Economic Ignorance in the GOP Race

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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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  • thebottom99pct

    It is civil war within the Republican party.

    What does it all say about conservatives and capitalism?

    In a searing critique Wednesday, MSNBC Host and former Republican Congressman Joe Scarborough lashed out at the hypocrisy of his own party over the past "horrifying decade."

    Scarborough's laundry list of grievances is shocking in its candor, outlining how Republican leadership has failed the conservative cause.

    But "Morning Joe" may have missed the larger point on a major issue that continues to outrage millions of Americans.

    Watch the clip here:

  • Brian

    Newt should also go after Romney for doubling the number of state employees as Gov

  • Amused

    So far , other than attacking one another and of course the required "get rid of Obama memes " I haven't heard NOT ONE single plan or solution coming from the mouths of ANY of the GOP candidates ,addressing jobs , the economy ,or health care , really no different than what I've heard coming from the GOP in Congress .
    Obama's got to go , Obama sucks as President …….ok …..What;s YOUR plan ?Romney despite this absence of any of substance , other than " who served in the miltary or who didn't " , who's a conservative or who's not , will most likely win the nomination .Then what ? Oddly enough , I hear the same from all you alleged conservatives on this blog . Plenty of personal animus against Obama , but still no plan . This will not win the election .And will probably insure Obama a second term . So all these little diatribes espoused here , which are in effect all your candidates are doing , will not cut it with the rest of the country .Unemployment is down approaching '06 levels , we're out of Iraq , Bin laden's been liquidated , Israel is getting all the arms it needs .

    • truckwork

      You obviously missed Romney's primary victory speech in New Hampshire.
      If it came to Mitt or our present POTUS, I would vote for Mitt if for no other reason than this, Romney will follow the rule of law and support and defend the Constitution as it was written, not "Fundementally transform the Country".

    • johnnywoods

      We are deeply moved by your "concern" for us Amused, now go play in traffic.

  • Amused

    as far as "the bail out " ? It's working , loans are being paid back , Detroit is on a roll , Obama Care is kicking in , and so far no complaints , no dead grandmas , none of the dire and nefarious accusations that we've been hearing for the past 3 years have happened .No one tried to take any guns away , no one has been shipped out to the " Obama Concentration Camps " .
    SO WHAT DOES THE GOP HAVE ? Perhaps a resurrection of the Birther Issue ? Or " Obama's a muslim " ?
    Good luck with that in November.

    • truckwork

      The bail outs are working? Really? I don't think so and time will tell. Wait till inflation kicks in because the Feds are printing money like there's no tomorrow.

      Yes, Obama and Holder did attempt and continue to attempt to take guns away. The ATF has implemented registration of any long guns larger than .22 cal. despite that lack of any legislation allowing them to do so. The Justice Department, the FBI, the DEA, ICE and the many other Justice Department agencies continue to implement programs and projects that whitle away at our Rights.

      And the majority of the regulations that are now part of Obama care are being written by HHS and haven't kicked in yet. When they do, watch your employer provided health care disappear, and you will be left with only the government provided insurance/care that they say is allowed.

  • Gamaliel

    Ben Shapiro missed one point which is that you can create jobs in the economy overall even if in a specific company you fire people. Lets say a company of a hundred people develops a machine that allows them to fire 97 people and still be as productive with 3. The costs to make their product goes down and their profits go up. That means that those who consume the product have more money to buy other things and other people are employed to produce those things. In addition if they spend their profits that creates still more jobs. In fact there will be more jobs if those 97 people are fired than if they aren’t. The profit motive produces jobs. That is a point Obama misses also.

  • mrbean

    Newt Gingrich in his desperation is looking more like and sounding more like Michael "grungy glutton" Moore that a aspiring GOP candidate for President. Keep it up and you will have 4 more years of the clandestine Muslim hating whitey incompetent in the obal office.

  • umustbkidding

    It is so disheartening to see our only political party that is not communist playing the communists game of bashing Capitalism.

    I'm beginning to believe that there isn't any difference between the two parties, which means that we have our government poised to attack this citizenry.

    • johnnywoods

      Hey "kidding", it is disturbing that so many of our so-called conservatives are attacking capitalism as if it were a bad thing. They could not get by with that if so many Americans were not brain-dead from being "educated" in government schools.

  • alexander

    last week unemployment claims : REAL: 642,000
    "Adjusted" by FuBar Ack and brown-nosed MSM: 399,000.
    Yep, not 400k or 401k…no no no , has to be under 400k, so here it is!!!
    Whatta circus

  • MethanP

    One has to wonder, given the nature of the attacks on Romney, whether the other candidates are sponsored by Soros. Truther moment-I was an anyone but Mitt, however the behaviour of the others has turned me off.

  • mrbean

    Like I said, Newt Gingrich in his desperation is looking more like and sounding more like Michael "grungy glutton" Moore that a aspiring GOP candidate for President. He has allied himself once again with the enemy, and I fear what he would do as Commander in Chief and use politician double-speak to defend it.