Today’s Guest Saturday post comes to us from Pat Slattery of The Free Market Project. The article was originally published on May 23, 2012.
How I’d Respond to Obama Campaign’s Attacks on Bain
My fantasy response from Mitt Romney to Barack Obama regarding the attacks by the Obama campaign (or its surrogates) of Bain Capital:
Mr. President, I know you have no experience in the private sector, and you have shown no evidence of understanding either economics or business, so let me tell you how this works.
Sometimes businesses struggle. That means that they are either losing money–they are not profitable, or they are barely making ends meet. This can happen for many reasons, but the common thread is that costs are exceeding, or just barely meeting, revenues. You see, in business, unlike in government, if you are spending more than you are making, you go out of business. You can’t simply raise a debt ceiling, or sell treasury bonds, or print money. Those things eventually cause a nation to fail, and they are not options for companies.
When a company is struggling, but seems to have potential, one of two things can happen. Either it goes out of business and everyone loses their jobs, or someone comes in and tries to rescue the company, to make changes that will return it to profitability. These people, such as Bain Capital, are taking a risk. The reward is that if the company is made profitable, the investors can make money and the company stays in business as a profitable enterprise. If the investors fail, as I said, everyone loses their jobs and the investors lose their money. You have to understand, these are people losing their own money, not the money of anonymous “taxpayers” whose capital politicians squander on wasteful programs, and funding boondoggles such as Solyndra or any of the other “investments” your administration has made in green technologies that have yielded so few jobs.
Just as an aside, Mr. President, what was the upside for the taxpayers whose money you invested for them? If the companies hadn’t gone bankrupt and wasted that money, would the government have made profit, or would it just have broken even, maybe plus a little interest for the millions or billions of dollars that you risked on the taxpayers’ behalf? How much of your own skin did you have in the game? Or was it all just the people’s money, borrowed at interest from the Chinese, that you were risking?
Back to actually doing real business in the private sector. Most often, costs have to be cut in order to bring a company’s revenues and costs into balance, or even profitability. Again, this is not like Washington D.C. cost cutting, where you simply slow the rate of the growth and call it a cut even though you’re actually spending more, year over year. This requires actually cutting costs. Often, and unfortunately, this can mean cutting employees, particularly when their productivity does not justify their wages. Now, when you consider that not saving the company means everyone loses their job, having to cut some jobs to save others, while distasteful, is necessary.
I know that you and the Democrat party are beholden to unions. However, it might surprise you to know that, in the real world, some unions have a reputation for driving costs up and productivity down. They are more concerned with making sure the next shift has work to do than with increasing their own productivity in order to help the company. Often union wages are inflated, as are their benefit packages. When confronted with a company that is going under and that has an unproductive workforce, some of those jobs have to be cut. The unions never like this, but the unions tend to lose track of the fact that the enterprise has to stay in business in order for anyone to keep their jobs. And, just as you tend not to take responsibility for anything and try to place blame on others, such as your predecessor, unions tend to blame the company or the investors when jobs are lost or a plant closes without ever taking a moment to think that perhaps if they hadn’t driven the cost of labor so high, the company may have stood a better chance of success.
So, when I was with Bain Capital, and even after I left–something you well know since you have now twice brought up efforts Bain made to turn a business around that failed after I’d left the management of the company–we tried to turn businesses around, to keep companies that were going out of business from going out of business. We invested our own money, and private capital from other people. Sometimes we failed. More often, 80% of the time, we saved companies and jobs, and when the companies were turned around, they hired more people. Again, keep in mind that the companies were in trouble when we went in; they were on their way to failure which would have cost everyone their jobs and all of the investors to lose all of their money.
Now, just to make it clear to you, again, given that you have no private sector experience and don’t seem to understand business or economics: When a business fails, that is bad for investors as well as being bad for employees and even communities. (Unless, like with your cronies in your green energy boondoggles, there are taxpayer guarantees to help ease the blow.) When I, or Bain Capital, was not successful in saving a company, we lost money–our own money and our investors’ money. There was no great benefit to failure. You are not considered a success being a “vulture” that picks the bones of dead companies. Selling off assets to recoup what you can from a failure is far less lucrative than being successful in turning a business around and having it become a thriving enterprise, doing business, employing people, and creating wealth and prosperity.
Your campaign’s efforts to paint my work at Bain Capital as something bad simply reveals that you truly have no idea how business works, or how the economy works. It shows that you don’t understand that companies need to be profitable, to have costs that are lower than revenues, in order to stay in business and employ people and create wealth and prosperity for the employees and investors, and the communities in which the businesses operate, as well as in the country. You are used to government work, where productivity and efficiency are not highly valued, where waste is tolerated, and were debt is a matter of debate, treated like a fiction (until it’s too late), instead of a matter of whether an enterprise exists or not.
I will tell you right now, and tell all of the potential voters: Washington D.C. needs to start operating more like the private sector. This country is deeply in debt, our costs have far overrun our revenue, and we are on the verge of bankruptcy. You seem content to ignore that ugly fact, to pretend it is not real, even while evidence of the hard reality it brings is being shown to you in Europe. We do need a President that understands a balance sheet. We do need a President that understands profit and loss. We also need a President that understands business and who realizes that jobs are not something politicians create. Jobs are created by a thriving private sector, and politicians can, at best, create a climate where business can thrive and wealth and prosperity can be created. You have done the exact opposite of that in your administration. That doesn’t surprise me, because it is clear that the private sector is neither of interest to you, nor understood by you. Rather than criticize the efforts of people to save companies, even when they fail, you would do well to return to private life and see what it’s like to start a business and try to make it successful.