The Betrayal of the American Dream -- A Once Vibrant Middle Class Is Now on the Brink
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Nick was talking about the carried interest. We have a whole section in the book about carried interest. And it’s a complex concept that people sometimes have trouble getting their mind around.
AMY GOODMAN: And if you could explain it simply.
JAMES STEELE: But it is just an outrageous thing. The idea is, if you are heading one of those private equity funds, you take a portion of the interest of one of these companies that you are theoretically managing. Part of your salary comes in a—part of your money comes in a salary, a direct salary, which is paid in normal rates. But part of it is supposedly an interest in this company. But you haven’t bought that interest. You’ve just been given it as the manager. And then, when you cash out on that, because it’s supposedly you were an investor, you pay the 15 percent. And that, as much as anything, as Nick was talking about, is why somebody like Romney and other private equity moguls pay 15 percent.
Now, there was a big boomlet to try to get rid of this a few years ago. And there were hearings in the Senate and the House. And a lot of people thought, "Oh, boy, this thing is going to change." But once again, people do not seem to realize how powerful those interests are in Washington. And they trotted out all kinds of people to lobby against it, mainly the private equity funds. I mean, Henry Kravis on down the line, all of those people actually paid visits to Capitol Hill.
AMY GOODMAN: It’s called "vampire capitalism"?
JAMES STEELE: "Vampire capitalism," that’s—excellent word. That’s exactly what it is. And they defeated the effort to try to change that. I mean, this Congress, you couldn’t do it at all, but back then there was a little bit more common sense that some people had. But even then, they couldn’t get that thing changed. And it, as much as anything, illustrates how this system is totally geared against the average person. There is no defensible—no defense for that tax break. And it’s something that was not basically used years ago, but it’s typical how folks in power figure out a way to bring the code to their advantage. And when it happens, Congress should amend it and change it. But because of that interest and that lobbying, that’s frustrated.
AMY GOODMAN: I want to turn to President Obama’s recent attack on Mitt Romney’s record at Bain Capital.
PRESIDENT BARACK OBAMA: I have said, let’s stop giving tax breaks to companies that are shipping jobs overseas, let’s give tax breaks to companies that are investing right here in the United States of America and investing in American workers, so we can make American products stamped with those three proud words: "Made in America." That’s how we build an economy that lasts, and that’s why I’m running for a second term as president. Now, Mr. Romney has got a different idea. You know, he invested in companies that have been called pioneers of outsourcing. I don’t want to pioneer in outsourcing. I want some insourcing. I want to bring companies back.
AMY GOODMAN: That’s President Obama. By the way, he is in New York tonight at the NoMad Hotel at a fundraising dinner, 60 guests spending $40,000 each at a hotel near the Gramercy Park.
JAMES STEELE: We won’t be there.
AMY GOODMAN: But his idea?
JAMES STEELE: Well, his idea, I mean, is a very valid idea, because one of the things that’s been happening with the multinationals is a lot of the money they earn offshore, they keep offshore. The estimates of the amount of money that companies like Apple, the technology companies, the pharmaceutical companies, some of the big manufacturing companies—their estimates are $2 trillion is sitting in foreign accounts that they will not bring back to this country. And the reason they will not bring it back, they say, is because of this onerous U.S. tax rate.