Why creative destruction is the core of capitalism.
Newt’s (and Rick Perry’s) attacks on Romney and Bain Capital are undermining the argument for limited government. They’re also giving ammunition to Obama in the fall if Romney is the nominee.
[Update a few minutes later]
Related: Romney doesn’t have to apologize for his Bain career.
Why would Newt and Perry care about the argument for limited government. Nothing in their political records has shown that they care about limiting the growth of government.
Send them to mars!
[insert SLS joke here]
Newt’s (and Rick Perry’s) attacks on Romney and Bain Capital are undermining the argument for limited government.
Truthfully pointing out that Romney made money off the misfortunes of others doesn’t imply anything about how big the government should be.
Romney doesn’t have to apologize for making money for himself and his investors, even when it involved destroying jobs. But he can’t keep claiming to be the job creator candidate and expect people to ignore his actual record.
His actual record is that he created jobs, on net, by reallocating resources in a more efficient direction. That’s how economies work. But instead, Obama wants to redirect them in less efficient directions.
How can you be sure? His biggest success story is Staples, which employs about 90,000 people. Staples succeeded by undercutting existing less-efficient office supply stores. One reason that those stores were less efficient is that they had higher personnel overhead — i.e. they employed more people and/or paid them more. Staples is a success story for Romney/Bain and other Staples investors, and for customers who get their office supplies for less. It’s a sad story for the owners and employees of less-efficient competitors who lost their place in the market. On net it created wealth and made the world a slightly better place. But it did not necessarily increase the quantity of jobs in the US economy.
When Romney ran Bain Capital he was judged by the return on invested capital, and on those terms he performed spectacularly. But now he’s claiming that accumulating profits for his handful of investors is synonymous with creating jobs; it isn’t. Voters who’ve been paying attention the last couple years know that sky-high Wall Street and corporate profits do not imply full employment.
Wow…
So, if a company of his did well, you fault him because the company’s competitors suffered?
It is doubtful that those office supply stores you mention had as many workers or provided better benefits.
So, if a company of his did well, you fault him because the company’s competitors suffered?
If you’re judging him as the CEO of one company, no — the only metric you care about there is return on shareholder capital. If you’re judging him as national job creator-in-chief, then yes, you care about the number of net jobs created.
Presidents don’t do what CEOs do, and aren’t judged by the same metrics. The centerpiece of Romney’s campaign — elect me because we need more jobs, and I created lots of jobs — is bogus.
Require long distance calls to be placed using less-efficient operators and eliminate more efficient “direct dialing”. The number of operators required would almost certainly guarantee full employment.
We live in an age where any sober response longer than a sound bite will be used against you. I don’t much like any of the candidates but any would be a welcome replacement for Obama. We may forget that in our future regrets but it will remain true. Obama is setting the stage for future disappointments.
What Rand said!
pointing out that Romney made money off the misfortunes of others.
It’s worth noting that police officers and fire fighters profit off the misfortune of others. They’re obviously not getting a kickback every time someone gets mugged or a house burns to the ground. but their jobs exist solely because bad things happen to people and their property.
Yes, and everytime I get hungry a restuarant or grocery store makes a profit. They’re profitting from my hunger!!
I KNEW those villains were up to something!!
Presumably you are less hungry after visiting the restaurant. A quarter of the companies Romney invested in were bankrupt afterwards, even as Romney pocketed big profits.
Two questions for you. Jim. What happened to the three quarters of those companies that didn’t go bankrupt? And did Romney get his profits from the companies that went bankrupt or the ones that didn’t?
Actually, several of the restaurants I patronized did in fact go bankrupt. At least they are no longer in business and all the employees are all out of work.
Romney’s 10 most profitable deals were private equity placements (as opposed to venture capital deals, like Staples) where Bain bought existing businesses using borrowed money, reorganized them, and then cashed out. Four of the ten then went bankrupt, in part because the leveraged buyouts left them with debt.
For example, Bain bought Ampad in 1992 with $5 million. By 2000 Bain had earned over $100 million from the deal, a spectacular return. Ampad was liquidated in 2001; all employees lost their jobs, all shareholders were wiped out, and creditors got less than 50 cents on the dollar.
Bain is Romney’s Swift Boat, the thing touted as his greatest strength that instead turns into his greatest vulnerability.
LOL! The Democrats are hopping mad they got scooped on this one, aren’t they? This was supposed to be their October “surprise”, but you can see them foaming at the mouth over on Jim’s homepage, TPM. The idea that leveraged buyouts could be equated to false accusations of war crimes against innocent veterans is such a grand miscalculation that the opponents could only hope that kind of stratagem remains in place through the fall.
Come November, “Bain” will only be that guy in the new Batman movie.
Bain is Romney’s Swift Boat, the thing touted as his greatest strength that instead turns into his greatest vulnerability.
Another intellectual slide into the morass. When you come up with evidence of anything other than your ignorance of economics, then we’ll talk. I will grant that there are people as ignorant as you, so yes, Obama will get some votes despite being one of the most dishonest people ever to inhabit the White House.
They’re also giving ammunition to Obama in the fall if Romney is the nominee.
I firmly believe the Democrats already had that ammo in their stockpile. They didn’t have to get it from Newt and the others. If Romney wins the nomination, you can expect to hear a lot more about this, especially in the last couple weeks before the election. While most of us understand the process and creative destruction, it makes for an effective campaign ad to show shuttered businesses closed by Bain Capital along with the collateral damage.
Yup, OWS wasn’t created by accident.
Isn’t a guy who has experience handing out pink ships exactly the kind of guy we need in the Oval Office?
How many pink slips did he hand out to government employees when he was governor? I suspect the answer is “very few, if any.”
Knowing how private equity works (from actually having analyzed real world deals), I take this sort of thing with a huge grain of salt. One could go back to the earliest financials at EDGAR to see how many people STAPLES employed when it was spun off.
Knowing how these guys operate, I have a really hard time understanding why Romney would be considered an acceptable person for the White House. Seriously, do y’all really understand how this stuff is done?
Let’s look at Hostess, which is apparently a strong contender for BK. When Interstate Bakeries came out of BK in back in 2009, they had all of $115.5Mn in debt on the balance sheet, after wiping out $830Mn in pre-petition debt. The exit was predicated on completion of a deal led by Ripplewood, which brought in $130Mn in capital ($44Mn in equity, $86Mn in conv. secured 4th lien notes), a $125Mn working capital line from GE, and $344Mn in secured debt from other PE firms. We can ignore the WC line for the moment, and add $115.5 + $86 + $344 = $546Mn in debt after the consummation of the deal. According to TheStreet, they’re going into BK with some $860Mn in debt, +$314Mn in 3 years. Where do you think that money went? Into the company? Evidently not, as the company is headed into BK.
What happened was the money was dividended up to the PE as soon as they could get their hands on it, and the company is left to flounder, undercapitalized. This all happens behind the scenes, as once the company is taken private they no longer report to the SEC, only to the PE firm. The PE firm has to provide accurate financials to the financiers, but they are confi-ed up and aren’t talking.
Why it should be acceptable to borrow money to pay oneself a dividend is beyond me. I was raised that one has to earn one’s rewards, which obviously makes me a chump. The way to get ahead is to borrow the reward and stick someone else with the bill.
I’m going to have to go with the principled candidate this time around, even if he is running as a Republican.
The problem with Romney is that he will NOT get rid of ObamaCare.
He’ll just want to massage it to make it work, like the fine system they have in MA.
Clarity. Thank you sir.