After all the attacks over the past few weeks regarding Mitt Romney’s record on private equity, and the subsequent navel gazing among Democrats questioning whether the attacks were fair game, and then the resolution that, in fact, they were, the presumed GOP nominee has had enough.
“You think Romney’s record on private equity is bad?” his surrogates are now saying. “Well, Obama’s no better. In fact, he’s worse.”
“Obama’s attacking private equity, but what’s his record on public equity investing?” we’re asked in a new ad produced by American Crossroads, the Republican super PAC.
The ad then takes us through two of Obama’s economic gambits that had negative effects. The auto bailout resulted in 2,243 U.S. dealerships being closed, along with 112,000 lost jobs. And then there is Solyndra, the now-defunct solar company that got a $512 million loan guarantee in 2009 before going bankrupt. All the while we see Obama’s head sloppily Photoshopped to make him appear like a breathless day trader, trading away American jobs.
It’s an innovative attack to describe a fairly inaccessible topic. An untraditional campaign topic, private equity is actually a foreign idea to many voters. A Bloomberg poll in March showed that 50 percent thought the business was “mostly bad.” About 20 percent thought it was “mostly good.” And the rest didn’t really know what to think.
The practice of equity streamlining, of course, is as complex as it is contentious. Companies like Romney’s Bain Capital would hunt for downtrodden businesses—ones seeing profits decline, losing market share, and largely underperforming. PE executives would then buy the company and optimize it by slashing the workforce and selling off assets, all to prep it for a fast sale and handsome profit.
That’s what Romney’s company did dozens of times between 1984 and 1999, earning him hefty rewards. “Guess what, I made a lot of money,” Romney said to awkward questioning back in March. But Romney is accusing Obama of doing the same thing—but committing a far greater offense by investing with taxpayer money that in some cases didn’t pan out.
On a factual basis, Romney’s surrogates are right. The auto bailout worked to revive Detroit because a lot of fat was cut from GM and Chrysler. That fat turned out to be bloated and unproductive dealerships. Shuttering them allowed headquarters to make the balance sheet more efficient. Solyndra is also an open-and-shut case. The White House and Department of Energy made a bad investment on a company that went belly up. Both led to jobs lost.
But the attack ad isn’t exactly fair. It glosses over some serious caveats. For one, the auto bailout saved a lot more jobs than it cost. Without the rescue package for Detroit, the entire city economy was believed to be at risk of imploding. Michigan officials estimated more than a million jobs would be lost, and the fallout would cripple parts of the Midwest. Faced with those options, eliminating 112,000 jobs seems the less potent of two powerful poison pills.
In the case of Solyndra, the initial intent was to create new jobs by jump-starting a new industry. Poor government research later showed the holes in that idea. And new discoveries of silicon that undercut the price of solar panels didn’t help either.
At the core of the private-vs.-public-equity debate is a fundamental difference. Romney, as a corporate executive, was trying to create profit for him and his shareholders. Obama, as the nation’s president, was trying to create broad economic activity and, in effect, jobs. Both men made risky decisions that led to slimming down uncompetitive companies and industries. Romney’s goal was actually to lay people off to make a business more lucrative. But Obama’s job cuts were byproducts of more well-meaning goals.