Friday, April 27, 2012


Mitt Romney likes to tell people that he is the epitome of what capitalism is all about. He's rich because he was successful at what he did. According to Romney what he did was create jobs. But this is a lie.

During the republican primaries fellow republicans Rick Perry and Newt Gingrich called him on it. Here's Newt:
Look, I’m for capitalism ... But if somebody comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that’s not traditional capitalism.

After looking into things you would be excused if you were to think that what Romney did at Bain Capital was Predatory or Vulture Capitalism (preying on dead, weak or infirm companies). Instead, what Romney did was engage in what's called Parasitic Capitalism.

In this article written by Peter Kotz we learn that instead of making money by eliminating weak and inefficient firms a good chunk of Mitt Romney's wealth is a product of sucking the life out of the healthy firms, which he bought with borrowed money.

... The year before Romney purchased [the company] Georgetown, he mounted his career in politics, setting his sights on the biggest target in Massachusetts: the U.S. Senate seat held by Ted Kennedy.

There were early signs that he might topple the Kennedy dynasty. Much like today, Romney was pitching himself as a commander of the economy, a man with the mastery to create jobs. Yet he suffered an affliction common to those atop the financial food chain: He assumed that what was good for him was good for all. Call it trickle-down blindness.

In the midst of that 1994 campaign, one of Romney's companies, American Pad & Paper, bought a plant in Marion, Ind. At the time, it was prosperous enough to be running three shifts.

Bain's first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health care benefits.

"They came in and said, 'You're all fired,'" employee Randy Johnson told the Los Angeles Times. "'If you want to work for us, here's an application.' We had insurance until the end of the week. That was it. It was brutal."

But instead of reapplying, the workers went on strike. They also decided the good people of Massachusetts should know what kind of man wanted to be their senator. Suddenly, Indiana accents were showing up in Kennedy TV ads, offering tales of Romney's villainy. He was sketched as a corporate Lucifer, one who wouldn't blink at crushing little people if it meant prettying his portfolio.

Needless to say, this wasn't a proper leading man's role for a labor state like Massachusetts. Romney was pounded in the election, taking just 41 percent of the vote. Meanwhile, the Marion plant closed just six months after Bain's purchase. The jobs were shipped to Mexico.

Like all parasitic forms Romney benefited by exploiting the resources, environment, and hard work of others. Specifically, Mitt Romney became rich because for over 30 years our lobbyist driven economic system has:

* ... rewarded borrowed money with interest deductions.
* ... encouraged capital investments with generous tax cuts and an effective tax rate of 15 percent for specific market players (but not for you and me).
* ... allowed companies to underfund pensions and then dump them on the federal government when companies go bankrupt.

If this wasn't enough, organized labor has been under attack for 30 years. Ronald Reagan began the process when he fired air traffic controllers. He then encouraged industry to use layoff threats as a negotiating strategy while he and his successors pursued globalization policies and free trade treaties, both of which made it easier for industry to sweep workers out and ship jobs over seas.

Tax subsidized investments and state negotiated "free trade" agreements created the culture and environment for Romney and friends to eliminate jobs and destroy industries. It's really that simple. Free trade and the magic of the market ... backed by favorable legislation and state negotiated treaties.

An orthodox paradox if I ever saw one.

Just to be clear. There's a difference between Venture Capitalism (what my brother does in the Silicon Valley), Vulture Capitalism (rejuvenating old firms; actually good for the economy), and Parasitic Capitalism (what Romney did). The first merges new ideas with aggressive money to produce new products (like Facebook). The second matches inefficient and failed industries with new investors who want to produce a product (like cars). The last uses borrowed money to buy strong companies, which are used as bait to secure more loans to pay the new financial managers for their "genius."

The first two groups are real capitalists. The last are parasites living off the host organism. Instead of building industries and monopolies they are using the money of others to play monopoly.

To recap, Mitt Romney borrowed money to purchase healthy companies. Often he would put these companies together with other companies to form a new corporation and then borrow more money to pay himself and his company (Bain Capital) millions in management fees. To pay off the borrowed money Romney would cut back on a firms maintenance, cut wages and benefits, and fire employees to help pay down debt loads accumulated by their borrowing spree. Many of these debt laden companies went bankrupt, or had their jobs shifted to other countries.

No wonder Romney can't keep his stories straight. He's not even trying. Romney needs the smoke and mirrors to keep people from understanding the difference between venture capitalists, vulture capitalists, and him ... the parasitic capitalist.

- Mark

Tuesday, April 24, 2012


Many who believe in the free market want the rest of us to believe one thing. The growing gaps in wealth and income we see in America today are a result of the super rich being smarter, harder working, and more deserving than the rest of us. They deserve all the money they have because they earned it.

Nice try. But I don't buy this argument, and neither should you. Here's why.

The growing gaps in wealth and income we've seen in America since 1979 are a direct result of very specific policies that work against the interests of the middle class. Specifically, if we want to understand why the rich have gotten richer while the bottom half of America has seen their financial position stagnate or lose ground we can start by looking at how favorable legislation, generous tax cuts, and a series of market bailouts have redistributed wealth to the super rich in America.

If you want a picture of where these policies are taking us as a nation take a look ...

In graph form this what's actually been happening ...

The impact has been staggering as we are now seeing property and wealth gaps that are only rivaled by what we saw during the Gilded Age (but then again, at least the Robber Barons produced something tangible) ...

(If you prefer graph form ...)

What this means is that, yes, there is a massive redistribution of wealth going on in America. Only it's not going in the direction many believe it is.

Worse, these policies are deliberate, damaging and depriving the state of much needed resources to deal with the demands of society. This quote from synopsizes what's been happening succinctly ...

From 1947 until the mid-1970s, the fruits of our bountiful productivity were shared reasonably fairly with working people. As productivity rose so did workers’ real wage ... This wasn’t socialism. There were still plenty of rich people who earned a significant slice of the productivity harvest. But much of that wealth was plowed back into the economy through taxation rates that between 1947 and 1980 hovered between 70 to 91 percent on incomes over $3 million (in today’s dollars). Much of that money was used to build our physical and knowledge infrastructures, and to fight the Cold War. Unions were supported by public policy and workers' real wages rose steadily after accounting for inflation. Wall Street was tightly controlled and the middle-class grew like never before.

Then something happened.

It wasn’t an act of God, or the blind forces of technological change, or the mysterious movements of markets. Nor did the super-rich become enormously smarter than before. Instead, flesh-and-blood policy makers decided that deregulation and tax cuts should become the order of the day starting in the mid-1970s.

The decision to go after labor by attacking unions - which includes having the WTO pushing for and implementing uniform financial and investment codes globally, while winking and nodding at incoherent labor standards - is a big part of this strategy.

I bring all of this up because I've been getting correspondence from many people who continue to believe that we live in some kind of free market wonderland, where those with the most money are some kind of Economic Supermen. In their world market players have gotten smarter, stronger, and play by the rules.

Their logic for how the economy works is naive and goes something like this.

Because people want to make money they will act nice to you. This means they will do what they need to do to secure your trust. They will then produce goods you will like and then purchase. They will make good products because they want you to return to purchase more goods. Similarly, if you get a bad product you will not return and the merchant will go out of business. Homo Economicus rules the day, but Caveat Emptor!

If everyone understands and learns these lessons we all live happily ever after. The end.

I know. Kind of makes you feel warm and fuzzy all over, doesn't it? This is the way life is supposed to work according to our free marketeer proponents.

Unfortunately, according to the free marketeers who live in this market wonderland, the state ruins everything. How? The state gets in the way of all that is good and efficient because the state can't do anything right (yes, the logic is kind of circular).

This perspective is pushed in spite of a mountain of evidence to the contrary.

One of the incredible points lost on our free marketeers is that over the past 100 years the profit motive has not been behind some of humanities greatest inventions or achievements. Benjamin Franklin's lightening rod, penicillin, and Jonas Salk's polio vaccine are examples of this. The best selling gun in history was not produced in the USA, nor was it a product of the profit motive.

At the end of the day there is much more to the human spirit than trucking and bartering for profit. To see the world otherwise is silly. In fact, if you think about it, while it has done good the profit motive has also done much to perpetuate many kinds of social myths, market evils, and moral turpitude.

For example, throughout history market players have shown themselves to be perfectly happy living in a world where women are second class citizens. According to this mind-set, which was sanctioned by free marketeers, men are sturdier and must bring home the bacon so women can stay home and tend to their natural duties. That it kept women from competing in the workplace was a side benefit.

As well, slavery was once viewed as a natural product of efficient market forces. And it was sanctioned in the Bible too. If you can make money and God says it's OK why mess with someones property?

Even trafficking in drugs, Nazi goods, illegal arms, and females are often viewed as "just business." That these activities undermine the human condition should not matter, according to those who make money from these markets. The profit motive, the argument goes, should not be messed with.

The point is that humanity has found numerous ways to justify wealth accumulation and obnoxious gaps in social stature. Today our free market culture has latched on to the notion that current levels of accumulated wealth and outlandish compensation packages are tied to mysterious market forces. These market forces are justified because they have been determined by talent and initiative alone.

At least this is what you are supposed to believe.

The reality is quite different. The widening gaps in wealth and income that we have seen over the past 30 years are a direct result of specific policies that were designed to shift trillions of dollars in wealth from one class in America to another. These policies, as I point out in my book, are tied to favorable legislation, tax cuts for the rich, and a series of market bailouts that most Americans either don't understand, or don't make an effort to understand.

The result of this very deliberate race to the bottom strategy is that (1) gaps in wealth and income in America have increased, (2) America's richest class now pay marginal tax rates of 15% on phenomenal income gains (derived largely from financial bets backed by you and me), and (3) our nation now owes more than $15.6 trillion (up from $1 trillion in 1981) as a result of paying for unfunded tax cuts, reckless wars, and budget shortfalls due to the market collapse.

It's time for those who benefited most from our nation's failed experiment in deregulation and tax cuts for the rich to pay up.

More specifically, taxing the super rich is not class warfare. It's our way of saying you didn't really earn your money over the past 30 years. You now need to pay for the financial gains you received from our decades long experiment with favorable legislation, unfunded tax cuts, and market bailouts that collapsed our economy and created our budget nightmare.

It's really that simple.

- Mark

Monday, April 23, 2012


One of the great things about coaching 11 and 12 year old kids is that you get some memorable experiences. This past Saturday was one of those experiences. 

It's the middle of the game. I'm the first base coach and we have a runner moving around third base. The runner - who also happens to be my son - thinks he can score if he can knock the ball out of the catcher's hand. But he hesitates. Our third base coach, however, has no doubts. He "sends" him.

My son and daughter (who was watching the game) captured the moment in this comic they put together Saturday night ("le me" is my son Sebastian) ...

While the "nudge-push" might have been over the top it was also one of the funniest things I've seen on a baseball field.

In the FYI category, the other team wasn't too happy so the coach was warned.

And, yes, it might be best if I or the other assistant are the third base coaches from now on ;-)

- Mark

Friday, April 20, 2012


Jon Stewart demonstrates how congressional republicans think $47 billion in millionaire money is a "mere pittance" but that $363 million in Planned Parenthood money is somehow "a lot" of money.

- Mark

Thursday, April 19, 2012


At the end of the day it's nice to see this kind of justice ...

Best line of the day on the this (from Kathy), "Lives up to the name BMW: Break My Windows" ... and kudos to Michael for the picture.

- Mark

Wednesday, April 18, 2012


Those of you who read this blog regularly (or my book) won't find anything new in this piece, which I synopsize below. It says in plain English that favorable legislation, industry bailouts, market subsidies, wealth extraction, and simple greed are now the backbone behind modern markets in America. It just says it in another way.  

From Paul Buchheit at Common, we get five reasons that help explain how the super rich have not earned their money.

1. They've Taken All the Middle Class Wage Increases
In 1980 the richest 1% of America took one of every fifteen post-tax income dollars. Now, according to IRS figures, they take THREE of every fifteen (doc) post-tax income dollars. They've tripled their cut of America's income pie. That's a trillion extra dollars a year ...

2. They've Mismanaged Key American Industries
We have the most expensive health care system in the world. Failing banks have survived because of taxpayer bailouts. Management-approved shortcuts have led to workplace deaths and chemical leak disasters. Companies lobby for cap and trade laws so their profits can pay for their pollution ...

3. They've Benefited from 50 Years of Public Research
The very rich have made their fortunes in good part because of taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health, the National Science Foundation, and numerous other government agencies ...

4. They've Increased Their Incomes By Not Paying Taxes
The richest 10% own 80% of the stock market, providing billions in "unearned income" that is taxed at less than half the rate of income earned through real work ...

5. They've Contributed Little to Society
The richest individuals and corporations have shown little regard for the majority of Americans who depend on sound financial management for their economic security. According to sources such as the New York Times and ProPublica, Wall Street firms including JPMorgan, Citigroup, Bank of America, and Goldman Sachs have been repeatedly charged with fraud only to avoid punishment by paying a fraction of their profits in fines ...

What all of this points to is that many of our modern "rugged individualists" do NOT represent the go-it-alone market entrepreneur many like to believe exists and dominate our market system. When it comes to making the magic of the market work, there are numerous (and I mean numerous) factors at work.

You can read Bruchheit's entire piece, with links, here.

- Mark

Friday, April 13, 2012


Over a year ago I wrote an op-ed piece describing what Republicans believed were the causes behind the 2008 market collapse. I wrote how the GOP members of the Financial Crisis Inquiry Commission (FCIC) issued a "primer" that deliberately left out the words "Wall Street," "deregulation," "shadow banking," and "interconnection."

I then asked "can you imagine getting handed a welfare fraud case then deciding not to use the words 'welfare' or 'fraud' during the investigation"? This kind of thinking is a blueprint for disaster ...

What we learned from the GOP sponsored report is that republican FCIC commission members - which included Bakersfield's own Bill Thomas - are more interested in establishing a political narrative than finding the truth. Their report went out of its way to blame the government for the reckless gambling and greed pursued by private investors and Wall Street.

Simply put, the Republican report on the 2008 market collapse was a stooge-like hack job that was deliberately designed to mislead and confuse the public.

And the GOP members of the FCIC were more than happy to drive America into it's little cul-de-sac of ignorance.

Well, brace yourselves. We have it's functional equivalent; only this time it deals with the health care legislation passed by the Obama administration. And it involves another GOP attempt to deliberately confuse the issue.

In this case a Mr. Charles Blahous was appointed to serve as one of the Republican trustees of the Medicare and Social Security programs. As a board member of Medicare Mr. Blahous recently issued a report that said President Obama's health care program would cost more money than the CBO originally estimated. His report was published through the Mercatus Center (yes, another conservative Koch-funded center). Blahous claimed:

President Obama’s landmark health-care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation’s budget. 

Stop the presses ... heady stuff, don't you think? Think again.

Blahous achieves his smoke & mirrors report by using a simple accounting trick. Without getting into the details (it's quite confusing) the logic is akin to you leaving a job that pays $25,000 a year to go to college, then having your neighbor ignore the new better paying job you have lined up to say, "Look at how much money you lost out on by going to school ... going to college actually cost your money. You're a loser for throwing all that money away."

Yeah, the story is a bit more complicated, but the logic is really that silly.

But it doesn't matter. Blahous' report made the papers, which included the Washington Post. Mission accomplished. Time for a toast ...

At the end of the day, we all need to recognize that many policymakers on the right have had serious trouble with math, the truth, simple facts, understanding budgets, and even following the law. It's almost as if the laws of logic and math don't apply in their universe.

Then again, what do you expect from a political party that actually produced a budget with no numbers ...

- Mark

UPDATE: I received a comment on the health care claims of the Obama administration. In a few words, the commentator cites a conservative blog to make the claim that the Obama administration is double-counting. This explains why their savings projections over the long haul look so strong. Ergo, everyone deceives, including Obama. Two wrongs make a right (wrong?), so nobody wins. Yay. Obama lies.

However, there's a problem. The double counting argument is an old one and has been debunked on numerous occastions.

Perhaps the best way to explain how the math is done, and why someone might think they can make a double counting charge is that they don't understand that "when a baseball player hits a home run: it adds to his team's score and also improves his batting average. Neither situation involves double-counting."

Put another way, there's no sea legs to the double counting whale of a story used by the GOP and conservative pundits. It only has a shelf life because conservative blogs, the far right noise machine, and the GOP need ammo - true or false - to make sure President Obama is a failure and liar in the eyes of their audience and constituents.

Anyways, I'm not publishing the comment from the writer because the guy who wrote is actually a nice guy, and friend from another life. But here's my response to him.
... I could post your comments, but it has several problems. First, the CBO report you cite is from a 2009 conservative blog post. It's primary message says that a CBO memo, which is cited by the Chamber of Commerce, does not buy into President Obama's accounting methods. If you go to the link [on the blog you cite] the Chamber post is no longer available. Not good. But this isn't the real issue. One of the problems with relying on these blogs is that they don't tell you that what you're stating about the accounting is not - and has not been - unusual. Dems and Republicans have used these accounting methods for years, which the CBO has signed off on, and confirms. If you had a CBO report saying otherwise this would make a difference. Instead, you cite a blog that cites another blog, which no longer has the link to the 2009 Chamber of Commerce post (and link) it cites. If you want me to post your comments anyways, I'll do so.

Thursday, April 12, 2012


This is a follow up to my earlier (Tuesday) post "One Source of Corporate Profits" ...

Since the early-1980s the manufacturing sector in America has produced more and more with fewer workers.

Does this mean workers on the factory floor who are helping to produce more are making more money?

No ...

When you consider that the very adaptable guy on the shop floor has had as big a hand increasing the productivity of America's manufacturing sector (as other factors) one has to wonder why the American worker is not being compensated in a way that matches the productivity gains of their industry.

Put another way, someone has be be getting the financial gains the modern worker is helping to produce but is not seeing in their wages.

Throw in the fact that corporate America's percentage contribution to national revenue over the past 60 years has been drastically reduced, one really doesn't have to ask why corporate profits (and CEO salaries) are so high ...

- Mark

Tuesday, April 10, 2012


"... every shilling with which they overburden the inferior number, is a shilling saved to their own pockets."

- James Madison, Federalist #10.

- Mark

In the FYI Department: Corporate taxes as a percentage of government revenue actually started dropping (to 27.3%) by 1955. Corporate taxes as a percentage of GDP (yes, there's a difference) dropped from 6.1% in 1952  to about 1.3% in 2011. Guess who gets to make up the difference?

UPDATE: And let's not forget this ... 26 corporations paid no federal taxes between 2008 and 2010 in spite of $205 billion in pretax profits.

UPDATE II: For your friends who don't believe anything unless it's on Fox News, here's the amount of revenue by source since 1934. Be sure to have them explain to you why corporate tax receipts have effectively dropped (collapsed?) as a source of revenue while individual income tax receipts and social insurance/retirement receipts  have climbed over the years. Then ask them what affect this might have on corporate profits. Better yet, ask them how this might impact yearly budgets, and our national debt.

Saturday, April 7, 2012


Get government off my back? Hardly (as I've pointed out previously). Check out what this republican business owner thinks of government supported Ex-Im Bank lending programs ...

“There’s not a bank in the United States that’s going to loan money to that customer of mine in Argentina to buy my airplane,” said David Ickert, vice president of finance at Air Tractor, which makes crop-dusting and firefighting airplanes in Olney, Tex. “There is not a free-market system that operates like that. It does not exist. We need the Ex-Im Bank, period.”

Long story short? Industry, Wall Street and all types of business owners work the system in order to make an extra buck. From subsidies to favorable legislation and bailouts, they all work to sustain our "free market" system. Getting certified as a certain type of business helps too. Here's a partial list of what helps qualify you as a small businesses, which are necessary for government subsidies.

Read what other private sector republicans really think of government assistance, when it comes to their business interests, here.

- Mark

Wednesday, April 4, 2012


First we had Ronald Reagan’s budget projections. It relied on budget math that resembled - as George H.W. Bush (President #41) so eloquently put it - "voodoo, economics." It was some serious voodoo.

Reagan nearly tripled our national debt, and cleared the path for the gradual deregulation of Wall Street.

Then we had George W. Bush (President #43). He low-balled the actual cost of tax cuts, lied about the costs of the Medicare Part "D" programs, and misled everyone about the costs for his reckless wars of choice. He liked to pretend the costs would not be permanent, then stood by as they became permanent. He left office playing possum while a deregulated Wall Street ran herd over America in 2008.

We're still paying the price. Nice.

Then we had the GOP's infamous budget with no numbers in 2010. Yeah, that's right. A budget with no numbers. Perhaps it's because they can't do the math. At least it was balanced, right?

Anyways, now we have Congressman Paul Ryan, who has a long history of living in a financial dream world. Once again he's proposed a completely irresponsible budget based on Alice in Wonderland projections. To be sure, Ryan claims to have a secret plan to raise trillions of dollars in revenue. But then - like Joe McCarthy during the 1950s - he refuses to let the rest of America in on his top secret information.

The suspense is killing me.

Still, our Republican-led Congress went along with Paul Ryan's budget nonsense, and passed his make believe budget along party lines. Incredible.

No wonder President Obama is calling Ryan's budget plan a Trojan horse. Like the GOP's plan from last year, its designed to transfer more money to the rich (with more tax cuts), while gutting America's social contract with the middle class (the same one that allowed Rep. Ryan to accumulate enough social security money from his Father's death to fund his years at a public college).

You can read all about Ryan's budget nonsense here. Or, to save you some time, you can just read this ...

My question is this: Why does anyone take these guys seriously when it comes to budgets?

- Mark

Monday, April 2, 2012


I've been saying this for some time now. The Federal Reserve has been helping to manage and keep our economy afloat for years. In the modern era, when the Federal Reserve (i.e. the Fed) intervenes in the economy it does so in ways that props up the market, which helps keep our economy moving along. It did so with trillion dollar money dumps immediately after the market collapse of 2008. It continues to do so with other market supporting tools today.

The problem with their actions is that they are not being done to clean out the market imperfections that brought us the 2008 market collapse. Instead, we're getting market infected band aids that are simply masking larger problems.

This is a distinct shift from the #1 job of any central bank, which is to guard the integrity of the currency.

Helping us to understand the Fed's actions is this article, "Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates." In the article, authors Eric Swanson and John Williams demonstrate that Fed interest rate policies, and their purchases of bonds and securities, have been very effective at managing market expectations. This has worked to keep our economy moving along, as I've pointed out many times (with the Fed's Quantitative Easing I, Quantitative Easing II, and Quantitative Easing III  programs).  
These activities have worked so well that ordinary Americans not only can't see that there is no real free market, but they no longer care to look for the man behind the curtain.
The problem with this is that we now have the appearance of normalcy, so we keep on dancing towards Emerald City, as if everything is fine. 
But things aren't OK. We're living off of borrowed time. History's whispering in our ear, but we don't seem to see or care about the coming calamity.

I'll have more to say about this in a coming post, later this week.

- Mark

UPDATE: The CEO and co-CIO of PIMCO, Mohamed A. El-Erian, agrees with me that market valuations are dependent on central bank policies. Specifically, what's been helping to keep markets afloat are the money dumps (or, as El-Erian puts it, the "aggressive provision of liquidity") from the Federal Reserve and the European Central Bank.