Economic gambling

I've been reading Newsweek magazine for more than 30 years, since shortly after I graduated from college. It is usually on my kitchen table so that I can read it during meals and while snacking. Lately I've been finishing off an issue in about 3 days (possible since I'm semi-retired).

But Newsweek has announced today that the Dec. 31 issue will be the last one printed. After that date content will only be online. That has left me with some questions. Do I want to sit in front of my computer to read it? That's an issue because it is now what I read when I'm not in front of my screen. What happens to the remaining 20 months of my subscription? Is it worth buying an in-home wi-fi transmitter so I can read it at my table on my netbook computer?

The radio program Marketplace did an interview with Jeff Jarvis, who promotes digital media. He's sorry about the job losses, but not at all disappointed to see the print version disappear. Besides, he says, the print version has had some pretty lame covers lately.



While I'm writing about Newsweek, a couple articles from the latest issue:

Sidney Blumenthal has a featured article about President Lincoln. He describes the national hero as a consummate politician, willing to do serious horse-trading for the highest ideals. First goal of 1864 was to get reelected. Since the North wasn't doing well at the time that didn't look likely. But Lincoln knew if he wasn't elected again the next administration would recognize the Confederacy as an independent nation. He did all the necessary politicking to keep his job.

Second goal was to pass the 13th Amendment, the one that abolished slavery. The list of political favors was long, including dangling political appointments in front of opposition lawmakers. In one case, Lincoln kept a vacant federal judgeship open saying the appointment could be influenced by a supporter of the Amendment.

Blumenthal's conclusion is that playing politics is not, by itself, dirty. It depends on what one is playing politics for. And the abolition of slavery is a pretty good reason.

Once the 13th Amendment was approved, Lincoln gave a speech promoting the 14th, which would make former slaves into fellow citizens. John Wilkes Booth was in that audience and couldn't stand that idea.



David Sessions wrote about how the Christian Right's push into politics has turned off the younger generations and has contributed to a drop in church membership and participation. Some leaders are now saying that politicizing the Gospel was a big mistake.



David Stockman was budget director under Prez. Reagan. He went on to do leveraged buy-outs (LBO) at Blackstone and then on to run his own finance company. His knowledge of LBOs allowed him to write the book The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy. Alas, it won't be published until well after the election. Part of the book is Romney's dealings while head of Bain Capital. Stockman's report lists the details of a few of those deals. Since Romney touts his leadership at Bain as a qualification for the presidency, it is important to take a close look.

Part of Stockman's story is that while Romney led Bain, the country was experiencing Alan Greenspan's bubble economy (which crashed the first time with tech stocks in 1999 as Romney was leaving Bain to rescue the Salt Lake City Olympic Games -- great timing). The policies of that time encouraged what Romney did at Bain.

The lesson is that LBOs are just another legal (and risky) way for speculators to make money, but they are dangerous because when they fail, they leave needless economic disruption and job losses in their wake. That’s why LBOs would be rare in an honest free market—it’s only cheap debt, interest deductions, and ludicrously low capital-gains taxes that artificially fuel them.

The larger point is that Romney’s personal experience in the nation’s financial casinos is no mark against his character or competence. I’ve made money and lost it and know what it is like to be judged. But that experience doesn’t translate into answers on the great public issues before the nation, either. The Romney campaign’s feckless narrative that private equity generates real economic efficiency and societal wealth is dead wrong.

In the deals Stockman details, it is amazing how little money Romney and his partners invest (though it is still in the millions) and how much they reap from the deals. One deal involved the companies Wesley-Jessen and Schering-Plough. A $6 million investment yielded $300 million four years later. A big reason for the 50 times return was a great deal of creative lying when preparing the companies to sell.

Stockman concludes by saying:

In short, this is a record about a dangerous form of leveraged gambling that has been enabled by the failed central banking and taxing policies of the state. That it should be offered as evidence that Mitt Romney is a deeply experienced capitalist entrepreneur and job creator is surely a testament to the financial deformations of our times.