During the second presidential debate, Mitt Romney returned to one of the original themes of his campaign – namely that his financial experience at Bain Capital qualifies him to solve the problems of a nation plagued by unemployment and debt. Ridiculed and reviled in millions of dollars of advertising by his political rivals, from Newt Gingrich to Rick Perry to President Obama, Romney’s private sector career remains his central argument for electing him on November 6.
Today Peter A. Joseph, a respected and experienced figure in the private equity business as well as a civic activist, scrupulously debunks that argument on the New York Times website.
Over the past three decades, Joseph founded two private equity firms, gaining considerable insight into Romney’s success at Bain as well as the differences between political leadership and investment savvy. While not unsympathetic to the pressures Romney faced at Bain or his industriousness in overcoming them, Joseph says those financial triumphs have no special relevance to the Oval Office.
The role of the private-equity financier, he notes, has very little to do with being a “job creator”:
A businessman seeking to optimize profitability will look to lower labor costs by reducing headcount, whether through technology, outsourcing, or rationalization. This is right out of the basic playbook. It is not the mission of the financier to create jobs. In fact, his mission is often to do just the opposite.
Joseph gently tweaks Romney for indulging in harsh anti-government rhetoric when so much of his and Bain’s wealth derive from investing the pensions of teachers, cops, firefighters and other public-sector employees. (He might also have noted Romney’s venomous hatred of the very unions whose contractual power enabled him to get his hands on their accumulated assets.) He also suggests that Bain and other private-equity outfits have ripped off their clients, including the workers, through inflated fees:
Romney constantly derides big government, but government is made up of individuals, whose pension funds helped make him and Bain unimaginably rich. There is no doubt that these pension funds sought the higher returns offered by private-equity investing. But as the private equity business grew, the public pension funds and other capital providers have gotten the short end of the stick. They have not completely shared in the value of the franchise that is created in part by their investment in the industry. It seems odd to hear Romney criticize big government without any acknowledgment that he has made much of his fortune managing the retirement funds of many public employees.
Joseph concludes by contrasting the qualifications of a private-equity financier with what is required from a president of the United States, which don’t have much in common:
Romney’s financial success is admirable and enviable, but it came by following the mantra of increasing cash flow, cutting jobs and minimizing taxable income. Though the Obama campaign has tried to exploit this with millions of dollars in anti-Bain ads, the real issue is how Romney’s experience relates to a president’s need to balance budgetary responsibility with the heavy lifting required to address our collective concerns, our common obligations. We have heard a lot about pragmatism and practicality, but I can assure you that compassion and broader social concerns rarely make it into an investment memo. If Romney really wants to push his Bain experience, Americans will have to decide whether the answers to the problems facing them are best provided by a financier president.
By: Joe Conason, The National Memo, October 19, 2012
Back in August, the famous Reagan Budget Director David Stockman tore Paul Ryan a new one in an op-ed accusing his presumed doppelganger of great feats of mendacity and cowardice.
Now Stockman’s back with an enraged J’accuse! aimed at the very heart of Mitt Romney’s biography: the idea that he was a champion creator of “jobs” or “wealth” at Bain Capital. Stockman makes earlier critics of Bain look like Starbucks-addicted yuppie pikers. Here’s a sample:
Bain Capital is a product of the Great Deformation. It has garnered fabulous winnings through leveraged speculation in financial markets that have been perverted and deformed by decades of money printing and Wall Street coddling by the Fed. So Bain’s billions of profits were not rewards for capitalist creation; they were mainly windfalls collected from gambling in markets that were rigged to rise.
If you find Stockman’s rhetoric discredited by his hard-money biases, check out this:
Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.
Whether you find Stockman’s producerism persuasive or not, there’s no question he’s making an effective challenge to the idea that ol’ Mitt knows what ails Main Street and Wall Street, and how to fix them. Romney’s loyalties have always been with the latter, and he knows as much about the former as his campaign’s talking points explain to him when he alights in the heartland locales where people like Mitt Romney once appeared like an economic angel of death.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, October 15, 2012
The Republican National Convention opened by smacking President Obama with the theme “We Built it.”
To pound that message, Republicans turned to a Delaware businesswoman, Sher Valenzuela, who is also a candidate for lieutenant governor. Valenzuela and her husband built an upholstery business that now employs dozens of workers.
Valenzuela presumably was picked to speak so that she could thunder at Obama for disdaining capitalism.
Oops. It turns out that Valenzuela relied not only on her entrepreneurial skills but also on — yes, government help. Media Matters for America, a liberal watchdog group, documented $2 million in loans from the Small Business Administration for Valenzuela’s company, plus $15 million in government contracts (mostly noncompetitive ones).
In a presentation earlier this year, Valenzuela described government assistance as an entrepreneur’s “biggest ‘secret weapon.’ ”
Someone has set up a parody Web site, using the name of Valenzuela’s company, First State Manufacturing, to mock the Republican message. The site, FirstStateManufacturing.com, declares, “Thank God government was there for me.”
In short, the Republicans are inadvertently underscoring the point that President Obama was expressing in his “you didn’t build that” comment in July. Obama noted then that “if you’ve been successful, you didn’t get there on your own.” He pointed to public investments in roads and bridges that enable businesses to flourish, and then he inelegantly added, “If you’ve got a business, you didn’t build that.”
Fox News erupted in outrage, selectively editing the clip to confirm Republican prejudices that Obama doesn’t understand the private sector. This fits into the Republican narrative that business executives are heroic job creators when they aren’t held back by regulations and taxes imposed by quasi-socialist Muslims born in Kenya.
Democrats tried to highlight a flaw in that narrative when they released a new ad pointing to Mitt Romney’s outsourcing of jobs and telling him, “You didn’t build that — you destroyed it.”
Yet to me, that Democratic line of attack on Romney as a serial job destroyer feels unfair. Sometimes the way to save a company is to cut labor costs or outsource jobs, and almost nobody wants to ban trade or overseas production even though they can cost jobs.
What is fair is to observe that the Republicans’ claim that they are the great job creators is a fiction.
Prof. Robert S. McElvaine of Millsaps College examined employment data for the 64 years from the beginning of Harry Truman’s presidency to the end of George W. Bush’s. He found that an average of two million jobs were created per year when a Democrat was president, compared with one million annually when a Republican was president.
More pointedly, and unfortunately for Romney, business executives have only a mediocre record when transferring their skills to government. In the last great economic mess, this country was led by a Republican who had been stunningly successful in business: Herbert Hoover. Hmm. More recently, President George W. Bush staffed his cabinet with C.E.O.’s who had been stellar in the private sector — and that didn’t work out so well, either.
Obama’s point about our shared undertaking was made last year, more eloquently, by Elizabeth Warren, the Massachusetts Democrat running for Senate:
“There is nobody in this country who got rich on his own — nobody!” she said. “You built a factory out there? Good for you. But I want to be clear: You moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you all were safe in your factory because of police forces and fire forces that the rest of us paid for. …
“You built a factory, and it turned into something terrific or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.”
In short, taxes don’t just smother. They can also fuel growth — when they’re invested in highways or the Internet, in colleges or early childhood education. They can create opportunities, as they did for Sher Valenzuela.
Or for Romney himself. He built his Bain empire partly because he was smart and hard-working, but also because of a great education and because of tax breaks for debt financing. Tax loopholes helped him build his fortune, and other loopholes gave him the low tax rates to retain it.
If the Republican convention wishes to highlight and explain Romney’s success, it should have a moment of silence to honor our infernal tax code.
Who built this country? Entrepreneurs, yes. But so did schoolteachers and railway construction workers. Doctors and truckers. Scientists and soldiers. You didn’t build it, Mitt Romney — we all built it.
By: Nicholas D. Kristoff, Op-Ed Columnist, The New York Times, August 28, 2012
So far, most of the discussion of Paul Ryan, the presumptive Republican nominee for vice president, has focused on his budget proposals. But Mr. Ryan is a man of many ideas, which would ordinarily be a good thing.
In his case, however, most of those ideas appear to come from works of fiction, specifically Ayn Rand’s novel “Atlas Shrugged.”
For those who somehow missed it when growing up, “Atlas Shrugged” is a fantasy in which the world’s productive people — the “job creators,” if you like — withdraw their services from an ungrateful society. The novel’s centerpiece is a 64-page speech by John Galt, the angry elite’s ringleader; even Friedrich Hayek admitted that he never made it through that part. Yet the book is a perennial favorite among adolescent boys. Most boys eventually outgrow it. Some, however, remain devotees for life.
And Mr. Ryan is one of those devotees. True, in recent years, he has tried to downplay his Randism, calling it an “urban legend.” It’s not hard to see why: Rand’s fervent atheism — not to mention her declaration that “abortion is a moral right” — isn’t what the G.O.P. base wants to hear.
But Mr. Ryan is being disingenuous. In 2005, he told the Atlas Society, which is devoted to promoting Rand’s ideas, that she inspired his political career: “If I had to credit one thinker, one person, it would be Ayn Rand.” He also declared that Rand’s work was required reading for his staff and interns.
And the Ryan fiscal program clearly reflects Randian notions. As I documented in my last column, Mr. Ryan’s reputation for being serious about the budget deficit is completely undeserved; his policies would actually increase the deficit. But he is deadly serious about cutting taxes on the rich and slashing aid to the poor, very much in line with Rand’s worship of the successful and contempt for “moochers.”
This last point is important. In pushing for draconian cuts in Medicaid, food stamps and other programs that aid the needy, Mr. Ryan isn’t just looking for ways to save money. He’s also, quite explicitly, trying to make life harder for the poor — for their own good. In March, explaining his cuts in aid for the unfortunate, he declared, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”
Somehow, I doubt that Americans forced to rely on unemployment benefits and food stamps in a depressed economy feel that they’re living in a comfortable hammock.
But wait, there’s more: “Atlas Shrugged” apparently shaped Mr. Ryan’s views on monetary policy, views that he clings to despite having been repeatedly, completely wrong in his predictions.
In early 2011, Mr. Ryan, newly installed as the chairman of the House Budget Committee, gave Ben Bernanke, the Federal Reserve chairman, a hard time over his expansionary policies. Rising commodity prices and long-term interest rates, he asserted, were harbingers of high inflation to come; “There is nothing more insidious that a country can do to its citizens,” he intoned, “than debase its currency.”
Since then, inflation has remained quiescent while long-term rates have plunged — and the U.S. economy would surely be in much worse shape than it is if Mr. Bernanke had allowed himself to be bullied into monetary tightening. But Mr. Ryan seems undaunted in his monetary views. Why?
Well, it’s right there in that 2005 speech to the Atlas Society, in which he declared that he always goes back to “Francisco d’Anconia’s speech on money” when thinking about monetary policy. Who? Never mind. That speech (which clocks in at a mere 23 paragraphs) is a case of hard-money obsession gone ballistic. Not only does the character in question, a Galt sidekick, call for a return to the gold standard, he denounces the notion of paper money and demands a return to gold coins.
For the record, the U.S. currency supply has consisted overwhelmingly of paper money, not gold and silver coins, since the early 1800s. So if Mr. Ryan really thinks that Francisco d’Anconia had it right, he wants to turn the clock back not one but two centuries.
Does any of this matter? Well, if the Republican ticket wins, Mr. Ryan will surely be an influential force in the next administration — and bear in mind, too, that he would, as the cliché goes, be a heartbeat away from the presidency. So it should worry us that Mr. Ryan holds monetary views that would, if put into practice, go a long way toward recreating the Great Depression.
And, beyond that, consider the fact that Mr. Ryan is considered the modern G.O.P.’s big thinker. What does it say about the party when its intellectual leader evidently gets his ideas largely from deeply unrealistic fantasy novels?
By: Paul Krugman, Op-Ed Columnist, The New York Times, August 23, 2012