Comparing Romney and Obama on Jobs Creation

What’s Wrong Today:

Some final thoughts on yesterday’s column on Mr. Romney’s job creation record:

Igor Volsky @ Think Progress reported on July 17:

During an appearance on Fox News on Tuesday morning, Mitt Romney surrogate and former New Hampshire Gov. John Sununu (R) argued that President Obama did not have the requisite business experience to create jobs because he was “smoking something” in Hawaii.

OK, let’s compare and contrast the records of our two candidates:

  1. Mr. Romney did 67 private-equity deals as CEO of Bain.
  2. Mr. Obama has done just 2 private-equity deals, both in his role as president. They were bigger than the sum total of all the deals Mitt Romney did at Bain and they worked better. All of the benefit accrued to the stakeholders: employees, vendors, management, customers, communities, taxpayers and the national economy.  And no investment banking or management fees were collected. It IS true that he used your money to do it.
  3. Particularly telling was the action taken by the president once his team realized that that both the management and boards of GM and Chrysler were incompetent and unworthy of investment. Mr. Obama, through car czar Steve Rattner, did what a truly great CEO (or private-equity guy) would do: He fired them and brought in new guys from outside Detroit. That was a huge risk, undertaken at lightning speed, which all of the traditionalists in the industry thought was crazy. In doing so, he fixed fifty years of Detroit incompetence at the highest levels.
  4. Mr. Romney touts his business acumen and job-creation record as a key qualification for being the next U.S. president. You remember his Op-Ed against the Auto Bailout. Above is a graph of domestic auto sales and production: Note what happened to sales after the Romney Op-Ed.
  5. So, let’s contrast Obama’s performance above with Bloomberg’s description of how Romney operated:

What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses.

As the Wrongologist has reported,10 of roughly 67 major deals by Bain Capital during Romney’s tenure produced 70 percent of Bain’s profits. Four of those 10 deals, as well as some others, later wound up in bankruptcy.


So, it may be less than clear how his experience at Bain is relevant to the job of overseeing the U.S. economy, strengthening competitiveness and looking out for the welfare of the general public, especially the middle class.

Some final thoughts on Mr. Romney:

A. He says he is a true believer in protecting the job creators from paying taxes. He shows this by hiring Paul Ryan to be his VP.

(i) Under Paul Ryan’s budget plan, Mitt Romney would have paid an effective 0.82 percent tax rate on $21 million of currently taxable income, since Ryan’s plan eliminates all taxes on capital gains, interest, and dividends, while reducing the top marginal tax rate to 25%, and eliminating the Alternative Minimum Tax.

(ii) So, instead of paying roughly $3 million in taxes in 2010, Romney would have paid about $177,000 instead.

B. Let’s look at what Mr. Romney has been doing since he was governor of Massachusetts:

(i) He hasn’t worked. 

(ii) He hasn’t created any jobs outside of his political campaigns and the new house in La Jolla.

C. He says he is a true believer in the trickle-down theory.

(i) So, shouldn’t he be creating more jobs with all of his wealth?

(ii) Is there any reason to believe that he would have created even more jobs if he’d been allowed by Mr. Ryan’s plan to keep an extra $3 million dollars a year over the last five years?

As anyone who has been around the financial industry knows, there are very few private equity firms that primarily buy and hold.

Most are like Bain, looking to turn a fast buck by purchasing and then quickly selling their targets. That’s their modus operandi.

To anyone who can look beyond their politics, Romney’s use of Bain’s short holding strategy to drive investment returns is totally understandable.

Using it as a proof statement for “job creation” is simply laughable.  

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