I have never done particularly well in any of the business classes I have taken in high school or University. However, I still think that I know 10 times what the average liberal does about business and markets. The recent attacks on Mitt Romney and his time at Bain Capital are perfect examples of how the left values clever rhetoric more than actual facts.
Here are the facts about Bain Capital:
Like other private equity firms, Bain’s major role was, and still is to step in when businesses both small and large look to be on the brink of collapse. Bain’s involvement sometimes involves investments of capital to resurrect the financials of the company, or else Bain can buy the company outright and restructure its business model in order for it to grow.
Like any action in free markets, there is a significant amount of risk involved, especially for the company that has been experiencing difficulty. Sometimes, even after firms like Bain have become involved, the company became a lost cause and filed for bankruptcy. In other cases, the company was rescued by Bain and then faced additional troubles in the future after Bain left.
President Obama has made clear that Romney’s time at Bain is not a distraction, and will be a major topic throughout this coming election season. Obama said in a press conference last week “if the main basis for him suggesting he can do a better job is his track record as the head of a private equity firm, than both the upsides and the downsides are worth examining.”
Well then, lets examine them.
The Wall Street Journal reported earlier this year that Romney earned between $190 million to $250 million during his time at Bain. This already has the left up in arms, because in their eyes no single individual should be allowed to amass that sort of wealth in America. But as always with capitalism, there is a trickle-down effect, or if liberals prefer a less controversial term- there are collateral benefits to the money Bain made, and in turn, to the money Romney made while he was there.
There is no doubt that there were instances where Bain reaped huge rewards for rescuing failing companies. What are being overlooked are the benefits to Bain’s clients, and the trickle down effect of those benefits.
It is reported that during Romney’s time at Bain, there were five private deals which involved buyouts. The two biggest examples of successful capital investments during Romney’s time at Bain are The Sports Authority and Staples.
When Bain Capital invested in Staples, the company had but a single store, employing roughly as many people as your average Occupy Wall street protest. By 1998, a year before Romney left the firm, Staples was reported to have roughly 42,000 employees. Today, they have close to 90,000 employees.
An example of where Bain brought in substantial returns on their investment is the case of Wesley Jessen Vision Care in 1995. When Bain stepped in, the company was not profitable. The original Bain investment was $6.4 million, which delivered a pretty return of $300 million when it was sold to Ciba Geigy in 2001. The company now employs 2,600 people.
Bains success rate in rescuing companies has been reported to be around 80%, meaning that 20% of the time Bain was unable to rescue the failing company. It is true that Bain sometimes managed to turn a profit even when it failed to rescue a company, while the employees lost their jobs. Those who use that fact against Bain don’t realize, or refuse to acknowledge that the company was failing and that those jobs were going to be lost in any case. Whether or not those jobs were lost a year or two later is irrelevant, and so is the fact that Bain profited in the process.
So, while it is true that jobs were lost at the companies that Bain was involved with, that does not mean that Bain is responsible for the said job losses. It is hard to say how many jobs were created during Romney’s time at Bain, but it is clear that in more cases than not, Bain was able to revitalize, and eventually grow companies to become huge employers. Some of these companies, like Staples, are among the biggest employers in the country.
How does Obama’s record of job creation stack up against Romney’s? Let’s let the facts speak for themselves:
When Obama took office, he inherited a financial system on the brink of collapse, and an economy in turmoil. He was given the task of rescuing the country’s job outlook, with the unemployment rate slowly ticking upward, just as Romney was given the task of rescuing private sector businesses.
Since Obama has taken office, the unemployment rate has not dropped below 7 percent. The job market has shrunk, and the federal government spent billions on a stimulus package that never stimulated.
As a part of this stimulus package enacted in 2009, a solar panel company in the silicon valley called “Solyndra” was given $535 million in taxpayers money in the hopes that renewable energy really was the “next big thing”, no matter what those dinosaur Republicans said.
Last August, Solydra announced that it was seeking bankruptcy protection after failing to deliver on the left wing promise of green energy. When Solyndra filed for bankruptcy, it fired all 1,100 of its employees.
When President Obama took office in 2009, nearly 28 million Americans were on food stamps. That number increased to 45 million in 2011.
It is difficult to calculate the exact number of jobs that have been lost under Obama’s presidency, and admittedly not all of those losses are his “fault”, but it is clear that the job growth has been extremely slow.
Since Obama’s signature healthcare bill was signed into law, the department of health and human services has issued roughly 1,200 waivers from the law. The businesses that weren’t fortunate enough to be granted a waiver from the federal government chose to cover the additional costs that the new law imposes by simply laying off a portion of their workforce. The Detroit Free Press reports:
“Stryker, the Kalamazoo-based maker of artificial hips and knees, will cut 5% of its global workforce by the end of next year to reduce costs in the face of new fees on device makers required by the U.S. health care law.” Bloomberg News reported that Stryker employed 20,000 employees as of December of last year. Maybe the Romney team should make a political ad with sob stories from laid off workers at Stryker.
Those on the left and their allies in the media do not live in a world where the actual facts about private equity matter, but only the rhetoric they are able to spew. Ginning up hatred for rich guys like Mitt Romney (unless their name is Clooney, Buffett, Kerry, Kennedy, or DiCaprio) may make you feel better, and it may help Barack Obama keep his job, but it certainly won’t help you keep yours, or allow your neighbor to find one.
The views expressed in this opinion piece are the author's own and do not necessarily represent those of The Prince Arthur Herald.
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