25 January 2008

My few problems with Mitt Romney

As the man coming in to rescue the Salt Lake City Olympics, he would, indeed, prioritize spending, remove waste and make sure that the games and essential services were met. However, as there was an ongoing federal probe and prosecution going on during that period, he was trying to distance the games from its earlier organizers and promoters. And, perhaps, going just a bit too far in that attempt. The following from a Concord Monitor article of 21 DEC 2007:

Not everyone was taken with Romney. As he came in, the FBI was investigating the scandal. While Romney overhauled the books, Welch, who had led the bid committee, was indicted on 15 felony counts, including racketeering, conspiracy and fraud.

To Fonsbeck, the former city councilor who said the high-priced wooing was an open secret in Salt Lake City, Romney was among those who worked to pin the blame on Welch and an associate alone, excluding them from even an Olympic memorial of names who'd contributed to the Games.

"He was kind of treating them like crooks, even though they hadn't been found guilty," Fonsbeck said. "He wouldn't allow them to be acknowledged in any way."

Fonsbeck, who was friends with Welch, said she talked to Romney just once - when he called her, asking her to urge her friend to plead guilty.

He "suggested I use my influence to get Tom to plead guilty for the good of the Games and the good of Utah," Fonsbeck said. Romney, she said, suggested that if it went to trial, Welch might end up in jail.

"I said, 'Well, I'll supply him with good reading materials,' " Fonsbeck said. "You have to understand that coming out of this redeemed is so important for Tom."

Ultimately, a judge threw out the charges, even thanking the men for their contributions.

''I can only imagine the heartache, the disappointment, the sorrow that you and your loved ones suffered through this terrible ordeal," District Judge David Sam said. ''My hope is that you will now be appropriately recognized and honored for your efforts."

But Hybl notes that the investigation wasn't Romney's - prosecutors alone decide who to indict and who not to. And Bullock brings up the cash, the scholarships, the scandal.

"Yeah, they weren't convicted, but that doesn't make something right," he said.

Yes "for the good of the Games and the good of Utah" would the executive in charge of the games press a city councilor, who knew Tom Welch, to plead guilty. It isn't the grand job that he did with the games was not grand, but in pushing for a man later to be found innocent to plead *guilty*, he went a step too far to try and make sure that *no* scandal would be attached to his tenure. In the 06 DEC 2003 Hannibal Courier-Post article on the decision in the case, the two men would be demonstrated to be innocent of the charges against them:

With a stinging attack on prosecutors, a federal judge threw out the case Friday against two civic leaders accused of bribery for lavishing $1 million in cash, gifts and favors on Olympic officials to bring the 2002 Winter Games to Salt Lake City.

The ruling by U.S. District Judge David Sam came midway through the trial of Tom Welch and Dave Johnson, and all but closes the book on the worst scandal in Olympic history.

The judge said that in his 18 years on the federal bench, he had never seen a case so devoid of "criminal intent or evil purpose." He said the evidence never met the legal standard for bribery, and the case "offends my sense of justice."

"Enough is enough," the 70-year-old Sam said.

The judge formally acquitted the men, which means the government cannot appeal, because retrying them would amount to double jeopardy.

While this tendency would not show up in governing MA, his overall performance was, basically, lack-luster. From the Cato Institute's Fiscal Policy Report Card on America's Governors: 2006 we get the final grade for out-processing Gov. Romney (and Mike Huckabee):

Mitt Romney, Republican Legislature: Democratic
Final Overall Grade: C

As Mitt Romney launches his bid for the Republican presidential nomination, his fiscal record as governor should be scrutinized. Romney likes to advance the image of himself as a governor who has fought a liberal Democratic legislature on various fronts. That’s mostly true on spending: he proposed modest increases to the budget and line-item vetoed millions of dollars each year only to have most of those vetoes overridden. But Romney will likely also be eager to push the message that he was a governor who stood by a no-new-taxes pledge. That’s mostly a myth. His first budget included no general tax increases but did include a $500 million increase in various fees. He later proposed $140 in business tax hikes through the closing of “loopholes” in the tax code. He announced in May 2004 that he wanted to cut the top income tax rate from 5.3 to 5 percent, but that was hardly an audacious stand. Voters had already passed a plan to do just that before Romney even took office. In his budget for 2006, he proposed $170 million more in business tax hikes, almost completely neutralizing the proposed income tax cut. If you consider the massive costs to taxpayers that his universal health care plan will inflict once he’s left office, Romney’s tenure is clearly not a triumph of small-government activism.

Do note that the fiscal responsibility includes a power the President does not get: the line-item veto. So any spending cuts due to that cannot be factored in unless he promises to use the Executive power to say that 'anything that is not on my desk for signature is not in the budget... and that includes all "off-budget" earmarks.' Ah, wouldn't that be lovely to hear? Actually from *any* of the candidates, not just Gov. Romney. And while he would try to stick to 'no new taxes' he would increase government fees (something difficult to do in the federal government) and propose to raise business taxes.


Finally he skedaddled from office before the bill for Romneycare could be fully assessed which, due to its structure, is a multi-year increasing cost deal. So getting to a 'balanced budget' was not done, by and large, by the decreases in spending but in the increases of fees and taxes on business. These are not definitions of a 'fiscal conservative' nor a 'small government conservative'.

Something Gov. Romney doesn't like to talk about is the use of off-shore tax havens. His various investment funds, Bain Capital, BCIP Associates III Grand Cayman, Sankaty hedge funds, and others use paper fronts and PO Boxes in the Grand Caymans and Bermuda to help corporate and other investing clients to avoid taxes (Source: AP via taxjustice-usa.com). While Gov. Romney has gained no personal tax benefit, he has invested in these funds. And that AP article gives this view of how that works and the Romney campaign's view of them:

Investing through what's known as a blocker corporation in Bermuda protects tax-exempt American institutions, such as pension plans, hospitals and university endowments, from paying a 35% tax on what the Internal Revenue Service calls "unrelated business income" from domestic hedge funds that invest in debt, experts say.

Kevin Madden, Romney's campaign spokesman, said there was nothing improper about the Bermuda arrangement, or in Romney's investment in the Cayman fund. In neither case, Madden said, did Romney gain the ability to defer or avoid paying U.S. taxes.

"I would disagree that these could be described as tax loopholes," he said. "These are perfectly normal and perfectly legal arrangements that American companies put together to be successful in the market."


Malt said he had repeatedly increased Romney's stake in the Cayman fund since 2003. He said he was unaware of the specific figures, but added that he knew he "wrote a lot of checks," and that it paid a return of 20% to 30% a year.

Malt said he was "pretty confident" that he had invested in additional offshore funds for Romney since taking over the trust. "I don't care whether it's the Caymans or Mars, if it's organized in the Netherlands Antilles or the Jersey Islands," he said. "That means nothing to me. All I care about is whether it's a good fund or a bad fund. It doesn't affect his taxes."


As governor, Romney helped raise at least $300 million in much-needed state revenue by closing what he called tax loopholes. Critics called the strategy a backdoor way to raise taxes, and Romney failed in an effort to give state officials the authority to penalize corporations that lowered their tax bills by moving their profits out of state.

As a presidential candidate, Romney calls for lowering the corporate tax rate, lowering income taxes and eliminating taxes on interest, dividends and capital gains for those earning less than $200,000. He does not discuss the use of offshore tax havens on his campaign website.

Yes, they aren't 'loopholes'. Heaven forbid that utilizing paper front companies in off-shore investing arrangements be thought of as 'loopholes'! They are just convenient ways to ensure that one's money is passed through Nations unaccountably. Unfortunately that also is the way the Red Mafia worked for the Chernoy brothers and Transworld Commodities via the paper company fronts made by Simon Reubens. They were able to so befuddle investigators and help out others, like Semion Mogilevich and the YBM Magnex fraud scheme, that the concept of 'off-shore tax loopholes' never entered into it: it was the way to filter money untraceably out of the US. So while I am sure that everything is safe, legal and above-board, may I also say that such arrangements are part of the *problem* of transnational terrorism and organized crime being able to operate out of such 'tax havens' with little to no accountability in them? Heaven forbid such accountability might affect a rich man's taxes!

This, actually, bugs me a lot. Spending articles looking at the BNL scandal, BCCI, Bank of NY, and the way off-shore paper companies have allowed terrorist and organized crime operations to proliferate and move funds unaccountably, even *after* 9/11, in addition to the direct person-to-person systems that also function out of the accountability networks, the idea of electing someone who sees these as a *good idea* is something I don't particularly like. That system of low-accountability and yet easy access to money is a direct threat to curbing and stopping the lawless actors on the world stage. So while it is perfectly 'legal' to do these things, the 'safety to the Nation' has decreased because rich folks want a way to dodge taxation in the US via these 'investment vehicles'.

Gov. Romney's work at Bain Capital would become a problem in the 1994 run against incumbent Ted Kennedy, as seen in this NYT article of 10 OCT 1994 after Bain had made taken over Ampad:

Those on the picket line are indifferent to the political implications of their strike. "They don't care about us, Democrats or Republicans, both of them," said Cindy Smith, 42, a file folder packer whose pay dropped from $9.97 to $7.88 an hour. "If Romney cared, he would come straighten us out. If Kennedy cared, he'd come find out what's happening."

Randy Johnson, 40, Local 154's top officer at the plant, said, "We kind of look at each other and say, 'What have we done?' " In July Mr. Johnson was demoted from slitting machine operator, at $10.04 an hour, to file folder packer, at $2.16 less.

When it was discovered that Mr. Romney was one of Ampad's owners, a Kennedy film production crew came out to interview workers. And now one picketer's sign proclaims, "Romney Union busters not welcome in union country." Another's says, "Romney creates jobs in Massachusetts, loses jobs in Marion."

"I don't know nothing about Ted Kennedy," said Jerry Rayburn, 25, who puts glue bindings on scratch pads and whose pay dropped by $1.83 from $9.71 an hour. "All I care about is going after Mitt Romney so we can get back to work. We're not asking for a penny more. We just want what we had."

The extent of the pay cuts is a much disputed issue. Mr. Hanson says the average worker earns $10.50 an hour -- 6 cents less than at the time of the takeover. But the union contends that workers lost 97 cents an hour.

Employees here say their problems began on July 5, when they received a memorandum telling them that Smith Corona, the company that had owned the plant, had sold it to Ampad.

At a meeting with Ampad management that day, they were presented with new wage schedules, work rules and management prerogatives, including the right to consider ability along with seniority in assigning jobs and promotions.

The shifts were altered, and many workers were told to work 12 hours each on Saturdays and Sundays and eight hours each on two other days. Workers' monthly cost of family health insurance would climb to $44, from $15, and deductibles, the amount workers pay before the insurance kicks in, would be raised.

The takeover, they were told, was a purchase of assets -- buildings, machinery, inventories, customer lists -- and the union contract was not among them. But since all the workers were union members, the company has recognized the union, as the law requires. Management and the union have been negotiating a new contract since July 20, but there has been little progress, prompting the strike.

Mr. Hanson says the changes have worked at other Ampad plants since Mr. Romney and his partners bought the company from the Mead Corporation two years ago, and since then Ampad's profits from the other three factories have grown and employment, too, from 728 jobs to 850. "People of entrepreneurial bent took it over and made it successful," he said.

Perhaps, say some workers, but the main beneficiaries of the success are Mr. Romney and his investors. Robin Dollar, a 31-year-old warehouse worker whose $9.62-an-hour wage was cut by 65 cents an hour after the company was sold, said, "I think somebody just wanted to make money at our expense."

This was a successful attempt by the Kennedy campaign to paint Romney as a corporate raider or 'take-over artist' not just a 'turnaround specialist'. It is very hard to 'turnaround' a company with high operating costs, and those costs are driven by the number of employees a company has. One of the great lessons of overhead is that equipment is, actually, cheap, but the people to run them are expensive. Also note that one of the first things to get raised was the cost of health insurance, which would then lower wages and cause problems. When done by many companies this then becomes a larger problem for the State. Luckily you get higher taxes and 'Romneycare' in a few years to take care of that problem. You would think that a man involved in venture capital and being a 'turnaround' specialist would also see the fruits of those things when they show up as a more general condition across a State and a Nation, and that shifting that burden away from companies and *to* the State is costing more money to those taxpayers, not less.

That is an indicator of a broken system: when every fix just makes things worse. By increasing the number of 'middle men' and distancing the actual cost by 'insurance' from the individual, the cost of the entire system goes *up* due to overhead (yes, high cost individuals to oversee a system!) and bureaucracy. Insurance is not the 'cure' it is the *cause* of the problem. In microcosm Gov. Romney got to see this from *both* ends and STILL does not recognize it. Perhaps systems that can't be turned around are out of his perspective as a businessman and Governor. And politician, as those are *votes* depending on a terminally broken system. Because calling subsidized insurance out to be the *problem* means the fix is eliminating the subsidization via taxation and other payments. And that is political suicide, and yet good business sense to eliminate the actual broken system and return 'insurance' to something that was a rare offer for a very few individuals because it was EXPENSIVE IN THE FIRST PLACE TO DO SO.

Doing that requires a 'small government conservative' and Gov. Romney loses out on that score previously and is shown to lose out on that, again, here.

Also it is extremely and highly ironic that Gov. Romney would try to end investing out of State in trying to close 'loopholes' after having, for years, exploited those exact, same sorts of regulations on the international scale. And says *nothing* about that while on the Presidential campaign trail.

This, unfortunately, brings us to the world of investment venture capital, an area that my understanding is nebulous, at best, and less than skin deep at worse. As Gov. Romney made Bain Capital Fund and much else of his investment funds out for him to be (and this is from the SEC filing for Bain Capital Fund VI LP in 2001):

Bain Capital Partners VI, L.P., a Delaware limited partnership ("Bain Partners VI") is the sole general partner of Fund VI and Coinvestment Fund. Bain Capital Investors VI, Inc., a Delaware corporation ("Bain Investors VI"), is the sole general partner of Bain Partners VI. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors VI and thus is the controlling person of Bain Investors VI. The executive officers of Bain Investors VI are set forth on Schedule A hereto.

Which, of course is also sole owner, etc. for Bain Capital Fund VI LP, ("Bain Capital"), Brookside Capital Investors, Inc., ("Brookside Investors Inc."), Sankaty High Yield Asset Investors, LLC, a Delaware limited liability company ("Sankaty LLC"), Sankaty High Yield Asset Investors, Ltd., a Bermuda company ("Sankaty Ltd."), Sankaty High Yield Asset Investors II, LLC, a Delaware limited partnership ("Sankaty II LLC"), Sankaty Investors II, LLC, a Delaware limited liability company ("Sankaty Investors II"). All of that is Mitt Romney. Sole owner, etc. for all of that. The the listing gives a bit more of a look at this for addresses and such, but by Irrevocable Power of Attorney (dated 1998) all of this is for Mitt Romney. Including an investment company called PEP in Australia.

So, one expects that running... well, it didn't even get to the Grand Cayman funds... probably held under yet another investment scheme or under that one in the Bermudas... that Mr. Romney has an idea of the tax laws involved, right? Certainly better than I do, I expect, and yet, once you can find someone to actually begin to explain it some very odd things that Congress has put in the tax laws start to pop up. Running across an article at Venture Beat on 27 JUL 2007, is an example of how the capital gains tax actually works, and then some examination of Gov. Romney's trying to describe that for a question he got over at Tech Crunch on 01 NOV 2007 (in which there is much backing and forthing in the commentary about what 'really meant' and what he did say and if the original understanding was right or not). Now the moment someone says 'tax law complexity' eyes immediately glaze over - I was fighting that myself at the time. But, for an area where Mitt Romney must be strong and convey a clear understanding of what is, at length, his life blood for income, one gets away with a feeling that something is awry. Thus starting at Gov. Romney's answer to a question on capital gains taxes at the Tech Crunch article:

MA: There’s an issue we talk about quite a bit in Silicon Valley about how venture capital is taxed. Venture capital is clearly the lifeblood of Silicon Valley that allows startups to form and grow without worrying about initial capital needs. Without that capital most public technology companies in the U.S. today would probably not exist or be in a much different form. one of the benefits of venture capital is the way they get their gains on their funds is they only pay capital gains on that carries interest even though they’re not investing their own money they’re only investing their limited partners money. It’s clearly a big incentive to be a successful venture capitalist because they’re taxed the capital gains rate. The capital gains rate is far below normal income tax rate. Congress in late spring looked at the issue to see if change is needed. Some prominent Venture Capitalists, Fred Wilson being one of them, came out and said they’re being taxed too low today and they should be paying normal income tax rates on what is effectively income. I have two questions for you, first what is your position on capital gains rate in general?

MR: I don’t believe that we should increase our capital gains tax rate. My view is in fact that for people earning 200k or less, we should eliminate the cap gains tax, the dividends tax, and the tax on interest altogether. I’d like Americans to save their money, and not get taxed on their savings. And with regard to carried interest associated with venture capital, real estate, private equity, I do not believe in raising taxes. And it is a capital gain because those individuals do make an investment, it’s a small investment, but they make an investment of their own capital and I would treat capital gains as capital gains instead of trying to re-categorize them as normal income.

Now here is the tricky part! By addressing the 'carried interest' he is getting into a nasty stew brewed up by Congress and the Venture Beat column does its level best to explain this and I will attempt to boil *that* down. What this involves is individuals running an investment fund (with many parts to it) and getting others to invest in that fund, and the manager then taking a fraction of any gains made by the fund. So while your own investment may be small, and indeed tiny, compared to Credit Suisse Boston or some other huge firm, there is money to be made from managing *their* money in these funds.

Thus, if you invest your money, as a fund manager, next to the money of a larger investor, here are the two outcomes:

Your funds X +their funds Y = T (Total)
Overall fund (F(1..n)) has n > 1 parts to it.

Lets say you all agree to the manager getting a 20% share of the profit.

Treating this all as capital gains means that any portion that pays back money out of T is taxed as capital gains without respect to the entire fund.

F(1),one item in the fund, gains R (Return), and R(1) > 0 the manager is liable for taxes on 20% of R(1) [ which is R(.2) as the agreed upon percentage] as Capital Gains Tax CGT= 15% x R(1)(20%).

If the total return for the entire fund R(T)<=0, then taxes are still paid for CGT on the part that made money ( R(1)).

Yes, you lose *and* pay at the same time.

Mitt Romney's position: If your income I <= $200k, then your CGT = 0 under what Mitt Romney wants to do.
So if you I > $200k, you then pay CGT on the loss as it is not 'normal income'.

Under this scenario of an overall fund breaking even or losing, while there is a single (or small portion) of winners, one still pays CGT for those winning parts as a MANAGER of other people's money because it is not 'ordinary income'. You have to give all the money back to the fund if it breaks even or loses money AND pay taxes on the parts that actually did well. Thus if you are the manager of, say, a local investors club for venture capitalists and have a moderately good job or set of 'ordinary incomes' just slightly over $200, and there are wild swings in the market, you could end up with a *huge* tax bill if you were managing the fund.

What that effectively does is limit the gains of a small investor, so as to try not to get investments that put them over that magic number. If you are already rich, then this worries you less as a fund manager... but if you are a talented, yet still small time manager trying to do well? Hope for a damned steady venture capital market... an oxymoron if there ever was one. If this were treated as a *fund* with 'ordinary income' due to the manager based on the profit of the *fund* then only normal tax laws (not capital gains tax laws) would apply. In other words - don't give up the day job, but don't earn too much anyways if you want to be in this realm of investing.

If I understand this (and my comprehension is dodgy at best) then the view of Gov. Romney is elitist in the extreme, due to him having forgotten what it was like to operate at the very beginning of one's career with very little to scrabble together with save one's wits and investing acumen. And if he cannot clearly explain what he wants as a politician in an area in which his knowledge, as vocally given by his supporters, is extremely high, then just how good a politician is the guy? That is the *job* of politicians: to explain the arcane idiocies they have created and why their proposals are such a *good thing*. No matter how you cut it, the explaining here is not good on his part and demonstrates either a fundamental lack of understanding of how he actually pays taxes, how he views taxes, or his ability to explain what he says and wants to do... or all of the above. If one is running as a business wonk with decent political skills, one must demonstrate *both* working together, and beyond one's own lofty income strata.

Not good to say the least. As I expect John McCain to be forthright in explaining *why* he would have been right in wanting more troops in Iraq early on without even defining the structure of the armed forces then in two conflicts and seeing a shift of time, kind and viciousness of opponent, I expect someone in the venture capital market to step me through why their views on taxation are right from fundamentals and from the existing tax code base. Clearly and succinctly as that is what politicians are supposed to *do*.

Now, Gov. Romney has also been doing a bit of self-financing this year for his primary. Over at Newsmeat it looks like $51,235 for 2007. Also of note for 2006 is a donation of $26,500 to the National Republican Senatorial Committee on 01 NOV 2006: just enough before election day so he can claim to have made it and help retire some debts, but not early enough to help much of anyone, which was what he did for the MA Republican State Congressional Committee to the tune of $10,000 on 06 JUN 2006. Now these are contributions not *loans* to oneself, and to find those we can look at the Romneyfacts website, under the lookup name of Romney. Thus we get personal loans to himself:

25 OCT 2006 - $850,000

22 DEC 2006 - $1.5 million

11 MAY 2007 - $2.5 million

29 JUN 2007 - $4 million

10 SEP 2007 - $3.5 million

28 SEP 2007 - $5 million

Total to 28 SEP 2007 - $17.35 million

To put this into perspective, over at Opensecrets, the Romney campaign, to 30 SEP 2007, is seen as raising a total of almost $63 million, of which self-financing is $17.4 million, or almost 28%. Note the Clinton numbers showing just a bit of $90 million on same to-date with that $10 million being a left-over from her senate campaign (Source: NPR). Without that he would still have been the top money earner, but would have had to scale his campaign drastically along a different route as it had already, by that point, spent all but $11 million. Without self-financing Mitt Romney would be a bit more high-flying than Rudy Giuliani or even the rest of the Republican field, but it would also have been something in line with that field. Part of depending on contributions for more than the majority but for the near entirety of one's campaign, is to demonstrate that an individual is capable of *earning* that money and *outcompeting* the rest of the field. Even worse is that the campaign spent so much money, and more by the time of the primaries, and has seen returns that, in previous years, would have seen such an individual drop out. Because of money to stay in the race, Gov. Romney can continue to keep on 'trying to make the sale' when, in a competition without such self-funding, he would quickly have to adapt to how well he was received and adjust to that.

If the knock against Fred Thompson was laziness, the one on Mitt Romney is that of a used car salesman continuing to make a pitch on something that is almost good enough but not good enough to make the sale the first time. He may, in actuality, *get the sale* but that is only to staying power that is afforded via self-finance, and stumbling hard and badly early on when his entire strategy was an 'early states victory' course. For those that put forth his great acumen from the business world: he has already LOST on his strategy and is now pushing hard to finally realize he must *make the deal* on something other than his business background and 'saving the Winter Olympics'. Those were a 'no sale' in Iowa, New Hampshire and South Carolina, and only in his 'home State' of Michigan and the relatively minor contests that no one else could compete in due to lack of funds and having half the delegates stripped from them, Wyoming and Nevada, did he get victories. How that makes the folks in the State where he has been GOVERNOR feel, I have no idea, but they have been told that he doesn't consider Massachusetts to be his 'home State'. And note his victories were not ones that he was *counting on* to gain momentum and he has been scrabbling hard to *get* momentum. Any other candidate having spent so much for so little would have been gone by now, as was seen in previous years with individuals running 'early state victory' campaigns.

Finally there is the Bain work to take over 3COM and give Huawei Technologies a minority holding. As Gov. Romney is sole *everything* to Bain and ultimate responsibility holder for that kit 'n caboodle, he does have some answers to give us on Bain looking to help along a Red Chinese company that has stolen US technology from Cisco, transferred technology to Saddam Hussein, and worked with the Taliban to try and buy them off so as to stop Gulbuddin Hekmatyar and others from inciting Islamic revolution in western China. Huawei has been notorious in multiple markets in their coercive deals, bribery and blackmail of individuals to get prime placement in telecom markets and drive out other competitors. Not just 'low price' but threats and business deals that stink, so as to coerce local purchasers from companies and Nations to give Red China a foothold in their technology and communication infrastructure. Does Bain really want to be a partner with such a company? They are going great guns on the global telecom market, but much of that is not through legitimate sales and they are working their people, quite literally, to death. As in: buried and in the grave death.

If this is the work of a *manager* he selected to work those funds, then *that* shows poor business and character sense in something that is of more than personal interest: Huawei's work has been cited as one that has endangered US soldiers in the battlefield.

I would like some answers on that... but doubt I will get them.

From this I will leave with two excerpts of somewhat pointed views on things:

Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy....

-President Andrew Jackson, part of the 10 JUL 1832 Bank Veto Message.

A democracy can be such in fact only if there is some rough approximation in similarity in stature among the men composing it. One of us can deal in our private lives with the grocer or the butcher or the carpenter or the chicken raiser, or if we are the grocer or carpenter or butcher or farmer, we can deal with our customers, because we are all of about the same size. Therefore a simple and poor society can exist as a democracy on a basis of sheer individualism. But a rich and complex industrial society cannot so exist; for some individuals, and especially those artificial individuals called corporations, become so very big that the ordinary individual is utterly dwarfed beside them, and cannot deal with them on terms of equality. It therefore becomes necessary for these ordinary individuals to combine in their turn, first in order to act in their collective capacity through that biggest of all combinations called the Government, and second, to act, also in their own self-defense, through private combinations, such as farmers' associations and trade unions.


Of course, in labor controversies it was not always possible to champion the cause of the workers, because in many cases strikes were called which were utterly unwarranted and were fought by methods which cannot be too harshly condemned. No straightforward man can believe, and no fearless man will assert, that a trade union is always right. That man is an unworthy public servant who by speech or silence, by direct statement or cowardly evasion, invariably throws the weight of his influence on the side of the trade union, whether it is right or wrong. It has occasionally been my duty to give utterance to the feelings of all right thinking men by expressing the most emphatic disapproval of unwise or even immoral notions by representatives of labor. The man is no true democrat, and if an American, is unworthy of the traditions of his country who, in problems calling for the exercise of a moral judgment, fails to take his stand on conduct and not on class. There are good and bad wage-workers just as there are good and bad employers, and good and bad men of small means and of large means alike.

But a willingness to do equal and exact justice to all citizens, irrespective of race, creed, section or economic interest and position, does not imply a failure to recognize the enormous economic, political and moral possibilities of the trade union. Just as democratic government cannot be condemned because of errors and even crimes committed by men democratically elected, so trade-unionism must not be condemned because of errors or crimes of occasional trade-union leaders. The problem lies deeper. While we must repress all illegalities and discourage all immoralities, whether of labor organizations or of corporations, we must recognize the fact that to-day the organization of labor into trade unions and federations is necessary, is beneficent, and is one of the greatest possible agencies in the attainment of a true industrial, as well as a true political, democracy in the United States.

This is a fact which many well-intentioned people even to-day do not understand. They do not understand that the labor problem is a human and a moral as well as an economic problem; that a fall in wages, an increase in hours, a deterioration of labor conditions mean wholesale moral as well as economic degeneration, and the needless sacrifice of human lives and human happiness, while a rise of wages, a lessening of hours, a bettering of conditions, mean an intellectual, moral and social uplift of millions of American men and women. There are employers to-day who, like the great coal operators, speak as though they were lords of these countless armies of Americans, who toil in factory, in shop, in mill and in the dark places under the earth. They fail to see that all these men have the right and the duty to combine to protect themselves and their families from want and degradation. They fail to see that the Nation and the Government, within the range of fair play and a just administration of the law, must inevitably sympathize with the men who have nothing but their wages, with the men who are struggling for a decent life, as opposed to men, however honorable, who are merely fighting for larger profits and an autocratic control of big business. Each man should have all he earns, whether by brain or body; and the director, the great industrial leader, is one of the greatest of earners, and should have a proportional reward; but no man should live on the earnings of another, and there should not be too gross inequality between service and reward.

- President Theodore Roosevelt, taken from Chapter XIII of his autobiography on Social and industrial justice.

The first a Democrat, the second a Republican and their message just the same: to let the common man decide and not have businessmen become aristocrats, because they can buy the time to 'make the sale'.

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