Okay, Make Bain the Poster Child

President Obama has ridiculed Bain Capital and Mitt Romney as job-destroying vultures.  He said, regarding Bain, that attacks are legitimate.  "This is what this campaign is going to be about."  Romney should welcome the discussion -- as long as he frames it, not Obama.

First, what is Bain?  What is a private equity firm?  Essentially, it's a company that manages, invests its own money, or raises capital for an equity stake in another business or company.  Frequently the target companies of private equity firms are those with potential that are either in financial trouble or are stalemated in some fashion and needing a boost of capital to grow and become (more) profitable.

So what did Bain do that was so bad?  It made Mitt Romney and his investors wealthy.  That's pretty much it.  Wow, how horrible.

Democratic claims about effectively robbing acquired companies and firing employees are not only overblown, but false.  A fair hired/fired employee analysis is provided by Steve Kaplan's article at The American, "How Many Jobs Did Romney Create at Bain?"  In this piece, Kaplan includes the number of employees hired and fired by Bain companies acquired while Romney was there.  As Kaplan points out, the number of employees in four of the companies that are the focus of Obama's attacks was actually larger when all was said and done than when Bain acquired them, and, when added to the number of employees created by the successful companies at Bain, the total number of net jobs created exceeds 100,000, just as claimed by Romney supporters.

But what about the attacks on Romney that we have heard so much about concerning steelmaker GST?  Kimberley Strassel provides a good account in the Wall Street Journal.  She points out that at the time of GST's closing, GST's union blamed the company's bankruptcy on the political class for failing to hamstring imports.  "We can't compete against the steel imports that are being sold under cost," said the president of GST's union in 2001.  "Our pleas fell on deaf ears in the political arena."

"The irony," says B.C. Huselton, vice president of the business at the time, is that this plant "wouldn't even be in today's news, if it hadn't been for the opportunity that came with Bain. Those jobs (just under 1,000) would have been gone in 1993."  From most accounts, the steel maker would have been closed had not Bain purchased it.  Eight years of holding on to those jobs resulted from Bain's acquisition of GST.

So, here's what Romney did at Bain:

  • He identified what was needed to make a company profitable.
  • He made money for his constituents and himself.
  • He got rid of non-productive, money-draining assets.
  • He helped create over 100,000 jobs net.
  • And while creating over 100K jobs, he made his companies lean and efficient.

This is what Obama is criticizing him for?  This straightforward type of leadership is exactly what's needed with the federal government.  Lean and efficient would be good.  Job creation would be good.  Getting rid of money-draining assets (or agencies) would be good.  What's not to like?

Those who slam Romney pick and choose which companies at Bain and which time periods to use in assessing his record on job-creation.  These are, of course, the same people who don't want to count the 4M-plus jobs lost during Obama's first year in office, declaring that he wasn't responsible for the crash.  Fair enough -- but then apply the same principles to studying Romney's numbers.

I believe that the WH has done a fantastic job at killing jobs.  However, if you believe the WH when they claim they (the stimulus) saved or created jobs, keep this in mind: they spent $850B to do it.  Bureau of Labor statistics show job-creation of approximately 2.4 million jobs after the slide in 2009.  If you add some mythical number of jobs "saved" (lets be generous and allow this number to be 2.6 million and ignore the reality that a certain number of jobs would have been created anyway), thus accepting even a ridiculously high-end estimate of 5M jobs, that's $170,000 per job.

It makes you wonder how many jobs would have been created if the $850B had been given to Romney to invest.

By the way: the 15% capital gains tax rate allowed more of the profits made from Bain (and other profitable private equity firms) to be reinvested in more companies, creating more jobs and wealth.

It also makes you wonder what would have happened to GST had Obama been put in charge.  He probably would have run the plant on solar energy, transported his products with electric vehicles using wind power, and raised wages and pension benefits, because making money "isn't his job."  His job is providing "fairness."

And no, GST would not have gone bankrupt -- it would have been bailed out, with the bill passed on to our children.

Obama, Biden, and Pelosi have all acknowledged Romney's success at whatever he has attempted.  But the fact that Romney has been successful at almost everything doesn't mean anything to them.  They claim that his type of success is not what is needed for the presidency.  Apparently, only good intentions are important.  Good intentions trump ability.  The American public understands that a successful person is just that -- successful.  Whether you put Romney in the White House or at the helm of a private equity firm, it doesn't matter -- he'll be successful.  Between Romney and Obama, I'd place my bet on Romney for anything.  Except public speaking and golf, of course.

My sense is that much of the undecided electorate, and some of those who think they know whom they will vote for, are behaving as they did in 2008.  They wanted desperately to hear something from McCain, but they never did.  Now they need to hear from Romney.  Romney's Bain story is potentially powerful.  The GOP and Romney need to let Obama sink his candidacy fully into attacking Bain, and then pound him with facts of how Bain has helped the economy and the people who worked at Bain companies, and how Obama and his surrogates don't even understand capitalism, much less how to nurture it.  But Romney and his people can't wait too long, because once opinions are formed, they are hard to break.