Monday, August 10, 2015

Carly Fiorina Takes A Page From The Herman Cain Playbook on Taxes

Earlier today, Carly Fiorina, former failed CEO of Hewlett-Packard, and perceived champion of the second tier train wreck that was the first Republican primary debate, sat down for an interview with Fox News' Chris Wallace.

During the interview, the Fox News host played a clip of DNC chair, Debbie Wasserman Schultz criticizing Fiorina for her disastrous tenure at HP.  Fiorina defended herself by prattling on the same inane and mundane talking points that she's been saying for months every time this subject came up:

Yes. And you know, I'm flattered that the head of DNC would come after me. I guess that means we're gaining traction here.

But here's the facts: I led Hewlett-Packard through a very difficult time, the dotcom bust post-9/11, the worst technology recession in 25 years. I would remind Debbie Wasserman Schultz that it has taken the NASDAQ 15 years to recover.

Sometimes in tough times, tough calls are necessary. However, we also took a company from $44 billion to almost $90 million. We quadrupled its growth rate, quadrupled its cash flow, tripled its innovation to 11 patents a day, and went from lagging behind to leading in every product category in every market segment.
Okay, I'm tired of hearing Fiorina spew the same misleading figures over and over again, so let's set the record straight.

Did HP nearly double its revenue while Fiorina was in charge? Yes, but it's missing some very important context. As Andy Serwer and Tae Kim point out at Yahoo! Finance:

Yes, Fiorina did double HP’s revenues by buying Compaq, but at what cost? Let’s take a look at the numbers. In 1999 when she arrived at the company, HP had $42 billion in sales and $3.1 billion in net earnings. When she left in 2005, HP had $87 billion in sales but only $2.4 billion in earnings. 
So although revenues doubled (mainly due to adding Compaq's revenues), net earnings (i.e. profits) went down. Why did that happen?

In subsequent years HP would become more profitable—to a large degree due to cost cutting by her successor as CEO, Mark Hurd—but the company would never become the moneymaking juggernaut Fiorina promised. Why is that? To a large degree it’s because HP basically traded a slice of its high-margin printer business for a larger share of the lower-margin PC business. For example, in 2004, after the merger and before Fiorina left the company, HP’s printer business produced $24 billion in sales and $3.8 billion in profits, while PCs produced $25 billion in sales, but only $210 million in profits.

Boy that sure is some savvy business acumen! And if that's not amusing enough, as Matt Krantz from USA Today points out, Fiorina financed the acquisition of Compaq by piling on massive amounts of debt:

That’s right. She created a larger company — with more debt. Wonder how that would work in government?

For the rest of Fiorina's dubious statistics, you can check out Glenn Kessler's and's posts on the subject here and here.

But there was one line Fiorina said during the interview that I really wanted to highlight. Wallace asked her about her tax policy and if she would cut rates for the wealthy. This was her response:

Yes. So, we have a 75,000-page tax code today. And that complexity favors the wealthy and the big and the well-connected because they can hire the accountants and the lawyers and the lobbyists to figure out how to make all that complexly work for them. We've got to get it down to three.
Some of you may find this proposal sounding familiar. That's because this ingenious idea was first advocated by a previous Republican frontrunner (and this blog's favorite Republican candidate from the last election), Herman Cain:

Engage the people. Don’t try to pass a 2,700 page bill — and even they didn’t read it! You and I didn’t have time to read it. We’re too busy trying to live — send our kids to school. That’s why I am only going to allow small bills — three pages. You’ll have time to read that one over the dinner table.
I don't know about you guys, but I for one am quite impressed that the tax policy from a former CEO of a major tech company has an equal level of sophistication as one that came from the brilliant mind of the Cain Train.

The primaries are off to a fantastic start.

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