The Wrongologist

What’s Wrong Today:

How many jobs did Mitt Romney create during his tenure at Bain Capital ?

By his count and that of his presidential campaign, the answer is more than 100,000. The calculation comes primarily from counting every position added from the point of the initial Bain investment until the present at four successful investments, including Staples Inc. and Sports Authority, Inc., by Bain Capital and Mr. Romney.

The number of jobs created by Bain during Romney’s tenure is a centerpiece of his campaign. The Republicans say that President Obama has not done enough to create jobs, despite the fact that the economy has created 4.5 million private sector jobs since the bottom in 2010.

Romney’s job creation record is used by the candidate and the Republicans to buttress the contention that Mr. Romney would be a better steward of the economy than President Barack Obama.

It also is a source of dispute between the campaigns as the Democrats assert that, far from creating U.S. jobs, Bain Capital under Mr. Romney was a leader in sending jobs abroad, which Bain and the Romney campaign reject.

So, What’s Wrong?

This is the most important debate we can have in the Presidential campaign. Without substantive job creation, we face a long-term low/no growth economy, which will be a significant challenge to our national security and our place in the world order.

This graph From the St. Louis Fed shows the US’s long-term unemployed currently at 5.2 million. Behind every data point on the line is a real live person, with ability, skills, promise, knowledge and capability who desperately needs someone to hire them.

Mr. Romney says that he is the better job creator. The debate over his job creation record while at Bain Capital is relevant and it should turn on how many jobs were created while he was there. The estimates range from 100,000+ claimed by the Romney campaign, to 1,500, under a more radical counting method, so the Wall Street Journal’s Mark Maremont reports.

Assigning job creation numbers to private-equity firms is an uncommon exercise among researchers.  As a result, there is no widely accepted accounting measure. The Romney campaign’s 100,000+ jobs claim is flawed, because:

• It gives Romney all the credit for jobs the firms created, even long after he left Bain.

• It gives Bain ALL the credit for all the jobs, even though other investors also played a role in each of the four key companies, not to mention management.

Take Sports Authority for example: The venture capital syndicate was led not by Bain, but by William Blair Venture Partners. The group included First Chicago Venture Partners, Phillips-Smith Venture Partners, Marquette Venture Partners, and Bessemer Securities along with Bain Capital.

Unnoticed amid the debate is that the four companies at the core of Mr. Romney’s 100,000+ jobs claim were relatively insignificant in dollar terms in the context of Bain’s portfolio investments during his 15-year Bain career.

The total invested in the four he claims credit for as a job creator was about $25 million, or about 2% of the money Bain invested during Mr. Romney’s tenure.

The other two companies, in addition to Staples and Sports Authority, are Bright Horizons Family Solutions LLC, a day-care provider, with about 19,000 employees, and Steel Dynamics Inc, a steel producer, with about 6,500 workers.

The WSJ chart above compares three ways of “counting” Romney’s success as a job creator. The first column gives him credit for ALL of the jobs created from the time of Bain’s investment to the present, long after his exit from Bain.

The second column gives Romney credit for the 100% of the jobs created, but ends with his reported “exit” from the firm in 1999.

The third column bases Romney and Bain’s credit as proportional to the scale of Bain’s investment to the total amount invested in the 4 firms.

The three different answers from the three different methods of counting underscore why many experts say it is futile to try to pin a number on Romney’s success as a job creator.

What’s wrong here is that any jobs creation claim by the RNC and the Romney campaign is fact-free and safe from scrutiny.

How would you grade Romney and Bain as job creators? The Wrongologist calls it a Gentleman’s “C”.

• A group of investors ponied up $2.7 million to buy restaurants from Richard and Maurice McDonald.
• Banker Ken Langone led a group of 40 investors to raise $2 million to start Home Depot.
• Mike Markkula gave Apple Computers the $250,000 it needed when it incorporated in 1977.

• How about incubators to start up businesses, complete with grants, tax incentives and investment, but require that the incubator and start-up incentive be run by some of the long term unemployed?
• How about requiring a percentage of private business new hires to come from the long term unemployed?