Romney’s Finances
I think Paul Krugman touches a nerve today. So it’s worth passing along. His op-ed today points at the heart of our current problems.
This is a theme I have been bashing away at myself. Perhaps not so eloquently.
The stark contrast between the fortunes of Romney Senior and Romney Junior stand as vivid reminders of how the economy has changed in just bone generation.
For the generation making a living back in the immediate post war era methods and attitudes were different. They look positively quaint form today’s cynical and jaundiced viewpoint. Romney senior made money the old fashioned way. He led a manufacturing company, built its profits, expanded its workforce, and paid his taxes along the way. When he ran for public office he was transparent and forthcoming about his fortune, released information in abundance, and was clear about his fortune. He was both politically and morally conservative.
Romney junior could not have migrated further from those ideals.
He is both politically and morally ambivalent. His fortune was made not in building manufacturing, but in downsizing, outsourcing, and otherwise destroying it. He has evaded transparency by only making public one year’s worth of tax information, and then only begrudgingly. He has hidden his fortune from public view and, indeed, from the view of the tax authorities. He has employed every dodge available to him. I am sure those dodges are legal. I know they are not moral.
The most revealing aspect of Romney junior’s attitude towards finance is the astonishing IRA account he has. For those of you who are unaware of what an IRA is let me explain: IRA in this context stands for Individual Retirement Account. Such accounts are designed to allow taxpayers to save a modest retirement next egg by setting aside a small tax free amount each year. So the amount going into a person’s IRA reduces their taxable income. The money only becomes taxable when the person withdraws it later in life. The notion being that a retiree generally has a lower average tax rate than a fully employed worker so there is a tax incentive to save in an IRA. Here’s the main point: the legislation took into account that setting up tax sheltering accounts could be a big break for the wealthy and since the target for IRAs were lower income earners who might otherwise find it hard to save for retirement it put a cap on them. There is an annual cap on how much income can be sheltered. Because of this IRA’s are viewed as a middle class product.
Romney has an IRA account. Fair enough. He’s entitled to one. But it has around $100 million in it. Or, rather, it is so hard to tell exactly what he has in it that its valuation varies between $20 and $101 million. That’s a lot of years at the current rate of a maximum $5,000, (or $6,000 if you’re older than 50 at the time you save the money). It is many lifetime’s worth of savings at $5,000 a year. Many, many lifetime’s. A quick look at the tax code tells me that excess contributions to your IRA account are subject to a 6% tax per year as long as the excess remains in the account.
So how come Romney has such a large IRA account? Is he dutifully forking over 6% of the excess each year? Or has he exploited some loophole to park a ton of income in a shelter designed for the middle class? What do you think?
The upshot is this: no matter how legal everything Romney is doing and has done, and I imagine it stays within the law by a hair, he can make no claim to being a morally upright citizen. He is the poster child for his generation. They found ways of making fortunes by trashing the economy, by exploiting loopholes, by treading close to the edge of the law, and by employing clever financial gimmicks. along the way the undermined the economy’s ability to sustain sufficient growth such that everyone was lifted equally. They both created and encouraged greater and greater inequality. They syphoned off capital for themselves rather than put it to work building anything. They focused on the short term not the long term. They worked hard to capture entire sections of the economy for their own use.
And they see nothing wrong with this. Nothing.
To people such as Romney the economy is all fair game. Everything that can be bought and sold is either bought or sold. Nothing is beyond the marketplace. Non-financial values are subordinated to finance or set aside as reflections of a bygone, less efficient, era. The economy has become a great big playpen in which these privileged children can frolic and amass great wealth without actually advancing it at all. They have become the elite of an unproductive generation. Unproductive because its elite focused on acquiring wealth by extracting it from the existing business rather than by creating new business. Getting rich is a goal in itself, not a by-product of invention, innovation, flair, risk taking, or contributing to society as a whole. These are the new rich. They are the true entitlement mill stone around the economy’s neck. They are a burden on the rest of us. They don’t contribute much. But they sure as hell extract a lot.
Oh. And by the way: Romney has a variety of other “offshore” accounts. One or two in the Cayman Islands. All legitimate I imagine. After all once you’ve become used to offshoring jobs to get wealthy, why not just keep on offshoring? You may as well offshore the wealth too. It helps cut your tax bill. And we all know that paying taxes is so … well … so for the little people.
