I have previously defended some of Mitt Romney’s seemingly absurd statements on this blog. I will not do the same for “I’m not concerned about the very poor.” Yes, he clarified that they have a safety net and that’s why he’s not concerned, but it’s impossible to take seriously his promise to “fix it” if it needs repair, while he campaigns on eviscerating the safety net and a massively regressive change in the tax structure. That’s just lying (which, as we have established, he does.)
Tag Archives: Mitt Romney
Romney’s been taking fire consistently over the last few days over his time at Bain Capital, a private-equity firm. He tried to spin that experience as showing he knows how to create jobs in the private sector, but his numbers are fuzzy and impossible to verify. Meanwhile, Newt Gingrich &co. in the GOP primary are doing Barack Obama & the DNC a huge favor, trotting out workers who lost their jobs to his “vulture” capitalism.
The problem, as Matt Yglesias and others have pointed out, is that private equity isn’t intended to create jobs–it’s intended to create value for the owners of the company. In many cases, that means laying off workers who aren’t providing a valuable service anymore. Replacing those workers with more efficient inputs (be they machines, overseas workers, etc.) makes the economy as a whole more efficient, and creates value for consumers and producers, but it really sucks for the people who have invested in obsolete human capital.
Yglesias’s response to that problem is smart and pithy: we need to “celebrate the creative, help after the destruction.” That also captures Romney’s problem: he can’t express any willingness to help after the destruction. If he was a Democrat, or a Republican running in a less crazy year, he could make the intelligent argument that “This is the process of capitalism: people lose jobs when industries change. That change makes us all, as a whole, better off, but it also means we have a bunch of people who aren’t doing as much as they could be. It makes sense to provide an effective safety net for those people, so they can keep buying things that the rest of us make and making things that we want.”*
As should be clear, Romney can’t make that argument in a rabidly anti-government Republican primary. I’m not even sure he would agree with the idea (to the extent that he has any intellectual principles at all). But I think that’s the one way he could effectively respond to the attacks on private equity. Claiming “100,000 jobs!” isn’t going to counter the stories of fired workers, no matter how right he is.
*In essence, we should provide some form of human capital insurance to protect people in the same way that we insure our physical capital (houses, cars, etc.) against loss. I don’t see any theoretical reason that such insurance couldn’t be provided privately, but it might make sense as social insurance because the people most likely to need it are the least likely to afford it. If anyone has seen this mentioned in the econ literature, shoot me an email!
Rick Perry made a ringtone of Mitt Romney. It’s great.
The problem is, I’ve actually been most impressed by Romney over the things for which he’s been most criticized: I’m thinking “corporations are people,” firing workers at Bain, “I like being able to fire people,” etc. All of those are actually things he did right.
First, “corporations are people:” Incredibly dumb sound byte? Yes. But he was also correct: he wasn’t arguing that corporate entities should have equivalent speech rights to people, or even anything close to that. Instead he was arguing that when corporations make money, that money goes to actual people. (This does not apply if the company is Apple.) That means corporate profits are good for people. They may not be good for all people equally, and you may not like the people who benefit from them, but corporations do not take worker’s hard-earned money and feed it to an evil dragon. Profits go to people.
Firing people at Bain: There’s this thing called “creative destruction.” Sometimes, people’s skills get overtaken by technology, or there are people who will do the same work for cheaper, or people stop wanting horse-drawn carriages. Those people usually lose their jobs, since nobody is willing to pay for what they make anymore. Bain bought some companies in that stage of their lives, and they sold off the bits that still had value. Bain is not legally or ethically responsible to the workers, and they probably made the world as a whole better off by re-allocating resources where they were useful. End of story. (Yes, folks, I haven’t got a populist bone in my body.)
“I like being able to fire people:” Again, dumb sound byte. But, importantly, he didn’t say “I like firing people,” and again, he’s right: being able to get rid of an unsatisfactory service provider is a useful tool that, in most cases, will lead people to get better service even if they never actually fire anyone. If a service provider knows you have no other options, they can do a shitty job with relatively little risk–after all, whatever service they’re providing has to be worse than nothing for you to leave. Certainly, most people wouldn’t want a system where they couldn’t get rid of (fire) their health insurer–it would lead to really lousy service. (None of that changes the fact that Romney’s health care plan is stupid, and there is exactly zero evidence that better private competition will lower health care spending, but that’s not what he’s being criticized for.)
So, while I have essentially no regard for Mitt Romney, let’s all be a little more careful how we criticize him. He has lots of dumb ideas–target them, not his rare moments of honesty.