The Boston Globe this weekend offered a fascinating analysis of why Mitt Romney lost the 2012 presidential election. But for all the impact of ground games, turnout models and campaign strategies, Mitt Romney lost not because he failed to define himself to the American people, but because he succeeded. At the end of the day, he was inevitably "reduced to caricature, as a calculating man of astounding wealth, a man unable to relate to average folks" because that is who Mitt Romney is. Voters sized him up as a hyper-ambitious, amoral opportunist more than willing to mislead them on almost any topic. As his number one son Tagg revealed to the Globe, Mitt Romney was a liar to the end, still pretending he never wanted to President in the first place.

Tagg, who now provides his father office space at the Solamere Capital private equity firm his parents' $10 million investment and priceless connections helped create, performed one final campaign task for Mitt. How disappointed could his father really be, Tagg suggested, if he never wanted to be President anyway?

"He wanted to be president less than anyone I've met in my life. He had no desire to...run," said Tagg, who worked with his mother, Ann, to persuade his father to seek the presidency. "If he could have found someone else to take his place . . . he would have been ecstatic to step aside. He is a very private person who loves his family deeply and wants to be with them, but he has deep faith in God and he loves his country, but he doesn't love the attention."

Unfortunately, a mountain of documentation exists which confirms voters' suspicions that Mitt Romney was preparing to run for President of the United States even before he took the oath of office as Governor of Massachusetts 10 years ago. Contrary to the Romney clan's tall tale that it took the intervention of Tagg and Mitt's wife Ann to convince her husband to run again in 2012, Mitt Romney never stopped running even after his bruising GOP primary defeat in 2008: As the New York Times detailed in August:

Not long after Mitt Romney dropped out of the presidential race in early 2008, a titan of New York finance, Julian H. Robertson, flew to Utah to deliver an eye-popping offer.

He asked Mr. Romney to become chief executive of his hedge fund, Tiger Management, for an annual salary of about $30 million, plus investment profits, according to two people told of the discussions...

But Mr. Romney was uninterested. His mind -- and his heart -- were elsewhere, still trained in the raw days after his political defeat not on Wall Street but on the White House and an urgent quest: to be understood by an electorate that had eluded him.

Romney's quest for redemption was well underway by the time Barack Obama took the oath of office in January 2009:

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At events across the country, Mitt Romney's presidential campaign is trying to convince voters that small business owners in fact build the roads and bridges they use every day. Unfortunately, Romney's "We Did Build It" gatherings have hit some potholes, with many participants revealed to be the recipients of government contracts and subsidies and others unaware of the full context of President Obama's selectively edited remarks now under attack.

But Mitt Romney has another, much larger problem with his baseless contention that President Obama is "insulting to every entrepreneur, every innovator in America." Because on his road to becoming a $250 million captain of private equity at Bain Capital, Mitt Romney had a lot of help from his uncle. Uncle Sam, that is. As it turns out, the U.S. tax code doesn't merely allow Romney to pay a lower rate than many middle class families. Without the public subsidy that is the corporate debt interest deduction, there might not be a Bain Capital--or a private equity industry as we know it--at all.

Private equity owes its success in no small part to that uniquely American provision of the corporate tax code. The New York Times recently helped explain why:

Companies can finance investment from either debt or equity. Companies can finance investment from either debt or equity. But profit on an investment financed with equity -- stock issued by the company -- is taxed. In contrast, if the project is financed with debt, then only the profit after interest payments are made is taxed. This means debt-financed investments are cheaper than equity.

And not just a little cheaper. As the Treasury Department recently explained, "The effective corporate marginal tax rate on new equity-financed investment in equipment is 37 percent in the United States. At the same time, the effective marginal tax rate on the same investment made with debt financing is minus 60 percent--a gap of 97 percentage points." The result:

This creates a bias by corporations toward debt.

Or, for the likes of Mitt Romney, a business model.

For the leveraged buyout (LBO) kings of the 1970's and 1980's, that was the pot of the gold at the end of the rainbow. Because the same interest deduction applied whether debt was taken on for a new factory or just to pay investors, Josh Kosman detailed in The Buyout of America, the early corporate raiders and their private equity successors could almost mint money as they bought firms for a fraction of the overall deal size:

Kohlberg saw a way to make debt far less onerous for the company being acquired. He would have the company treat its debt the way businesses handle capital expenditures--as operating expenses deduced from profits through the depreciation tax schedules, thereby greatly reducing taxes. With far less to pay the government, his companies could use the money that formerly went to Uncle Sam to retire these huge loans at an unusually fast rate. Bear's equity would rise with every dollar the companies paid back in debt, even if the value of the businesses only remained the same. The final step in the plan was to sell these companies, usually within four to six years.

In January, The Economist explained how the perverse incentives work:

From 2004 to 2011 private-equity firms piled more debt onto their companies so they could take out $188 billion in dividends to pay themselves. The deals got bigger and bigger. The largest ever, in 2007, was the $44 billion purchase of TXU, an electricity company. The market worries the company will go under.

But though the private-equity people may have walked off with the loot, America's tax code was partly to blame, because it encourages this behaviour. The tax deductibility of interest payments on debt gives private-equity executives an incentive to pile extra debt onto the companies they buy, thereby risking the health of these firms for the sake of a tax benefit and the prospect of higher returns.

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Back in 2007, Republican White House hopeful Mitt Romney declared that taking a big payment from a company that later failed "would make me sick, sick at heart." If so, Romney by now must be badly in need of a quadruple by-pass. Because as the New York Times became just the latest to report, through massive consulting fees, sales of stock and, most perversely, dividend payments, Romney and his partners at Bain Capital reaped whirlwind profits even when the companies they acquired collapsed.

Back in January, McClatchy offered this primer on how private equity firms like Bain Capital work, at least on paper. As candidate Romney explained at a GOP debate back in June 2007, "Don't forget that when companies earn profit, that money is supposed to be reinvested in growth."

But as the New York Times documented Friday, large sums of that money were going to Mitt Romney and his Bain colleagues whether their portfolio companies were profitable or not. Put another way, Bain won either way:

Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain's funds.

Cambridge Industries, which filed for bankruptcy in 2000 after amassing $300 million in debt, is hardly unique when it came to Bain's "win even when they lose" business model:

Yet Bain Capital, the private equity firm that controlled the Michigan-based company, continued to religiously collect its $950,000-a-year "advisory fee" in quarterly installments, even to the very end, according to court documents.

In all, Bain garnered more than $10 million in fees from Cambridge over five years, including a $2.25 million payment just for buying the company, according to bankruptcy records and filings with the Securities and Exchange Commission. Meanwhile, Bain's investors saw their $16 million investment in Cambridge wiped out.

"Traditionally," Josh Kosman wrote in his 2009 book The Buyout of America, "cash-rich public companies have paid dividends to lure and reward investors." But private equity firms, he explained, stand this process on its head:

Fourteen of the largest American private equity firms had more than 40 percent of the North American companies they bought from 2002 until September 2006 pay them dividends. In thirty-two of the eighty-three case, 38 percent, they took money out in the first year.

Mitt Romney was a pioneer of this strategy. His private equity firm, Bain Capital, was the first large PE firm to make a serious portion of its money not from selling its companies or listing them on the stock exchange, but rather by collecting distributions and dividends, which in this context is the exact opposite of reinvesting in a company. Bain Capital is notorious for failing to plow profits back into its businesses.

Just how notorious was first detailed by the Times five years ago during Mitt Romney's first presidential bid:

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"It is more blessed," Jesus said, "to give than to receive." That may be, but the billionaire backers of Mitt Romney's presidential campaign and Super PAC plan to do both. As they gather this weekend for a three-day Romney conclave in Park City, Utah and a secret Koch brothers summit in San Diego, the deep-pocketed donors and bullish bundlers ultimately hope to shower $1 billion on the Republican nominee. If the captains of industry and finance succeed, they can expect a golden shower of their own in return. After all, Romney has not merely promised to roll back environmental regulations, open federal lands to energy exploration and undo the Dodd-Frank reforms of Wall Street. Just by eliminating the estate tax, President Romney would divert tens of billions of dollars currently destined for the United States Treasury into the bank accounts of the richest families in America.

Despite record high corporate profits, historically low effective upper income tax rates and a stock market which has risen by over half since January 2009, Barack Obama is not enjoying the usual fundraising advantage of incumbency. Nowhere is this more true than on Wall Street. As Politico documented:

Mitt Romney's presidential campaign and the super PAC supporting it are outraising Obama among financial-sector donors $37.1 million to $4.8 million.

Near the front of the pack are 19 Obama donors from 2008 who are giving big to Romney. The 19 have already given $4.8 million to Romney's presidential campaign and the super PAC supporting it through the end of April, according to a POLITICO analysis of Federal Election Commission filings. Four years ago, they gave Obama $213,700. None of them has given a penny to the president's reelection campaign or the super PAC supporting it.

(As the New York Times reported this week, Robert Wolf, one of the few high-profile financiers publicly supporting President Obama, has been "muzzled" by his bosses at UBS.)

The energy industry, too, is proving a gusher for Mitt Romney and his Restore Our Future Super PAC. Hours after being named an oil adviser to the Romney campaign, Harold Hamm of Continental Resources contributed $1 million of his $11 billion net worth to Restore Our Future. Charles and David Koch have pledged $395 million for the 2012 election cycle, which combined with Karl Rove's American Crossroads and Tom Donohue's U.S. Chamber of Commerce could produce a billion-dollar tidal wave of cash to wash Barack Obama out of the White House. (As one Democratic consultant described the operation, "It's just like the Cold War. They're going to force Obama to spend himself into oblivion.")

Others among the usual suspects on the right are opening their vaults as well. Former Newt Gingrich sugar daddy and casino mogul Sheldon Adelson has said his donations could be "limitless" and will likely top $100 million. While billionaire investor and Chicago Cubs owner Joe Ricketts may have abandoned his Jeremiah Wright smear campaign, his is bankrolling other projects including the ersatz documentary based on Dinesh D'Souza's book, "The Roots of Obama's Rage." Meanwhile, Texas billionaire Harold Simmons has already delivered $18.7 million to Republican political organizations, a sum which will likely double by November.

(It is worth noting, as the New Republic and Huffington Post did recently, that many of Mitt Romney's Super PAC donors are embroiled in corporate bribery scandals. Adelson's casinos, the Walton family's Walmart operation in Mexico, Koch Brothers businesses in the Middle East and Meg Whitman's Hewlett Packard are all entangled with alleged violations of the Foreign Corrupt Practices Act.)

But Mitt Romney's gilded-class allies won't merely win if he slashes taxes and regulations for their businesses. They will reap a huge return on their multi-million dollar investments from the massive tax cut windfall for the wealthy would-be President Romney has in mind for them.

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It's no secret in my part of the world that Cory Booker is a very ambitious man, whose horizons stretch far beyond New Jersey. (Until the election of Barack Obama, many observers thought he would be the first black president.)

This might explain his fondness for Bain Capital - their employees were among his earliest financial backers:

A ThinkProgress examination of New Jersey campaign finance records for Booker’s first run for Mayor — back in 2002 — suggests a possible reason for his unease with attacks on Bain Capital and venture capital. They were among his earliest and most generous backers.

Contributions to his 2002 campaign from venture capitalists, investors, and big Wall Street bankers brought him more than $115,000 for his 2002 campaign. Among those contributing to his campaign were John Connaughton ($2,000), Steve Pagliuca ($2,200), Jonathan Lavine ($1,000) — all of Bain Capital. While the forms are not totally clear, it appears the campaign raised less than $800,000 total, making this a significant percentage.

He and his slate also jointly raised funds for the “Booker Team for Newark” joint committee. They received more than $450,000 for the 2002 campaign from the sector — including a pair of $15,400 contributions from Bain Capital Managing Directors Joshua Bekenstein and Mark Nunnelly. It appears that for the initial campaign and runoff, the slate raised less than $4 million — again making this a sizable chunk.

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The whole field of private equity has taken a hit in the reputation department, thanks to the Republican ads against Mitt Romney. Honestly, if you had told me in 2008 that I would ever type that sentence, I would have said you were crazy, but here we are. I doubt very much if most Americans had really thought very much about the field, until Super PAC ads started showing up in their states, blaming the loss of jobs to greedy vulture capitalists like Mitt Romney during his tenure with Bain Capital.

However, it's key that the one percent protect their own, so Fareed Zakaria-- with his multiple degrees from Yale and Harvard, sitting board member of Yale University, the Trilateral Commission the New America Foundation and the Council of Foreign Relations--gives the fluffiest of softball interviews to David Rubenstein of The Carlyle Group.

Rubenstein assures us that private equity is really not so bad, honest. They don't cut jobs...that would cut down on productivity and therefore profit, right? Well, not always:

Do private-equity firms create jobs, destroy jobs or neither?

The best empirical evidence says the answer is that private equity both creates and eliminates jobs. After a buyout, employment in existing operations tends to decline relative to other companies in the same industry by about 3 percent. (This may mean employment actually grows, but just by less than at other companies). At the same time, employment in new operations tends to increase by more than other companies in the same industry by more than 2 percent. Net job losses were relatively greater in retail buyouts. This is not surprising, given that Wal-mart and Amazon have put a great deal of pressure on retailers over the past 20 years. If retail buyouts are not included, it is likely that net employment growth was positive. In other words, there does not seem to be a large net employment effect. That is not to say, however, that some people do not lose jobs. The overall pattern suggests that private-equity firms make firms more productive. They make cuts or grow more slowly when that makes sense, and they invest and grow more quickly when that makes sense.

The goal of a private equity firm is not to keep people employed. It's to net the highest profit possible for their shareholders. They leverage these companies to the hilt and then they get out. So yes, it's possible to say that the jobs are there while they are managing the companies. But that debt stays once they move along and it is then that these companies file for bankruptcy, losing ALL the jobs in the process. Think Progress looked at some of Bain Capital's acquisitions and the resulting job losses:

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Bain Capital must seem like a Frankenstein's monster to Mitt Romney's campaign Like Mary Shelley's creature, it's stalking its creator just as he's about to claim the thing he loves most. But Bain Capital - and Bain Capitalism - isn't Mitt's creation. It was sewed together from the corpses of dead ideals and shocked into life in Washington's political laboratories.

Mitt's monster was created by a broken political process that's allowed politicians in both parties to create an artificial, destructive and exploitative form of pseudo-capitalism - and often to get rich from it. Romney's campaign will probably survive, but the monster will go on destroying lives and dreams.

Conservatives and self-described "centrists" speak about "Bain Capitalism" - aka "vulture capitalism" - as if it were the inevitable result of immutable economic laws. But it's only been around for 30 years or so, after government policies in taxation and bank regulation made it possible. That's right: Government, not free enterprise, made Bain Capitalism.

And what government has made, government can un-make.

The "Bain Bailout"

They're calling it the "Bain Bailout" -- although Bain didn't receive any actual funds. But when a federal regulator took over a failing New England bank, it decided to "forgive" several million dollars for loans that Bain had received from the bank.

Why? Nobody's been asked to explain. But that decision reflects a long history of cozy relationships between regulators and the financiers who might one day pay them a hefty salary after they've left government service.

If the millions in "forgiveness" were intended to make sure that jobs stayed in New England, it backfired. As we'll see, job creation is used a lot to justify government actions that make a few people rich without creating any jobs - and often destroy them.

Money for Nothing

Bain and Company was a Boston-based management consulting firm, and in many ways one of the better ones, until CEO Bill Bain decided to create an investment firm and asked Mitt Romney to run it.

Management consultants make a good living, but they aren't usually able to stockpile the hundreds of millions it takes to become a serious investor. So where did Romney and his associates come up with the money to become serious players?

They didn't. They invested other people's money. Their venture didn't really take off until relaxed enforcement of banking regulations made it possible for them to get into "leveraged buyouts" -- investments of borrowed money -- in a big way. They moved aggressively into private equity - investments in privately-held corporations which aren't subject to disclosure rules and other requirements that publicly traded companies must meet.

Skin

Investment funds are typically expected to have some "skin in the game" by putting up some of their own money, but in Bain's case that was almost always a sham. Dade International is a perfect example: Romney and associates invested' $30 million in Dade. But they also demanded $100 million in management fees from the company, which means their actual investment was negative $70 million.

The money that Romney & Co. borrowed doesn't go onto their books, either. It's charged against the companies they buy with it. In Dade's case, the company wound up saddled with $1.5 billion in debt - plus Bain's $100 million management fee, of course - and went bankrupt. Roughly 1,700 people lost their jobs - but Bain walked away with $242 million in stock sales that Dade had "borrowed" (under Romney's management) to pay.

Somebody got "skinned" in this deal, but it wasn't Romney. Bain did lose its remaining shares during the bankruptcy proceedings, however, after creditors accused Romney and his associates of "professional mismanagement" and "unjust enrichment."

Unjust Enrichment

Now there's a concept that's due for a comeback. "Unjust enrichment" is generally held to apply legally whenever someone got wealthy at the expense of others without compensating them, and without doing anything substantial to earn it. (One legal definition describes it as the acquisition of wealth or property "by chance, mistake, or without any personal effort.")

In the world of highly-leveraged investors like Bain Capital, unjust enrichment isn't jut a legal term. It's a way of life.

The enrichment process for players like Romney accelerated dramatically during the deregulation fervor of the go-go '90s. Romney and his ilk were allowed to borrow more and more money from third parties, use them to buy up companies, and skim the cream for themselves.

With the relaxation of Glass-Steagall enforcement, and ultimately its repeal altogether, banks were able to lend Bain-type investors millions of dollars of their customers' money, too. Some of the money that Bain borrowed to buy companies could have belonged to the workers who lost their jobs as a result. And when those over-leveraged banks finally collapsed, every taxpayer's money was used to rescue them.

How's that for "unjust enrichment?"

Tax Deduction Destruction

Why do you think Mitt Romney won't release his tax returns? This Fox Business article is almost certainly correct: because he has saved millions of dollars through the tax loophole known as "carried interest."

Income on investments is frequently taxed at 15 percent, instead of the higher rates paid by cops, firefighters, nurses, or anyone who works at a job to earn their income. Conservatives defend that break by saying that this encourages business investment and therefore creates jobs.

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President Barack Obama took an oath to "promote the general Welfare." Venture capitalist Mitt Romney pledged to maximize shareholder value. Unfortunately, candidate Mitt Romney is pretending the two are the same thing. As Romney repeatedly insisted this month, President Obama's rescue of the U.S. auto industry and over one million jobs associated with it is little different than his own Bain Capital days of slashing jobs - and extracting profits.

Romney introduced the new defense of his "vulture capital" past during the December 15 GOP debate in Sioux City, Iowa. There, he took Obama to task for layoffs at General Motors as part of the successful auto bailout Romney opposed:

"In the real world, some things don't make it, and I believe I've learned from my successes and my failures. The President, I'll look at and say: 'Mr. President, how did you do when you were running General Motors as the president, took it over? Gee, you closed down factories. You closed down dealerships. And he'll say: 'Well, I did that to save the business.' Same thing with us, Mr. President. We did our very best to make those businesses succeed. I'm pleased that they did, and I've learned the lessons of how the economy works. This president doesn't know how the economy works. I believe to create jobs, it helps to have created jobs."

Days later, the son of American Motors magnate George Romney repeated the talking point:

"The president has had one experience overseeing an enterprise -- a couple of enterprises, General Motors and Chrysler," Romney told Fox News in an interview that aired Sunday. "What did he do? He closed factories. He laid off people. He didn't do it personally, but his people did. Why did he do that? Because he wanted to save the enterprise, and he wants to make it profitable so it can survive."

No. In 2009, President Obama was trying to save an entire industry, one at the very heart of American manufacturing. In so doing, Obama likely helped save the United States from a second Great Depression.

As McClatchy reported this week:

U.S. and foreign automakers are poised to add nearly 167,000 U.S. jobs by the end of 2015, according to the nonprofit Center for Automotive Research in Ann Arbor, Mich. That breaks down to 30,000 hourly and salaried workers at the Big Three U.S. automakers, 17,000 jobs at foreign automakers and about 120,000 auto-supply sector jobs...

Most analysts say the industry's growing stability is sweet vindication for the federal government's $80 billion bailout, which allowed General Motors and Chrysler to reorganize. The Center for Automotive Research estimates that the bailouts saved more than 1.1 million jobs in 2009 and another 314,000 in 2010, while avoiding personal income losses of more than $96 billion.

(The November 2010 CAR analysis is available here.)

And over time, the federal tax revenue from that personal and business income will more than offset any potential losses the government might sustain from its future sales of GM stock. As USA Today noted in June in admitting the success of the Obama administration's bailout of Detroit:

That loss is nothing to sneeze at. It's a heck of a lot better, though, than the $108 billion to $156 billion the government would have lost over three years if it hadn't intervened, according to the Center for Automotive Research, a Detroit-based think tank. Those losses would have come in the form of lower tax receipts and higher spending for pension guarantees, jobless pay and other benefits.

As for Mitt Romney, who famously insisted in November 2008 that Washington should "Let Detroit Go Bankrupt," USA Today rightly pointed out, "On what planet would the automakers have found private lenders willing to provide tens of billions of dollars in needed bankruptcy financing at the height of a financial panic?"

In a nutshell, President Obama's tough actions, including painful layoffs and pay cuts for auto workers, saved American jobs, American taxpayer revenue and perhaps the American economy. But for Mitt Romney and his Bain colleagues, the benefits often went into their pockets alone.

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