In the past week, the Republican primary campaign for president has turned to the question of Mitt Romney’s record as a businessman. Romney, the front-runner, is campaigning on his experience at Bain Capital LLC, which he evidently regards as more relevant than his experience as governor of Massachusetts.
He says he demonstrated an ability to “create jobs” at Bain -- 100,000 of them. His opponents, particularly Newt Gingrich, have challenged this claim, saying that Bain actually destroyed more jobs than it created as it went about the business of buying and selling companies or pieces of companies.
Whether Romney is being frank about his history at Bain is a valid question because of what it may reflect about his honesty and character, more than what it says about his business skills. The notion that being a businessman in Massachusetts or Utah is better training for a president than being a politician in Washington is one of the more tiresome conceits of American politics.
That said, it’s still worthwhile to know how well Romney did at Bain. The Wall Street Journal on Monday reported on a study of 77 businesses that Bain had invested in from 1984 (when Romney joined the firm) to 1999 (when he left it). The study looked at what happened to these companies eight years after Bain got involved. It found that 22 percent of them had either gone bankrupt or otherwise closed their doors, and an additional 8 percent had lost all of Bain’s investment. Although not all the bankruptcies resulted in shuttered companies, jobs were surely shed.
There is no scientific way to evaluate this record. The Journal indicates, via quotation from various experts, that Bain’s win-loss record is fair-to-poor, compared with that of other private-equity players. However, it appears that Bain took on riskier investments, so while its failures were bigger, so were its successes. Bain objects to the study, saying that the Journal blames Bain for business disasters that occurred after Bain had sold its stake. But if the question is whether Romney created jobs at Bain, what happened after Bain finished its handiwork can be as relevant as what happened when it was still involved.
Romney deserves credit for more than doubling the return of his investors. If he wins the Republican nomination for president, we’ll be arguing for months (probably with insufficient evidence on either side) about whether he was as good for employees.
The history of the small companies bought and sold, financed and milked, by Bain is like the history of small businesses in general. You would think, from the way politicians from both parties carry on, that small business is simultaneously a mighty engine of American prosperity and a delicate flower that will wither in the slightest chill. In truth, small businesses create jobs when they start up or expand, and they destroy jobs when they shrink or close. They do both at a rapid clip.
President Barack Obama wants to raise taxes on people with incomes of more than $200,000 or $250,000 a year. It’s no argument against this that many small businesses make more than $250,000 a year. An owner whose small business makes more than $250,000 a year can afford to pay more taxes just like someone who makes more than $250,000 in salary. Small businesses deserve our admiration, and so do owners and investors -- people like Mitt Romney -- if the businesses succeed. What they don’t deserve is special treatment.
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