Nausea and Economic Populism

Perhaps Mitt Romney has found his running mate – the charismatic young mayor of Newark, Cory Booker. Yeah, he’s a Democrat, and what they call a progressive – but he’s black, which would shake things up, and he’s from New Jersey, just like Tony Soprano, the fictional conflicted mafia thug, who murders anyone at all, even family and friends, when it gets him what he thinks he wants, and “Snooki” Polizzi, the sloppy-fat in-your-face star of the reality show Jersey Shore, and just like the political amalgamation of those two in all their traits, physical and psychological, the governor there, Chris Christie. As we see with the success of shows like The Real Housewives of New Jersey, everyone loves the crude blustering braggart who unapologetically insults everyone in sight. Sloppy tastelessness and taking joy in abusing others is authenticity after all – at least in popular culture. It’s a Jersey thing. And if you don’t like it, well, screw you. And maybe Romney could use a Jersey thug on the ticket.

But the well-spoken and elegant Cory Booker just doesn’t seem that kind of guy – he’s just too polite and courteous. On the other hand, on Sunday’s edition of Meet the Press, in the middle of his rousing defense of all things Obama, urging Obama’s reelection, he did say that he found the Obama campaign’s focus on Mitt Romney’s record at the private equity firm Bain Capital “nauseating” – even if he spread things around:

But the last point I’ll make is this kind of stuff is nauseating to me on both sides. It’s nauseating to the American public. Enough is enough. Stop attacking private equity, stop attacking Jeremiah Wright. This stuff has got to stop because what it does is it undermines, to me, what this country should be focused on. It’s a distraction from the real issues. It’s either going to be a small campaign about this crap or it’s going to be a big campaign, in my opinion, about the issues that the American public cares about.

Booker later released a YouTube video trying to walk the statement back:

“Mitt Romney has made his business record a centerpiece of his campaign,” Booker said in the video. “He’s talked about himself as a job creator. And therefore, it is reasonable, and in fact I encourage it, for the Obama campaign to examine that record and to discuss it.”

Still, the damage was done, and Adam Serwer saw things this way:

Booker’s reasoning is odd since the Obama campaign is directly attacking Romney’s record at Bain while the proposed Wright ad was associated with a pro-Romney Super-PAC. The premise behind the ad was that Obama’s presidency has been an act of revenge against white people stemming from the hatred Obama absorbed at Wright’s church. It’s hard to see the two as comparable, because Obama is directly responsible for the Bain attacks and Romney is not directly responsible for the Wright proposal. On the other hand, criticizing Romney’s business record is far more justifiable than the deranged premise of the Wright ad.

This isn’t the worst example of disloyalty or veering off message, but if you’re a Democrat who finds it “nauseating” to even discuss how some people end up needing the social safety net, you may be in the wrong party.

And thus maybe Romney is trying to get Booker to be his running mate now – after all, see Bain and Financial Industry Gave Over $565,000 To Newark Mayor Cory Booker for 2002 Campaign – so it’s not like they’re not friendly or anything. And on the Romney website you’ll find this – “President Obama’s attacks on free enterprise have triggered a backlash among many – even among those in his own party. In just the past few days, everyone from former advisors to his own surrogates has criticized the Obama campaign’s attack on free enterprise. With no record to run on, it is no surprise that the Obama campaign has resorted to misleading attacks that have been disavowed by its own supporters.”

And that was followed by the massive “I Stand by Cory Booker” advertising blitz by the Republicans, with a petition – protect this man from Obama’s wrath – and Booker ending up on the Rachel Maddow Show:

Remarking on the GOP’s “I Stand with Cory Booker” effort, Booker said the GOP is “plucking sound bites out of that interview to manipulate them in a cynical manner and use them for their own purposes.” He added, “Anybody in the GOP who wants to stand with me, please stand with me” – on issues such as marriage equality, not turning back the clock on women, making healthcare more accessible, making college more affordable, etc.

Plainly, he stated, “I stand firmly with the president” – before expressing his frustration with the Republican Party, which, he said, tends to overlook the kind of urban areas he’s been working in for years. Stand with Cory Booker? Sure, he said: stand with him in Newark or Camden or Detroit.

And he doesn’t need protection from Obama’s wrath, saying he had met with the Obama team, and they didn’t force him to walk back anything:

Booker underlined that he is unhappy with the way Republicans have been using his words. They pulled that soundbite, he said, but noted that his other remarks included criticism of super PACs and Citizens United.

“I’m a mayor of a city, I have to deal with urgencies every single day,” Booker said, adding that right now the discussion from the “cynical right” does very little for the issues people are dealing with in urban areas.

Booker said, “I am upset that I have been taken out of context, that I have been used to support cynicism.” It manipulates his entire professional career, he said, later adding, “People have ignored Newark before, but to exploit it or its mayor – that’s something I’m not going to sit still for.”

Perhaps Mitt hasn’t found his vice president, and maybe this was a one-day issue of no significance. And Obama’s certainly not backing down:

Responding to criticism from some Democratic supporters, President Obama said Monday that attacks on Mitt Romney’s experience at Bain Capital were fair game and that Mr. Romney’s years at the helm of a private equity firm were worthy of serious debate.

“This is not a distraction,” Mr. Obama said about Mr. Romney’s record at Bain during a news conference at the end of the NATO summit meeting here. “This is what this campaign is going to be about.”

Mr. Obama’s comments were his first explicit endorsement of his campaign’s aggressive strategy attacking Bain Capital. The Obama campaign’s full-throated assault, through ads, statements and Web videos, is now in its second week and portrays Mr. Romney in highly personal and unflattering ways. A video released on Monday highlights an office supply company in Indiana whose workers were fired when it was bought by a Bain company.

Cory Booker may be a bit unhappy, but there’s nothing unfair or unjustified here:

“If your main argument for how to grow the economy is, ‘I knew how to make a lot of money for investors,’ then you are missing what this job is about,” Mr. Obama said, putting an emphasis on the words “this job.” “It doesn’t mean you weren’t good at private equity. But that’s not what my job is as president. My job is to take into account everybody, not just some.”

But there’s the other point of view:

“President Obama confirmed today that he will continue his attacks on the free enterprise system, which Mayor Booker and other leading Democrats have spoken out against,” Mr. Romney said in a statement. “What this election is about is the 23 million Americans who are still struggling to find work and the millions who have lost their homes and have fallen into poverty.”

Bain Capital was also moved to defend itself, issuing a statement on Monday saying that “revenues grew in 80 percent of the more than 350 companies in which we have invested.”

And this was after Romney said the attacks on his record at Bain were saying “I’m not a good person or a good guy” – and that’s character assassination. But Obama argues the other way:

Obama said he views private equity firms like Bain Capital as a “healthy part of the free market” that are designed to “maximize profits.” He said that among them there are “folks who do good work.” But he made it clear that he believes private equity firms put profits above all else, which, he said, is too limited a view at a time of economic struggle. “Their priority is to maximize profits, and that’s not always going to be good for businesses or communities or workers,” Mr. Obama said.

Yeah, yeah – you have to think about the workers too. But Romney maintains that’s just stupid, and the president just “doesn’t get it.” Obama is a slow-learner or something. He has no concept of how capitalism works.

And on it went, spinning away in web ads, as Mark Memmott summarizes:

An opening is an opening. So team Romney and his supporters focus on the “stop attacking private equity” part of Booker’s comments and start firing back at the Obama campaign. Which prompts Booker to put out a video of his own, to say he thinks “President Barack Obama has done such a strong job as a leader of our nation that he more than deserves re-election.” … That doesn’t stop the Romney campaign from putting out a new video of its own, though. Called Big Bain Backfire, it uses Booker as one example of an Obama supporter who has “had enough” of the Obama campaigns tactics. And that brings us back to the Obama campaign, which is doubling down on its Bain Capital-related story line with another, nearly six-minute long, video. Will the cycle ever stop? Probably only when one side decides it’s time to focus on a new issue.

But economic populism plays well, and at Politico, Alexander Burns covers how this hurt Romney back in Massachusetts, when the Bain stories sank Romney when he ran against Ted Kennedy and lost badly, and this year in the Michigan and Ohio primaries, where he barely squeaked by, but adding this:

The challenge for the Obama camp is figuring out how to drive the Bain message without provoking a full-blown revolt among elites who matter when it comes to fundraising and the national-level media narrative.

You don’t want to offend rich donors, or the folks at Fox News, or CNN’s Campbell Brown, their former news anchor now married to Romney’s chief spokesman, Dan Senor, once chief spokesperson for the Coalition Provisional Authority in Iraq. Brown, no longer with CNN, just wrote a scathing editorial denouncing Obama. Fox News’ Greta Van Susteren loved it, and you don’t mess with these people. With economic populism you do speak to the real and dire concerns of the people, but not the important people.

And Slate’s John Dickerson has a few things to say about that:

Booker’s complaint was that the Obama campaign’s ads distracted from the important issues facing voters and that its tone would sour people on the election. In general, it’s a reasonable complaint; there’s plenty in Obama’s campaign that saps voters’ hopes and distracts from core issues. But Booker picked the wrong target. Mitt Romney has argued repeatedly that his career at Bain – more so than almost anything else – gives him special insight into how to turn around the U.S. economy. It’s well within bounds to put that career under a microscope to assess the truth of his claims.

And Dickerson sees where Obama is going with this:

Obama said he was not attacking venture capitalists but Romney’s specific stewardship. (Good thing, too, since venture capitalists whose companies sometimes fail donate to his campaign.) The president’s position raises legitimate questions – all of which Romney has been mum about answering. Romney has asserted that business experience will make him particularly qualified to be president at this moment, but what does that mean? Does it mean he knows how to create jobs, an issue which everyone seems to think is the signature issue of this election? That wasn’t really Romney’s precise job. His job was to maximize profits. He was very good at it. Bain even made money when companies collapsed and people lost their jobs, but his career shouldn’t be defined by the things that went wrong any more than the president should be defined by the failure of Solyndra.

So the issue may be job losses:

According to the Wall Street Journal, 22 percent of the 77 companies the paper analyzed from Romney’s tenure went bankrupt or closed their doors. Another 8 percent lost Bain money. How did Romney decide winners and losers? What does that tell us about how he’ll make choices as president? If the market dictated the winners and losers, what should people conclude about the way government might change under his stewardship? If this unpleasant portion of his business experience isn’t relevant to the skills he’ll need as president, which skills are relevant? Where does he draw the line?

And there’s this:

You could argue that a person who has kept his eye on the ball (making profits) while remaining unsentimental about inevitable losses is just the kind of person you want at a time when hard choices must be made. Of course, Romney would never make this argument. It would be political suicide. His posture so far has been essentially pain free. He says hard choices must be made, but he gets nervous when articulating those choices.

And we may be looking at the wrong thing:

It stands to reason that anyone who has been in a senior executive post should have some skill making decisions, and that is the central attribute required of a president. But in business you don’t have to deal with politicians as much as you do in the presidency, and you don’t have to coddle interest groups nearly as much, either. The more relevant portion of Romney’s career should perhaps be his tenure as governor of Massachusetts, where he tried to apply those business practices to government. His jobs record there is more lackluster than the success he had in private business, but there also aren’t ready-made horror stories with sympathetic characters. Another reason voters should probably spend more time with Romney’s Massachusetts record is to see how he handled politicians of the other party. He’ll have to work with them in Washington, which is more polarized than ever. How would he do that? Two of the three promises he makes in his first general election ad – reforming health care and the tax code – will not pass without the help of Democrats.

But Romney is trapped now, positioning himself as certainly not the naïve Obama and solely the wonderful businessman, but one who is, oddly, not very good at talking about it:

He doesn’t have the appealing anecdotes a successful small businessman would have. That became readily apparent in a conversation I had with two Ohio men who run their own businesses. They could easily drop stories about chats they’d had on the shop floor with their workers, the stress they’d felt worrying about bankruptcy, and the pride they took in never having laid off a worker. Romney is great at asserting, but he’s not very good at storytelling. He hopes that the assertion will be enough. Plus, a full and frank discussion about the trade-offs of capitalism is dangerous territory for a politician. During the 2008 Michigan Republican primary, when John McCain said a reality of the business cycle was that auto jobs were not likely to come back to the state, Mitt Romney clobbered him, even though he probably knew it was true.

So it comes down to this:

The president argues that the government needs to play a better role creating opportunity for everyone. What Romney’s business experience tells him is that slashing government and freeing the private sector are the best ways to create prosperity. He points to his career at Bain as proof of that.

Cory Booker, and his distress at all the negative ads flying back and forth, is a minor matter here. He needs to get over that. No one is assassinating Romney’s character. Both sides should stipulate that Romney is generally a good guy. He probably is. But he’s claiming his way of thinking, about what’s good for the country, is what we need right now. Someone really ought to ask him why he thinks that is so. We already know THAT he thinks it’s so.

And to that end, there are these two comments from Andrew Sullivan’s readers:

Obama is not attacking private equity. He’s attacking the record of a man who claims to be a business wiz and job creator extraordinaire when what he really was, was a man whose only business was to found a company who purchased up other businesses, sucked out all the equity and spit them out.

He built nothing but his own bank account. If Romney were running on his record as governor (oops can’t do that) and could somehow use his Bain experience to prove he used his acumen to create jobs in MA – then that would be one thing. But he made sure his state was 47th in the nation on job creation. And just like with Bain, as soon as he could add the word “governor” to add to his resume, he ditched them and got out. Bain is totally fair game because the business model is the model for Romney’s entire mindset.

And another suggests that we ought to get familiar with the concepts of financial engineering and dividend recapitalization:

Financial engineering is the alchemy that drives the entire private equity industry – by rejiggering a company’s capital structure a private equity firm purports to “create value” that previously didn’t exist. Like all other forms of alchemy, if it actually happened that simply, it might not be a bad thing. Unfortunately, the processes that create that value for the private equity firm – levering the company’s balance sheet with borrowed money, reducing headcount, cutting costs and, yes, tax arbitrage – tend to whipsaw a company by depriving it of any margin of error (because it has to spend its cash flow on interest payments) while also diverting resources away from future profit-maximizing initiatives (because all of its cash is being spent on interest payments).

This is the legendary “discipline” that private equity apologists cite in these conversations, but there is very little focus on making the business, as the business, run better. Instead, the focus is on freeing up enough cash to service the debt and return cash to the new owners. The end result tends to be a less ambitious company with a far smaller footprint (employees, plants, etc.) and a reorientation away from investment in the future growth of the business and toward like as a “cash cow.” This is the case even when private equity “works.”

And then there’s that other matter:

Dividend recapitalization is the most insidious subset of financial engineering – the owners take out a loan backed by the assets of the company and use the proceeds from the loan to write themselves a dividend check of roughly the same amount. The company is again forced to focus all of its attention on servicing this new debt, frequently groaning under the pressure. When it fails in that mission and tumbles into bankruptcy, the private equity backers toss the keys to the creditors and walk away, having already recouped most, if not all (or, in some cases, many multiples of all) of their investment. Loans are, fundamentally, supposed to be used to boost investment in productive enterprises, but in this case, the financial/private equity industry has bastardized that premise to funnel money away from productive uses and straight into their coffers.

I have worked around the private equity industry for nearly a decade, and I have never met anyone in it who can tell me with a straight face what productive ends the dividend recap serves (I do not consider tax arbitrage “productive”).

Yeah, it’s convoluted, so we have a political mess:

All of this (including the cash cow and tax arbitrage concepts) is complicated stuff that requires a familiarity with finance that not many voters possess, which is why the left has such a hard time explaining what is really going on and instead leaves itself open to charges of demagoguery by focusing on the human cost of Bain’s investments and follow-on decisions. That’s unfortunate, but it does not render false the left’s substantive critiques on the topic…

The right, on the other hand, can’t possibly reckon honestly with the pros and cons of private equity, because to do so would be an admission that it consists mainly of financial parlor tricks that benefit a small group of wealthy individuals at the expense of virtually everyone else. They know how that would play with the voters, and so they obfuscate at best, lie at worst and proclaim “class warfare” at every turn.

No wonder Cory Booker finds it all nauseating. But sometimes you have to get past the overwhelming nausea and deal with what’s really going on. Anyone from New Jersey should know that. Think of Bayonne.

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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