Is Mitt Romney a Vulture Capitalist?

Mitt Romney as a result of yesterday’s convincing defeat of Newt Gingrich has again established himself as the odds-on favorite to win the Republican nomination for president.  But even so, Gingrich has vowed to stay in the race until the convention.

One of the issues raised by Gingrich is about Mitt Romney’s former position at Bain Capital.  Romney has cited his business background as making him uniquely qualified to create jobs.  Gingrich’s response was to ask how Romney can create jobs when at Bain Capital, he made a career out of destroying them.

If you haven’t already, I invite you to check out the 28 minute video When Mitt Romney Came to Town.  It is compelling watching but in fairness, it was produced by Newt Gingrich’s super PAC so it may well be tainted with bias.

But what is the truth behind what Romney’s detractors call Vulture Capitalism?  Because these transactions are so complicated, it’s hard to say for sure.  Romney says that he created 100,000 jobs.  But he hasn’t presented any supporting evidence.

A Wall Street Journal article Romney at Bain: Big Gains Some Busts tries to come up with some answers.

Amid anecdotal evidence on both sides, the full record has largely escaped a close look, because so many transactions are involved. The Wall Street Journal, aiming for a comprehensive assessment, examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain's involvement and shortly afterward.

Among the findings: 22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost.

Of the 10 businesses on which Bain investors scored their biggest gains, four later landed in bankruptcy court.

What is perhaps the most controversial is Bain’s use of the Leveraged Buyout which is defined and explained in this Investopedia article.

Definition of 'Leveraged Buyout - LBO'  

The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.  

Investopedia explains 'Leveraged Buyout - LBO' 

In an LBO, there is usually a ratio of 90% debt to 10% equity. Because of this high debt/equity ratio, the bonds usually are not investment grade and are referred to as junk bonds. Leveraged buyouts have had a notorious history, especially in the 1980s when several prominent buyouts led to the eventual bankruptcy of the acquired companies. This was mainly due to the fact that the leverage ratio was nearly 100% and the interest payments were so large that the company's operating cash flows were unable to meet the obligation.  

One of the largest LBOs on record was the acquisition of HCA Inc. in 2006 by Kohlberg Kravis Roberts & Co. (KKR), Bain & Co., and Merrill Lynch. The three companies paid around $33 billion for the acquisition. 

It can be considered ironic that a company's success (in the form of assets on the balance sheet) can be used against it as collateral by a hostile company that acquires it. For this reason, some regard LBOs as an especially ruthless, predatory tactic.

There seems to be a pattern that the companies that failed did so because of overwhelming debt imposed on them by the acquiring company.  In addition, companies with these large amounts of debt have far more difficulties dealing with down markets.

But what was the idea of Bain taking over these companies?  Unless one is incredibly naïve, it was first and foremost with the idea of making money (preferably big money).  If workers lost their jobs and perhaps their pensions from their companies going bankrupt, that’s just a part of capitalism where according to Romney, there have to be winners and losers.  But all too often Bain made a handsome return from management fees whether the company did well or not.

While there is no accusation of Romney and Bain doing anything illegal, there is a question of conscience and empathy.  If I were to cause the loss of hundreds or even thousands of jobs to make a nice payday, I would feel terrible about it.  But then I’m just a bleeding-heart liberal.  Mitt Romney doesn’t seem to even give it a second thought.

So what this is ultimately about is whether Mitt Romney has compassion for those of us who are not wealthy like him.  Today, he make a curious remark saying that he is not concerned about the poor since they already have a safety net while at the same time supporting the Ryan Budget Plan which would not only make cuts in that same safety net, but also lower taxes on capital gains to zero.  So for those who are outraged at Romney paying only 14% on his submitted income tax return, his taxation rate under the Ryan Plan that he favors would be close to zero on all of the millions that he earns mostly from capital gains.

Assuming he gets the Republican nomination, voters this fall will have to decide if Mitt Romney is looking out for the interests of the 99% or the 1% he is a part of.  I think I know!

Our Concentration of Wealth

The increasing concentration of wealth by the top 1% in the US has been talked about and was the subject of the Occupy demonstrations on Wall Street and elsewhere and summarized nicely in this video presentation.  But does it really make much of a difference to our prosperity as a whole?  I believe it does.

To start with, let’s show an example of the difference of wealth in the hands of ordinary middle class people as opposed to the wealthy.

Say we have 100 families each with a yearly income of $50,000.  This allows each of them to buy or rent somewhere to live, buy at least one car, a TV, a cell phone, food at the supermarket and occasionally a restaurant and perhaps a vacation among other things.  These are purchases that keep the economy going.

Now if we take that same $5 million away from those families, perhaps from outsourcing their jobs and give that money to the CEO who runs the company, what happens?

For one thing, the families now without a steady income will start to severely curtail their spending which puts a strain on the businesses trying to sell to them.  In the meantime, the CEO who gets the $5 million is not likely to spend much of it because he already has everything he wants.  Even if he wanted to spend it, he has no need for 100 houses, cars, TVs, etc. that the 100 families would buy which greatly decreases demand.

And make no mistake about it.  The high unemployment we are going through is mainly about lack of demand for goods and services.  Although corporations are making handsome profits, it is not resulting in the hiring of workers because there is no need for additional capacity due to the lack of demand.  This blows a hole in the label of “job creators” given to the wealthy.

In addition to its contribution to our present unemployment, there are a few other adverse effects that this concentration of wealth has brought us.  One is that the wealthy have far more control over our elections than in past years.  Yes, money has always been part of elections, but with the Supreme Count decision Citizens United, unlimited amounts of money can go into political advertisements and the source of the money doesn’t even have to be revealed.

Another is that it is difficult to run an effective campaign for Congress without already being wealthy which most of our Congressmen are.

It is not difficult to understand why voters feel that members of Congress don't understand or, even worse, don't care about their concerns. How could lawmakers with wealth, based on their own cushy circumstances, have similar feelings to ordinary Americans on jobless benefits, inheritance taxes, bank bailouts and income taxes?

Perhaps worst of all is the class disparity we are now dealing with between the haves and have-nots.   Most Americans have had positive feelings about the wealthy because they envisioned themselves as possibly becoming rich themselves.  After all, this was America, the Land of Opportunity where as former presidential candidate Herman Cain was quoted as saying "If you're not rich, blame yourself."

But an interesting essay in Esquire, We Are Not All Created Equal had these words about what it calls a new reality.

The Great Outcry that has filled the country with inchoate rage is the bloody mess of this fundamental belief in the justice of American outcomes crashing headfirst into the new reality. The majority of new college grads in the United States today are either unemployed or working jobs that don't require a degree. Roughly 85 percent of them moved back home in 2011, where they sit on an average debt of $27,200. The youth unemployment rate in general is 18.1 percent. Are these all bad people? None of us — not Generation Y, not Generation X, and certainly not the Boomers — have ever faced anything like it.

And if it’s that difficult for young people coming out of college, what is it like for older workers who have always had a more difficult time in the workplace dealing with age discrimination?

The fear here is that the huge concentration of wealth by a few is making it more and more difficult for everybody else to enter and stay in the middle class.  What can we do?

There are solutions that we can try but needless to say, those politicians who are supported by the wealthy will be opposed to them.  But here goes anyway.

First, we need to repeal the Bush tax cuts for the wealthiest Americans.  Our treasury needs that revenue.

Secondly, we need to stimulate the economy by spending money on our decaying infrastructure.  This puts people to work and like in the example above with the 50 families, they will spend money that puts others to work.  With interest rates being so low, it will never be cheaper.

And finally, what can we do to bring at least some of our manufacturing back to the US?  Admittedly, it’s difficult to compete with the salaries in China and elsewhere.  But would the cost in labor make such a huge difference in the end cost of the product?  Or put another way, would US consumers pay a little more for something that is labeled as ‘Made in the USA’?  I think the answer is Yes.

Sam Walton proudly displayed ‘Made in the USA’ goods at his Wal-Marts when he was alive.  But since then, it has used its significant buying power to force manufacturers to close plants here and source in other places like China as detailed in this PBS Frontline Documentary  Is Wal-mart Good for America?

While these practices to lower prices made Wal-Mart grow, mass retailers like Wal-Mart and Sears have not been doing so well lately (as opposed to upscale retailers such as Nordstrom).  Perhaps there will be a realization that low prices are only so good until too many of their customers lose their jobs as a result.

But some of the jobs outsourced to China are actually coming back to America.  But it’s a good news, bad news scenario as detailed in the NYT article U.S. Manufacturing Gains Jobs as Wages Retreat

Some manufacturers are hiring again in America, softening a long slide in factory employment. But for a new generation of blue-collar workers, even those protected by unions, the price of employment is likely to be lower wages stretching to retirement.

The wages for the new hires [at General Electric], however, are $10 to $15 an hour less than the pay scale for hourly employees already on staff — with the additional concession that the newcomers will not catch up for the foreseeable future. Such union-endorsed contracts are also showing up in the auto industry, at steel and tire companies, and at manufacturers of farm implements and other heavy equipment…

So much for the belief in greedy unions causing our problems. With the threat of moving production back to China, GE has its workers over a barrel.  They either accept a job whose pay doesn’t allow a middle class lifestyle or go without a job.  Meanwhile, the CEO, the Board and stockholders at fabulously profitable GE enjoy the profits while the workers are squeezed out of every dollar possible.  Another example of wealth going to the top.


What we take from all of this is that we cannot have a strong economy without a strong middle class to provide enough demand for our goods and service.   The wealthy can only spend so much.  After all, how many houses or cars can one person use?  And those at the bottom can only spend at a subsistence level which does not make produce enough demand. 


With many in the middle class struggling, 2012 is an important election year for the wellbeing of our people.  Right now there is a battle going on for control of our government.  On one side are the Republicans who are representing the interests of the wealthiest 1% who already have an inordinate amount of power.  On the other side are the Democrats who (usually) tend to look out for the interests of the other 99% of us.  When President Obama and the other Democrats are running for office this year, all they have to do is ask the voters whether they want someone looking out for the interests of the 99% or those of the top 1%.  That should help a lot of those undecided voters make up their minds! 

Do Businessmen Make Good Presidents?

Vote for me!  Unlike those other guys who are politicians, I’m a businessman.  I’ll run the government just like a business.

George W. Bush used his MBA from Harvard to boast of his business prowess.  And more recently there is Mitt Romney who touts his experience at Bain Capital taking over and liquidating companies and not his time as the governor of Massachusetts to boost his qualifications for the presidency.

And then there is Herman Cain who has no experience in elected office running for president based on his experience as the CEO of Godfather’s Pizza.

Is business experience in itself adequate preparation for running a government?  To begin to answer that question, it has to be pointed out that a business and a government are very different. 

A business takes in money to make as much profit as possible.  A government takes in money in the form of taxes to provide services for its citizens.  Of course, it is beneficial to spend the tax receipts as efficiently as possible.  But while a business can and does cut workers to meet the bottom line, a government shouldn’t indiscriminately cut government workers and recipients who rely on the safety net programs just to try and balance a budget.

And then there is Herman Cain’s abysmal ignorance of foreign affairs as shown in his beki beki stan stan quote along with the embarrassing silence when asked a question about Libya.  I believe much of this is the mentality Cain has as a former business CEO.  As the CEO of Godfather’s Pizza, he likely didn’t have to be familiar with all of the details of how the pizza was made.  Other people who worked for him were in charge of that.

So it’s easy for him to say that if he wins the presidency, he will surround himself with advisors to help him so he doesn’t need to know about foreign policy or much of anything else.  But running a government is different.  Especially for a president, decisions on foreign policy can mean the difference between life and death for people.  More importantly, if a presidential candidate is not curious enough to learn about the issues he may face, how will he know enough to intelligently choose who will be advising him?

After 9/11, George W. Bush relied on Donald Rumsfeld who advised him to invade Iraq based on questionable WMD intelligence – a decision that was a disaster.  As bad as that was, can you imagine Herman Cain dealing with a catastrophe the likes of 9/11?

But when questioned about his lack of foreign policy knowledge, Cain responded that “we need a leader, not a reader”, a line he may have gotten from The Simpsons.

Ignorance is not bliss.  We need candidates who have a working knowledge of the issues of the day.  If that means they are politicians and not businessmen, so be it.

But ignorance is not bliss for voters either.  It’s easy to think like Cain and say that one will rely on the experts to make decisions for us.  But experts disagree, sometimes strongly.  While we cannot all expect to become experts, we can at least become critical thinkers by at least acquiring a basic understanding of the issues and expecting no less of those who want to lead us!

Taking to the Streets

With the Occupy Wall Street demonstrations gathering momentum spreading from city to city, one cannot help but marvel how remarkable these are.  Unlike in other countries like France where mass demonstrations against the government are routine, many Americans normally display indifference toward the political process.  Even in 2008 when the country was excited over the prospect of electing its first black president, the voter turnout was only about 56%. 

And in off-year elections, turnouts are much smaller. Perhaps there is an attitude here in the US that no matter whom we vote for, it really doesn’t make that much of a difference in our daily lives.  And if voting is too much trouble, certainly demonstrating in the streets is more than most people want to do.  But having said that, it’s hard to forget the demonstrations against the unpopular Vietnam War where unlike for our present wars, people were drafted to serve so indifference was not an option.

Our problems with unemployment and uneven distribution of wealth have been going on for some time now.  But most of the distress has been shared by the older people in the workplace.  After a career earning a decent living, many of these people have been discarded as being useless to the job market.  But while these people have found the road to re-employment to be a rocky one, the young college graduates have had far fewer problems – until about the last couple of years.  Now many of our college graduates are finding that they have no professional employment opportunities in their chosen fields after earning their diplomas.  And now they are on the hook for paying off sometimes massive college loans.   While those at the top of the economic food chain are doing quite well, their path to a middle class lifestyle has been shut off.  So once again indifference is not an option.

And while many compare the Occupy Wall Street movement with the Tea Party protests, there are significant differences.  Most notably, the Tea Party protests have been heavily financed by those on the political right, especially the Koch Brothers.  For more on this, please check out a previous posting The Koch Brothers - The Most Powerful People You've Never Heard Of.  With this financial support, the Tea Party has been able to work the political system to their advantage.

By contrast, the Occupy movement has been about calling to our attention that our political system is broken.  The power being wielded by those with the most money to buy control of our government is overshadowing any control that ordinary citizens have by way of the vote.  It has even led to outside observers such as the German magazine, Der Spiegel to ask Has America Become an Oligarchy?

The Occupy Wall Street movement is just one example of the sudden outbreak of tension between America's super-rich and the "other 99 percent." Experts now say the US has entered a second Gilded Age, but one in which hedge fund managers have replaced oil barons -- and are killing the American dream.

At first, the outraged members of the Occupy Wall Street movement in New York were mainly met with ridicule. They didn't seem to stand a chance and were judged incapable of going up against their adversaries, Wall Street's bankers and financial managers, either intellectually or in terms of economic knowledge.

Indeed, they have given shape to a development in the country that has been growing more acute for decades, one that numerous academics and experts have tried to analyze elsewhere in lengthy books and essays. It's a development so profound and revolutionary that it has shaken the world's most powerful nation to its core.

Just for this alone, we owe a debt of gratitude to the courageous people who are participating in these demonstrations and are in some cases enduring police brutality and pepper spray for a cause they believe in – a cause called democracy!

Repeal Obamacare?

In watching the Republican debates, one thing sticks with me more than anything else.  When the discussion moves onto the subject of healthcare, the mantra that is repeated over and over by the candidates is “Repeal Obamacare”.

I get it that they do not like the president’s healthcare reform bill that was signed into law.  But the fact is that it passed not only in the House but also in the Senate, not just by a majority but a supermajority of 60 to avoid a filibuster.  Instead of accepting it as the law of the land and trying to make it work, the Republicans, especially the Tea Partiers want to repeal it.  Government does not work well when laws are passed and then are repealed as soon as the other party regains power.  But for people who hate government, this helps to reinforce their narrative that government doesn’t do anything well.

But more importantly, the “Repeal Obamacare” demand begs the question, “And replace it with what?”  It’s a question I have yet to hear from any of the debates’ moderators.

A number of the law’s provisions have already gone into effect, such as the ability of children to have access to health insurance without being denied for preexisting conditions.  And with so many recent college graduates unable to secure jobs that have health benefits, the ability to add them to their parents’ insurance polices up to age 26 means that they are not forced to go without health insurance.  Would they like to repeal these provisions?

One of the big gripes is the individual mandate that requires everybody to buy insurance.  But without it, the whole system collapses.  Starting in 2014, everybody will be able to obtain health insurance without worry about preexisting conditions.  This is a vital part of the law so that everybody can be covered.  But we cannot realistically force insurance companies to accept all of the sick people without adding all of the healthy people to the risk pool.  And with the price of health insurance being too much for many poor people, we cannot make them buy coverage without subsidizing the cost of the insurance for them.

But still there is the question of whether this law will really work once everybody can enroll in 2014.  Many of those on the political left feel that the law may be fatally flawed without the inclusion of a so-called public option where the federal government offers insurance to keep the private insurers honest in their pricing, a provision that the insurance industry successfully fought to keep out of the law.

So what has happened since the passing of the law?  We now have Health Insurers Pushing Premiums Sharply Higher

Major health insurance companies have been charging sharply higher premiums this year, outstripping any growth in workers’ wages and creating more uncertainty for the Obama administration and employers who are struggling to drive down an unrelenting rise in medical costs.

The higher premiums are particularly unwelcome at a time when the economy is sputtering and unemployment is hovering at about 9 percent. Many businesses cite the cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. The cost of family coverage has about doubled since 2001, compared with a 34 percent gain in wages.

Consumer advocates contend that the latest requests exceed any documented rise in costs, with some companies enjoying three years of record profits and paying millions of dollars in dividends and executive compensation.

And therein lies the rub when entrusting our system solely to the private insurance market.  Corporations like these exist for one and only one purpose – to make as much profit as possible.  While Medicare has an overhead of about 3-4%, private insurers can have an overhead of over 20%, much of that money going to profits instead of providing healthcare.

If health insurance premiums get any more out of control, we may someday be forced to add the public option that was left out of the original law.  Or better yet, offer Medicare for everybody, otherwise known as single-payer.

But let’s get real.  With the present anti-government zeal of those on the right, trying to improve the present law may well be impossible unless the 2012 elections give control of the Congress along with the White House to Democrats.  And the law doesn’t really kick in for most Americans until 2014 – assuming the law doesn’t get overturned in the meantime by a conservative Supreme Court as unconstitutional because of the requirement that everybody buys insurance.

Meanwhile, we still have about 50 million Americans uninsured, a figure that is inflated according to those on the right but in any event is a huge number of uninsured.  What happens to them if the law gets repealed or overturned?

If that happens, we may have no other workable option to provide universal health insurance coverage at an affordable cost than by eliminating the insurance middle-men with single-payer Medicare for all.

It gives credence to Winston Churchill who once said that 'You can always count on Americans to do the right thing – after they’ve tried everything else!'

Should We Take Rick Perry Seriously?

Recently, David Brooks, one of the conservative columnists at the New York Times wrote an interesting op-ed President Rick Perry? which concluded:

[Mitt] Romney might be able to beat back the Perry surge. In the meantime, it’s time to take Perry seriously. He could be our next president.

For those of us who are not part of the Tea Party right, Governor Perry is an interesting if not scary curiosity.  He is one who has such an intense dislike of our federal government that he once suggested the secession of Texas from the US.  Now he wants to head that same federal government.

So should we take Rick Perry seriously?  Could he really be our next president?  I say ‘yes’ to the first question and ‘not likely’ to the second one.

Certainly his opponents have to take him seriously.  For right now, he is being given free reign by his opponents, especially former Republican front-runner Mitt Romney in the hopes that he will self-destruct before having to take him on.  That may well happen.  But this passive strategy of underestimating Governor Perry could well backfire, especially if the unemployment rate continues at or near this high rate through the 2012 election as is being forecasted by many economists.  So Romney now and if Perry gets the nomination, President Obama will have to take him seriously enough to call him out on some of his extreme views.  Certainly badmouthing a beloved program like Social Security as a Ponzi scheme is not going to endear him to many people.

At present, Governor Perry has taken a sizeable lead in the polls over his Republican opposition.  Does that mean that he is a shoo-in for the nomination?  Not necessarily.

Perry has certainly created a lot of buzz around his campaign.  That’s nice but it doesn’t necessarily lead to victory.  Sarah Palin created a lot of buzz for John McCain’s floundering campaign when he picked her as his VP running mate.  Everybody wanted to have a chance to interview Sarah.  What outrageous thing would she say next?  But eventually the novelty wore off and her lack of experience and knowledge became a liability to McCain’s campaign.

More recently, Michele Bachmann was the ‘flavor of the month’ after her win in the Iowa Straw Poll.  She was on just about every political interview show as we wondered what would happen to our country under a President Bachmann.  Then Perry came along and she has now been overshadowed in the polls.  If buzz will win the Republican nomination, then he has a clear edge over Romney.  But the mainstream Republicans may well decide that Romney would be more electable in the general election and go with him.

But even if Perry gets the nomination, he has provided a tremendous amount of ammunition that can be used against him in the general election. 

His book Fed Up! published only last November presented a number of controversial (at least to those who are not Tea Partiers) views by someone who at the time had no stated intention of running for president.  But with these views in print, he will eventually have to explain himself in response to the many questions that voters and the media will undoubtedly have waiting for him.

He is running on his record as governor of Texas.  But as detailed in a recent NYT editorial, Gov. Perry's Cash Machine he has taken crony capitalism to a new level.

The exchange of campaign contributions for government contracts, favors or positions is all too common in Washington and around the country. It has been developed to an especially high art — or more to the point, a low art — by Gov. Rick Perry in Texas. For a presidential contender who insists that big government is the country’s biggest problem, it is particularly cynical.

There are nearly 600 boards, commissions, authorities and departments in Texas, many of which are of little use to the public and should have long been shut down or consolidated. They are of great use to the governor, who more than any predecessor has created thousands of potential appointments for beneficent backers and several pro-business funds that have been generous to allies.

So much for the virtues of small government.  And while “pay to play” is considered business as usual by many in Texas, he will have a lot of explaining to do now that he is under the national media spotlight.

But no matter how many disagreeable things we may find out about Gov. Perry during the campaign, if he wins the nomination, President Obama will have to do more than simply ask people to vote for him because of Perry’s negatives.  He must give enough people positive reasons to vote for him — especially on the all-important issue of jobs.

Soon we will hear President Obama’s plan for addressing our job crisis.  And with the economy in such terrible shape and all of the suffering that entails, he needs to present a bold plan that will give us hope that things will get better someday.  Sure, the Republicans in Congress will oppose just about any idea he comes up with.  But if that happens, he must make his plan the centerpiece of his campaign to offer a contrast to the Republican ideas of little more than tax cuts, slashing regulation, and cuts in government spending.

If the president decides to play it safe and offer something less bold in an attempt to compromise with the Republicans, his base supporters may finally throw up their hands in despair and decide to stay home for next year’s election.  And then yes, Rick Perry could very well be our next president.  God help us all! 

Taking our Government Hostage

Now we can reflect on the budget cuts that were forced on us in return for not allowing our government to go into default.

It is important to note that every part of our budget is there because enough of our elected representatives voted for it.  You or I may not agree with parts or it but that is the nature of democracy.  If there are parts of the budget that we want reduced or cut altogether, we can always put a bill through Congress to try and do that.   That’s the way the democratic process works.

So if we agree that like it or not, what’s in the budget is legitimate, then it follows that we must try to come up the revenues to pay for it.  This pay as you go method worked well enough in the 90’s under President Clinton to not only balance the budget but also result in a surplus.

But then President Clinton’s successor, George W. Bush did something that was unprecedented.  He dramatically raised spending by choosing to conduct two wars while at the same time cutting taxes, mostly benefiting the wealthy.  Previously, wars were paid by raising the top marginal rate, sometimes to as much as 91%.

So the predictable result was a return to deficits and the resulting borrowing that has greatly added to our debt level that we are trying to address now.  But it also makes it clear how to reverse the process – and that is to not only cut spending but also end the Bush tax cuts since both the overspending and tax cuts clearly contributed to the problem.

But those on the political right have used the Big Lie over and over by saying that “It’s not a revenue problem but is instead a spending problem.”  When in reality, it is both.  The revenue problem is not only because of the reduced tax intake from the Bush tax cuts, but also from so many unemployed who are paying no taxes.

The Bush tax cuts were scheduled to expire at the end of 2010.  President Obama wanted them to continue for the middle class and below and end them for those in the upper 2% of income.  But the Republican Senate in what can only be described as an act of extortion, threatened to filibuster all legislation, including the extension of unemployment benefits unless the tax cuts for wealthiest Americans were extended.  The president gave in to the demand.

The crisis over raising the debt ceiling was nothing more than an extortion attempt to get what the failed Ryan budget plan tried to get through the normal legislative process.  In a previous posting Republicans Backed Into a Corner, I detail how Ryan and other Tea Party Congressmen were booed and heckled when they explained their budget plan making radical changes to Medicare to their constituents at their town hall meetings.

This is because there is a solid majority in polls who have strongly said that they do not want major changes to Medicare.  In addition, most people polled believe that the richest Americans should contribute more in tax revenues as part of a balanced approach to addressing our budget deficits and resulting debt.

But a belligerent minority got their way through the Tea Party’s demand for deep budget cuts including entitlements but without any additional tax revenues whatsoever or let the US go into default by not allowing the debt ceiling to be raised.

Of course we can question the soundness of a philosophy that wants to take a wrecking ball to government and never agree to tax increases under any circumstances.  For example, is there ever a possibility that taxes can be too low?  Is there a possibility that we can ever have an inadequate amount of government to meet the common needs?  Surely they are not asking for no government or taxes.  So the question is how much of each do we need.  And this is what is legitimately worked out in the democratic process which involves compromise.

But this is not about the pros or cons of the Tea Party philosophy.  It is about the way they imposed their views on our public policy in a thoroughly undemocratic way through taking our government hostage.  It is for this reason that they and their other Republican enablers deserve condemnation.  The Democrats must call them out on this in the upcoming elections before the democratic process in this country gets even more poisoned by unethical tactics like this.

And to show that there is no remorse whatsoever over how this was all accomplished, we have this breathtakingly blunt quote in the Washington Post by Senate Minority Leader Mitch McConnell which says it all.

McConnell said he could imagine doing this again.

“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting,” he said. “Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming. And it focuses the Congress on something that must be done.”