Newt’s Attack on Bain Supports Obama’s Class War

I’ve admired and supported Newt Gingrich for decades.   I certainly did not want to publish this criticism.  But to ignore his attack on Mitt Romney and Bain Capital would be to diminish the credibility of this website.  So, here goes.

Considering the sum total of Gingrich’s life, he has done more than almost any modern politician to advance the cause of  limited government and greater economic liberty.  For these accomplishments, and for his sincere contrition, he has earned a measure of forgiveness for some of his sins, including his inexplicable but apparently expired romance with the global warming/climate change movement, his association with Freddie Mac and his personal moral failings.

But with his attack on Mitt Romney’s tenure at Bain Capital Mr. Gingrich has crossed the line.  A week of  innuendo ended with release of a half-hour video smear of Romney and Bain.  The subtle-as-a-jackhammer video includes all the lurid, emotion-evoking techniques ever used in the most vile, leftist propaganda.

To the right are some samples of the  2 – 5 second, grainy, flickering, clips showing:

  • an attache case full of cash, like the one the hit man receives as payment in a movie about the mob;
  • several vacant and boarded-up industrial buildings (with no connection to Romney);
  • a junk yard;
  • an ugly closeup of a man (not Romney) smoking a cigar;
  • a closeup of someone’s hands counting hundred dollar bills;
  • scary winter snow storms (Did Bain control the weather?);
  • Unflattering, black and white photos of Romney, with grainy effects added to make him look sinister, with the voice-over alleging he defrauded investors and gleefully, sadistically laid off hapless employees;
  • absurdly out of context, Romney soundbites, five to eight word sentence fragments snipped from TV interviews and speeches.

These crude devices surround brief clips of individuals who lost jobs, describing their misery and blaming Romney.  There is of course no effort whatsoever to present relevant facts or data or context.  And no testimony from people whose jobs were at risk but saved by an investment from Bain Capital.

Appearing on Sean Hannity’s radio show Gingrich said, in part:

There are three or four places where the record is pretty bad and [Romney] needs to explain…I’m totally pro free enterprise, I’m totally pro entrepreneur, I’m totally pro the Capitalist model.  It’s the only one that works. We’re not talking about defending the model. were talking about the character, the judgment of one particular person who seeks to be the President…I’m not questioning free enterprise…It’s his character, his judgment his decisions that I find it interesting that he’s so unwilling to talk about.

But the video does attack free enterprise by ignoring the way markets discipline business owners and investors.  The video supports the false narrative of the Left, that business owners are not subject to market discipline and thus are free to abuse customers, investors and employees without consequences.  But no business owner can survive and attract more investors by buying a business and then willfully destroying it.

In fact if this video weren’t such naked propaganda, if it were a bit more clever, one might mistake it for the Obama campaign’s 2012 strategy of shifting from hope and change to demonizing American business as the weapon of “the top one percent.”

When Romney was in charge of Bain Capital it was (and still is) a private equity (PE) firm. PE firms combine the resources of several investors to buy a business and manage it, usually for several years.  The goal is to make the business more valuable so it can be sold for a gain, which is then split between the PE firm and the investors.  Businesses become more valuable when their sales, profits and future potential improve.  More often than not value-adding improvements involve hiring additional employees.  But sometimes there are obsolete product lines, inefficient production processes or unprofitable divisions that reduce the value of the business and must be streamlined or shut down, resulting in layoffs.

Sometimes PE firms buy seriously troubled businesses that are at risk of imminent bankruptcy that would force layoffs of the entire work force.  The PE firm will employ some combination of investment of new capital and limited downsizing/layoffs to bring the business back to profitability, thus preserving the jobs of the remaining workforce.

It’s not easy to find objective data about Bain’s investments during Romney’s tenure, party because a private equity firm was not required to publish quarterly financials as are publicly traded corporations.  But the only reasonable conclusion one can reach from what information is available is that Bain took risks on dozens of companies and tried to profit from improving their performance.

Drew, an adviser, occasional contributor, and good friend to Liberty Works is a partner in another private equity firm and knows the business from an insider’s perspective.  When asked his opinion of Bain he replied:

The truth is Bain is a tremendously successful and well regarded PE firm and was one of the few that employed the combination of operational and financial expertise.  Great returns.  We all wanted to work for Bain.  It will never ever be portrayed in the press correctly because of the narrow focus on a few unsuccessful transactions, but Bain was and is one of the best.

Obviously, people who are laid off and suffer varying degrees of hardship may become bitter.   The former employees in the video are posed with insufficient light and other video techniques used by propagandists so they come across as pathetic sad sacks.

The underlying message is that the net result of business operations in a free market is misery.  The viewer is left with the impression not only that Romney is a bad man but there is too much liberty in America, and businesses must suffer even more draconian regulation, justified by the false promise that bureaucratic control can somehow keep them all profitable and thus make layoffs unnecessary.

On a personal level, I’m deeply troubled by the GOP primary campaign and Gingrich’s attacks.  I realize he has been the target of Romney’s ruthless and relentless smear campaign, sanitized by the media that gave it the innocuous “negative ad” label.  But Romney’s political record is target rich with material for critical ads.  There was no reason to give aid and comfort to the anti-free market progressives and their current leader, Barack Obama.

11 Comments so far

  1. GrantOc on January 15th, 2012

    This blog confuses talking points with real life business decisions. Bain didn’t “invest”, it leveraged to buy a company. But then the company owed the money, not Bain. That way Bain could sell assets and bust unions and divest pension funds and leave an empty shell.

  2. Drew on January 16th, 2012

    GrantOc cites “real world” business decisions………and then goes on to recite intellectually light talking points.

    The amount of equity put into a buyout vs debt varies based a number of factors and over time. But 25% to 45% would not be atypical. Further, the buyout firm supplies a portion of that equity personally. The balance is provided by the limited partners in the fund. These limited partners generally include reserach endowments, teachers pension funds, state worker pension funds, union pension funds, insurance companies etc etc.

    The real goal of buyouts is growth. To reinvigorate past glory, or realize unfulfilled potential. Sometimes it works, sometimes it doesn’t.

    But “empty shell” rhetoric is testimony to the ignorance of a commenter, and less to Bain.

    Back to your union rag…..GrantOc

  3. Happy on January 16th, 2012

    I’m no fan of Gingich. He’d make a terrible President and the polls show even Republicans are ready to dump him. But Romney should come forward and explain what happened. Why were so many people laid off? Couldn’t Bain do something better for the workers than sucking millions out of those companies and then leaving them jobless?

  4. Cantankerous on January 16th, 2012

    Romney’s perfect to represent Republican, corporate “values” of every man for himself and screw the little guy.

  5. Drew on January 16th, 2012

    “Couldn’t Bain do something better for the workers than sucking millions out of those companies and then leaving them jobless?”

    First, can you cite any concrete evidence that this is factual?

    Second, what would have been your prescription for stewardship of these companies………and where was your money to support it?

  6. MsParks on January 16th, 2012

    Somehow we have to find a way to beat Obama and the machine. they say Romney would be best to appeal to independents. They say Gingrich would be best debater against Obama. Truthfully, I’m worried. The GOP is a big, disorganized mess, all trying to ruin each other instead of Obama.

  7. MarineMom on January 16th, 2012

    The fact that Newt Gingrich has labeled Romney’s Bain years means Obama can’t be called “anti-free enterprise” or “anti-business” when he says the same things. All Democrats need to do is put a clip of Rick Perry or Newt in an ad where they accused Romney of being a “vulture capitalist.”.

  8. AzTex on January 16th, 2012

    Well I see this blog finally came back to life. Nobody cares about all those bullshit graphs but they do care about a guy running for President who has a history of making millions by killing American jobs.

    Barack Obama and Mitt Romney both got a degree at Harvard. President Obama went to work helping people. Workers who had been decimated by the shutdown of the steel industry in Chicago.

    Romney went to work to make millions for himself. And a few well connected investment cronies by closing down a steel mill and other businesses and union busting.

    Obama cares about the lives of ordinary people who do the real work in this country. Romney and all the republicans including sleazy, unethical Gingrich care only about enriching themselves and gobbling up even more for the top 1%

  9. Happy on January 16th, 2012

    To Drew:

    here is the report http://www.massresistance.org/romney/ampad_062607/index.html

    Bain made over $100 million while the company went bankrupt and workers lost jobs.

  10. Drew on January 17th, 2012

    I wonder how many people know that Obama has a number of private equity people on his staff.

    I also wonder how many know that teacher and union pension funds are some of the biggest investors, and therefore beneficiaries, of private equity investing.

    Oops.

  11. Drew on January 17th, 2012

    Oh, and I forgot to comment on Ampad. The real story is that staples simply was a better business concept, and won. Spin it any way you want, folks, but thats what happens in a marketplace.

    And I wonder how many of you will be screaming for the union pension funds to give back their gains. Heh. Probably none.