Mitt Romney lost South Carolina after failing to convince voters he has the character and platform to turn the country around.
Voters in the Palmetto State, burdened by shuttered factories, high unemployment and vanished dreams, keenly see the problems facing our country: Large corporations, sitting on $2 trillion in ready cash, invest too little in American jobs, and instead move production and R&D to Asia as quickly as they can.
President Obama has further tilted the playing field in favor of Asian venues by tolerating higher tariffs, more discrimination in government procurement and increased manipulation of currency values by China and others.
The current occupant of the White House has raised the cost of doing business in America by shutting down oil production, raising health care costs and tolerating the monopolization of commercial banking by Wall Street.
Mr. Romney promises to aggressively develop domestic oil and stand up to China, but will encounter fierce opposition from Democrats in Congress on energy issues, and from them and House Speaker Boehner on China. In addition, Wall Street bankers are among Mr. Romney’s largest campaign contributors, and they don’t want China confronted.
Only by making a compelling case during the campaign that oil and China are central to fixing the American economy will Mr. Romney obtain the mandate he needs to face down entrenched opposition on Capital Hill and Wall Street.
So far, Mr. Romney’s poor performance countering opponents dinging his personal record would indicate he does not have the strength of character to set the national agenda and compel Congress to act.
Mr. Romney promises to send health care dollars to the states, but offers little to anticipate governors will not be hamstrung by federal rules keeping them from solving the essential problem—prices for health care and drugs are twice those in Europe. Republicans don’t like price controls but a free market in health care does not exist with governments picking up more than half the tab, and providers setting prices—overtly or through lobbying.
Banking and capital markets have become a rigged game, making private equity executives and investment bankers rich and denying ordinary Americans jobs and a decent retirement.
In the wake of Dodd-Frank, more than 60 percent of all U.S. bank deposits are controlled by a handful of Wall Street financial houses; hence, depositors get less than one percent interest, while banks charge 4 percent or more for low risk loans—if you can get one.
Most Americans are watching their retirement accounts wither, even as corporate profits and executive bonuses soar.
In February 1998, the S&P 500 first closed above 1,000. Since then, corporate profits are up more than 240 percent, while stocks have risen 31 percent—less than required to keep pace with inflation.
Simply, most of the value created by higher profits has been captured by private equity, hedge funds, and aggressive M&A shops at investment banks, or paid out to corporate executives through lavish stock options.
Private equity and their brethren do shape up troubled companies, but also load them with excessive debt to pay lavish bonuses and big returns to investors. Like executives at publicly traded companies, private equity partners print lots of new stock to reward themselves. In the end, the companies, or their pieces, get sold to new investors, overburdened with debt, and often fail or don’t make a decent return.
That’s how private equity and corporate leaders get rich, while most Americans’ retirement savings stagnate or shrink. IRAs and similar vehicles are usually invested in mutual funds that include the companies Wall Street and corporate executives pillage.
Ordinary Americans, every month, put their retirement savings into the market, and buccaneer capitalists like Mitt Romney, overpaid CEOs and close lieutenants take it out.
In the bargain, businesses are compelled to slash workers pay, jack up health insurance premiums and co-pays, and sack their pensions.
Americans don’t need a mea culpa from Mr. Romney—at Bain & Company he responded to the incentives created by the Clinton-Bush-Obama financial sector policies. Rather, Americans need to know how he intends to fix capital markets so that investing in America is about creating jobs, not pirating profits.
Voters know Mr. Obama won’t fix these problems—he’s had his chance and failed—but it may be a fool’s journey into the darkness to believe Mr. Romney will do any better.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland.