Bonking Romney & US Private Equity On the Head

Obama has a lot of opportunity to not just hit at Romney but also to hit at private equity in general in the US because it is set up in the worst way possible. Vulture capitalism is more strictly a problem in venture capitalism, but this is definitely vulture capitalism as well, and American business policy is to blame.

Private equity itself isn’t a bad thing, but we have it set up all wrong.

“In general, I am a supporter of private equity, so first a disclaimer. There appears to be a real and genuine problem with the private equity industry in the U.S.: our tax code encourages private equity companies to load their acquisitions up with too much debt. That is a relatively recent problem, and one that seems fixable.

But on the other hand, Josh Kosman’s new book purports to show that companies bought by private equity tend to go bankrupt. And the overleveraging thing appears to have become a lot more common recently; this may mean that private equity has been more destructive recently than in the 80s, but the long-term data isn’t in yet. My tentative conclusion: If done right, private equity creates value and improves productivity, but we need to close the interest tax deduction loophole that encourages overleveraging.”

This is where Obama can really hit Romney. It’s all about the tax code! Romney’s primary intent in becoming president seems to be to cement the tax code in a way that benefits him and his type of capitalist investor. Perhaps he’s still working for Bain indirectly – he seems a firm believer of this kind of capitalism.

And I am, too. I do believe private equity is a very important part of creating a more productive economy. You can read the rest of Noah’s blog post to get a quick summation and example of why private equity is important, but it needs to be done more delicately in the US and we need something else as well to go along with it:

RT @MattYglesias: Why we need a safety net RT @TPM: McCain defends Romney’s Bain record: ‘The free enterprise system can be cruel’


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