Beneath the Etch a Sketch: 5 Signs That Romney’s Real Ideology is Crony Capitalism
Is Mitt Romney “severely conservative,” as he put it during the primary season, or is he instead the semi-compassionate moderate he has portrayed since the first debate? It’s the question pundits keep asking, and of course it’s important to his political strategy and the outcome of the election. But to understand how Romney would actually govern as president, this dichotomy obscures a critical point.
If you look beyond Romney’s stump remarks — dig beneath the Etch A Sketch — to the structure of his campaign and the details of his policy proposals, it appears that Romney’s true ideology is not small-government conservatism, or social conservatism, or pragmatic centrism. Instead, it is a brazen brand of crony capitalism. On a surprisingly wide range of issues, Romney is poised to tailor policy and government spending in ways that would reward his rich friends and donors, as well as his own family, and, in some cases, cause harm to the country.
Here are five key pieces of evidence:
1. Expanding the Romney family business
As the Romney presidential campaign moved into high gear, so did the private equity fund Solamere Capital, run by Mitt’s son and increasingly influential campaign adviser Tagg Romney, along with Spencer Zwick, who also serves as the top fundraiser on the Romney campaign staff. Solamere was launched in 2008 with a $10 million investment from Mitt Romney, who keynoted Solamere’s first investor conference. Solamere describes itself as a “fund of funds” that allows its privileged investors to buy into high-end private equity firms. Solamere also has an investment relationship with Bain Capital, the private equity firm that Mitt Romney launched and ran for almost two decades.
As the New York Times found, “While Solamere has not operated exactly as a subsidiary of the Romney campaign, it has seemed that way at times. The firm shared its first address with the Romney campaign headquarters in Boston. Later, the company was located in the same building as Mr. Romney’s leadership PAC….” Some Solamere employees have been Romney fundraisers, and some Solamere investors are also Romney donors. The intertwined nature of the two ventures — let’s make money while running for President! — recalls Tim Robbins’ 1992 chilling film comedy Bob Roberts, where campaign staff day-trade stocks right from the candidate’s bus.
In June, the Romney campaign held a retreat in Park City, Utah, for about 200 wealthy donors. Remarkably, right outside the retreat, Solamere Capital held its own investor lunch meeting. “It was not a coincidence that the Solamere conference took place in the same city just before the retreat began,” an unnamed fundraiser told the Huffington Post. So the Romneys offered donors, in one trip, complementary pitches for the candidate and for the family private equity firm. To underscore the blatant disregard for propriety, the speaker at the Solamere lunch was Karl Rove, who is a top official of the GOP Super PAC American Crossroads. Federal campaign laws would have barred Rove from pitching his Super PAC at the Romney event itself, so the Solamere event provided a questionable backdoor.
As the hosting of a Solamere event adjacent to the Romney campaign retreat illustrates, there is the implication that investing with Solamere is a great way for business executives — especially those whose businesses depend on federal contracts, grants, or legislation — to build ties with the possible next president. Lee Fang wrote in a new investigative piece that people “looking to lobby a Romney administration may very well have a leg up if they are already doing business with the firm that the president created for his son.” As Fang’s article details, a number of Solamere partner companies make their money through big government taxpayer largesse — a supplier to the Pentagon of biological and chemical decontamination technology, a company that sells voting machines to states, and dental management companies dependent on Medicaid and linked to overbilling and other abuses. As President, Mitt Romney would be in a position to implement policies that would advantage such companies, as well as those owned by outside investors in Solamere.
2. Enabling ripoff colleges
For a particularly egregious example of how Solamere cronyism could poison policy in a Romney administration, consider for-profit colleges, whose multiple bad actors have been caught defrauding our veterans and low-income students with deceptive recruiting practices, and defrauding government with phony reporting. The for-profit college sector has grown rapidly and now accounts for about 12 percent of U.S. college students, but its financial footprint is much bigger: With high prices, high dropout rates, and poor job placement, it accounts for 25 percent of federal financial aid — over $32 billion a year — and almost half of student loan defaults.
Yet on the campaign trail, when asked what he would do about the rising cost of higher education, Romney pointed to a for-profit college, Florida’s Full Sail University, as an innovator that knows how to “hold down the cost of their education.” Full Sail turns out to be the third most expensive college in America, with a mixed record of helping students and at least one program at risk of losing its eligibility for federal student aid because it leaves so many students deep in debt.
Why did Romney single out for praise this overpriced college? One possibility is that his campaign and Super PAC have received about $240,000 from Full Sail CEO Bill Heavener and from C. Kevin Landry, chairman of TA Associates, the private equity firm that owns Full Sail. But the cronyism gets worse. TA Associates, it turns out, is one of the firms that Tagg Romney’s Solamere Capital offers to its clients for investment. So if Full Sail gets richer, the Romneys get richer. Mitt Romney, in effect, used the campaign stump as a commercial for the family business. And TA Associates owns not just Full Sail but a number of for-profit schools including troubled Vatterott Colleges, marked by exploitative recruiting practices and high student loan defaults.
That’s not all. The political action committee of the Apollo Group, owner of the largest for-profit education business, the University of Phoenix, which Romney has also praised by name on the trail, has contributed $75,000 to the Romney Super PAC Restore Our Future and the maximum $5,000 to Romney’s campaign, the company’s only contribution to a 2012 presidential candidate. Goldman Sachs, the number one source of contributions to Romney, owns 41 percent of EDMC, the second largest for-profit college business, currently being sued by the Justice Department and investigated by state attorneys general for fraud.
Romney’s policy proposals favor the same for-profit college industry that funds his campaign and in which his family is invested. Romney’s education policy paper attacks the Obama Administration’s “gainful employment” rule — an effort to channel federal student aid to college programs that actually help students learn and get jobs, rather than to programs that leave students deep in debt and ruin their lives. The biggest for-profit schools get around 85 percent of their revenue from taxpayer funds, and they’ve devoted a big chunk of that money to a lobbying, public relations, and litigation campaign that has watered down and delayed — but not yet eliminated — the Obama rule. Romney has pledged to put the nail in the coffin of this common sense provision. Such a backward policy step would directly benefit Romney donors, and it would provide particular aid to Solamere Capital — eight of Vatterott College’s 39 college programs recently flunked the gainful employment test that Romney now pledges to eliminate.
3. Shielding Wall Street abuses
Solamere, Bain, and the investment firms in their networks could all benefit if Romney is elected and blocks reforms to undo the big, unwarranted tax breaks now enjoyed by the private equity industry. They also could gain if Romney fulfills his vague pledge to “repeal and replace” the Dodd-Frank bill, which helps protect consumers and investors against Wall Street abuses. Three of Solamere’s associated private equity firms are part of the Private Equity Growth Capital Council, which has spent almost $5.8 million in the past three years lobbying Washington to weaken accountability for investment companies.
Other potential beneficiaries of Dodd-Frank repeal are the big Wall Street investment banks, which also would gain from another Romney pledge: that he will reverse President Obama’s reform of the student loan system. Until recently, the big firms dominating the student loan business — Sallie Mae, Citigroup, Wells Fargo, JPMorgan Chase — got paid as if they were lenders, when in fact they were merely loan servicers; it was taxpayers who actually took the risk of students defaulting on loans. These banks then used our money to hire lobbyists to protect their billions in unwarranted profits. The Obama Administration stood up to them, and in 2010 Congress, with nowhere left to cut spending, finally ended this absurd giveaway.
There’s absolutely no logical reason to restore this massive waste of taxpayer money. You would only do it if a central principle of your presidency was to hand out gifts to special interests who helped you get elected. JPMorgan Chase, Citigroup, and Wells Fargo employees are ranked numbers 3, 6, and 7 among the top 2012 Romney donors.
4. Doing the coal industry’s bidding
At the first presidential debate, Romney offered this declaration: “I like coal. I’m going to make sure we continue to burn clean coal.” What he didn’t tell Americans is that coal likes him back, big time. And that at least one of his top campaign advisers is paid by the coal industry.
Robert Murray, CEO of Murray Energy, the nation’s largest privately-owned coal company, likes Romney so much that he hosted a $1.7 million fundraiser for the campaign this year, and his firm’s own employees have given Romney over $120,000. Not surprising, given the evidence that Murray endlessly presses his workers to donate to GOP candidates.
Murray’s undue pressure on his workers aside, there’s nothing wrong with a politician and an industry sharing common values. What’s wrong, in this case, is that the coal industry spends millions every year lobbying Congress to block responsible action to reduce carbon emissions, which are linked to global warming and toxic pollution. And when Romney tells America he loves coal, he misleads us by not disclosing the ties between the coal industry and his campaign.
Last fall, the Romney campaign released an energy policy paper that included a statement by Romney adviser and former Senator Jim Talent blaming government regulation for America’s energy challenges: “The problem is not that America does not have energy. The problem is that our government—alone among the governments of the world—will not allow its own people to recover the energy that they possess.” Where can such energy be found? Talent helpfully lets us know: “America has hundreds of years of coal reserves.’’
Talent, considered a top candidate for a key cabinet position with Romney, has a day job: co-chairman of Mercury Public Affairs, a D.C. lobbying and communications firm. As the Boston Globe first reported last year, Mercury lobbies for St. Louis-based Peabody Energy, the world’s biggest private sector coal company. Peabody has paid Mercury nearly $700,000 in the past six years. The Romney energy paper did not disclose that Talent’s firm was earning money from the coal industry when Talent praised coal as a pillar of America’s energy future for centuries to come.
Newsweek ranked Peabody energy 500th out of 500 — dead last — in its environmental ranking of America’s largest corporations in 2009 and 2010, because of the impact of mining and burning coal and because of Peabody’s aggressive stance against regulation. Peabody is a corporate leader in denying the dangers of global warming. Peabody’s website says today, “The greatest crisis society confronts is not a future environmental crisis predicted by computer models but a human crisis today that is fully within our power to solve… with coal” (ellipses in original). Peabody is also a member of the American Coalition for Clean Coal Electricity, a coal industry group that has spent millions campaigning against efforts to halt global warming. Peabody itself has spent about $42 million on lobbying in Washington since 2005.
So Romney’s campaign is connected by money and people to an industry that has fiercely resisted cap-and-trade and other reforms to address climate change. And although Romney has sometimes (though not always) conceded that human activity contributes to global warming, he has joined the coal industry in opposing cap-and-trade reforms.
Need I add that Solamere Capital invests in at least one private equity firm that focuses on the energy industry? That’s SCF Partners, a Texas firm that invests in oil and gas extraction, including the controversial practice of hydrofracking. Here again, Romney’s policy positions track Solamere investments: He has promised to rapidly increase fracking and has attacked President Obama for seeking to regulate its safety.
5. Creating the Romney policy braintrust