Off and Out With Mitt Romney

In better America, Romney would be running for president on the strength of his major achievement as governor of Massachusetts: a health reform that was identical in all important respects to health reform enacted by President Obama. Massachusetts reform is working pretty well and has overwhelming popular support. In reality, however, Mr. Romney is doing no such thing, bitterly denouncing the Supreme Court for upholding the constitutionality of his own health care plan. His case for becoming president relies, instead, on his claim that, having been a successful businessman, he knows how to create jobs. This, in turn, means that however much the Romney campaign may wish otherwise, the nature of that business career is fair game. How did Romney make all that money? Was it in ways suggesting that what was good for Bain Capital, the private equity firm that made him rich, would also be good for America? And the answer is no. (source: Paul Krugman – NYTimes – 06/07/2012)

The truth is that even if Mr. Romney had been a classic captain of industry, a present-day Andrew Carnegie, his career wouldn’t have prepared him to manage economy. A country is not a company (despite globalization, America still sells 86% of what it makes to itself), and tools of macroeconomic policy, interest rates, tax rates, spending programs, have no counterparts on a corporate organization chart. Did I mention Herbert Hoover actually was a great businessman in the classic mold? In any case, however, Romney wasn’t that kind of businessman. Bain didn’t build businesses; it bought and sold them. Sometimes its takeovers led to new hiring; often they led to layoffs, wage cuts and lost benefits. On some occasions, Bain made a profit even as its takeover target was driven out of business. None of this sounds like kind of record that should reassure American workers looking for an economic savior. And then there’s business about outsourcing. Two weeks ago, Washington Post reported Bain had invested in companies whose specialty was helping companies move jobs overseas. The Romney campaign went ballistic, demanding, unsuccessfully, The Post retract the report on the basis of an unconvincing “fact sheet” consisting largely of executive testimonials. What was more interesting was campaign’s insistence that the Post had misled readers by failing to distinguish between “offshoring”, moving jobs abroad, and “outsourcing,” which simply means having an external contractor perform services that could have been performed in-house. Now, if Romney campaign believed in its own alleged free-market principles, it would have defended right of corporations to do whatever maximizes their profits, even if that means shipping jobs overseas. Instead, however, campaign effectively conceded that offshoring is bad but insisted outsourcing is O.K. as long as contractor is another American firm. That is, a very dubious assertion.

Consider one of Romney’s most famous remarks: “Corporations are people, my friend”. When audience jeered, he elaborated: “Everything corporations earn ultimately goes to people. Where do you think it goes? Whose pockets? People’s pockets”. This is undoubtedly true, once you take into account the pockets of, say, partners at Bain Capital (who, I hasten to add, are, indeed, people). But one of main points of outsourcing is to ensure that as little as possible of what corporations earn goes into the pockets of people who actually work for those corporations. Why, for example, do many large companies now outsource cleaning and security to outside contractors? Surely the answer is, in large part, that outside contractors can hire cheap labor that isn’t represented by union and can’t participate in the company health and retirement plans. And, sure enough, recent academic research finds that outsourced janitors and guards receive substantially lower wages and worse benefits than their in-house counterparts. Just to be clear, outsourcing is only one source of huge disconnect between a tiny elite and ordinary American workers, a disconnect that has been growing for more than 30 years. And Bain, in turn, was only one player in the growth of outsourcing. So Mitt Romney didn’t personally, single-handedly, destroy middle-class society we used to have. He was, however, an enthusiastic and well remunerated participant in the process of destruction; if Bain got involved with your company, one way or another, odds were pretty good that even if your job survived you ended up with lower pay, diminished benefits. In short, what was good for Bain Capital definitely wasn’t good for America. As I said at the beginning, Barack Obama campaign has every right to point that out.

Doubts Over Merkel’s Euro Path Grow at Home

Angela Merkel has long been able to count on opposition support as she charts her euro-crisis course. But, as dissent grows within her own ranks, the Germany’s center-left is becoming uneasy, and a prominent economist is fomenting a revolt against her strategy. Influential German economist Hans-Werner Sinn has always been something of a fly in the soup of Chancellor Merkel’s efforts to save European common currency. As head of Munich-based Ifo Institute, Sinn has tirelessly warned, with eurozone central banks owing Bundesbank upwards of €500 billion ($627 billion), Germany is in a precarious situation. «We are trapped», Sinn has been fond of pointing out. Still, with plenty of other economists eager to counter his doomsday prophecies, Sinn has been an easy fly to ignore. But his isolation may now be coming to an end. SPIEGEL has learned that Sinn, together with several other leading economists, is preparing a public appeal against resolutions agreed upon at most recent European Union summit. A draft of the appeal says Merkel was «forced into» agreement at meeting, held last Thursday and Friday in Brussels. In particular, Sinn and his allies are concerned about the trend toward the creation of a European banking union and allowing the euro bailout fund, European Stability Mechanism, to provide direct aid to struggling European banks instead of channeling money through governments and attaching strict austerity and reform requirements to it. Such a move, appeal states, means nothing less than the «collective accountability for the debts of banks in the euro system.» Because the sum of that debt is almost three times as high as euro-zone state debt, the draft continues, «it is virtually impossible to make taxpayers, pensioners and savers in the thus-far stable countries of Europe liable for that debt.» The summit made clear that EU is moving toward a banking union which, in exchange for emergency aid, would also include a European bank oversight authority and possible euro-zone-wide deposit guarantees. That, though, Sinn and his allies write, would inevitably result in bitter differences between financially solid countries in the north and nations in need to the south. «Conflict and discord with our neighbors is unavoidable». «Our children and grandchildren will suffer». Economist rebellion is telling. As long as Berlin was partnered with Paris in its efforts to introduce reforms to save the euro, Merkel could count on broad backing at home. Now that she appears to be losing ground to uprising led by Mario Monti and François Hollande, concerns about Germany’s ability to save euro on its own, voiced repeatedly by Angela Merkel herself recently, are rising. Germany’s center-left opposition, is demonstrating an increasing unwillingness to support Merkel’s strategy for plugging eurozone dike. That combined with the significant numbers of rebels within her own coalition, which pairs her conservatives with business-friendly Free Democrats, could spell danger to the chancellor in the near future (…..)

Link: http://www.spiegel.de/international/germany/euro-crisis-exposing-fault-lines-in-merkel-government-a-842739.html