Saturday, July 14, 2012

Romney and Bain

If the Democrats were to ask me how to counter Mitt Romney's claim that his background in business gives him a better ability to manage the US economy, I'd suggest something along the following lines.

Bain's MO was to use its investors' money to buy a company, and then load the company up with debt to pay back the investors.  Then Bain set about cutting costs at the purchased company by, among other things, reducing the workforce - putting people out of work.  Some companies struggled through the debt load and survived, some did not.  The debt load was an unproductive use of credit: all it did was benefit Bain and its investors.

Compare that to a productive use of credit:  taking on debt to invest in growing the company - installing new equipment and hiring more people to expand the company's capabilities and output, and then using part of the additional profits to pay off the debt.

Romney intends to bring the first (Bain) model to the US economy if elected.  He is promising he will add to the US debt burden by cutting taxes on the wealthy - so paying off his "investors" - with no benefit to the US economy.  And he is also promising to "cut spending" - i.e. put people put of work.  [There are three ways the Federal government can cut spending:  lay off government employees; cut purchases of goods and services (meaning the suppliers of goods and services will lose business, and lay off workers); and cut transfer payments like food stamps and unemployment benefits (meaning less money being spent, businesses suffering, and workers being laid off]. So "cutting spending" translates into adding to the unemployed - at a time when we have over 20 million unemployed or underemployed.  And the newly unemployed would not be spending - further exacerbating the low demand that is the drag on the economy at the moment, and threatening to send us right back into recession.

Contrast that with the Obama suggestion:  cut (temporarily) taxes on lower income people who will actually go out and spend the little extra income in their pockets, hire back state and local employees who will have incomes to spend, so generating more demand so businesses can expand and hire more workers, and infrastructure products that will help keep the travel and communications needed in our future economy while putting people to work right now.

So, yes, both candidates suggest increasing our country's debt.  But Obama is suggesting a productive use of borrowed money to put people to work and invest in our future, while Romney is suggesting an unproductive use while at the same time diminishing our economic output.

You'd think that it would be a no-brainer for the Democrats to contrast the two approaches, and to show how Romney's "business" approach would be disastrous for our country.  But right now they're quibbling over when Romney left Bain - 1999 or 2002.   Urgghh!

Update 7/18

Well - the "quibble" does seem to be working for them.  Turns out the issue of when Romney left Bain is exposing Romney's propensity for falsehood.

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