Nel's New Day

July 19, 2012

Romney’s Problems Grow

Mitt Romney’s campaign has two serious dilemmas: the call for his releasing tax returns and the outsourcing done by Bain Capital, Romney’s personal business. To solve the first one, he sent his wife, Ann, to convince the media that he is a truly good person. In an interview with Robin Roberts on ABC, Ms. Romney said:

“You know, you should really look at where Mitt has led his life, and where he’s been financially. He’s a very generous person. We give 10 percent of our income to our church every year. Do you think that is the kind of person that is trying to hide things, or do things? No. He is so good about it.”

When asked why they don’t release the tax forms if there is no problem with them, Ms. Romney continued:

“Because there are so many things that will be open again for more attack… and that’s really, that’s just the answer. And we’ve given all you people need to know and understand about our financial situation and about how we live our life. And so, the election, again, will not be decided on that. It will be decided on who is gonna turn the economy around and how are jobs gonna come back to America.”

My favorite phrase from her interview is “you people,” the term that smacks of an arrogance in the same way that Michelle Malkin’s comment on Fox and Friends Weekend did when she said,

“Romney types, of course, are the ones who sign the front of the paycheck, and the Obama types are the one who have spent their entire lives signing the back of them.”

Lots of people are betting that Romney’s tax returns would show some shady deals. The first question is how he got between $21 million and $101 million in an IRA that can’t collect more than $30,000 a year. Another questionable activity comes from when he was chairman of Marriott’s audit committee. At that time, a Marriott tax shelter, known as “Son of BOSS,” involved creating paper losses to offset taxes on real income. The Internal Revenue Service challenged the shelter, and Marriott lost in court. Judges called the shelter “fictitious” and a “scheme,” and the company was forced to pay $29 million.

The Republicans who are telling Romney to release the tax returns have found a solution for his second problem, outsourcing. Jonah Goldberg summarized their position: “Outsourcing isn’t evil. Building businesses overseas doesn’t necessarily cost American a thing, and it often creates wealth and value both here and abroad.”

The 170 workers losing their jobs in Freeport (IL) because Bain owns their jobs disagree with Goldberg. In 2006 Bain bought Sensata Technologies, based in Attleboro (MA), and plans to move production to China during the month of this year’s election despite the fact that the business has never lost money. The city council has drafted a resolution that “calls on Mitt Romney to come to Freeport to meet the people directly affected by Bain Capital’s outsourcing and to step in and stop the outsourcing of these jobs from Freeport to China.” Although Romney does not operate Bain, he does have a controlling financial interest.

Robert Reich wrote that the biggest problem with corporations is that they have no concern for the people of the United States. He quoted an Apple executive who told the New York Times, “we don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” Reich might have added “and showing profits big enough to continually increase our share price.” Apple’s employment of 43,000 people in the United States is dwarfed by their contracts with over 700,000 workers overseas. U.S. workers get six percent of what people pay for an iPhone.

The Republicans who would solve the problem of outsourcing by  lowering salaries in this country and perhaps getting rid of the minimum wage overlook the fact that Chinese workers live in company dormitories where they can be called up to work any time day and night. Apple assembles iPhones in China both because wages are low there and because Apple’s Chinese contractors can quickly mobilize workers from company dorms at almost any hour of the day or night.

Reich also cited another reason for outsourcing as this country not educating young people to do the necessary high tech jobs farmed out to Japan and Germany, in large part because the government does not pay for education. While this country forces young people to ratchet up high student loans, China invests in world-class universities and research centers.

The United States also has substandard transportation and communication systems compared to other countries. Outmoded ports, congested roads, and faulty bridges damage the opportunities for people to have jobs in this nation.

Without support from corporations, this situation will only exacerbate. Without government requiring corporate support, these companies will continue to outsource. All they want are lower taxes and fewer regulations. To get what they want, they buy elections.

Goldberg needs to know the following results of outsourcing:

U.S. multinationals cut their U.S. workforces by 2.9 million in the 2000s while increasing employment overseas by 2.4 million, according to the U.S. Department of Commerce. The Bush tax cuts may have caused the 35 biggest U.S.-based companies to add jobs, but almost three-fourths of these jobs were offshore.

U.S. manufacturing has suffered the biggest blow from offshoring. Working America reported that manufacturing jobs dropped every month for 43 months—the longest stretch since the Great Depression—between August 2000 and February 2004. Between 1998 and 2008, the time that George W. Bush gave corporations big tax cuts to create jobs, the number of manufacturing plants shrank 12.5 percent. The country lost 51,000 plants during those ten years, plants that gave stable, middle-class jobs.

Revenue from the global electronics contract manufacturing industry reached $360 billion in 2011 and is expected to expand to $426 billion by 2015. These companies contract outside firms primarily in third-world countries. Other huge companies, Nike for example, subcontracts all its shoe production to foreign companies.

Private equity firms have upped the competition between corporations by creating the fear that if CEOs don’t run their businesses to maximize short-term profits and share prices that they will be taken over by a company like Bain Capital. Their answer is outsourcing. If they lose the company to a company like Bain, “the standard strategy has been to load up company executives with so much stock and stock options that they don’t hesitate to make difficult decisions such as shedding divisions, closing plants or outsourcing work overseas,” according to Steve Pearlstein, a professor of public and international affairs at George Mason University and a Pulitzer-prize winning columnist.

Three-fourths of the companies surveyed by Duke’s Fuqua School of Business gave labor costs as their reason to relocate offshore, but this is becoming a weaker excuse for taking jobs away from the United States.  The labor cost gap between the U.S. and China has shrunk by almost 50 percent within the last eight years; this gap is project to be just 16 percent by next year. Fuel prices are also rising, increasing the costs of transportation.

The same survey showed that “only 4 percent of large companies had future plans for relocating jobs back to the United States.” No reason was given, but Seth Hanlon thinks that their reluctance is the U.S. tax code that “rewards companies for making investments abroad—and leads to them shifting offices, factories, and jobs abroad even if similar investments in the United States would be more profitable absent tax considerations.”

Tax loopholes and porous rules allow multinational companies to avoid U.S. taxes by reporting much of their profits in tax havens such as Bermuda and the Cayman Islands. That may be why Romney is fond of these tax havens. Shifting profits into tax havens costs the U.S. Treasury tens of billions of dollars in revenue every year. While President Obama wants a law that benefits companies for keeping jobs in the United States, Romney wants to make U.S. corporations’ overseas profits exempt from U.S. taxes, understandable because this would financially benefit him.

Today, the Senate tried to vote on the Bring Jobs Home Act to end taxes that reward companies that ship jobs overseas and instead provide a tax cut for American businesses that move overseas jobs and business activity back to America. A filibuster killed the bill was killed with a 56-42 vote; it’s the standard Republican position that 60 out of 100 votes are required to pass any Senate bill. The three brave Republican senators voting against the filibuster were Susan Collins (ME), Olympia Snowe (ME), and Scott Brown (MA). Therefore the Senate Republican “majority” of 41 men and 3 women have determined that taxpayers must continue to pay for the offshoring of jobs.

According to The Hill, Republicans wouldn’t vote for a bill to bring jobs back to the United States because they wanted to include an amendment repealing the Affordable Care Act. Senate Majority Leader Harry Reid, (D-NV) said, “It’s no surprise Republicans are on the side of corporations making big bucks sending American jobs to China and India. After all, their presidential nominee, Mitt Romney, made a fortune outsourcing jobs, too.”

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