The day before the New Hampshire caucuses, Mitt Romney’s opponents finally decided on a strategy to attack him – from the left. Now, lest you think this is nuts in a Republican primary, remember that John McCain was our presidential nominee in 2008. Which means that unless someone cuts into Romney’s “moderate” base, we will likely see him as the nominee.
Thus Newt Gingrich released the hounds on the frontrunner, telling audiences that Romney has “some very big questions to answer” about his time at Bain Capital, the investment firm at which he was CEO. “I don’t have much respect if you rig the game so you end up walking off with all the money,” Gingrich told Bloomberg TV. Gingrich cited one particular case in which Bain invested $30 million in a company, only to withdraw $180 million later, sending the company into bankruptcy. The question, said Gingrich, was whether “these particular companies were being manipulated by the guys who invested in order to drain them of their money, leaving behind people who are unemployed.”
Is this attack fair? In some ways, it is. Romney has run on his record at Bain Capital, suggesting that he created some 100,000 jobs in his time there. When asked by George Stephanopoulos whether this number was “net” – meaning that it took into account the jobs created minus the jobs cut – Romney answered that it was. There’s only one problem: it clearly wasn’t. In his 1994 campaign, Romney claimed that he had created 10,000 jobs; by today, that number has multiplied by ten. What changed? The companies he founded or invested in grew. But that’s not solely due to Romney’s involvement of course – it’s like arguing, as my grandmother jokingly does, that all of our accomplishments are due to her getting pregnant with my father some 55 years ago. Sure, it’s true technically. But there have been a few intervening events in that time frame.
So Romney made his record on jobs at Bain an issue. Thus, his actual job creation record becomes fair game.
That’s doubly true when you take into account Romney’s Super-PAC ads against Gingrich in Iowa, which were both brutal and slightly misleading. Presidential races do have karma, and Romney brought the bad juju on himself.
The broader question is whether Romney’s success at Bain Capital should be judged on job creation in the first place. It shouldn’t. When Romney’s opponents suggest that his record at Bain Capital was all about cutting jobs, they miss the point: Romney’s job at Bain Capital was to turn companies profitable, or to dismantle them on behalf of his investors. His job wasn’t to create jobs – it was to create profit.
This is one of the key pitfalls that conservatives keep running into on economics. They know that for public relations reasons, they must talk jobs – but employment is an almost irrelevant byproduct of true economic health. A company is not better run or more useful because it “creates jobs.” A solid company is a solid company because it offers useful services and goods for prices people are willing to pay, and is able to continue offering those services and goods because it does not spend more than it takes in.
That’s why GM, which employed 92,000 people at the time of its collapse, was a rotten company; that’s why Microsoft, which employs approximately the same number but ran a profit of $14.6 billion in 2010, is a great company. GM needed government bailouts; Microsoft didn’t. With GM, we ended up paying to preserve the jobs of people at companies whose goods and services we don’t want to buy. With Microsoft we didn’t. Why? Because jobs numbers are a terrible gauge of economic health. Just ask the Soviet Union, where everyone had a job but nobody had a potato.
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