. "States are required to document the number of hours that welfare recipients spend in paid jobs, voluntary work or other activities directly related to finding employment. States can lose federal funding for their welfare programs if they don't meet targets for recipients' participation in these activities...The Obama administration said that two states, Utah and Nevada, had specifically asked for waivers from the requirements. Both states have Republican governors. On Thursday, the Department of Health and Human Services sent states a letter saying they could get a federal waiver to those rules if they proposed better ways to help recipients find permanent, well-paid jobs. Federal officials have suggested that states could use the flexibility to let welfare recipients spend more time studying for high-school equivalency diplomas as well as working, or doing jobs that the state government is subsidizing." Louise Radnofsky and Janet Hook in The Wall Street Journal.

Cybersecurity legislation may still pass before August recess. "With the August recess nearly three weeks away, it will be difficult for the Senate to move forward on cybersecurity legislation--but don’t count it out just yet. Some are holding out for progress to be made on a compromise framework drafted by Sens. Jon Kyl (R-Ariz.) and Sheldon Whitehouse (D-RI) on provisions dealing with critical infrastructure, such as water systems and telecommunications networks...The floor schedule is already full for the next couple weeks with a campaign finance disclosure bill and tax cut extensions on the docket...Senate Majority Leader Harry Reid (D-Nev.) has said he plans to tackle cybersecurity this year. A spokesman for Reid said not to count it out and there is a possibility that the upper chamber will get to cybersecurity legislation this month." Jennifer Martinez in The Hill.

Spinoff interlude: Breaking Bad as an ABC sitcom.


Big banks are stepping up their role in the oil trade. "Wall Street banks are wading deeper into the business of supplying oil as they increasingly compete with oil traders and merchants selling crude to refineries. JPMorgan Chase, Morgan Stanley and Goldman Sachs have all recently struck deals to supply US refiners. Goldman Sachs is now the largest supplier of crude and the largest customer of refined products for refineries owned by Alon USA in California, Louisiana and Texas. The banks’ growing profile in the market highlights the effect of persistently high oil prices on cash-strapped independent refiners who have been forced to turn to banks to finance their stocks." Gregory Meyer in The Financial Times.

@pourmecoffee: Wow, awful. "New Data: 2012 Drought Rivals Dust Bowl"

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



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