Sunday, October 28, 2012

Glenn Hubbard: Mitt's PEU Chief Economic Advisor

Presidential hopeful Mitt Romney's private equity underwriter (PEU) background is clear from his stint at Bain Capital.  However, Romney's Chief Economic Advisor Glenn Hubbard has his own PEU history.

Since 1994 Glenn served as the Russell L. Carson Professor of Economics and Finance at Columbia University's Graduate School of Business.  Russ Carson is a founder of Welsh, Carson, Anderson & Stowe. a private equity underwriter specializing in health care and information/business services.  Romney's economic advisor has been PEU sponsored for eighteen years.

WCAS was founded in 1979, a time when U.S. manufacturers were being trounced by the Japanese. Dr. W. Edwards Deming, an American taught the Japanese about quality.  Deming's System of Profound Knowledge, which consisted of systems theory, understanding variation, knowledge (how do we know what we know?), psychology (what demotivates people) and interactions between the four areas.

In 1984 Dr. Deming lamented takeovers and leveraged buyouts (LBO's) as the antithesis of his teachings and highly damaging to constancy of purpose .  LBO's were re-branded private equity, where Mitt Romney later cut his "management" teeth.  Romney's history in job elimination and shipping jobs overseas mirrors that of other PEU's.

"Unemployment is not inevitable.  It is a sign of bad management."--Dr. W. Edwards Deming
Deming also stated knowledge is prediction.  Hubbard advised President George W. Bush on his 2001 tax cuts and made a number of predicitons:

On August 22, 2001, Hubbard published an article in the Wall Street Journal entitled "Tax Cuts Won't Hurt the Surplus."

In the article, Hubbard also predicts that his tax cuts would preserve the Clinton budget surpluses by causing GNP to grow 0.3% per year faster.
Tax cuts benefited the PEU class in the last decade, which saw explosive growth in private equity.

Over half of the benefits of the Bush-Hubbard tax cuts went to the top 1% of the population. In part to benefit the wealthy, the tax cuts were also structured to reward investment in financial assets, rather than either consumer spending or real capital investment. As a result, the tax cuts caused huge budget deficits, yet did little to stimulate growth or job creation: There were basically no new jobs created during the Bush administration, despite adding trillions to the national debt.
Many PEU affiliate jobs went overseas during this time.  Meanwhile, Glenn Hubbard personally benefited from board positions, public and private

Mr. Hubbard has been a director of KKR Financial since October 2004.  He is currently a director of ADP, Inc., BlackRock Closed-End Funds and MetLife,  Inc. He was previously a board member of Capmark Financial, Duke Realty Corporation, Ripplewood Holdings, RH Donnelly and Information Services Group, Inc. 

Election talk has little to do with the way either party governed the last decade. Reds and Blues compete for the right to steer trillions in government spending to their friends, as they dole out tax goodies.  Red and Blue love PEU...

Mitt's PEU stench is great, according to PEU David Stockman.