The president resurrects a failed anti-capitalist trope.
Given his underwhelming performance in the Republican primary, Texas Gov. Rick Perry would seem an unlikely model for a presidential campaign. Yet the Obama administration is taking a page out of Perry’s hastily retired strategy book by going on the attack against presumptive challenger Mitt Romney for his record at Bain Capital, the venture capital firm Romney co-founded and once headed.
That now-famous mental block apart, Perry's most notable contribution during his brief time in the running was to target Romney's tenure at Bain. In a series of ill-fated snipes, Perry condemned venture capital firms like Bain as “vultures” who wait for companies to “get sick and then they swoop in, they eat the carcass. They leave with that and they leave the skeleton.” The populist line earned Perry some deserved scorn from critics, who pointed out that venture capital takeovers of the kind Bain specialized in frequently offered a lifeline to moribund companies that would have gone out of business absent outside investment.
If Perry’s untimely political demise serves as an object lesson about the perils of crude populism and anti-capitalist demagoguery, the Obama administration seems determined to ignore it. This week, the Obama reelection campaign unrolled a television ad to run in five swing states that essentially recycles Perry's attacks on Romney and Bain. The ad, called “Steel,” features interviews with former employees at GST Steel, a Kansas City, Missouri, steel mill that was taken over by Bain in the 1990s and filed for bankruptcy in 2001. The employees in the ad unanimously condemn Romney and Bain for causing job losses at the mill. "It was like a vampire," one worker laments, referring to Bain. "They came in and sucked the life out of us." Rick Perry would have approved.
Whether voters will is far from certain. Among other flaws, the ad is in desperate need of fact checking. For instance, the ad suggests that Romney was in charge when GST Steel filed for bankruptcy, when in fact he had left Bain two years earlier, in 1999, to oversee the Olympics in Salt Lake City, Utah. That's not to say that no one in Bain’s leadership from the time is relevant to the election. The current managing director and chief investment officer at Bain is one Jonathan Lavine, who joined Bain in 1993. But Lavine has another distinction, as well: According to the non-partisan Center for Responsive Politics, which tracks federal campaign contributions, Lavine is a leading bundler of campaign contributions for Obama’s campaign and has raised between $100,000 and $200,000 for Obama’s reelection effort. Conveniently, the "Steel" ad omits that detail.
The bigger flaw in the ad is the false premise that Bain was primarily responsible for the job losses at GST Steel. Obama’s ad makes the charge directly, through a negotiator for the workers at GST Steel who says, "Bain Capital was the majority owner. They were responsible.” That might be a damning criticism if it were true, but it isn't. The fact is that GST Steel was already going out of business, which is why it was taken over by Bain in the first place. At worst, Bain delayed the mill's day of reckoning.
That Bain failed to make the company profitable is not an indictment of Romney or of the firm. Rather, it is an illustration of the obvious free-market principle that investment and restructuring do not invariably bring success. The flipside of this principle is that often they do just that, a point the Romney has campaign deftly made with a rebuttal ad spotlighting Bain’s successful investment in another steel company, Indiana-based Steel Dynamics. Struggling when it was taken over by Bain a decade ago, it has prospered since, growing from 1,400 jobs to 6,000. If the Obama administration wants to blame Romney and Bain for losing jobs at GST Steel, it should at least be consistent by crediting them with creating them at Steel Dynamics.
Besides its flawed message, the "Steel" ad is likely to have some unintended consequences for Obama. For instance, the ad inadvertently highlights Obama's role in causing job losses through the government’s bailouts of the auto giants Chrysler and General Motors. Journalist Byron York notes that as part of the bailout package, the government saved union jobs but triggered job losses throughout the automotive industry as hundreds of dealerships and manufacturers affiliated with the companies were forced to shut down under pressure from the Obama administration's auto task force. In July 2010, the New York Times reported that an “estimated ... tens of thousands of jobs were lost as a result.” Obama might well argue that these layoffs were necessary to make the car industry more competitive, but of course that is the same defense that private equity firms can make. With one notable exception: Taxpayers generally don't have to pick up the tab for the failed investment schemes of private companies, even as they are on the hook for failed government investment ventures like Solyndra.
More broadly, the president’s attacks on Bain highlight his hypocrisy on investment firms. On the same day that his campaign was unveiling the ad assailing Romney for his association with Bain, Obama was raising $2 million in campaign cash from wealthy Wall Street donors at the New York apartment of Tony James, the president of private equity giant the Blackstone Group. If Romney’s record running one private equity firm is to be considered a serious critique of his candidacy, the president should explain why he’s justified in hitting another one up for campaign funds.
For all its flaws, the Obama campaign ad gets one thing right in focusing on jobs. All indications are that job growth and the prospects of the economy will be the dominant issue of this year's election. If so, the president is in trouble. The latest Gallup Poll shows Romney with a clear advantage on the issue, with most voters saying that they expect the economy to improve more under Romney than under Obama. The president's latest attack ad, rehashing an anti-capitalist theme already tried and found wanting, can only confirm those impressions.
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