Jim Hightower

What are these phantasmagoric money machines that they call "private-equity firms?" They're much in the news now, with former private-equity tycoon Mitt Romney running for president on the claim that, because of his years in that business, he knows how to "fix" our economy.

Sure enough, private-equity whizzes are all about the fix. They operate by borrowing big piles of cash from rich speculators to buy out XYZ Corporation. Then, to pay the high interest rates on this debt and to siphon off a financial killing for themselves, the fixers do two things – they plunder XYZ's assets, selling off profitable chunks of the corporation, and they severely downsize the XYZ workforce, firing as many workers as possible and demanding deep wage cuts and benefit givebacks from the employees they keep.

It’s a redistribution-of-wealth scheme, transferring XYZ's revenues from its many workers to its few equity partners, while creating no new products or wealth. Nothing equitable about it.

But the fix also includes a set of very special partners, few of whom are even aware that they're in on the deal: taxpayers. The private-equity business model is not structured on old-fashioned free enterprise, but on a skewed system of tax loopholes punched into federal law by these financiers' lobbyists and the lawmakers they own. For example, they are able to load up on such heavy debt to finance their corporate take-overs only because all of the interest they must pay to speculators for that borrowed money is tax-deductible. In other words, our government directly subsidizes private-equity plundering by covering their huge interest payments.

To add to their fun, many of these tax-code scammers grab such big debt deductions that they pay zero corporate income taxes, even though they rake in millions in profit.