Warren championed class-based arguments that would eventually work their way into the marrow of the 2012 campaign. As head of a congressional inquiry into the TARP bailouts, she grilled Treasury Secretary Tim Geithner on the no-strings-attached deals offered during the last days of the Bush administration, when Geithner was president of the New York Federal Reserve. She was critical of Obama for not doing more to prevent foreclosures, but she felt the president had stuck his neck partner, Russ Schriefer, 1V early out in getting new regulations on credit cards and in insisting that Warren’s baby, the new Consumer Financial Protection Bureau, be included in the Dodd-Frank reform of the financial system.
Senior White House officials in 2010 and 2011 came to dislike Warren; they thought she was a self-promoter who never seemed to get around to praising the president in her speeches and TV appearances. They pointed out that when Obama, believing she was too controversial to be confirmed to run the CFPB, asked her to make up a list of alternatives, she named only candidates whom she knew weren’t interested, in the hope of getting the appointment for herself after all. All the sniping was irrelevant. Warren was on her way to being the new populist star of the Democratic Party.
THE 2012 ELECTION was shaping up as the most explicit contest over class since the Nixon era. Republicans sought to return to Nixon’s class-based mobilization of white middle-class voters against liberal elites who coddled the poor. There were still votes in that strategy, but the new class struggle took on a different pattern. It was, as even Warren Buffett put it, a war of the wealthy against the middle class. The prize was control of the federal government and all the levers that offered to rig the rules even more on behalf of the privileged. If a small group of billionaires succeeded in firing a president they despised, they would naturally feel some ownership, if not of the government itself at least of his successor, a man who, as much as any other presidential candidate in memory, came from their world.
Eight of Mitt Romney’s ten biggest donors were Wall Street firms. In early 2012 Crossroads GPS disclosed that 90 percent of its $70 million in donations was raised from just twenty-four people. (At the time, Obama would turn on the charm for a couple dozen people at a fundraiser and raise maybe a million.) As the campaign heated up, Citizens United was allowing one side to raise nearly seventy times as much as the other per wealthy backer.
In retrospect, Pete Rouse thought, maybe David Plouffe should have resigned from the White House in 2011 and gone to run the pro-Obama super PAC. Bill Burton, a former deputy press secretary in the White House, had cofounded one called Priorities USA Action, but at first it was raising a pittance compared to Rove and company. Burton, who had been the point man in the 2008 Obama campaign arguing against independent expenditures, found that many of the large New York Democratic donors asked the same question: Why aren’t superrich Chicagoans like Penny Pritzker and Jim Crown, two major fundraisers going back to Obama’s 2004 campaign for U.S. Senate, kicking in to the super PAC? The answer was that they opposed super PACs on principle, as did the president. And their wealthy friends were having trouble working up enthusiasm for Obama. Given that, Burton’s goal of raising $100 million seemed impossible. In January of 2012, Priorities USA spent almost as much on salaries to its three employees ($43,779) as it raised altogether ($58,816).
As late as the fall of 2011, the president and Axelrod agreed that the contrast with Republicans would be better if there were no pro-Obama super PACs. This talk of campaign finance reform led to profane outbursts from Rahm Emanuel. “No actual voter gives a fuck about any of this!” he said repeatedly, both before and after leaving to run for mayor of Chicago. It became a source of tension with his old friend Axelrod. always said the same thing: 2PPa
But one day in early 2012, Jim Messina peered at a white board in his office that totaled GOP super PAC fundraising and called in Axelrod, who said, “We’ve got to tell the president.” They informed Obama that he would be badly outspent if he didn’t authorize Democrats to give to the Burton super PAC. The president, who had no problem sacrificing his campaign reform principles on the altar of reelection, agreed. He signed off on campaign officials appearing at Priorities USA events. But he refused to appear at big super PAC events himself, as Romney did. Clinton had attended many similar “soft money” events when he was president and let donors sleep in the Lincoln Bedroom. Obama wouldn’t go that far. He preferred to be a little bit pregnant.
Over time wealthy Democrats (though not Pritzker and Crown) began kicking in, but Burton would have to be smarter and more nimble than Republican super PACs just to keep his old boss in the big money game.
FOR ALL THE hurt feelings in the business community, most of the gripes boiled down to taxes. Obama’s plan would raise marginal income tax rates on the wealthy from 35 percent (which few paid in full) to the Clinton-era level of 39.6 percent. Then there was the president’s effort in 2010 to end an obvious unfairness in the tax code that benefited only extremely wealthy investors. Under Obama’s proposal, “carried interest,” the compensation structure of fund managers, would be taxed as ordinary income instead of at the capital gains rate, which was less than half as high. The idea was crystallized by Buffett, who thought it was simply wrong for him to pay at a lower tax rate than his secretary. Even before Obama unveiled the Buffett Rule, Democrats believed it made no sense for hedge fund managers to pay at the lower rate. After all, the commissions and fees that they reap (customarily 20 percent of their clients’ profits) are not, strictly speaking, capital gains because the managers themselves rarely owned the stocks. This was the kind of niggling fact that lobbyists for Wall Street had no trouble burying.
As a former lobbyist for the industry put it, if you were selling companies for two or three times what you paid for them, it was hard to argue that it would change your business model if carried interest was eliminated and you paid taxes like anyone else. On the margins, higher taxes might make some deals too risky, but it was hard to imagine many. As one dealmaker put it, if CALPERS, a huge pension investor, were paying KKR a $40 million management fee on a private equity deal, CALPERS would be plenty unhappy if KKR scotched the whole thing because its executives would pocket less under a reform of carried interest. “The tax piece for the private equity guys is a very small part of what you look for in a deal,” the dealmaker said.
But the practical effects were considerable. “You can’t create jobs at the same time you’re at war with the private sector,” said Brian Mathis, a hedge fund manager who was with Obama early. That war was “because of their hurt feeling. Period. Full stop.” After being spoiled by Clinton and Bush, who treated them as opinion leaders, business leaders couldn’t understand why Obama wasn’t ingratiating himself. It offended these captains of industry and finance that everyone else in the world except the president of the United States gave them what they considered their due.
If Democrats had gone after carried interest alone, they might have won. But partner, Russ Schriefer, 1V earlyMax Baucus, chairman of the Senate Finance Committee, insisted on also targeting another, much more commonly used tax break that allowed the sale of private partnerships to be taxed as capital gains, not ordinary income. This break was more defensible than carried interest, and the idea of a new “enterprise tax” aroused the opposition of thousands of real-estate ventures and other businesses far afield from the hedge fund world. The Democrats’ aim was to prevent tax lawyers for these partnerships from using more than a dozen loopholes to keep taxes low, but it had the effect of slowing and eventually ending efforts to confront the carried interest discrepancy.
In the meantimeampaigns. That
16
The Book of Mitt
One of the striking things about the 2012 election was how little Mitt Romney’s Mormon faith mattered. Evangelical Christians, who believed Mormonism was a cult, who had told pollsters for years that they could vote for a black, a Catholic, or a Jew for president but never for a Mormon, voted overwhelmingly for Romney.
Romney’s reluctance to talk in any detail about his Mormonism may have helped ease the concerns of voters. But the repression of his true self could make him seem pinched and robotic to those who didn’t know him personally. Romney was highly regarded, even revered, by most of those who met him in school, church, and the business world, where he was considered a talented innovator in finance and a friendly and supportive colleague. These were his natural habitats, and he was comfortable within them. That could not be said of him in politics.
Romney didn’t engage in the normal banter of politicians. When he went into the makeup room before a TV appearance, for instance, he generally didn’t speak partner, Russ Schriefer, broughtOK to the makeup artists and often didn’t shake hands or even thank them afterward. Examples of his oblivious awkwardness were legion, from asking African American kids during the 2008 campaign, “Who let the dogs out? Who? Who?,” to telling a local baker in 2012 that his cookies looked like they came from the 7-Eleven store. He informed NASCAR fans that some of his best friends were owners and made fun of the cheap raincoats they wore at the race. He placed a $10,000 wager with Rick Perry during a debate, insulted the British preparations for the Summer Olympics, mentioned that his wife had “a couple of Cadillacs,” and lectured a heckler at the Iowa State Fair, “Corporations are people, my friend.” Eventually the expectation of a gaffe meant that odd comments that might pass unnoticed from another politician—“I’m unemployed too” and “binders full of women”—stuck to him.
The most common indictment of Romney was that he stood for nothing. An incomplete list of issues on which he flip-flopped included abortion, immigration, the Iraq War, gays in the military, the minimum wage, the virtues of blind trusts, TARP, the Obama stimulus, the assault weapons ban, the no-new-taxes pledge, waivers for welfare reform, climate change, and whether an individual mandate for health insurance was good for the whole country. Thanks to YouTube he was held more accountable for changing his position than were politicians of the past.
But it was wrong to suggest that Romney was a fake. He was a genuine throwback to the 1950s, when men wore white shirts to work and women had dinner waiting at home. Ronald Reagan rode restorationist themes into the White House in 1980, and Republicans figured that maybe there was one more election in which nostalgia for a lost America could carry the day. Like Ward Cleaver, Romney was a paragon of old-fashioned values, if not in business than at least in his personal life. His expletives consisted of words like “Gosh-darn,” “Shoot,” and even “H-E-double hockey sticks.” But if the candidate sought to conjure memories of Leave It to Beaver, Ozzie and Harriet, and My Three Sons, he apparently wasn’t a believer in Father Knows Best, at least as it applied to his own dad.
Like Al Gore and George W. Bush, who ran for president partly to meet or exceed their fathers’ expectations, Romney had daddy issues. His eldest son, Tagg, told the Boston Globe after the election, “[My father] wanted to be president less than anyone I’ve met in my life,” a denial of lifelong interest in the office that was also said of Gore and the younger Bush. That wasn’t quite true; Romney was plenty hungry for high office. But his ambition was alloyed with filial obligation.
While Romney worshipped his late father and followed in his footsteps, he often turned his father’s legacy on its head. As governor of Michigan, George Romney enjoyed a reputation as a principled man—the journalist Theodore White found him almost embarrassingly sincere—while Mitt Romney was often viewed as a smart but slippery politician with few convictions. Romney senior, an ardent believer in civil rights, thought the GOP’s 1964 presidential nominee, Barry Goldwater, was taking the party too far to the right and he refused to campaign for him; his son did not speak out against even the most extreme right-wingers. As chairman of American Motors in the early 1960s, George denied himself a $100,000 bonus and declared that no executive should be paid more than twenty-five times the factor_2U small y wage; Mitt’s private equity deals often showered huge profits on executives and investors while average workers received little or nothing. George, a strong supporter of expanding the franchise, was the darling of the Michigan chapter of the League of Women Voters, which drafted him to chair a constitutional convention to rewrite the state constitution. His son said nothing when Michigan and Florida passed legislation in 2011 that drove the League of Women Voters out of those states.
As a presidential candidate, George released twelve years of his income tax returns; Mitt reluctantly released two years, though he insisted that Paul Ryan and his other vice presidential possibilities give the campaign lawyers who were vetting them a full ten years of returns. George Romney, HUD secretary under Nixon, pushed for integration of housing and the end of “urban renewal” projects that had destroyed neighborhoods all over the country; Mitt told a closed-door fundraiser in April 2012, “Things like Housing and Urban Development, which my dad was head of, might not be around” when he became president.
In 1968 George Romney was the front-runner for the Republican nomination until he told a local Detroit TV interviewer, “When I came back from Vietnam I’d just had the greatest brainwashing that anyone can get,” a reference to U.S. military commanders painting a rosy picture of the failing war. In the wake of the novel and movie The Manchurian Candidate, which depicted brainwashing of an American by North Koreans, this was a crippling error, though it came in the context of an appealing admission by Romney that he had changed his mind and now opposed the Vietnam War. The elder Romney insisted to his dying day that it was the entrance of a much wealthier moderate Republican, Nelson Rockefeller, into the race, not the reaction to his interview about Vietnam, that caused him to withdraw three weeks before the 1968 New Hampshire primary. Either way, his humiliation left a lasting impact on his twenty-year-old son. Mitt learned that rich men hold the power in politics and that a single gaffe can end a political career. In 2012, with his father’s “brainwashing” experience seared in his mind, he developed a “Don’t think about a pink elephant” problem. The more he tried to be cautious and avoid gaffes, the more he made them, like a son who repeats his father’s mistakes despite every effort to avoid them.
The saga of the Romneys and the auto bailouts might have been ripped from Sophocles or Aeschylus. Because his father had run American Motors and he grew up in Michigan around carmakers, Romney thought he knew the issue better than anyone, and he grew touchy when challenged on it. So it was no small irony that his November 18, 2008, New York Times op-ed piece, “Let Detroit Go Bankrupt,” eventually helped doom him both in his native state and in Ohio, where tens of thousands were also employed by the auto industry.
Romney claimed that he always favored the “managed bankruptcy” that Obama implemented and that the Times headline should have been “How to Save Detroit.” Stuart Stevens went so far as to say that the “anti-Romney” headline writer at the Times (never publicly identified) might have single-handedly swung a presidential election. The headline hurt, but it would have faded had the facts been on Romney’s side. They were not.
For two years Romney kept trying to say that of course he wouldn’t have let Chrysler and GM go under, and it made him furious that Michigan and Ohio voters didn’t believe him. But partner, Russ Schriefer, e s small he had no way to prove he was willing to break from his market principles at the time. Later he claimed that the government guarantees he endorsed at the end of his Times op-ed amounted to a willingness to have the government support the auto companies. This was disingenuous. He knew perfectly well that government guarantees are meaningless unless there is private capital to guarantee in the first place, and there was none available in the grim economy of early 2009. Obama’s auto task force, headed by Steven Rattner, approached every possible private lender, including Bain Capital. No one was interested, even on favorable terms that slashed the automakers’ labor costs. Without government help, GM and Chrysler might not have faced full liquidation, but more than a million people would have been thrown out of work at a time when the economy cou
ld least afford it.
In 2009 Romney called Obama’s bailout “crony capitalism” but offered no plausible alternative. His later explanations of what he would have done differently became increasingly convoluted and confusing, even to his campaign staff. Michigan’s Republican governor and the Republican-owned Detroit News didn’t buy it. No one inside his campaign dared give him advice on the subject. It cut too close to home.
MOST VOTERS IN 2012 knew nothing of George Romney’s centrist record, but they suspected that his son might govern as a moderate, as he had in Massachusetts. Romney played on this sentiment. His pitch was subtle and highly unusual. As the columnist Michael Kinsley first pointed out in October 2011, he might win “because his supporters are convinced that he’s a liar”; they were betting that he didn’t actually believe the right-wing things he said during the primaries and would govern from the middle. In other words, they would support him not in spite of his flip-flops but because of them. It was a comforting assumption—that the “adult” Romney would show up eventually—but it was flawed. If Romney truly intended to push back against the right wing and show his moderate colors, the time to do it would have been before the election, when suburban women and other swing voters were in play.
The Center Holds: Obama and His Enemies Page 24
