President Barack Obama took an oath to "promote the general Welfare." Venture capitalist Mitt Romney pledged to maximize shareholder value. Unfortunately, candidate Mitt Romney is pretending the two are the same thing. As Romney repeatedly insisted this month, President Obama's rescue of the U.S. auto industry and over one million jobs associated with it is little different than his own Bain Capital days of slashing jobs - and extracting profits.
Romney introduced the new defense of his "vulture capital" past during the December 15 GOP debate in Sioux City, Iowa. There, he took Obama to task for layoffs at General Motors as part of the successful auto bailout Romney opposed:
"In the real world, some things don't make it, and I believe I've learned from my successes and my failures. The President, I'll look at and say: 'Mr. President, how did you do when you were running General Motors as the president, took it over? Gee, you closed down factories. You closed down dealerships. And he'll say: 'Well, I did that to save the business.' Same thing with us, Mr. President. We did our very best to make those businesses succeed. I'm pleased that they did, and I've learned the lessons of how the economy works. This president doesn't know how the economy works. I believe to create jobs, it helps to have created jobs."
Days later, the son of American Motors magnate George Romney repeated the talking point:
"The president has had one experience overseeing an enterprise -- a couple of enterprises, General Motors and Chrysler," Romney told Fox News in an interview that aired Sunday. "What did he do? He closed factories. He laid off people. He didn't do it personally, but his people did. Why did he do that? Because he wanted to save the enterprise, and he wants to make it profitable so it can survive."
No. In 2009, President Obama was trying to save an entire industry, one at the very heart of American manufacturing. In so doing, Obama likely helped save the United States from a second Great Depression.
As McClatchy reported this week:
U.S. and foreign automakers are poised to add nearly 167,000 U.S. jobs by the end of 2015, according to the nonprofit Center for Automotive Research in Ann Arbor, Mich. That breaks down to 30,000 hourly and salaried workers at the Big Three U.S. automakers, 17,000 jobs at foreign automakers and about 120,000 auto-supply sector jobs...
Most analysts say the industry's growing stability is sweet vindication for the federal government's $80 billion bailout, which allowed General Motors and Chrysler to reorganize. The Center for Automotive Research estimates that the bailouts saved more than 1.1 million jobs in 2009 and another 314,000 in 2010, while avoiding personal income losses of more than $96 billion.
(The November 2010 CAR analysis is available here.)
And over time, the federal tax revenue from that personal and business income will more than offset any potential losses the government might sustain from its future sales of GM stock. As USA Today noted in June in admitting the success of the Obama administration's bailout of Detroit:
That loss is nothing to sneeze at. It's a heck of a lot better, though, than the $108 billion to $156 billion the government would have lost over three years if it hadn't intervened, according to the Center for Automotive Research, a Detroit-based think tank. Those losses would have come in the form of lower tax receipts and higher spending for pension guarantees, jobless pay and other benefits.
As for Mitt Romney, who famously insisted in November 2008 that Washington should "Let Detroit Go Bankrupt," USA Today rightly pointed out, "On what planet would the automakers have found private lenders willing to provide tens of billions of dollars in needed bankruptcy financing at the height of a financial panic?"
In a nutshell, President Obama's tough actions, including painful layoffs and pay cuts for auto workers, saved American jobs, American taxpayer revenue and perhaps the American economy. But for Mitt Romney and his Bain colleagues, the benefits often went into their pockets alone.
"I never thought of what I do for a living as job creation," said Marc B. Walpow, a former managing partner at Bain who worked closely with Romney for nine years, adding. "The primary goal of private equity is to create wealth for your investors." As the Los Angeles Times documented, Walpow was exactly right on both counts:
Bain's top 10 dollar investments under Romney -- averaging $53 million -- spanned a number of sectors, including healthcare, entertainment and manufacturing. The firm's largest investment was its 1999 buyout of Domino's Pizza, into which Bain put $188.8 million, eventually reaping a fivefold return.
Four of the 10 companies Bain acquired declared bankruptcy within a few years, shedding thousands of jobs. The prospectus shows that Bain investors profited in eight of the 10 deals, including three of the four that ended in bankruptcy.
Under Romney's successful leadership, the Times concluded, "Bain Capital often maximized profits in part by firing workers." Which is why neither FactCheck.org nor the Washington Post Fact Checker could not vouch for Romney's claim that "In those hundreds of businesses we invested in, tens of thousands of jobs net-net were created." While Staples, Domino's Pizza and Sports Authority may now have over 100,000 employees, firms like Ampad and Dade International are just some of the companies whose instituted large layoffs. At another company ThinkProgress profiled:
Four years later, the Holson Burns Group Inc. - the company controlled by Romney's Bain Capital LLC - closed the factory and laid off about 150 workers. Some jobs were sent north, where months later many of those were also eliminated. Other operations went overseas. [...]
For Bain, the plan was a financial success: Holson Burnes raised $24 million from its initial public offering on the over-the-counter trading market, with Bain executives retaining the majority of the company's shares. Bain, in the end, reaped more than double the return on its initial investment. But workers were left jobless just as the local economy began to slump.
Put another way, American workers' pain was Mitt Romney's gain.
And still is, as the New York Times explained just last week. Thirteen years after he left Bain, Mitt Romney is still reaping a financial windfall from the jobs he created - and destroyed.
Yet when it came to his considerable personal wealth, Mr. Romney never really left Bain.
In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain's profits ever since, bringing the Romney family millions of dollars in income each year and bolstering the fortune that has helped finance Mr. Romney's political aspirations.
As the Times rightly highlighted, "In the process, Bain continued to buy and restructure companies, potentially leaving Mr. Romney exposed to further criticism that he has grown wealthier over the last decade partly as a result of layoffs." TPM pointed out that even Mitt's GOP allies are worried about the implications should Romney win the party's nomination:
"A lot of Republicans who have thought through how his record at Bain could be used against him, especially in nasty campaign ads in economically depressed parts of swing states, think Bain is a huge liability and that Democrats will bludgeon him with it."
(Making matters worse regarding the auto industry in his home state of Michigan, Governor Romney recently made fun of one of Detroit's newest products. "The Chevrolet Volt?" Romney said, "Let's see. An idea whose time has not come.")
All of which is why Mitt Romney is already resorting to lies and slanders in his campaign against President Obama. On Tuesday, Romney falsely declared that "President Obama believes that government should create equal outcomes." The previous week, Romney essentially charged Obama of treason:
"I think the President has gone from being a failed Presidency, a guy over his head, to someone who is now so desperate to get reelection that he's doing things that are very much counter to the interest of the country and he knows it."
Of course, when it came to the American auto industry, it was President Obama who in the face of Republican opposition acted very much in the interest of the country. It was Mitt Romney who responded to Obama's rescue of Detroit by declaring Americans could "kiss the American automotive industry goodbye."
Presidents should worry about the public good, not private gain. After all, like Barack Obama they swear an oath to "preserve, protect and defend the Constitution of the United States", including the part about "the general Welfare." As hundreds of thousands of workers in the American auto industry can now attest, that's mercifully a far cry from Mitt Romney's Bain Capital prospectus, which promised "state of the art financial engineering" to "increase profitability."
(This piece also appears at Perrspectives.)
