Friday, August 31, 2012

What is "Moral Hazard"?


"Moral Hazard"

In economic theory, a moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. A moral hazard may occur where the actions of one party may change to the detriment of another after a transaction has taken place. 

For example, persons with insurance against automobile theft may be less cautious about locking their car, because the negative consequences of vehicle theft are now (partially) the responsibility of the insurance company. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party isolated from risk behaves differently from how it would if it were fully exposed to the risk. Another example would be cellular companies offering insurance on cell phones and tablets. People are less likely to be as protective of their phones knowing that the insurance will cover it if it was to break or be stolen.

Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of his or its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.

Economists explain moral hazard as a special case of information asymmetry, a situation in which one party in a transaction has more information than another. In particular, moral hazard may occur if a party that is insulated from risk has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information.

Moral hazard also arises in a principal–agent problem, where one party, called an agent, acts on behalf of another party, called the principal. The agent usually has more information about his or her actions or intentions than the principal does, because the principal usually cannot completely monitor the agent. The agent may have an incentive to act inappropriately (from the viewpoint of the principal) if the interests of the agent and the principal are not aligned.

(Note that the concept of moral hazard was the subject of renewed study by economists in the 1960s and then did not imply immoral behavior or fraud; rather, economists use the term to describe inefficiencies that can occur when risks are displaced, not the ethics or morals of the involved parties.)
-- Wikipedia, the free encyclopedia


How might this economic theory be likened to your current feelings of government provided assistance? Do you believe a far greater number of people on government provided assistance are of a certain race or gender? If so, what are your thoughts and why?

How might this theory relate to those who saw the government provided assistance go to victims of Hurricane Katrina and now, to victims of Hurricane Isaac? Do you believe people should have moved back into low-lying areas in New Orleans? If so, why? If not, why?

Thoughts?


The Law: Never Outshine Your Master


THE LAW: NEVER OUTSHINE YOUR MASTER
“Always make those above you feel comfortably superior. In your desire to please and impress them, do not go too far in displaying your talents or you might accomplish the opposite— inspire fear and insecurity. Make your masters appear more brilliant than they are and you will attain the heights of power.”
-- Robert Greene

TRANSGRESSION OF THE LAW:
Nicolas Fouquet, Louis XIV’s finance minister in the first years of his reign, was a generous man who loved lavish parties, pretty women, and poetry. He also loved money, for he led an extravagant lifestyle. Fouquet was clever and very much indispensable to the king, so when the prime minister, Jules Mazarin, died, in 1661, the finance minister expected to be named the successor. Instead, the king decided to abolish the position. This and other signs made Fouquet suspect that he was falling out of favor, and so he decided to ingratiate himself with the king by staging the most spectacular party the world had ever seen. 

The party’s ostensible purpose would be to commemorate the completion of Fouquet’s château, Vaux-le-Vicomte, but its real function was to pay tribute to the king, the guest of honor. The most brilliant nobility of Europe and some of the greatest minds of the time— La Fontaine, La Rochefoucauld, Madame de Sévigné attended the party. Molière wrote a play for the occasion, in which he himself was to perform at the evening’s conclusion.

The party began with a lavish seven-course dinner, featuring foods from the Orient never before tasted in France, as well as new dishes created especially for the night. The meal was accompanied with music commissioned by Fouquet to honor the king. After dinner there was a promenade through the château’s gardens. The grounds and fountains of Vaux-le-Vicomte were to be the inspiration for Versailles. Fouquet personally accompanied the young king through the geometrically aligned arrangements of shrubbery and flowerbeds. 

Arriving at the gardens’ canals, they witnessed a fireworks display, which was followed by the performance of Molière’s play. The party ran well into the night and everyone agreed it was the most amazing affair they had ever attended. The next day, Fouquet was arrested by the king’s head musketeer, D’Artagnan. Three months later he went on trial for stealing from the country’s treasury. (Actually, most of the stealing he was accused of he had done on the king’s behalf and with the king’s permission.)

Fouquet was found guilty and sent to the most isolated prison in France, high in the Pyrenees Mountains, where he spent the last twenty years of his life in solitary confinement.

INTERPRETATION:
Louis XIV, the Sun King, was a proud and arrogant man who wanted to be the center of attention at all times; he could not countenance being outdone in lavishness by anyone, and certainly not his finance minister. To succeed Fouquet, Louis chose Jean-Baptiste Colbert, a man famous for his parsimony and for giving the dullest parties in Paris. Colbert made sure that any money liberated from the treasury went straight into Louis’s hands. With the money, Louis built a palace even more magnificent than Fouquet’s— the glorious palace of Versailles. He used the same architects, decorators, and garden designer. And at Versailles, Louis hosted parties even more extravagant than the one that cost Fouquet his freedom.

The evening of the party, as Fouquet presented spectacle on spectacle to Louis, each more magnificent than the one before, he imagined the affair as demonstrating his loyalty and devotion to the king. Not only did he think the party would put him back in the king’s favor, he thought it would show his good taste, his connections, and his popularity, making him indispensable to the king and demonstrating that he would make an excellent prime minister. Instead, however, each new spectacle, each appreciative smile bestowed by the guests on Fouquet, made it seem to Louis that his own friends and subjects were more charmed by the finance minister than by the king himself, and that Fouquet was actually flaunting his wealth and power.

Rather than flattering Louis XIV, Fouquet’s elaborate party offended the king’s vanity. Louis would not admit this to anyone, of course— instead, he found a convenient excuse to rid himself of a man who had inadvertently made him feel insecure. Such is the fate, in some form or other, of all those who unbalance the master’s sense of self, poke holes in his vanity, or make him doubt his pre-eminence.

When the evening began, Fouquet was at the top of the world.
By the time it had ended, he was at the bottom.

--Voltaire, 1694-1778


Greene, R. (2000). The 48 Laws of Power. Penguin Group.

In light of Clint Eastwood’s appearance — who, unlike Obama, was not invisible at the convention, let’s clear up some facts  and then -- just for fun – ask, “Did Eastwood help or hurt Mitt Romney, the intended superstar of the evening?”

Eastwood mistakenly said that 23 million Americans are “unemployed.” Actually, the figure is a little more than half that — 12.8 million in July, according to the most recent figures from the Bureau of Labor Statistics.

Eastwood didn’t phrase things as artfully as most other convention speakers. The often-used 23 million figure also includes 8.2 million who are employed in part-time jobs but say they are seeking full-time work, the so-called “under-employed.” And it also includes another 2.5 million who say they would like a job and would take one, but haven’t looked for one in the last four weeks.

We hate to nit-pick one of our favorite actor/directors, who is not all that used to the ways politicians inflate numbers without actually saying something false. (He could have said 23 million who “need work” or “are suffering from lack of jobs” and not been technically wrong.)

But then, Eastwood was mayor of Carmel-by-the-Sea, Calif., and so he knows something of politics. And other film stars have gone on to run for even higher office. To which we say: Go ahead, make our day.
-- Robert Farley, with Eugene Kiely, Lori Robertson, Ben Finley and Brooks Jackson

Did Eastwood help or hurt Mitt Romney, the intended superstar of the evening? If so, how? If not, why?

Thoughts?

Thursday, August 30, 2012

Focus on the Problems -- Not the People


Attacking people instead of creating solutions to problems gets “nasty and brutish.” Focus on the problems and not the people! 

Remember, if I am a young American student, I want to fight to save my Pell Grant -- and I care less for/about Medicare. If I am an older American, I want to fight to save my Medicare coverage -- and I care less for/about a young American student’s Pell Grant. If I am a American woman who believes my rights will be taken away by policies the Tea Party puts forward and/or supports then I am going to focus on social issues that ensure my rights as a woman in this country are protected. If I am a gay person, I would fight to have DOMA repealed. If I am a person whose child is in need of long-term medical care, I would fight to keep coverage. If I am a woman at high risk for breast cancer, I would fight to have preventive medicine as a part of my coverage. If I am a male providing for my family for food, shelter, education and healthcare, and I feel as if I can no longer afford to care for my family in an effort to pay to care for those outside my family, I am going to fight to severely cut spending and lower the amount of taxes I must pay to the Federal government.

Most people are fair. How we define “fair” may differ person-to-person or party-to-party. But what we can agree on is neither EXTREME is fair, by any definition. This country is not one of rich or poor (at least it should not be), nor is it a country of white or black, male or female, gay or non-gay, Republican or Democrat. This Democracy is a country for ALL.

When we find ourselves seated beside someone from another moral matrix or political mindset, we shouldn’t just jump right in until we’ve found a few points of commonality or established a bit of trust. And when we do bring up issues of morality, we must show a sincere expression of interest. We’re all stuck here for a while, so let’s try to work it out. We should all focus on the problems, not the people.  Talking about common interests, options for mutual gain, and fair standards may be a wise, efficient, and amicable game of negotiation, but what if the other side won’t play?

While you try to discuss common interests, they may state their position in unequivocal terms. You may be concerned with developing possible agreements to maximize the gains of both parties. They may be attacking your proposals, concerned only with maximizing their own gains. You may attack the problem on its merits; they may attack you.

What can you do to turn them away from dug-in positions and toward the merits?

There are three basic approaches for focusing their attention on the merits:
1) What you can do. You yourself can concentrate on the merits, rather than on positions; it holds open the prospect of success to those who will talk about interests, options, and criteria. In effect, you can change the game simply by starting to play a new one. If this doesn’t work and they continue to use positional bargaining, you can resort to a second strategy

2) What they may do. It counters the basic moves of positional bargaining in ways that direct their attention to the merits. This strategy is called negotiation jujitsu.

3) What a third party can do. If neither principled negotiation nor negotiation jujitsu gets them to play fairly, consider including a third party trained to focus the discussion on interests, options, and criteria. Perhaps the most effective tool a third party can use in such an effort is the one-text mediation procedure. The first approach is the preferred approach -- principled negotiation.

If the other side announces a firm position, you may be tempted to criticize and reject it. If they criticize your proposal, you may be tempted to defend it and dig yourself in. If they attack you, you may be tempted to defend yourself and counterattack.

In short, if they push you hard, you will tend to push back. Yet if you do, you will end up playing the positional bargaining game.

  • Rejecting their position only locks them in.
  • Defending your proposal only locks you in.
  • And defending yourself sidetracks the negotiation into a clash of personalities.

You will find yourself in a vicious cycle of attack and defense, and you will waste a lot of time and energy in useless pushing and pulling. If pushing back does not work, what does? How can you prevent the cycle of action and reaction? Do not push back. When they assert their positions, do not reject them. When they attack your ideas, don’t defend them. When they attack you, don’t counterattack.

Break the vicious cycle by refusing to react. Instead of pushing back, sidestep their attack and deflect it against the problem. As in the Oriental martial arts of judo and jujitsu, avoid pitting your strength against theirs directly; instead, use your skill to step aside and turn their strength to your ends. Rather than resisting their force, channel it into exploring interests, inventing options for mutual gain, and searching for independent standards.

How does “negotiation jujitsu” work in practice? How do you sidestep their attack and deflect it against the problem? Typically their “attack” will consist of three maneuvers, asserting their position forcefully, attacking your ideas, and attacking you.

Let’s consider how a principled negotiator can deal with each of these. Don’t attack their position, look behind it. When the other side sets forth their position, neither reject it nor accept it. Treat it as one possible option.

Look for the interests behind it, seek out the principles that it reflects, and think about ways to improve it.

An example: In 1970, an American lawyer had a chance to interview President Gamal Abdel Nasser of Egypt on the subject of the Arab-Israeli conflict. He asked Nasser, “What do you want [Israel’s Prime Minister] Golda Meir to do?” Nasser replied, “Withdraw!” “Withdraw?” the lawyer asked. “Withdraw from every inch of Arab territory!” “Without a deal? With nothing from you?” the American asked incredulously. “Nothing. It’s our territory. She should promise to withdraw,” Nasser replied. The American asked, “What would happen to Golda Meir if tomorrow morning she appeared on Israeli radio and television and said, ‘On behalf of the people of Israel, I hereby promise to withdraw from every inch of territory occupied in 1967: the Sinai Peninsula, the Gaza Strip, the West Bank, Jerusalem, the Golan Heights. And I want you to know, I have no commitment of any kind from any Arab whatsoever.’” Nasser burst out laughing. “Oh, would she have trouble at home!”  Understanding what an unrealistic option Egypt had been offering Israel may have contributed to Nasser’s stated willingness later that day to accept a cease-fire in the ongoing hostilities.

Do not defend your ideas -- instead invite criticism and advice.

A lot of time in negotiation is spent criticizing. Rather than resisting the other side’s criticism, invite it. Instead of asking them to accept or reject an idea, ask them what’s wrong with it. Examine their negative judgments to find out their underlying interests and to improve your ideas from their point of view.

Rework your ideas in light of what you learn from them, and thus turn criticism from an obstacle in the process of working toward agreement into an essential ingredient of that process.

Another way to channel criticism in a constructive direction is to turn the situation around and ask for their advice. Ask them what they would do if they were in your position. “Recast an attack on you as an attack on the problem. When the other side attacks you personally— as frequently happens— resist the temptation to defend yourself or to attack them. Instead, sit back and allow them to let off steam. Listen to them, show you understand what they are saying, and when they have finished, recast their attack on you as an attack on the problem.

What can we both do now to reach an agreement?” Ask questions and pause. Those engaged in negotiation jujitsu use two key tools. The first is to use questions instead of statements. 

Statements generate resistance, whereas questions generate answers.

Questions allow the other side to get their points across and let you understand them. They pose challenges and can be used to lead the other side to confront the problem. Questions offer them no target to strike at, no position to attack. Questions do not criticize, they educate. “Do you think it would be better to have teachers cooperating in a process they felt they were participating in, or actively resisting one they felt was imposed on them and failed to take their concerns into account?”

Silence is one of your best weapons. Use it. If they have made an unreasonable proposal or an attack you regard as unjustified, the best thing to do may be to sit there and not say a word. If you have asked an honest question to which they have provided an insufficient answer, just wait. People tend to feel uncomfortable with silence, particularly if they have doubts about the merits of something they have said. For example, if a teacher’s representative asks, “Why shouldn’t teachers have a say in layoff policy?” the school board chairman might find himself at a loss: “Layoffs are a purely administrative matter.  .  .  . Well, of course teachers have an interest in layoff policy, but they really aren’t the best qualified to know who’s a good teacher.  .  .  . Uh, what I mean is  .  .  .  .” Silence often creates the impression of a stalemate that the other side will feel impelled to break by answering your question or coming up with a new suggestion. When you ask questions, pause. Don’t take them off the hook by going right on with another question or some comment of your own. Some of the most effective negotiating you will ever do is when you are not talking.

If you cannot change the process to one of seeking a solution on the merits, perhaps a third party can. More easily than one of those directly involved, a mediator can separate the people from the problem and direct the discussion to interests and options. Further, he or she can often suggest some impartial basis for resolving differences. A third party can also separate inventing from decision-making, reduce the number of decisions required to reach agreement, and help the parties know what they will get when they do decide.

At this stage, a third-party learns all he can about needs and interests and is invited to mediate. Sometimes a participant acts as mediator...

Let’s say you are a legislative assistant for a senator who is more concerned with getting a certain appropriations bill passed than with whether the appropriation is ten million dollars or eleven. Or you may be a manager trying to decide an issue on which each of your two subordinates favors a different course of action; you care more about making a decision both can live with than about which alternative is chosen. In each of these cases, even though you are an active participant, it may be in your best interest to behave as a mediator would and to use the one-text procedure. Mediate your own dispute.

Perhaps the most famous use of the one-text procedure was by the United States at the Camp David summit in September 1978 when mediating between Egypt and Israel. The United States listened to both sides, prepared a draft to which no one was committed, asked for criticism, and improved the draft again and again until the mediators felt they could improve it no further. After thirteen days and some twenty-three drafts, the United States had a text it was prepared to recommend. When President Jimmy Carter finally did recommend it, Israel and Egypt accepted. As a mechanical technique for limiting the number of decisions, reducing the uncertainty of each decision, and preventing the parties from getting increasingly locked into their positions, it worked remarkably well. The one-text procedure is a great help for two-party negotiations involving a mediator. It is almost essential for large multilateral negotiations. One hundred and fifty nations, for example, cannot constructively discuss a hundred and fifty different proposals. Nor can they make concessions contingent upon mutual concessions by everybody else. Combining parts of many different proposals is also unlikely to produce the best answer, as illustrated by the old quip that a camel is a horse designed by a committee. Multiple parties need some way to simplify the process of decision-making without diminishing the quality of the outcome. The one-text procedure serves that purpose.

Fisher, Roger; Ury, William L. (2011). "Getting to Yes: Negotiating Agreement Without Giving In." Penguin Group

In light of YOUR own position, can you find a way to give merit to the reason for another's differing position?  Can you listen with empathy and not judgment? It is easy to work with someone who has same or similar views and needs...can you work together with someone who does not?

Thoughts?

Nasty and Brutish: A Summary of the Real Issues on Both Sides from Unbiased Parties

Presidential Campaign 2012 


This time the real issues facing the country are much bigger than ever before: A lagging recovery from the worst recession since the 1930s, a string of $1-trillion-plus deficits, inexorably rising medical costs that burden both state and federal taxpayers, and a Social Security system unable to pay full benefits for more than another 20 years or so. Just to name a few.
And what are the candidates and their allies talking about?
In Chicago, the Obama campaign for weeks has been consumed with the date (1999 or 2001?) of Romney’s departure from Bain Capital, the venture-capital firm he founded. The reason? The Obama campaign wants to blame Romney for management decisions made after Feb. 11, 1999, at a few of the companies in which Bain invested. Romney did retain ownership and corporate titles listed in routine SEC filings after February 1999, but no evidence has yet shown that he exercised any active control over Bain’s investment decisions during this time. Romney was working 12-hour days, six days a week, as president of the 2002 Winter Olympics committee and was not actively involved in Bain.
Obama has even stooped to make a false claim that Romney favored banning abortion in cases of rape or incest, as though the contrast between their actual positions was not sufficiently clear. In doing so, the president mirrors the distortions of opponents who once accused him of favoring “infanticide.”
For his part, Romney has claimed to have created as many as 100,000 jobs while at Bain, happily taking credit for hiring that happened long after he left (and offering no actual accounting for the figure). He has accused Obama of waging a “war on women” based on job losses from a recession that started more than a year before Obama took office. He has falsely stated in a TV ad that an inspector general found stimulus contracts “were steered to ‘friends and family,’ ” when the IG made no such finding. And he has repeatedly misrepresented Obama’s new health care law.
Meanwhile the tone of the campaign becomes ever more nasty. Obama campaign aides recently suggested Romney was guilty of a “felony,” while a Romney surrogate said the president should “learn to be an American.”
And neither candidate speaks candidly of what he would actually do if elected. Romney won’t say how he plans to cut taxes further without losing revenues. Cutting or eliminating the deduction for home mortgages or for state income taxes? Obama says nothing about how Social Security is to be preserved. Raising the payroll tax?
Perhaps we’ll hear more in the 109 campaigning days to come. Perhaps the candidates will become less personal, more substantive, and more forthcoming about their plans for leading the nation. We remain hopeful. But, based on the facts so far, we’re not optimistic.

Analysis

On April 10, former Pennsylvania Sen. Rick Santorum suspended his campaign for the Republican presidential nomination and former Massachusetts Gov. Mitt Romney became the party’s presumptive nominee — marking the unofficial beginning of the general election. A day later, Romney attacked President Barack Obama for waging a “war on women” because “over 92 percent of the jobs lost under this president were lost by women.”
Romney appropriated the phrase “war on women” from Democrats, who had been using it against Romney and Republicans who opposed the Obama administration’s contraception mandate. CNN carried a headline over an April 11 story that read, ” ‘War over women’ kicks off Obama-Romney race.”
Things haven’t gotten much better since then.
War Over Women
Romney’s statistic about female employment was accurate, but not the whole story. Male employment fell sharply and much earlier in the economic downturn, but has recovered at a faster rate than female employment. A more telling statistic: The unemployment rate was lower for women (8.1 percent) than men (8.3 percent) in April.
The battle for the women’s vote has resulted in some twisted claims from both sides.
An Obama TV ad alleged Romney “backed a law that outlaws all abortions, even in cases of rape and incest.” But there was no such law. The Obama campaign was referring to a question about a hypothetical “federal ban on all abortions” posed at a 2007 debate by an audience member. In his answer, Romney did not say what, if any, exceptions he supported — giving the Obama campaign the opening to answer for him. But Romney has been specific, both before and after that debate, that he supports exceptions for rape, incest and to save the life of the mother.
In another TV spot featuring Obama’s signing of the Lilly Ledbetter Fair Pay Act in 2009, the president’s campaign said women are “paid 77 cents on the dollar for doing the same work as men.” That’s not true. In 2010, the Census found that “the earnings of women who worked full time, year-round were 77 percent of that for men working full time, year-round.” But that’s the median (midpoint) for all women in all jobs, not a figure for women doing “the same work” or even necessarily working the same number of hours.
Stimulus Hyperbole
The Romney campaign and his supporters have sought to portray the stimulus program as rife with waste, particularly clean-energy loan programs. One Romney campaign ad said “[t]he inspector general said contracts were steered to ‘friends and family.’ ” But Gregory Friedman, the inspector general for the Department of Energy, did not say that. He said the office was investigating that kind of thing, but no charges have been made, at least not yet.
new TV ad by the Romney campaign called “Where Did All the Money Go” claimed stimulus funds went for “electric cars from Finland.” The conservative Americans for Prosperity made a similar charge in an earlier ad. Both are referring to Fisker Automotive, which received more than $500 million in loans. It’s true that Fisker builds cars in Finland, but the stimulus money went for engineering, sales, and design and marketing in the U.S. “The money could not be, and was not, spent on overseas operations,” the Department of Energy says.
The new ad asked the question: “Where did all the Obama stimulus money go?” A breakdown of the $840 billion stimulus can be found on the Recovery Board’s website. Most of it went for tax credits to U.S. taxpayers and grants to states for Medicare, Medicaid and education.
Taxes: Broken Promise?
An attack ad from Crossroads GPS made the largely false claim that Obama broke a promise to not increase taxes for families making less than $250,000 a year. Obama actually cut taxes for such families, first through the stimulus tax credit in effect for 2009 and 2010, and beginning in 2011, through a reduction in the payroll tax for all workers.
Obama’s 2 percentage point reduction in the Social Security payroll tax started in 2011 and is scheduled to continue through the end of 2012. The cut is equal to $1,000 this year for a worker making $50,000 a year — or as much as $2,202 to any worker earning at least the maximum taxable level of wages or salary ($110,100 for 2012). Prior to that, he signed the stimulus bill into law, which included the “Making Work Pay” tax credit that benefited nearly all working families and was in effect from 2009 through 2010. That credit was worth a maximum of $400 per person, or $800 for couples during those years.
Crossroads GPS based its claim on taxes that mostly have yet to be implemented under the federal health care law, otherwise known as the Affordable Care Act. But most of the law’s taxes would specifically fall on businesses and corporations, or individuals making at least $200,000 and families making more than $250,000 a year.
Spinning Jobs Data
Perhaps the most important issue of the campaign is jobs, yet so much of the political banter has been less about how to create more jobs than about the candidates distorting their own or each other’s record on jobs.
For example, the Obama campaign claimed in an ad that when Romney was governor,   Massachusetts “fell to 47th in job creation.” It’s true that over Romney’s four years as governor, the state ranked 47th out of 50 states in percentage of job growth. It had ranked 37th in the four years prior.
There’s another way to look at the numbers. Instead of looking at the cumulative, four-year ranking, the Romney campaign prefers to cite the year-to-year progress.
In the 12 months before Romney took office, the state ranked 50th in job creation, and for his first 12 months in office, the state remained 50th. But by his final year, the state ranked 28th. That’s still mediocre, but an improvement, and not a decline, as the ad would lead viewers to believe.
On the other hand, the “50th to 28th” narrative touted by the Romney campaign absolves Romney of all responsibility for job creation in his first year, a concession Republicans never grant to Obama.
Both sides do it. The president’s typical stump speech makes reference to private-sector job growth during the last two years or so. By lopping off the worst of the recession early in his presidency and focusing on just private-sector jobs, Obama is able to claim that businesses have created “over 4 million jobs in the last 27 months.” But if one looks at all jobs (including government jobs) over the entirety of Obama’s time in office — as the Obama campaign does when it looks at Romney’s record as governor — there has been a net loss of jobs.
In a campaign speech in June, Obama claimed he created more private-sector jobs in the past 27 months than President George W. Bush created “during the entire seven years before this crisis.” But that’s like comparing apples and mangoes. The president is absolving himself of responsibility for the savage recession he inherited, while assigning to Bush responsibility for the recession that began within weeks of his taking office in 2001.
The fact is, the economy has gained just about the same number of private-sector jobs (Obama’s preferred measure) in the 27 months since the most recent job slump hit bottom as it did in the 27 months following the bottom of the first Bush slump. And looking at total jobs — the broader and more customary measure — Bush’s post-slump job creation record was significantly better than Obama’s.
A Romney ad, meanwhile, put its own spin on jobs statistics, claiming that as governor, “Romney had the best jobs record in a decade.” Massachusetts added more net jobs during Romney’s four years in office than during the four-year period of either his predecessor or successor. But that ignores the national recessions before and after Romney’s time in office. If you look at how Massachusetts stacked up on job creation compared with other states, Romney actually fared worse than his predecessor and successor.
The same ad claimed Romney “reduced unemployment to just 4.7 percent.” Massachusetts’unemployment rate went from 5.6 percent to 4.6 percent under Romney. But the state’s unemployment rate was slightly lower than the national rate when he took office, and was roughly the same as the national rate when he left office.
Bain: Killing Jobs?
In recent weeks, the Obama campaign has been focused like a laser beam on Romney’s wealth — particularly on how he earned his money at Bain Capital, a venture-capital firm founded by Romney in 1984. The Obama campaign accused Romney in a series of TV ads of being a “corporate raider” who “shipped jobs to China and Mexico.”
There’s no question that Bain invested in companies that outsourced work to others here and abroad. There’s also no question that Bain invested in companies that manufactured goods in foreign and domestic plants. The Obama campaign’s claim that “he [Romney] shipped jobs to China and Mexico” comes down to a few examples of management decisions at companies in which Bain invested after Romney took a leave of absence from Bain in February 1999 to run the 2002 Winter Olympics. Romney wasn’t actively in charge of the firm at the time and, as it turned out, did not return to the firm after February 1999.
Stephanie Cutter, deputy campaign manager of Obama’s reelection committee, suggested Romney may have committed a felony. “Either Mitt Romney, through his own words and his own signature, was misrepresenting his position at Bain to the SEC, which is a felony. Or he was misrepresenting his position at Bain to the American people to avoid responsibility for some of the consequences of his investments,” Cutter said. But Jill E. Fisch, a professor at the University of Pennsylvania Law School and co-director of the Institute for Law and Economics, told us: “If that really mattered to investors, they might consider that a civil liability, but we wouldn’t be talking about a felony.”
It’s also simply inaccurate to call Romney a “corporate raider.” We have documented instances in which Bain enriched itself and its investors with hefty fees and dividend payments that left companies heavily in debt and vulnerable to bankruptcy. But that doesn’t make Romney a corporate raider, which has a specific meaning in the business world. According to the Oxford English Dictionary, a corporate raider is “one who mounts an unwelcome takeover bid by buying up shares (usu. discreetly) on the stock market.” Bain didn’t engage in hostile takeovers when Romney was at the helm.
Bain: Creating Jobs?
During the early stages of the GOP primary, Romney took to claiming that he created more than 100,000 net jobs through his work in the private sector. But the claim that he created that many net jobs while at Bain Capital is unproven.
It’s true that the private equity firm Bain Capital invested in many companies that went on to add jobs. But there’s no thorough count of the jobs gained and lost in all the companies in which the firm invested.
When we asked the Romney camp for support, spokesman Eric Fehrnstrom sent us a list of jobs added at three companies in which Bain had invested, saying that these three companies alone created over 100,000 jobs: Staples, which had 89,000 employees as of Dec. 31, 2010; The Sports Authority, which had 15,000 employees as of July 2011; and Domino’s, which has added 7,900 jobs since 1999. But it’s highly debatable whether Bain, and Romney, deserve credit for all of the jobs created, particularly when there were other investors, executives who launched or ran the companies, and new owners in later years. And that count does not include job losses that occurred at other companies that Bain acquired, such as 385 jobs cut at American Pad & Paper, 1,900 positions cut or relocated at Dade International, 2,100 workers laid off from DDI Corp., 2,500 jobs lost at Clear Channel Communications, and 3,400 layoffs at KB Toys.
Blame Game, Part 1
17-minute Obama campaign film included the curious claim from narrator Tom Hanks that Obama “would not dwell in blame” for inheriting a huge economic mess.
It’s true that Obama did not blame outgoing President George W. Bush or the Republicans for the deepening recession in his inauguration speech in 2009. But in numerous public statements over a course of many, many months, Obama used a metaphor — involving getting a car out of a ditch — to repeatedly cast blame for the economic crisis.
The president used the metaphor at least 72 times by our count. It became a staple of his stump speeches during the 2010 congressional midterm elections. We found 26 unique instances in which the president used the phrase “car out of the ditch.” There were another 46 events at which he gave a variation of that phrase — such as “car into the ditch,” “drove our economy into a ditch,” “we’ve gone into the ditch,” “they drove it into a ditch,” and “we went down into the ditch” and “finally we got that car back on level ground.” Sometimes, the Democrats were wearing muddy boots to retrieve the car and the Republicans were “sipping on a Slurpee.”
Blame Game, Part 2
Romney and his surrogates have on occasion blamed Obama for actions that had originated under Bush.
Speaking to the National Rifle Association, Romney railed against the “Obama EPA” and “how the Obama government interferes with personal freedom” — citing an EPA action taken in 2007, when Bush was president. The Bush administration’s EPA ordered a couple to stop building a home in the wetlands. The couple tried to sue but a Republican-nominated federal judge ruled in 2008 (when Bush was still president) that they were not entitled to a hearing on their appeal of the EPA’s compliance order. The Obama EPA continued the case, which went back to a lower court after a U.S. Supreme Court ruling in the couple’s favor.
In response to Obama’s charges of outsourcing by Bain Capital, former New Hampshire Gov. John Sununu claimed the president “outsourced a major portion of the U.S. space program to the Russians.” Sununu was referring to the July 14 launch of a Russian Soyuz spaceship that carried U.S. astronaut Sunita Williams to the International Space Station. But it was Bush who announced a “new vision” for NASA in 2004 that included ending the Space Shuttle program without having a replacement vehicle for at least four years. “Administration policy is to retire the shuttle in 2010 and purchase crew transport from Russia,” as Michael Griffin, who led NASA under Bush, once explained. Obama continued that policy.
Buffett Rule
In an effort to pass the “Buffett Rule” legislation, Obama and Vice President Joe Biden gave the false impression that many, if not most, millionaires (people who earn $1 million or more a year) are paying a lower tax rate than the middle class. The fact is that even without the Buffett Rule “more than 99 percent of millionaires will pay” a higher tax rate than those in the very middle of the income range in fiscal year 2015, according to the nonpartisan Tax Policy Center.
In an April 10 speech, the president described the Buffett Rule this way: “[W]hat the rule says is you should pay the same percentage of your income in taxes as middle-class families do.” Two days later, Biden declared that Buffett is “not alone,” and there are “tens of thousands and several millions of people who are in that same situation.”
But Roberton Williams, a senior fellow at the Tax Policy Center, who spent 22 years at the nonpartisan Congressional Budget Office, wrote that even without the Buffett Rule, only about 4,000 of those with $1-million-and-above incomes will pay less than the 15 percent effective federal tax rate that middle-income households will pay in fiscal year 2015. “The Buffett rule sounds good in principle,” Williams wrote. “High-income taxpayers should pay at least as large a share of their income in taxes as the rest of us. But most already do.”
And, Of Course, Health Care
What list of whoppers would be complete without a few bogus health care claims? In response to the Supreme Court ruling upholding the federal law, Obama and Romney exchanged a flurry of false and misleading claims.
Romney claimed the law “puts the federal government between you and your doctor.” The health care law does set new minimum benefits packages, but that’s more a matter of coming between patients and their insurance companies, rather than patients and their doctors. Under the law, medical services will not be government-run, nor does the law allow for rationing of care.
Obama reiterated his “if you like your plan, you can keep your plan” refrain, despite the fact that at least a few million workers won’t keep their employer-sponsored plans, according to the Congressional Budget Office. The latest CBO report on this topic found that under the most likely scenario, 3 million to 5 million fewer workers would get health insurance through their employers than would be the case without the law, from 2019 to 2022. Some of those employees would make the switch voluntarily, choosing “to obtain coverage from another source,” CBO said.
Sorry, But …
So, where are we now? The campaign got to the point that on consecutive days a surrogate for each candidate issued one of those “I’m sorry if I offended anyone” apologies. 
First, Sununu created a stir when he said this during a July 17 media call arranged by the Romney campaign: “I wish this president would learn how to be an American.” Within hours, Sununu was on CNN to issue a semi-apology and explain what he meant to say: “I apologize for using those words. But I don’t apologize for the idea that this president has demonstrated that he does not understand how jobs are created in America.”
A day later, the Democratic National Committee released a video (titled “Dancing Around the Issues”) attacking Romney for failing to release more than two years of his tax returns. The video featured his wife’s horse in a dressage competition. Ann Romney has multiple sclerosis and took up horse training as therapy. The DNC (sort of) apologized for it. DNC spokesman Brad Woodhouse told ABC News that the DNC did not mean for the video to “offend” Ann Romney. “We regret it if it did. We were simply making a point about Governor Romney’s failure to give straight answers on a variety of issues in this race.”
Nasty, brutish and … long, indeed.
– by Brooks Jackson, Eugene Kiely, D’Angelo Gore and Robert Farley

What are YOUR thoughts...and why?


“over 92 percent of the jobs lost under this president were lost by women,”