Newt Gingrich repeated his previous attacks against Mitt Romneys career in the private sector, one that he in previous debates had noted was one of creating jobs (in the context of that being possible due to Gingrich’s reforms made as House Speaker) and a group associated with Gingrich plans to release a 28-minute documentary savaging Mr. Romney’s Bain tenure as one of ruthless corruption, system gaming and life destroying.
The attack of Romney as an Evil CEO caricature from a movie script is catching on as the GOP frontrunner gains more and more traction in the polls. Jon Huntsman said “What’s clear is [Romney] likes firing people, I like creating jobs.” This was in response to Romney speaking about insurrance companies saying “It also means if you don’t like what they do, you can fire them.” Romney said, “I like being able to fire people who provide services to me. If someone doesn’t give me the good service I need, I’m going to go get somebody else to provide that service to me.”
On ABC on Sunday, Obama strategist David Axelrod criticized Mr. Romney as “a corporate raider.”
Mr. Romney describes job losses and bankruptcies as an inevitable byproduct of the capitalist system, and has said that in some cases, eliminating some jobs may save the rest of the company. In response to Mr. Gingrich, Mr. Romney said: “Doesn’t he understand how the economy works? In the real economy, some businesses succeed and some fail.”
Gingrich in particular is taking a huge risk in focussing the most attacks on Romneys record at Bain Capital:
With just hours to go before voting begins in the New Hampshire primary, Newt Gingrich is taking an extraordinary gamble, betting that Republican voters who once rejected his critique of Mitt Romney’s business record will change their minds when they learn more about what Romney actually did in the 1980s and 1990s as head of Bain Capital.
“I don’t think a Milton Friedman or a Hayek would say to you, rich guys have to go and rip off companies and leave a wreckage behind,” Gingrich said in an interview after a town hall appearance here Sunday night. “I think that’s plundering. I don’t think that’s capitalism.”
Gingrich has staked his hopes in large part on the story of struggling steel companies taken over by Bain in the ’90s. The industry was suffering devastating losses to foreign competition at the time, and after buying the companies Romney and Bain tried to refocus their strategy and institute new efficiencies. They also greatly increased the companies’ debt and paid themselves tens of millions of dollars in dividends. Their efforts failed amid bitter conflict with the companies’ unions, and the companies declared bankruptcy in 2001. Hundreds of workers lost their jobs, retirees lost benefits, and the federal Pension Benefit Guaranty Corporation had to cover some of the failed companies’ pension costs. (The story was told a few days ago in a detailed article by Reuters, which Gingrich has repeatedly mis-identified as the New York Times.)
More details on why exactly this is a risky strategy:
Targeting Romney’s business record is an enormous risk for Gingrich because in the past Republicans have approved of Romney’s success in the marketplace. Back in December, when Romney criticized payments Gingrich received from Freddie Mac, Gingrich shot back, “If Gov. Romney would like to give back all of the money he’s earned from bankrupting companies and laying off employees over his years at Bain, then I would be glad to listen to him.” Gingrich ran into a buzzsaw of criticism from Republicans, who saw his remarks as questioning the very risk-and-reward foundation of capitalism. Gingrich had to beat a quick retreat. “There was a very brief moment where, frankly, he got under my skin and I responded in a way that made no sense,” Gingrich told Fox News. “I’ve said publicly he is a good manager, he is a good business manager. He got that round. If you are scoring rounds in boxing I will give that round to Mitt.”
In the interview Sunday, I asked Gingrich why, after that failure, he would try again to criticize Romney’s business record. This time, Gingrich was careful to try to distinguish between the kind of risk-taking capitalism that Republicans admire and what he called “looting” of companies. “There is a huge difference between free-market capitalism that goes out and creates companies, grows jobs, and takes an appropriate profit, which can be quite large — I mean, Bill Gates has done fine,” Gingrich said. “It even makes sense to have companies that go out and re-organize inefficient companies and end up making very substantial profits out of doing it…What you have to question is if somebody went out and looted a company, leaving behind a shell.” If the Reuters report is accurate, Gingrich said, “Bain Capital actually makes a huge amount of money while cratering the company — I think you have to question whether that’s a very defensible form of capitalism.”
James Pethokoukis wonders why Romney is doing such a “lousy job” at defending his record, which Pethokoukis contends is very good.
But what about Romney’s job creation record? During his time as governor, Massachusetts had net job growth of 1.4 percent, as USA Today has noted. That was slower than the national average of 5.3 percent with only Louisiana, Michigan and Ohio notching slower gains. That’s bad.
Yet the unemployment rate also fell sharply to 4.5 percent from 5.8 percent. That’s good.
“When Mitt came into office, the state was losing jobs every month. When he left office, the economy was generating new jobs by the thousands,” is how Romney’s website vaguely describes his jobs record as governor. But you can go to the U.S. Labor Department and see the data for yourself. From January 2003 when Romney took office through December 2007, the Massachusetts economy added 61,042 jobs.
Then there’s Romney’s job creation record at Bain Capital. What was the net affect of his firm’s venture capital and private equity investments? Romney likes the nice, round number of “over 100,000″ jobs created. This is what he toldTime magazine in December: ”And so I’ll compare my experience in the private sector where, net-net, we created over 100,000 jobs. We created over 100,000 jobs.” And this is what Romney told Fox last month: “And I’m very happy in my former life; we helped create over 100,000 new jobs.”
Some numbers from Bain:
The Wall Street Journal investigated Bains record.
A spokesman for Bain Capital said its “success rate in growing and turning around businesses in both strong and weak economic periods is very high…” The company called the Journal’s analysis “inaccurate and misleading” and said it unfairly put the onus on Bain for events at companies after it no longer owned them.
Seeking the protection of a bankruptcy court isn’t necessarily a sign of long-term business failure. Many of the Bain companies emerged from reorganization healthier, just as, for instance, General Motors did a few years ago. But while bankruptcy filings aren’t a perfect measure of performance, they provide a way to assess a disparate array of target businesses that in many cases weren’t required to make public financial filings.
James Pethokoukis says that Romney has nothing to apologize for in his Bain record, noting:
– 22 percent either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses.
– An additional 8 percent ran into so much trouble that all of the money Bain invested was lost.
– Ten deals produced more than 70 percent of the dollar gains.
– Bain produced about $2.5 billion in gains for its investors in the 77 deals, on about $1.1 billion invested.
– Overall, Bain recorded roughly 50 percent to 80 percent annual gains in this period, which experts said was among the best track records for buyout firms in that era.
– Academic research has shown that buyout firms during this era exited their deals on average after 5½ years, but in a large percentage of cases were still involved beyond seven years. … If the Journal analysis were limited to bankruptcies and closures occurring by the end of the fifth year after Bain first invested, the rate would move down to 12 percent. That measure would exclude several cases that have brought Mr. Romney political criticism, where businesses filed for bankruptcy seven or eight years after Bain’s investment.