The nation has been treated this week to a real-life illustration of Hans Christian Anderson’s tale “The Emperor’s New Clothes,” with the unlikely casting of Republican presidential candidate and former House Speaker Newt Gingrich as the precocious young lad stating the obvious that others are afraid to acknowledge.
Gingrich’s accurate description of GOP candidate Mitt Romney’s business experience as head of a private equity firm specializing in raiding troubled corporations isn’t a campaign smear — though it is politically motivated. It’s a statement of fact.
Romney’s corporate raider firm dismantled companies, sold lucrative assets, saddled what remained with too much debt, shipped jobs overseas, and pocketed the over-funded pension plans of laid-off workers. (Companies with excess pension funds were favorite targets for corporate raiders.) Romney and many other private equity firms operated as scavengers, leaving behind gutted carcasses destined to fail.
But in telling the truth about Romney’s record, Gingrich, and to a lesser extent his fellow aspiring GOP candidates Rick Perry and Jon Huntsman, have exposed the lie in the constant, well-orchestrated refrain from supporters of the status quo that the uber-wealthy financial elites are all universal “job creators.” No, they’re not.
It’s making some very wealthy and powerful people very uncomfortable that this irrefutable truth has been laid bare: Some of these Wall Street emperors have no clothes.
There’s a difference between investment income and “vulture capitalism,” as Perry called it, or “creative destruction,” to use Romney’s own words. Corporate raiding, junk bonds, synthetic derivatives, hedge funds, and other recent Wall Street ‘‘innovations,” produce wealth for a few by taking from the U.S. economy, not investing in it. Call it disinvestment income, the redistribution of wealth from the many to the few.
Rewarding actual investment risk with lower tax rates is sound, logical policy. Rewarding pure market manipulation by insider elites who play their own secret by-invitation-only game of Wall Street Monopoly with legal, but ethically fuzzy rules is not.
Definitions of investment income and capital gains in the nation’s tax codes are two decades behind the reality of what occurs on Wall Street today. Trading in the stock market, the traditional method of business investment, constitutes less than 40 percent of Wall Street’s feverish activity. The bulk of the capital moving in, out and around Wall Street on a daily basis no longer represents an investment in anything — it’s more akin to gambling than investment — but with a nifty piece of fabricated “truthiness” we still pretend it’s investment income. Wink, wink.
The certain pushback to the surprising truth-telling from Gingrich, Perry and Huntsman has been predictably swift and severe. Former New York mayor and presidential candidate Rudy Giuliani quickly made the rounds of news/talk shows, serving as Wall Street’s plutocratic attack dog. Gingrich, Giuliani said, is talking like a communist or a socialist — apparently Giuliani doesn’t know there’s a dramatic difference between the two — and criticizing the bedrock of free-market capitalism.
No, he’s not. But the pushback from those who’ve benefited dramatically — and unfairly — from the deceit still enshrined in our tax codes is to be expected for obvious reasons.
Though the political intent is to knock Romney down a notch or two with GOP voters, Gingrich’s truth-telling concurs with what many responsible public leaders have been saying in the ongoing and so-far futile discussions about revenues, spending, budgets, deficits, debts and tax policy: Not all income created by free market capitalism produces jobs, grows the economy or adds to the nation’s Gross Domestic Product. There’s no logical, honest public policy rationale for taxing such income at a lower rate than earned wages.
Criticizing our out-of-date, contrived, false tax policy is not an attack on the underpinnings of free market capitalism, nor is it promoting socialism. It’s long past time for our political leaders and policymakers to have a truthful discussion about what constitutes investment income and fair tax policy, minus the political posturing and partisan spin.
The emperor will get new clothes, and the nation will be better off, if Gingrich and other Republicans continue truth-telling after the presidential campaign season ends.