Mitt Romney, who secured the number of delegates needed for the Republican nomination last week, said early on that this election is a choice between President Barack Obama's "entitlement society" in which people are dependent on government benefits, and his "opportunity society" where business is free to flourish.
But if you take Romney's own life as representing a governing philosophy, he has the dichotomy backward. Romney is the one who has taken advantage of government entitlements — the ones that flow to the wealthy. And his interest in opportunity lies with rich investors who exploit government rules, often to the detriment of Main Street. Romney's use of the federal bankruptcy courts to extinguish debts owed to suppliers, shops and service providers is a perfect example — more on that later.
For starters, let's tick off some of Romney's favorite government entitlements:
• Special tax rules allow him to pay federal income taxes of just 15 percent on his millions in "carried interest" profits, capital gains and dividends. The rest of us pay a rate of up to 35 percent on income from work.
• Bain Capital, the private equity firm Romney founded and ran from 1984 to 1999, only succeeded due to a major tax loophole. Bain was able to deduct the interest on the massive loans taken out to finance the purchase of its takeover targets — loans secured with the companies' own assets. In 2008, Germany put limits on this kind of tax shenanigans, but don't expect anything that enlightened to happen here.
• Romney's firm also enjoyed government largess in the form of job creation tax breaks. Just the year before Dade Behring, a Bain company, closed its operations in Puerto Rico in early 1998, with nearly 300 workers losing their jobs, the company received federal tax break of $3 million for promoting jobs there and a $4.1 million tax exemption from Puerto Rico.
But there is no big government entitlement as magical or beloved by Romney and Bain than the get-out-of-debt-free card bestowed by federal bankruptcy court.
Dade Behring went bankrupt, leaving Main Street creditors empty-handed, but not before Romney's firm took $242 million out of it. In fact, of Bain's 10 top business investments that made up 70 percent of the $2.5 billion Bain made for investors, four eventually went bankrupt, according to the Wall Street Journal.
That's called winning for losing, a game perfected by top 1 percenters.
For a closer look at one destructive bankruptcy, read "Romney Economics: Cheat Main Street," a column by Leo Gerard in the Huffington Post (http://tinyurl.com/dylorbl).
Gerard documents the way Bain left Main Street businesses licking their financial wounds as it legally absconded with millions in management fees, dividends and other distributions. His featured example is American Pad and Paper Co. (Ampad) that Bain bought from Mead Corp. in 1992. Bain remained the company's largest single shareholder through 1999, and three Bain executives sat on its board. In 2000, the company filed for bankruptcy, leaving debts to suppliers of more than $180 million. Even so, Bain came out smelling like money. It had invested $5 million and took out more than $100 million.
Eleven years after Ampad filed for bankruptcy, as Gerard points out, the company's nearly 1,300 unsecured creditors finally got a pittance of what was owed: Green Bay Packaging Inc. was owed $75,500 and received $137; Lakeway Container Inc. was owed $47,100 and received $89; American Coffee Break Service was owed $1,300 and was paid $2.56. The bankruptcy trustee's final report lists page after page of Main Street businesses receiving less than a penny on the dollar. Had that $100 million flowed to Ampad's suppliers rather than Romney and Bain investors, it would have covered more than half the debts.
Romney desperately wants to convince the public that Bain operated in the best interests of Main Street and that he didn't get fabulously rich under government-rigged rules. But the man exemplifies the special tax breaks and legal shields from creditors that the wealthy see as their right.
That's Romney's "entitlement society."