Romney the job creator?

It seems almost too obvious to have to point this out, but, in general, people don’t start businesses, run businesses, invest in businesses, or buy businesses in order to create jobs. They generally do it to make money for themselves. Duh, right? Everyone knows this, but all the Repub talk about the “job creators” could lead you astray.

My buddy Tom Hamburger of the L.A. Times published a piece over the weekend about Mitt Romney’s track record at Bain Capital, the leveraged buyout firm he ran before he went into politics, and which turned him into the multi-hundred-millionaire he is today.

Hamburger acquired a 1999 prospectus in which Bain listed the ten biggest investments Bain made during the Romney years and sheds a lot of light on how they went. Some of the businesses thrived and some flopped. A lot of jobs were created and the lives of ordinary Americans were enhanced and a lot of jobs were destroyed and lives ruined. Some of the companies that Bain acquired ended up bankrupt, but thanks to all the cool ways there are to do these deals, Bain actually came out ahead on most of the ones that went bust.

Through it all, Bain’s estimated annual returns were five times that of the Dow Jones Industrial average. Five times. I wish I had had a piece of that actioin, but it required a minimum of $1 million to buy in.

On one 1996 deal, Bain and another private equity firm acquired Experian, a consumer credit reporting firm and sold it two months later, “reaping $252 million on its initial investment of $88 million,” according to Hamburger’s story.

Romney was obviously a very smart and successful businessman, judged the way success in business is normally judged. He made a ton of dough for himself and his investors. Five times. And I don’t doubt that, as Romney frequently says, he demonstrated that he knows a lot about how the economy works. But in the context of the rest of the nonsense that flows through these debates, you might think the economy exists to create jobs. At least from the standpoint of Romney during the Bain years and of his partners and investors, the economy existed to create wealth for investors.

If that sound a little Bolshie to you, let me put in the words of one of Romney’s former partners who, for some unimaginable reason gave Hamburger a quote that makes the point quite clear:

“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 before forming his own firm. “The primary goal of private equity is to create wealth for your investors.”

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Comments (10)

  1. Submitted by Paul Brandon on 12/05/2011 - 12:09 pm.

    Knowing how to skim money off of the top of the economy is not the same as understanding it.
    Romney’s record as governor of Massachusetts is probably more relevant here, and less impressive.
    It may be possible to evaluate the performance of the chief executive of a private corporation strictly in profit/loss terms. When we look at the chief executive of a public entity we have to take a broader look at social costs and benefits.

  2. Submitted by Ray Schoch on 12/05/2011 - 07:56 pm.

    Mr. Walpow is uncharacteristically honest, but the scope of his assertion is too limited. It’s not just “private equity.” The primary goal of *every* corporation is “to create wealth for its investors.” “Job creation” may occur, and may, in fact, be essential to the creation of that wealth, but it’s basically a byproduct, and not the reason for the formation of the corporation. Not many entrepreneurs go out on a financial limb (even if it’s a venture capitalist’s money and not their own) to “create jobs.” They do it because they hope to produce a product or service that will support them in a style to which they’d like to become accustomed.

  3. Submitted by Ron Gotzman on 12/05/2011 - 09:30 pm.

    Just think of all the taxes Mr. Romney has paid over the years and all the taxpayers he created.

  4. Submitted by Paul Brandon on 12/06/2011 - 09:22 am.

    Ron–
    Not having access to Romney’s tax statements, I don’t know what proportion of his income he has paid in taxes, nor what country he has paid them to.
    I do know that in his career with Bain as a takeover artist he put many companies out of business (the standard buy it, gut it, toss it overboard) thus eliminating jobs.
    I’d check the facts before making statements.

  5. Submitted by Paul Brandon on 12/06/2011 - 09:28 am.

    Ray–
    I know I’m repeating myself but ….
    These days productivity can (and often is) be increased without hiring additional workers. In fact, workers are often laid off and replaced by machines/computers as part of the process of increasing productivity and therefore wealth.
    And (see Romney) wealth can be created in the short run by eliminating companies and investing the profits from their sales in nonproductive ways.
    Finally, in the age of globalization productivity and wealth may be created by increasing jobs in other countries (such as China) and investing it in other countries (such as the Cayman Islands).
    Adam Smith saw all of this, but I doubt that he anticipated its scope.

  6. Submitted by Paul Udstrand on 12/06/2011 - 10:51 am.

    Or think of the taxes Romney WOULD have paid before his tax rate was cut from 75% to 29%.

  7. Submitted by Ron Gotzman on 12/06/2011 - 12:05 pm.

    Paul,
    If Mitt would have been paying 75% in taxes – he would probably have paid a lot less in taxes and created far fewer taxpayers.
    Of course, if he was paying a 90% tax rate – it still would not be enough for you.

  8. Submitted by Paul Brandon on 12/06/2011 - 03:29 pm.

    Ron–
    Back in the ’90’s when Romney -would- have been paying much more in taxes, job creation was in fact much greater (and the economy healthier).

  9. Submitted by Ron Gotzman on 12/06/2011 - 09:31 pm.

    Paul,

    So Mitt did create jobs and pay taxes?

  10. Submitted by Paul Brandon on 12/07/2011 - 09:52 am.

    Ron–
    As I said, I don’t have access to Romney’s personal papers, so I can’t answer (nor I think can you).
    I’m sure that he paid taxes; the question is how much and to whom.
    I’m sure that he created jobs; the question is whether he created more than he killed?
    Do YOU know the answers?

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