What Lies Behind Clinton's Remarks on Private Equity
Bill Clinton's remarks about Romney's record and the Bush tax cuts demonstrate his fealty to the financial sector.
We can attribute Bill Clinton making trouble for President Obama to his unquenchable need for the limelight. He first praised Mitt Romney’s business record and private equity practices in general. He then said the Bush tax cuts should be extended, without indicating that he agreed with Obama that the tax increases on the wealthy should be retained.
Clinton’s concern about raising taxes in the weak economy while cutting federal spending is right on. America is now practicing austerity, if a milder version than Europe’s. If not reversed, we could well have a recession again in 2013. And then what happens to the still-strained financial sector?
But Clinton’s remarks are disturbing for what they suggest about his tolerance for the financial class, for lack of a better term. Was it an accident that he left out any mention of raising taxes on the wealthy? The financial class dominates that group, if we include business execs who make a great deal of money from their stock options.
The real giveaway about Clinton is how he supports the financial industry’s assertions about the good done by private equity. We’ve addressed some of that in this space before. Clinton says flat-out that they do a good job. Does he have any evidence to demonstrate that? Has he looked at the evidence that undermines those assertions? Does he really think private equity was all about saving companies rather than exploiting the ability to borrow against their assets, cut them down, and then sell the company? Was it all about making America more productive and innovative? Come on.
This is of course the Bill Clinton who wholeheartedly gave us financial deregulation—no regulation of derivatives, no restraints on bank expansion as Glass-Steagall was undone, little concern by his SEC about over-speculation and analytical lying in investment firms, allowing CEOs to get enormous stock options, and so on.
He has apparently bought the assertion that the financial engineering of the past 20 years was mostly good. Of course, Wall Street is where the campaign money is.
In his most recent book, Clinton argued for stronger government, a welcome call. But he was the one who gave us less government.
Next week, we will post a thorough piece by economist Eileen Appelbaum on the good and bad of privatization. In the meantime, keep in mind that the heyday of privatizations, then known as Leveraged Buyouts, was the 1980s, when productivity growth for America remained historically slow. It did not rise again until the mid-1990s, with the advent of the Internet. The large, large share of productivity gains was in high technology and companies like Wal-Mart, not in the buyouts of companies by Bain and others.
Bill Clinton image via Shutterstock.