With four months remaining in the interminable contest to become chief occupant at 1600 Pennsylvania Avenue NW, we are finally seeing where the candidates can draw their battle lines. How telling is the tale of the tape so far?
On the left, President Obama has been criticized by his base for not being liberal enough when called for the most. On the right, Mitt Romney has been criticized for his lack of conservative credentials. On the left, the base thinks that electing the guy on the right would send the country back to the days of rugged individualism. On the right, the base thinks that re-electing the President would send the country careening into the sea of socialism.
For all of their perceived differences, they each have similarities. Both have ties to Massachusetts, with the President an alum of Hahvid and Mister Romney once the governor. Both politicians passed a health care reform package that included a mandate to carry health insurance, lest one wishes to pay a tax (or a penalty depending upon who’s asking). Mitt Romney is a multimillionaire. So is President Obama. If the President’s ads are to be believed, Mitt Romney is a corporate raider. What the ads don’t tell you is that President Obama is also a corporate raider.
It’s true folks, the President is just as guilty of being a corporate raider. In fact, I could argue that since his campaign has decided that this is the winning issue, the President could be said to have a worse record in this area.
Perhaps the President’s ads could be geared towards the female college freshman demographic. Mitt Romney, the dapper venture capitalist and father of five, grows fangs under the glow of lower-Manhattan moonlight and sucks the blood, sweat, and tears from the Holson Burnes picture frame factory in “swing state” New Hampshire. Various ads allude to this theme, and most of the claims in the ads have been debunked. Even the Washington Post, allegedly a sympathetic publication, is saying that it’s time to shift the sails.
Private equity firms certainly have invested in companies whose survival is dependent upon finding alternate means of manufacturing or routing of services. Isn’t the deal in general designed to provide firms with an infusion of capital in exchange for a return on investment? Sometimes the businesses still fail, and domestic plants are shuttered. People eventually lose their jobs.
But What if there were no capital infusion? Wouldn’t that simply accelerate the demise of the subject company? Capital is a necessary component that helps secure faith in America’s firms. We should be encouraging more venture capital, not vilifying it.
Even Newark mayor Cory Booker, a surrogate of the Obama campaign, understands that some of his constituents creep along the Lincoln Tunnel to get to work at their respective firms, some of them likely invested in Newark’s revitalization. Frederico Pena, formerly Secretary of Transportation and currently a surrogate for the campaign in Denver (where Obama was nominated in 2008), is a partner with Vestar Capital Partners. Vampires are everywhere nowadays!
But even the President himself has a record as a corporate raider. While Governor Romney was heavily involved in private equity, President Obama has performed the very same tasks with public equity.
Among his accomplishments, the President lays claim to saving America’s auto industry. But how was this done? The US government took a 61% common equity stake in a reformed General Motors Company LLC. Bondholders, ordinarily preferred in these proceedings, were told to wait in line. Immediate restructuring aside, long-term plans for this company were to reduce its dealerships by roughly 40 percent (1,600 in all) and to close 13 plants while shedding four brands. All told, that is a loss of 22,500 jobs.
As with any equity firm, there are failures (assuming the auto deals are successes). The government used funds created by the Energy Policy Act of 2005, which was later rolled into the stimulus of 2009, to provide California solar panel manufacturer Solyndra with more than $500 million in loans. The firm’s revenue for 2010 was $140 million. The government was trying to make chicken salad from inferior ingredients. Other firms in this sector like Nevada Geothermal and Abound Solar have seen $160 million in loans evaporate in the sweltering summer heat.
So while the President assails Governor Romney for his supposedly spotty record in private equity, has he done any better with public equity at his disposal? In any event, we aren’t likely to see an end to the Bain attacks. Despite all the Pinocchio awards and hand slaps from fact checkers, the theme continues. Democratic Party strategist Chris Hahn sums it up, “If it works, keep doing it. That’s the way politics is.”
I’ve always said that Democrats like trickle down economics as much as Republicans. What they can’t agree on is who gets to do the trickling. I’m seeing all of these ads and the thin justification for them, and I’m beginning to think that it isn’t actually raining.