Mitt Romney tells his audiences that the two most important things that recommend him for the Presidency are his career as a businessman and his service as a governor. The fact is that neither experience recommends him.
Romney supports the Wall Street Bailout but he will not honestly address why the economy crashed or give any credit to the Obama Administration.
Romney condemned the Auto Bailout and still says it was a mistake despite its having saved a hallmark U.S. industry and a million plus jobs.
Romney’s solution for the Housing Crisis is to let market forces prevail wiping out the single largest investment most Americans have and when values bottom out he recommends converting many foreclosed properties into rentals.
All of this makes sense in light of his experience in founding a company which depended on those market forces to turn fast profits by destroying weak companies and rebuilding moderately strong ones to maximize investor profit.
The proof that he is extraordinarily unsuited to hold office is how badly he did as governor in dealing with the loss of manufacturing, jobs and state revenue.
A closer look at Romney’s Positions on Three of the Most Significant Economic Decisions since 2008.
1) Romney supports the Wall Street Bailout BUT gives no credit to Obama for supporting and carrying it out. For him the credit all goes to Bush and his Treasury Secretary Paulson. AND they get none of the blame for the meltdown. Romney ignores how Paulson, as head of Goldman Sachs, lobbied to raise leverage limits that fueled Wall Street’s unchecked risk-taking machine. The Bush administration sponsored low-income housing and deregulatory policies that promoted the illusory idea of a self-stabilizing Wall Street, gutted the financial regulatory system and set the stage for the disaster.
2) Romney condemned the Auto Bailout when it was first proposed and continues to condemn it today. His loyalty to free market principles seems absolute. Indeed Romney implies that Obama was eager to see the auto industry collapse, so he could do “all these things that liberals have wanted to do for years.”
That is false. The collapse of the auto industry began before Obama took office, and it was President George W. Bush who began the bailout of Chrysler and General Motors. But it was only after the Feds delivered $80 billion in bailout funds, as part of a managed bankruptcy demanded by the Obama administration that Chrysler and General Motors turned things around. Romney would have let the industry collapse and with it one million jobs.
3) Romney criticized the Obama administration’s “hands off” approach for not fixing the housing crisis and in the next breath declared that the most effective way for the market to correct itself was to allow the foreclosure process “…run its course and “hit the bottom.”
For a man who owns a lake home in New Hampshire, as well as some choice beachfront real estate in La Jolla, CA (which Romney will remodel after the election) and Boston, Romney has a slim and inconsistent set of views on U.S. housing policy.
In his 59-point plan to fix the U.S. Romney does not single out housing as vital. Romney has only offered a cursory “analysis” of why the housing market tanked citing the Democrat’s desire for cheap housing as the principal cause. He offers no plan to stabilize home values and remedy the foreclosure hemorrhaging suggesting that underwater homes become rental properties managed by the mortgage holders.
How could a salvager of businesses, and a job creator hold positions like this? Easy. His business experience was not about saving companies or creating jobs. It was about maximizing capital growth often at the expense of company solvency and the loss of jobs.
Romney’s experience at Bain Capital makes sense of his positions and more importantly predicts how he will approach the management of the U.S. economy in the global environment. Begin with the fact that Romney set up Bain Capital with guarantees made by the partners from the parent consulting firm Bain & Company that ensured that he would risk nothing and be paid very handsomely no matter how the new company did.
His business model at Bain Capital was one of picking the meat off the bones of struggling companies to maximize profit for wealthy investors. He did this by picking away at jobs, decent wages and benefits plant by plant AND by attaching massive new debt to those that were moderately healthy. There were cases where companies were rebuilt and emerged stronger but fewer than 30 percent of Bain’s acquisitions could make that claim.
His specialty was flipping companies — or what he often called “creative destruction.” The new must constantly attack the old to bring efficiency to the economy, even if some are destroyed along the way. Wolves, cull the herd of the weak and infirm.
His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.
The result was that previously profitable companies were now burdened with debt. It didn’t matter if a company manufactured bicycles or contact lenses. The formula worked for them all.
Bain would slash costs, jettison workers, reposition product lines, and merge its new companies with other firms. With luck, they’d be able to dump a firm in a few years for millions more than they’d paid for it. If not, the company died but Bain still made a lot on fees, property sell-offs, and asset transfers.
The beauty of Romney’s thesis (from the point of view of the investor) was that it really didn’t matter whether the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.
THAT IS HIS VAUNTED BUSINESS EXPERIENCE.
DOES THIS RECOMMEND HIM TO OVERSEE THE U.S. ECONOMY?
WHO WILL HE FAVOR?
WHO WILL HE REGARD AS EXPENDABLE?
But how did he do in his one position of public service, as Governor of Massachusetts? Surely that record recommends him?
As governor, Romney’s crucial test is like Obama’s. It lay in applying his vaunted business background to a slow-growing economy — and the data shows that the results were unremarkable, Some would say they were poor.
Romney ran for governor vowing to attract new jobs to the state, but there were limits to what he could do. Massachusetts by law had to balance its budget every year, and revenue had taken a dive after the first Bush recession, hindering the state’s ability to use public money to stimulate the economy.
In November 2003, Romney signed a modest stimulus, that included a one-day sales tax holiday and a tax rebate for companies that created manufacturing jobs in the tech sector. The package, costing about $131 million, was tiny compared with the state’s total budget then of more than $20 billion. Today, few involved in Massachusetts’s economic policy even remember it. Romney was unable to craft any better plan than this.
At the end of 2002, just before he entered office, there were 338,000 manufacturing jobs in the state. By the time he left, there were 298,000, a drop of 12 percent, according to federal data. The service sector also suffered largely as a result of the drop in manufacturing. With a further decline in state revenue cuts in public positions followed.
Thus job growth only increased at a 1.3 percent rate during Romney’s term, a period of generally robust growth throughout the country, ranking Massachusetts 47 out of 50 states in that statistic during that time, in absolute terms.
Unemployment did go from 5.6 percent to 4.7 percent but that was only because people were leaving the workforce in droves during Romney’s term. Just one state had a bigger drop in its labor force during the same period, according to the Labor Department — that was Louisiana, which was hit by Hurricane Katrina in 2005.
Massachusetts has been losing manufacturing jobs for more than a decade. And Romney was unable to stem the tide. At the end of 2002, just before he entered office, there were 338,000 manufacturing jobs in the state. By the time he left, there were 298,000, a drop of 12 percent, according to federal data.
BUT he did get two significant measures passed. First, he raised taxes on businesses. The most pressing issue for Romney was finding money to fill a yawning budget gap of about $3 billion. He avoided raising income or sales taxes, by targeting corporate tax “loopholes.” To pro-business groups, this was the equivalent of raising taxes on businesses just when these firms were needed to help grow the state’s economy. By the end of his first term Romney was in trouble with many in the business community.
His most successful initiative? Yep….Romneycare and its noteworthy and trendsetting mandate.
THAT IS HIS VAUNTED GOVERNMENT LEADERSHIP EXPERIENCE.
Romney is completely unsuited to lead the nation in the one category where he claims to have the greatest credibility and where polling shows he has strength. If he becomes President most of us will drown in his and his friends’ pools of cold, hard cash.