How the Country Changed from George to Mitt

Jacob Weisberg notes how thoroughly the relationship of wealth to productivity and job production in the last few decades, using George and Mitt Romney as textbook examples of those changes.

3. Bain shows how Wall Street is rigged in favor of the rich. Private equity firms, like hedge funds, earn their money through a 2-and-20 structure, which means investors pay a 2 percent annual management fee, and give away one-fifth of their profits. According to one study, firms like Bain get two-thirds of of their earnings from fees charged to investors, rather than from the share of profits. According to another study, private equity firms managed to keep 70 percent of all investment profits for themselves, rather than paying them out. They’ve figured out how to be hugely profitable even if they aren’t successful, and even where firms they own go bankrupt. And because their gains come in the form of “carried interest,” private equity owners are taxed at 15 percent, rather than the top rate of 35 percent.

4. Romney’s Bain career is a story about rising inequality. It’s telling that George Romney, Mitt’s father, made around $200,000 through most of the years he ran American Motors Corporation. Doing work that clearly created jobs, the elder Romney paid an effective tax rate that averaged 37 percent. His son made vastly more running a corporate chop shop in an industry that does not appear to create jobs overall. In 2010, Mitt Romney paid an effective tax rate of 13.9 percent on $21.7 million in investment income—around 14 times as much as his father in inflation-adjusted terms. This difference encapsulates the change from corporate titans who lived in the same world as the people who worked for them, in an America with real social mobility, to a financial overclass that makes its own separate rules and has choked off social mobility. The elder Romney wasn’t embarrassed to explain what he’d done as a businessman or to release his tax returns.

I think it’s likely that the real reason he won’t release more tax returns is because those returns show that he paid even less in taxes some years than he did in 2010, when his rate was less than half the rate I paid (and I’m hardly a wealthy person). And as George Will so aptly put it, he has decided that whatever is in those returns would cause even more problems than not releasing them is already causing. I suspect that decision is going to backfire on him because he will likely be forced by the backlash to release them anyway, so he’ll end up getting both of the bad outcomes rather than just one of them. And the fact that he gave 23 years of tax returns to John McCain to get the job of vice president pretty much destroys any argument he has against releasing those returns to the public when trying to get the job of president.

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  • abb3w

    The most plausible speculation I’ve found for what Romney is hiding (from Matthew Yglesias over at Slate) is that he took advantage of the 2009 IRS amnesty for unreported overseas accounts. The Swiss bank at the epicenter of it was UBS; ABC News noted a correction in one of his disclosures as a result of a UBS account being closed in 2010; and according to the LA Times piece fewer than 1-in-30 of those who held accounts in 2009 reported them in 2008.

  • uncephalized

    “Jacob Weisberg notes how thoroughly the relationship of wealth to productivity and job production in the last few decades…”

    I think you dropped a verb somewhere in that first sentence, Ed…

    Maybe “Jacob Weisberg notes how thoroughly the relationship of wealth to productivity and job production has changed in the last few decades…” ???

  • Trebuchet

    I’m not sure if George presiding over the combination of several failing auto companies into one failing auto company qualifies as “job creation” anyhow.

  • omcdurham

    George Romney was the head of American Motors when it was competing against Detroit’s “Big Three” automakers from 1954-1962. He had nothing to do with it’s merger with Renault, or its subsequent acquisition by Chrysler in 1987.

    George was also a huge civil rights activist in the 1960s, and was part of Nixon’s Cabinet, as Secretary of Housing and Urban Development. He quit that post because Nixon thwarted his efforts to increase housing options for the poor.

    Romney was a Republican who thought like normal people do. One might have called him a ‘liberal Republican’, which is why Nixon didn’t like him.