21st Century Eunuch: The Courtier in the Kleptocrats’ Court

In many societies throughout human history, ranging from Ancient Greece and Rome through the Middle East to the Orient, eunuchs served as personal servants, functionaries, and bureaucrats in royal or imperial courts. Regarded as particularly loyal and trustworthy, they were allowed the ruler’s ear and enjoyed great proximity to power. As late as the 12th Century in Norman Sicily, a eunuch actually served as prime minister, though in more recent times eunuchs have been useful in the less prestigious roles of harem guard or brothel servant. Now, if Governor Rick Scott had his way, and university anthropology departments themselves became historical curiosities, we wouldn’t know any of this. We would simply know enough about the world to consume, and maybe even produce, goods and services, without wasting any mental energy on the larger context of our lives described by the humanities. And that would be rather unfortunate, for it would deprive us of a perfect way to think of the contemporary plutocratic propagandists who have sold their souls to the masters of our universe.

On Wednesday, September 26th, the Leesburg Daily Commercial subjected its middle-class readership to a plutocratic diatribe that treated both its audience and the principles of intellectual integrity with a truly shocking level of contempt. Syndicated Cal Thomascolumnist Cal Thomas styles himself as a conservative but, for the sake of his career, has allowed himself to become a mouthpiece for forces in American society that are in fact profoundly radical. A true conservative sees society as an organic whole, with each stratum – particularly the highest – having obligations to the others. But the rich of today’s world – and we say “world” because this is a global problem, not just an American one – have come to see themselves as a class apart. For them, the rest of society is a resource to be exploited, not an organism to be nurtured. While wealth was once created and, to some extent at least, shared, today it is extracted and concentrated. Cal Thomas is sufficiently intelligent to perceive this shift in the way power and wealth are deployed, yet instead of railing against it as a disgrace to the foundations of our society and culture he purveys an endless stream of lies and distortions to prevent the wider public from understanding what is being done to them. And for this treachery there is only one satisfactory explanation: he doesn’t have the balls to stand up for what is right.

Legitimate Rape, Romney Style

Before we dissect Cal Thomas’s putrid defense of Mitt Romney, it is necessary to establish the context that we are not being given by the Daily Commercial. A few weeks before Romney released his 2011 tax return, Matt Taibbi of Rolling Stone wrote a breathtaking expose of the manner in which Romney made his money. Taibbi starts by drawing attention to the spectacular hypocrisy at the heart of the Republican pitch; to wit, the constantly-invoked specter of destructive debt. It turns out that Mitt Romney knows a thing or two about debt, particularly how to use it for his own advantage:

Everyone knows that he is fantastically rich, having scored great success, the legend goes, as a “turnaround specialist,” a shrewd financial operator who revived moribund companies as a high-priced consultant for a storied Wall Street private equity firm. But what most voters don’t know is the way Mitt Romney actually made his fortune: by borrowing vast sums of money that other people were forced to pay back. This is the plain, stark reality that has somehow eluded America’s top political journalists for two consecutive presidential campaigns: Mitt Romney is one of the greatest and most irresponsible debt creators of all time.

During his career at Bain, Romney made a pivotal decision to move “away from creating companies like Staples through venture capital schemes, and toward a business model that involved borrowing huge sums of money to take over existing firms, then extracting value from them by force”:

A private equity firm like Bain typically seeks out floundering businesses with good cash flows. It then puts down a relatively small amount of its own money and runs to a big bank like Goldman Sachs or Citigroup for the rest of the financing. (Most leveraged buyouts are financed with 60 to 90 percent borrowed cash.) The takeover firm then uses that borrowed money to buy a controlling stake in the target company, either with or without its consent…. Romney and Bain avoided the hostile approach, preferring to secure the cooperation of their takeover targets by buying off a company’s management with lucrative bonuses. Once management is on board, the rest is just math. So if the target company is worth $500 million, Bain might put down $20 million of its own cash, then borrow $350 million from an investment bank to take over a controlling stake.

But here’s the catch. When Bain borrows all of that money from the bank, it’s the target company that ends up on the hook for all of the debt.

Here is just one of several examples of how Romney operated:

Take a typical Bain transaction involving an Indiana-based company called American Pad and Paper. Bain bought Ampad in 1992 for just $5 million, financing the rest of the deal with borrowed cash. Within three years, Ampad was paying $60 million in annual debt payments, plus an additional $7 million in management fees. A year later, Bain led Ampad to go public, cashed out about $50 million in stock for itself and its investors, charged the firm $2 million for arranging the IPO and pocketed another $5 million in “management” fees. Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren’t crying: They’d made more than $100 million on a $5 million investment.

To recap: Romney, who has compared the devilish federal debt to a “nightmare” home mortgage that is “adjustable, no-money down and assigned to our children,” took over Ampad with essentially no money down, saddled the firm with a nightmare debt and assigned the crushing interest payments not to Bain but to the children of Ampad’s workers, who would be left holding the note long after Romney fled the scene. The mortgage analogy is so obvious, in fact, that even Romney himself has made it. He once described Bain’s debt-fueled strategy as “using the equivalent of a mortgage to leverage up our investment.”

It goes without saying that we won’t be getting this kind of information from Russ Sloan in the Money section of the Daily Commercial. Sloan’s job, just like Thomas’s, is to disguise and deceive on behalf of the Romneys of this world. In Russ Sloan’s case, it is questionable whether he even understands finance as actually practiced in our brave new world, but Cal Thomas is a much sharper tack and is positively begging to be hit with an even larger hammer of dissent.

The Ghastly Opera Singing of the Castrato

The central purpose of Cal Thomas’s column was to persuade us that what Mitt Romney pays in taxes doesn’t matter and, further, nor does his wealth. The column, of course, was a response to Romney finally acquiescing to public pressure to release the details of his 2011 return, a full copy of which may be viewed on Romney’s website. Since the numbers on Romney’s 1040 are spectacularly large, Thomas has his work cut out for him; but, loyal little servant that he is, he doesn’t disappoint, tossing distracting firecrackers hither and yon, and no doubt mesmerizing quite a few feeble minds in the process. We shall focus on the larger flashes, pops, and bangs and ignore the minor sparks.

All Together Now! The Raucous Debt Chorus

Thomas’s utterly predictable playing of the debt card needs little attention after the foregoing extract from Taibbi, but we include it here partly for entertainment value:

I don’t care how much, or how little, the Romneys pay in taxes. I do care, and so should voters, about government overspending and a national debt that now tops $16 trillion. […]

I do care – and so should voters – that our future is being mortgaged to pay for “entitlements” and huge interest on long-term debt that is greater than the gross domestic product of some countries.

We’ve always been able to count on Cal Thomas for a hypocrisy high, but this one takes the prize. Although his Fox News audience probably won’t notice, it is particularly amusing that Thomas has undermined his credibility – such as it was – in the service of a candidate he clearly opposed during the Republican primaries. Beyond this, there is the intellectually bankrupt tactic of blaming budget deficits entirely on spending without even acknowledging the revenue side of the equation in an era of tax-cutting fervor, and the minor detail that Social Security and Medicare did not create the existing national debt.

The debt device has many uses for the radicals now masquerading as conservatives, but in Thomas’s case it is chiefly a shiny object with which to distract his prey. Just as in his odious defense of Todd Aiken’s legitimate rape remarks, he is trying to shift the field of battle to an area where he feels safer. But in this instance he is like an ice-skating child who has fallen into the frigid waters and is frantically trying to haul himself out onto the ice, clutching at any seemingly solid object he can reach. Since he believes in self-reliance, let’s see how he fares….

Senate Majority Leader Harry Reid

An Ad Hominem Fallacy and A False Choice

Another line of defense is to go on the offense against Senate Majority Leader Harry Reid, who rather foolishly contended that the Romneys had not paid any tax at all for ten years. While Romney’s 2011 return doesn’t specifically rebut that charge, the summary statement of twenty prior years released by his accountants most certainly does. Although Reid has been correct to note that the Romneys deliberately claimed less in charitable deductions than they could have done – purely to enable the candidate to verify his claim that he paid an effective tax rate of at least 13% – Reid has not helped himself and has become an easy target. But so what? The problem with this line of attack from Thomas is the assumption that the only conversation that matters in our polity is the back-and-forth chatter between the two organized mobs that represent the American corporate oligarchy. For those of us who have seen through that charade, Reid’s embarrassment is irrelevant, and his opinion is scarcely more important than that of Cal Thomas. This is particularly so because the Democrats themselves are not going to do anything significant to prevent the kleptocrats from following Romney’s playbook.

One of the perverse tax incentives that encourages Bain-style leveraged buy-outs is the ability of fund managers to treat much of their plunder as “carried interest” subject to the long-term capital gains rate. (Others include the ability to funnel management fees back into the firm so they can be distributed later as capital gains instead of taxed as ordinary income, and the ability to deduct interest paid on “investment” loans.) Thanks to the budget-busting Bush tax cuts, the capital gains rate tops out at only 15%, and this is the main reason why the Romneys end up paying an effective (average) tax rate that is less than that of many working people. Although the Romneys paid Alternative Minimum Tax (AMT), triggered in part by enormous itemized deductions and a foreign tax credit that alone exceeds the median family income in the United States, it is almost laughable that the Romneys deliberately reduced the deductions claimed in order to pay just over 14% overall. (One can’t help wondering if they will come back and amend when all the dust has settled. They have three years to play with, and by then Cal Thomas will have been joined by almost everyone else in not caring.) So what do the Democrats propose to do about this?

The Democrats’ tax plan, which a cynic could readily dismiss as a theatrical gambit designed to be bargained away later in a statesmanlike show of bipartisanship, calls for the top rate on capital gains to increase to 20%, which is where Saint Bill left it after cutting it from 28% to please his Wall Street buddies. In addition, the much-maligned Affordable Care Act adds a surtax of 3.8%, putting us at a combined 23.8%. Now, for a plutocracy that will happily allow poor children to die from inadequate healthcare instead of paying an extra mil in income tax, that must seem frighteningly European. But it’s a far cry from eliminating the preferential treatment of capital gains that has helped the richest 400 Americans increase their net worth by a combined $200 billion over the last year while median household incomes declined by 4%. Ross Perot’s “giant sucking sound to the south” has been replaced by a giant sucking sound to the top, and neither party – posturing aside – is really going to address that. Inequality is here to stay, and as far as Cal Thomas is concerned, it’s as American as apple pie.

Legalized Kleptocracy and the Myth of Equal Opportunity

In Thomas’s shrieking falsetto, Mitt Romney is to be congratulated for obeying the tax laws as they currently stand, and would deserve to be scorned if he did not. Thomas elides the awkward point that Romney’s manipulation of his return meant he actually paid more tax than was legally required, which Romney himself had previously contended would be so stupid as to disqualify him from the presidency. But that omission by Thomas pales into insignificance next to his naive insistence that everyone has a fair chance to emulate Romney’s shining example:

… Americans who make average incomes can benefit from lower capital gains taxes if they build sufficient wealth by making good investments….

I don’t care how much money anyone makes and neither should voters. Voters should be concerned only about whether they have the opportunity to make a decent living without having to depend on government….

In the first presidential debate scheduled for Oct. 3, Romney… should remind Americans of their history of self-reliance, personal responsibility and accountability. When government replaces those virtues with entitlements and dependency it diminishes and weakens the nation.

Never mind that Mitt Romney’s firm would have gone under without a federal bailout. Forcing the FDIC to accept pennies on the $30.6 million owed to it by Bain – in order to escape the utter humiliation of the bankruptcy of his high-priced consulting firm – in no way undermines Romney’s self-reliance or bespeaks dependency. It just shows, like his use of the tax code, what a clever boy he is. If you were that clever you, too, could be reporting over $6 million in capital gains on your tax return. And if you were that virtuous, you would realize that loading existing businesses with debt and cashing out whenever you felt like it was a good investment, not a scam. As a management consultant, why should you be accountable to the families of the workers who Lake Winnipesaukee, New Hampshirelost their livelihoods? It doesn’t dimish the nation in any way, shape, or form if the surrounding community or other firms in the supply chain are damaged. Haven’t you ever heard of “creative destruction”? The displaced workers can always get themselves a degree from Harvard Business School, have their fathers make a few introductions, and before long they’ll be mooring their yachts next to yours on Lake Winnipesaukee.

The reality, of course, is that equal opportunity has become a myth to cover a kind of Social Darwinism not seen since the Gilded Age. As George Monbiot reported recently, among OECD countries only the (notoriously class-ridden) United Kingdom and Italy have less upward mobility than the United States. In 2009, 16% of all the capital gains in the United States went to just 400 people – an elite that represents just 0.00013% of the population. This is perhaps the most graphic example of concentration in our era, and underscores the importance of the capital gains tax issue raised by Romney’s returns, Cal Thomas’s mewling notwithstanding. Among the recently updated Forbes 400, 40% inherited their wealth and most of the rest are classified as “investors.” Mitt Romney isn’t even close to entering this club – the membership fee is now $1.1 billion – but he shares with them the privilege of paying preferential rates of income tax on increasingly disproportionate shares of income that have been carefully characterized as capital gains. To defend such a state of affairs on the grounds that it is all perfectly legal is to hide the not-so-minor detail that the statutes of the United States are not written by neutral arbiters of the common good but by agents of the very plutocrats who benefit so handsomely from them. The ultimate theft, in other words, is not just of an excessively large slice of the economic pie; it is of the process that bakes the pie in the first place.

Et Tu, Thomas?

Almost as central to Cal Thomas’s modus operandi as the art of distraction is the arrogant assumption that his political advice should be heeded by the members of his party. Given the recent revelations about Mitt Romney’s true history at Bain, it is not at all clear how he can credibly remind America, as Thomas would have him do, of “what our grandparents tried to hand down to us: individual responsibility and a sense of caring for each other.” In marked contrast to his own father, who actually built a business – American Motors – that created good jobs for Michigan workers, Romney destroyed businesses and jobs with impunity and cared only about profits. He took a federal bailout for himself but would have denied it to the descendants of the auto workers his father employed. So that’s a non-starter.

But Thomas’s ultimate failure as a courtier in the kleptocrats’ court is to advise Mitt Romney to quote Jefferson, Lincoln, and Reagan. Under Reagan, the preferential treatment of capital gains was eliminated, and the economy eventually rebounded from a deep recession, undermining Romney’s argument that his special form of income needs special treatment. Lincoln’s Gettysburg Address did not say that government of the corporations, by the corporations, for the corporations, shall not perish from the earth. And Jefferson – more than any other the man associated with the very idea of America – believed that a republican form of government could not survive if wealth and power became concentrated in the hands of the few, which they most assuredly have. Barack Obama is smart enough to know all of this, even if he isn’t honorable enough to apply it.

Cal Thomas’s advice looks like a bit of a trap to us, and maybe that’s the way he intends it. So we have some advice of our own for Mitt Romney: Forget about Lincoln and Reagan, and remember Nixon. In resisting kleptocracy, Cal Thomas clearly has no balls; but in resisting you – which he did for a long time – he turns out to be a little Tricky Dick.

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