Wednesday, May 23, 2012

Bain v. Empty Set

“Nice try, kid, but I think you just brought a knife . . . to a gunfight.”
—Harrison Ford as Indiana Jones in Indiana Jones and the Kingdom of the Crystal Skull

Continuing what is clearly going to be his “us vs. the evil rich people” campaign theme, Obama last week ran ads criticizing Governor Romney’s past work as the CEO of Bain Capital as that of a vampire.  Just another installment of Romney as the out-of-touch 1%-er, a rich bastard who has made millions by looting it from the little people.  But don’t worry, Obama isn’t engaging in class warfare.  He’s the Great Uniter, don’t you know?

I don’t want to debunk the ad here.  The Wall Street Journal ran an excellent piece detailing its errors, notably that the steel company at the center of it didn't go bankrupt until two years after Romney left Bain, that it was already heading down the drain when Bain bought it, and that it would have gone out of business eight years earlier but for Bain’s investment in it.  I want instead to make the larger point that if this is the arena in which Obama chooses to engage, there’s ground to be gained.  In short, if he wants to play the Bain game, I think Romney should take him up on it.

Let’s start by acknowledging some truths about Romney and Bain.

Mitt Romney is wealthy.  I get it.  No real secret there.  So are/were Bill Clinton (law, real estate—Whitewater, anyone?), both Bushes (business, inheritance), Ronald Reagan (acting, endorsements), Jimmy Carter (inheritance, commercial farming, real estate), Gerald Ford (real estate, books, corporate board service), Richard Nixon (law, real estate), LBJ (real estate, media), John Kennedy (family trust funded by bootlegging), etc.; it takes a lot of money and rich friends these days to run for President.  Romney has made millions running successful businesses like Bain Capital, and this should be a good narrative for him to showcase his management skills and understanding of markets.

Bain Capital was and is a venture capital enterprise, not a pirate ship.  It provides operating funds for startups and other businesses in exchange for a stake in the profits.  Put a different way, it collects money to invest in other enterprises that employ people to create products and provide services.  Yes, in some instances Bain’s investments failed; that’s the nature of business investing, as Obama has reminded us about Solyndra.  At least Bain was risking private money voluntarily contributed for that specific purpose, and managed by businesspeople who actually knew what they were doing (but that’s another post).  Yes, in some instances Bain bought businesses and shut them down to sell the assets.  Any economist this side of Paul Krugman will tell you that when a business’ assets are worth more than the value of the going concern—i.e., the capital is being employed towards a purpose society does not value—the more efficient use of that capital is to pull it out of the failing venture so it can be reallocated to something society values more.  Over time, everyone benefits.

But the point here is that Bain Capital and Mitt Romney didn’t make money by stealing it from others.  They employed people.  They provided capital so that other businesses could operate and employ still more people to provide goods and services still more people wanted to buy.  That’s how the economy works.  Bain Capital made profits by participating as a productive cog in the economy, to the benefit of its shareholders, the businesses in which it invested and their employees, and the consumers of those businesses’ goods and services.  That’s how Mitt Romney made his money; it’s a success story in how the American free market system operates, and it’s one Romney should welcome the opportunity to tell.

But there’s a flip side to that story if Obama wants to cross swords on this ground, and it’s one that also works to Romney’s advantage if he’ll take it.  In fact, if he does it right it should be no contest.

Barack Obama is also wealthy.  Maybe he’s not in the same Forbes rank with Romney (or John Kerry, or Nancy Pelosi . . .), but he’s pretty flush.  Current estimates put his net worth upwards of $10 million.  I don’t have $10 million.  Do you?  Chances are overwhelming that you don’t.  That makes Obama also a member of this evil 1% economic super-elite he likes to demonize when he’s not hanging out in their parlors, skiing at their resorts, or tapping their wallets for campaign donations.  So how did he make his millions?

He wrote a book (OK, in fairness, he actually wrote two books).

About himself.

That’s it.  He didn’t employ anybody.  He didn’t provide a good or a service.  He didn’t supply capital fuel to the engines of commerce so that someone else could employ people to provide a good or service.  He didn’t otherwise do anything productive.  Obama’s sole economic contribution through which he has generated his considerable wealth was to tell the world he existed.  He did nothing more than engage in an audacious act of narcissism, and some people—for reasons that will forever pass understanding—bought it.  It is no wonder that his Presidency has been all about “look at me”; it is in fact all he knows how to do, because it’s all he’s ever done. 

I don’t care that Obama’s gotten wealthy.  If he can get people to buy an autobiography of a 30 year old with no significant accomplishments to his credit, more power to him.  But if he wants to hold up Bain Capital as a campaign issue, it seems to me it’s the perfect platform to highlight just how shallow and empty Obama is.  Consider the contrast on this issue alone.  With Romney and Bain Capital, we see a candidate who has had to manage people, marshal resources, generate results, and be accountable.  In other words, he’s actually had to do something in real life.  Obama, on the other hand, has done nothing but grab attention, claim credit for the work of others, and deflect blame and responsibility.  Present.

Oh, yeah, and operate Microsoft Word.

You want to talk about Bain Capital and real world experience, Mr. President?

Bring it.

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