Mitt’s Gray Areas

Once upon a time a rich man named Romney ran for president. He could claim, with considerable justice, his wealth was well-earned, that he had in fact done a lot to create good jobs for American workers. Nonetheless, public understandably wanted to know both how he had grown so rich and what he had done with his wealth; he obliged by releasing extensive information about his financial history. But that was 44 years ago. And the contrast between George Romney and his son Mitt, a contrast both in their business careers and in their willingness to come clean about their financial affairs, dramatically illustrates how America has changed. Right now there’s a lot of buzz about an investigative report in the magazine Vanity Fair highlighting the “gray areas” in the younger Romney’s finances. More about that in a minute. First, however, let’s talk about what it meant to get rich in George Romney’s America, how it compares with the situation today. (Paul Krugman – NYTimes – 09/07/2012)

What did George Romney do for a living? The answer was straightforward: he ran an auto company, American Motors. And he ran it very well indeed: at a time when the Big Three were still fixated on big cars and ignoring the rising tide of imports, Romney shifted to a highly successful focus on compacts that restored company’s fortunes, not to mention that it saved jobs of many American workers. It also made him personally rich. We know this because during his run for president, he released not one, not two, but 12 years’ worth of tax returns, explaining that any one year might just be a fluke. From those returns we learn that in his best year, 1960, he made more than $660,000, the equivalent, adjusted for inflation, of around $5 million today. Those returns also reveal he paid a lot of taxes, 36% of his income in 1960, 37% over the whole period. This was in part because, as one report at the time put it, he “seldom took advantage of loopholes to escape his tax obligations.” But it was also because taxes on rich were much higher in the ’50s and ’60s than they are now. In fact, once you include the indirect effects of taxes on corporate profits, taxes on very rich were about twice current levels. Now fast-forward to Romney the Younger, who made even more money during his business career at Bain Capital. Unlike his father, however, Romney didn’t get rich by producing things people wanted to buy; he made his fortune through financial engineering that seems in many cases to have left workers worse off, and in some cases driven companies into bankruptcy. And there’s another contrast: George Romney was open and forthcoming about what he did with his wealth, but Mitt has largely kept his finances secret. He did, grudgingly, release one year’s tax return plus an estimate for the next year, showing that he paid a startlingly low tax rate. But as the Vanity Fair report points out, we’re still very much in the dark about his investments, some of which seem very mysterious.

Put it this way: Has there ever before been a major presidential candidate who had a multimillion-dollar Swiss bank account, plus tens of millions invested in the Cayman Islands, famed as a tax haven? And then there’s his Individual Retirement Account. I.R.A.’s are supposed to be a tax-advantaged vehicle for middle-class savers, with annual contributions limited to a few thousand dollars a year. Yet somehow Mr. Romney ended up with an account worth between $20 million and $101 million. There are legitimate ways that could have happened, just as there are potentially legitimate reasons for parking large sums of money in overseas tax havens. But we don’t know which if any of those legitimate reasons apply in Mr. Romney’s case, because he has refused to release any details about his finances. This refusal to come clean suggests that he and his advisers believe voters would be less likely to support him if they knew the truth about his investments. And that is precisely why voters have a right to know that truth. Elections are, after all, in part about perceived character of the candidates, and what a man does with his money is surely a major clue to his character. One more thing: To the extent that Mr. Romney has a coherent policy agenda, it involves cutting tax rates on the very rich, which are already, as I said, down by about half since his father’s time. Surely a man advocating such policies has a special obligation to level with voters about the extent to which he would personally benefit from policies he advocates. Yet obviously that’s something Mr. Romney doesn’t want to do. Unless he does reveal the truth about his investments, we can only assume he’s hiding something seriously damaging. 


Acerca de ignaciocovelo
Consultor Internacional

3 Responses to Mitt’s Gray Areas

  1. Professor Uziel Nogueira says: For the first time ever, Prof Krugman makes a powerful and challenging case about Mitt Romney’s motivation for seeking the presidency: ” Has there ever before been a major presidential candidate who had a multimillion-dollar Swiss bank account, plus tens of millions invested in the Cayman Islands, famed as a tax haven? ” the question is, how does this argument will play out with the huge mass of American voters? Clearly, if the majority of American voters (the 99%) think Romney is running for president to preserve the status quo of the rich 1% (his own tax haven’s money), he’s already lost the election. However, what if Romney does convince the 99% that they could become rich like him? what if the American Dream is still alive and well in the mind of millions of voters? after all, millionaires have been elected for decades in the so-called democracies of Latin America. Italy did the same with Silvio Berlusconi and the US is no exception. Romney is a smart guy and knows quite well what the majority of voters are looking for in the next president: stop the economic decline, eliminate the high unemployment and create well paid jobs. In other words, voters are looking for hope of bringing prosperity back to the land. Many Americans, including Democrats, believe Obama has lost the opportunity to restore prosperity and will vote for Romney. The game ain’t over yet. In fact, it is just starting for the millionaire –Swiss bank account– Mitt Romney.

  2. Professor Uziel Nogueira says: Mitt Romney will be voted by millions of (thinking) retirees and savers, regardless of their political affiliation. Their financial goal is aligned with those of Romney. As President, the GOP candidate will do the best to protect the value of his fortune denominated in dollars. The only way to do that is a monetary policy that raise interest rates and strength the dollar. Mr. Bernanke will certainly oblige to his new political master. Millions of savers, suffering from negative interest rates under Obama, will benefit from Mitt Romney as president.

    In times of deep economic crisis, financial self interest becomes a powerful incentive for millions of voters.

  3. Linzt: Mr. Nogueira, your views is very right wing. Mitt Romney is a big liar, manipulated, and have Zero interest to help the economy. His interests is only for himself, and the Masters. The GOP will destroy every foreign policies, just because of their Arrogance and Ignorance. The monetary policies, will not survive, Bernanke did not act, because….. The vultures, financial institutions and Wall Street, dictates everything. Oh.. ! I miss my beatiful Island.


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