No one knows for certain yet whether the decision of Newt Gingrich to attack Mitt Romney for his work at Bain will end up hurting or helping Romney’s campaign. Most conservatives believe the attack now gives the GOP frontrunner the chance to prepare a response. In her column today, Peggy Noonan understands what’s at stake:
A full-throated, detailed defense of Bain that is also a defense of economic freedom and free markets might not only benefit Mr. Romney. It just might help valorize, or rather revalorize, the reputation of capitalism, which has taken a beating the past few years and not recovered. That, actually, might be a public service.
The Obama campaign wanted to launch its Bain attack in the fall. Mr. Romney can face the attack now, head on, and begin not inoculating himself from the issue but exhausting it.
Read the whole thing.
I watched the 30-minute Gingrich film about Romney and his tenure at Bain. It might as well have been a Michael Moore production.
But it was still effective. I know a lot of the details and circumstances were left out but the story is familiar: private equity firm shows up, piles on lots of debt, loots the company which then files for bankruptcy and closes its doors.
I’m not sure when capitalism stops being capitalism. Sure, people can make a lot of money but at what cost?
If an investor makes money investing in a company that makes better mousetraps – great. But when the investor makes a killing by putting people on the street and on welfare and by stiffing creditors – that seems more like theft. Socializing losses while privatizing the profits.
What politicians seem to miss (or ignore) is that the average, rank-and-file, middle-of-the-bell-curve American is 1) scared and 2) sick and tired of the elites be they politicians or business.
I know exactly: when money is compromised, and/or failures are bailed out.
Capitalism is supposed to include failure. Capitalism is supposed to include job DESTRUCTION. People are supposed to save their money and/or keep their skills fresh, so they can handle those times.
And money is supposed to be hard – i.e., supposed to keep its value – not have its value stolen from people by Obama’s deficits, financed with Bernanke’s money printing a.k.a. “quantitative easing”.
When there is a Soviet-style central planning agency for money supply and interest rates (a.k.a. the Federal Reserve) which consistently bails out the worst of the Big Government – Big Banking – Big Labor nexus presently ruling America, then capitalism has stopped being capitalism.
I have no complaints about a man engaging properly, it would appear, in both the creative and the “creatively destructive” sides of capitalism. My complaints are about the people who have killed capitalism, by destroying the dollar over an 80-year period to keep themselves afloat.
(continued) My steam is up and I just have to say it again: Nobody on Earth is born with a right to stay in the same job, or with the same company, forever. Job destruction is essential to progress and, as such, entirely proper. It’s the lack of NEW jobs (new companies, new industries) that’s the problem. And, again, the bailouts (and general siphoning off of wealth) for the undeserving, which causes the stagnation / the lack of new jobs.
ILC – I agree with your opening statement in #2 but I think #3, while correct in fact, is ignoring some realities.
First, there’s (my hobby horse) the bell curve. Not everyone is cut out to be a molecular biologist. Second, the creative destruction has been heavy on the destruction while the creative part has been pretty anemic. We’re losing jobs with both hands and have been for years; there is nothing on the horizon that I can see that can soak up the idled labor. Government policy is a part of this but so is productivity growth: more output with less input. That’s a fact but I don’t think anyone knows what to do about it.
That’s somewhat akin to blaming ATM’s and self checkout kiosks for joblessness. There is no ceiling for productivity. With a large population, there is a limitless opportunity to satisfy wants and needs. If a robot can do your job, its a sure sign that you need to adapt.
Along the way, if a factory can be automated and make a better profit then the employees should be let go. A factory is not a jobs program. It is there to produce a product that they can sell for more money than it took to create it. Those employees can find manufacturing jobs elsewhere or they can train for something relevant in the modern world. There will always be innovation and progress, and workers need to adapt with the market.
Its tough, but that’s how life is. It makes little sense to continue paying people to manufacture horse drawn carriages, when everyone wants an automobile, just to avoid laying people off.
You can’t send mining jobs or logging jobs to China. But if you are manufacturing brake linings and paying union wages and being kept to the EPA and OSHA rules, you either design robots or calculate the shipping costs from China.
The harsh reality is that we have made the workplace so darned pristine that it is nearly impossible to employ the workers and conform to the standards required by our government.
What I like best about Mike Rowe and his Dirty Jobs program is that we do have a strong work ethic left in this country and not everyone is wussified.
So, if Bain is in the vulture business, it is because there is carrion on the dinner table. The issue isn’t the vulture, the issue is how the carrion came to be.
Kodak is in Chapter 11. Like the many, many watch companies in America that dildn’t catch the quartz movement soon enough to save themselves, Kodak got eclipsed. That is one form of death that comes to a formerly dynamic company.
Schwinn bicycles were made in Chicago. They were so battered by the unions that they literally, left town one weekend and moved to Arkansas.
All over the country are towns that lost their manufacturing jobs because the company died, moved, or sent their production to China. That is a natural response to the globalization of supply and demand. It only stands to reason that experts in consolidation, reorganization and liquidation would arise if there is a profit to be made.
Which brings me to the whole “service economy” concept. In this concept, you receive a service from an individual which includes some amount of money that goes directly to him just for existing. That is his profit. That is his “mark-up” on his labor. Additionally, along comes an organizer who collects the service workers up and pays them a wage and charges access to the workers at an inflated rate and that is his profit.
It all depends on how you look at capitalism. You can skip the electrician from the company that specializes in electrical work and do the job yourself and save a bundle. Or, you can try to grab the employee on a weekend and shave part of the service bill off. Or you can hire somebody driving by who says he knows how to do the work.
In many cases, the consumer has just as much to explain as the producer.
In a sense, every government worker is a service producer. The worker supplies his labor for a government wage which is paid with money (taxes) taken by the government from the citizens at the point of a gun.
We are learning more and more often, that the government jobs come with higher wages and far better benefits than the same sort of jobs in the non-government world where wages and benefits are paid according to whether the company can be competitive and stay in business.
This whole argument about how much money “the 1%” pulls out of the profit system is pretty bogus. The glass temples that rise to the sky in Manhattan are certainly not necessary. No one needs a penthouse and a place in the Hamptons and to travel by private jet and be met by a driver when he lands and accompanied by a bodyguard or three. He could live just as long being a clerk at the DMV. That is the level of debate that we have come to.
Romney and Bain have made money from the failure of other people. They have engaged in the repo, foreclosure, scrap business. Sort of like George Soros, who finances every progressive fringe group imaginable.
Bailing out failure, trying to stem the tide of change, paying people not to work is not a solution. Neither is it possible to load a race horse down with a two hundred pound load and expect him to win place or show against a field that is running without the handicap. Our rules and regulations have been the death of a thousand cuts to our manufacturing sector.
GE shut down a huge plant with nearly 200 wage workers in Winchester, Virginia because they were making 100W light bulbs. GE is making CFL’s (with mercury) in China. We all know the backstory on that one.
Do you understand how labor markets work, when they are free? There will always be unskilled labor, yes, and in a free market, there will always be uses (i.e. demand) for it. History shows that even peasants and janitors benefitted – and hugely – from the Industrial Revolution, in terms of their living standards. A janitor today lives like a king, compared to the janitor of 200, 100 or even 50 years ago.
(continued) It’s called progress and it’s what Obama and Big Government have been preventing, or killing. That’s the problem. Progress comes from free people in free markets continually creating new companies and positions. That’s what we need to get back to.
I’ll add that Keynesian policies cause job destruction where it might not have otherwise been necessary.
And many government jobs sure as hell aren’t necessary. Destruction of those jobs would be a sign of progress, and would be beneficial to everyone else.
ILC – yes, I understand labor markets and, yes, there will always be a market for unskilled labor.
The point is that the economy is not generating enough jobs fast enough to absorb available workers.
There will always be demand for certain high-skilled workers (although those skills change over time) and the more capable workers can usually adapt. What I keep to say (not very well) is that there is an enormous number of people for whom gainful employment is getting harder to find.
The thing that triggers my comments in this area are suggestions that surplus workers “adapt” or “retrain”. That’s fine in some circumstances (I’m a pretty good software guy so I could adapt to database design without too much difficulty) but when you’re talking about tens of thousands of people on the left hand side of the bell curve or workers whom employer see as too old, there are issues we’re not dealing with. And ditto for lots of people on the high end of the curve that hit the market when Cicso lays off thousands or when Pfizer announces 16000 layoffs (Aug 2011).
I’m not suggesting some grandiose gubmint program, I’m just trying to point out an issue many economies are dealing with. Our governments policies do little to help and do a fair amount of harm but this situation has been a long time in the making.
My response to that, Robert; in Silicon Valley in 1999, age, lack of experience, and average to below average intelligence were far less important than breathing and a pulse.
A common misconception is that in a recession, companies lay off their lowest-paid workers. The correct answer is that they are more prone to lay off their lowestvalue workers. If I have a manager and an admin and I have to get rid of one of them, the math is pretty straightforward: the manager can be an admin and a manager, and the admin can only be an admin. The manager may make twice as much, but can do essentially twice the work.
The flip side of that is that, once I have pared down my company to the highest-value workers, I’ve also capped off my productivity. I have a great and brilliant software architect, but I have her doing QA because I don’t have any QA people. I’m essentially paying her vast sums per hour to do something that could be done for someone else at a third of the price — AND instead of her coming up with brilliant software solutions, she’s stuck doing QA.
In a normal expanding economy or where future growth would be a good idea, I would hire a QA person. But in the Obama universe, I will have to pay proportionately more for that new QA person, who may or may not know more, and I will be penalized with higher taxes for the increased productivity I gain.
The simple answer is that right now, labor is expensive and outlooks are uncertain. As a result, I as an employer, am going to stick with the people I know can do the job and avoid adding more. If we had the opposite — a situation where the market was expanding rapidly, i.e. 1999, or one in which the cost of labor was cut, I would add people faster. And US companies have done exactly that — in lieu of a rapidly expanding market, they have added people where labor is cheaper.
The other really stupid thing the Obama Party has done is to choke off small businesses. The national and global economy are ecosystems; there are little nooks and crannies everywhere that can be filled by little salamander businesses that can live in and adapt to environments that the alligator multinationals can’t fit into or can’t serve profitably with their current business models. These businesses can also suit those in the labor pool who aren’t of the caliber, temperament, or other characteristics more suited to the large companies; while someone who wasn’t completely up to speed on the latest apps programming, you could do a fine job as the website designer for Mom and Pop’s Online Hardware Store.
But because Obama and the Obama Party are overwhelmingly halfwits who have never worked anywhere that wasn’t government or lacked a faculty lounge, they simply do not understand that small businesses are not the same as large ones. Hence they slap on rule after rule, regulation after regulation that the large businesses can afford to meet either through capital investment or economies of scale, but which are absolutely fatal for small business. It is as if they decreed that all creatures must exceed a certain size or eat the same food – and in the process they destroy businesses and a huge portion of opportunity for jobs.
Long story short, we need the economy to start growing again. We need to remove the uncertainty, take off the stupid regulations, and make it clear that government’s job is to mind the sidelines and blow the whistle on obvious infractions.
Having a factory or any place of enployment where you work close down can be very bad or it can be very good. Since we are discussing Romney’s closing of plants, I would like to give you my expierence. When I got out of the Service in 46, I was just one of the millions. I could have gone to College as most of the guys did but college did not interest me. I was living in the Washington D.C. area and about the only job listed in the newspapers were for door to door salemen. I went up to Washington to the Government Oversees Office and I got a job in China. I was there a year and half (until the Commies ran us out) What a great expierence that was!! I stopped in Japan and worked for the Air Force for 6 months. When I got back to the States all my friends were still in college under the GI.
I still could not get any job that paid anything, so I took a job in Alaska. My friends wanted to know if I would be living in Igloos. No. But Anchorage was only 30 years old and there was nowhere much to live. Couple of the guys that I worked with homesteaded land and until they got their house built, they lived in tents.
I loved Alaska and after 6 years when my company said we don’t need you any more in Anchorage but we do in NYC, Chicago, Denver or Honolulu. I picked Denver, but I thought I would only come down and stay a year and have a good time and then resign and go back to Alaska. But after a year I got married so returning to Alaska was out of question. Besides I loved living in Colorado.
So after 18 years, I was surprised again when my company said that they were closing Denver and we were needed in Chicago, Dallas or San Francisco. We picked San Francisco because we wanted ‘something different’. But we thought we would return to Denver after we retired in 7 years. In 7 years my older daughter was well settled here. She was a school principal and my younger daughter was a student at UCSD working on her PHD. My wife decided that she didn’t like the cold and she may fall on the ice. Besides we really love it here except for you know who.
We are so lucky to live in America where our States are as large as most countries and if we become unemployed in one we are free just pack up and go to another. And it has been a terrific expierence for me and one has to live in a place to really know it.
What I am saying is if you ever get unemployed don’t think that the Government let you down. Get off your butt and GO.
Consider it suggested. So-called “surplus” workers (who in fact are needed somewhere else – or would be, if the government were not making war on free enterprise) should indeed adapt and retrain.
Do you believe that’s in dispute here? It’s not… it’s part of my point. The problem is Big Government. The problem is the philosophy which says, -among other- nefarious things, that workers (be they private sector or government) are entitled to their positions which must therefore be protected by government interference in the economy and labor markets. The interference, by its nature, creates unemployment as it saps the economy’s ability to generate new jobs and companies.
Romney’s defense of Bain should be simple: Bain Capital invested their own money and had many successes and a few failures. Obama threw our taxpayer money at Solyndra (and 11 Other Failing Solar Companies), Lehman Brothers, and the Chevy Volt.
The difference between Mitt Romney and Barack Obama is the difference between free market capitalism and crony capitalism.
Thanks John R, great story!
…..whaaaaat? Uh…. how? Whose philosophy is this that you’re talking about?
How can you say something so ridiculous? Almost all of the economic growth has been going to the top tier of earners for the past few decades, and if you think that’s a symptom of a healthy economic system…. well look around.
If it isn’t obvious to you, it’s the rich people that have instilled conservatives with the idea that giving rich people even more money is supposed to be better for the economy. I mean, connect the dots Helio, you don’t think that’s a little self-serving? And here we are after 3 decades of huge tax cuts and GDP growth that has been disproportionately enjoyed by the wealthy, and the economy is in worse shape than it’s been in almost a hundred years. At what point is all the trickling down supposed to happen?
No, it is a symptom of government interference. In a system with a more pure form of capitalism, economic growth would be spread more evenly as new entrepreneurs would have more of an opportunity to compete with the larger ones, and would therefore have an opportunity to create wealth.
Instead, high corporate tax rates and more regulations punish small businesses and favor the larger, more established ones.
Ah, Levi – the moment I see your name on a post, I just know it’s going to be full of nonsense.
Ah, Levi, you and your fellow liberals do not really recognize your hilarious and stupid bigotry, do you?
You have sat here and screamed for years that higher taxes do not affect income and wealth.
Yet your response to “income inequality” is to massively increase taxes on “the rich” so they make less and have less wealth — which contradicts your statement that taxes do not reduce income or wealth.
Meanwhile, your blathering over “income inequality” is patently stupid at its core. Anyone with any common sense would see that a low-performing Verizon clerk like yourself should make less than an excellent heart surgeon. But you don’t have any common sense, given how you shriek and scream that the surgeon should have money taken away from her because she doesn’t deserve it and have it given to you instead.
Jealousy, laziness, and envy are all that motivate you and your Obama Party, Levi. You want what you don’t have and won’t work to get. Then you have the gall to demand that money be taken at gunpoint from those who do work because you won’t.
More regulations and higher tax rates favor larger businesses? Yeah, that makes sense. Never mind that larger businesses are constantly lobbying and arguing for lower tax rates and fewer regulations…. I mean what are you even talking about?
Levi – actually, high tax rates and regulation DO benefit large business. It’s simple, really. First, regulation raises the cost of entry into a business. If you’re GE, regulatory costs are small. If you’re Levi Industries, these costs are a barrier to competition. In industry, ISO-9000 serves a similar purpose: costs are relatively small to Megacorp but onerous to Garage Shop Inc.
Same thing with taxes: mid size companies pay taxes while companies like GE and Apple can offshore earnings and have armies of lawyers and lobbyists to see that things go their way.
ILC, NDT: thanks for your thoughtful responses. I can’t disagree with anything you wrote but theory and practice aren’t the same thing.
Yes, labor is a commodity with price based on supply and demand. Currently, demand is low while supply continues to increase. But while labor is a commodity, it’s also human beings. If demand for oil falls, a barrel of oil doesn’t mind being left in the ground a few more years. When demand for labor falls, real people hurt.
As John R wrote, people can move nearer the jobs. And if your skills are in demand somewhere, that works. Myself, I’ve moved for work three times: Texas oil patch, California, and Kansas. Fortunately, I don’t have kids to move nor at the time did I own a home in a market like the current one.
A society where more and more people see their standard of living declining or disappearing entirely – in some cases due to Wall Street machinations – is going to see increasing resentments and instability. It’s only natural that Susie Bluejeans resents losing a job at a closed factory in a small town so that a multimillionaire can stuff a couple more million into his pocket. The resentment is unproductive but ignoring that it exists is futile.
All I’m saying is that if conservatives hope to slow this disaster down, our leaders need to understand the view from the bottom.
Yours, Levi. A few easy tests:
– You don’t seriously support right-to-work laws, do you? Nor at-will employment?
– Conversely, you do think that Obamacare (which destroys jobs by sending associated costs through the roof) is a step forward, right? With universal government-financed health care (which would destroy even more jobs) as the ultimate goal beyond that?
– And, if you knew that the Greek constitution makes it impossible for their government employees to be laid off – well that sounds pretty sweet to you, right? Pretty right on? Something that any “civilized” nation should consider?
– And you don’t like Romney for firing people or shutting down companies while at Bain, right?
LOL
SCR, again, not only do I not dispute that, I claim it as part of my point. In the end, free markets help workers and Big Government doesn’t.
SoCalRobert. Yes, it is more difficult to move if you have a family and own your house. When I left Anchorage, I had a house. I had it rented and after a year I sold it. When I left Denver, I had 2 daughters, one in the 9th grade and the other in the 5th. I had several houses and I sold one and keep the others rented. That was a big problem. It envolved our flying back (mostly my wife since I was working) to take care of them until we decided to sell. But it wasn’t impossable, and financally I did very well. But for some families it was a problem. One had a daughter who refused to move away from her boyfriend. They kept their house and the mother stayed with her until she graduated and got married. After 2 years she was devorced and moved out here with her parents.
Neither of these are serious issues. Is it your assertion that these kinds of policies have brought the economy down?
Obamacare sucks, but universal healthcare is absolutely necessary. Whatever damage any lost jobs in the current healthcare industry would do to the economy would be more than made up for by lowering the costs of healthcare across the board and putting money back in people’s pockets. The current system is twice as expensive and a fraction of the effectiveness compared to the rest of the developed world.
I wouldn’t ever support such a thing.
He’s got every right to make money however he wants, I just don’t think that’s a good characteristic for a President.
You don’t even know what I was talking about, do you? LOL
Hint: right-to-work laws and at-will employment laws HELP the economy (not bring it down).
Riiiiiiiiiiiiiiiiiiiiiiight.
Amazing.
Especially when you compare it with Levi’s previous statements that tax cuts putting money back in peoples’ pockets do absolutely nothing good for the economy.
Or Levi’s previous statements that now everyone, even those who weren’t purchasing health insurance before, will have to pay — which means money is being taken OUT of peoples’ pockets, not being put back in.
Once you realize that Levi’s entire goal is getting other people to pay the bills that he currently won’t pay himself, his attitudes become comprehensible. He doesn’t want to pay for his own health care; he wants you to do it for him.
Levi does not and will not pay his “fair share”.
NDT, Levi is also full of magical thinking and B.S. Neither Obamacare nor government-owned health care lower costs across the board. They raise costs across the board. They both lower efficiency even more. Obamacare makes it much more difficult (or financially dangerous) for employers to hire. Government-owned health care would do likewise, just via a slightly different channel – destroying businesses with the tax hikes that would be needed.
That’s what I meant by saying they destroy jobs. Free enterprise creates jobs. Big Government kills them. Tragically for America, we have long since become a Big Government country (not free enterprise).
Bingo, ILC.
After all, in government, where is the incentive to reduce costs? Just demonize the rich and hike taxes or manipulate the stupid and cut services.
Private companies which do not have monopoly pricing power are incapable of operating without cost reduction. There will always be someone figuring out a better mousetrap and either underpricing or out-valuing your product otherwise.
But who’s kidding who? The only government agencies that operate at a state-of-the-art level are the Defense Department and the CIA — because they have outside competition from other countries and government and need to stay ahead.
Everywhere else? Laughable.