Who knew that Newt Gingrich was such a fan of the New York Times? Gingrich, who wins applause at debates for insulting the moderators and blames “news media bias” for ignoring “anti-Christian bigotry,” loves to look smarter than the so-called liberal elite. But politics make strange bedfellows, and the former speaker is only too happy to engage the mainstream media to further his attacks on frontrunner Mitt Romney. Twice in the last few days Gingrich has name-checked the Times; first in Saturday’s ABC debate, when he cited a Times story about Romney laying off workers, and again today, when he said the 30-minute anti-Romney documentary purchased by a Gingrich-supporting super PAC would “be based on establishment newspapers, like The Washington Post, the Wall Street Journal, the New York Times, Barron’s, Bloomberg News, and I hope it is totally accurate.” Until now, the only media “establishment” on Gingrich’s radar has been the east-coast liberal establishment.
Despite Gingrich’s convenient change of heart, there are serious problems with relying on the Times or the Post for an accurate depiction of Romney’s career at Bain Capital. Recent coverage has focused almost exclusively on Bain’s failures; indeed, the stories of bankrupt companies and laid-off workers are nearly boilerplate in their similarity. It’s hard to think of a newspaper that hasn’t had a Romney expose, from international news services like Reuters to glossy magazines like New York. Taken together, these stories provide ample fodder for criticism by Gingrich, who has suggested Romney should “give back all the money he’s earned from bankrupting companies and laying off employees over his years at Bain,” and Rick Perry, who dramatically accused Romney of “looting” companies and getting “rich off failures and sticking it to someone else.”
There is delicious irony in watching two free-market conservatives, who want to privatize everything from Medicare to airport security, wrap themselves in anti-capitalist rhetoric. Gingrich sounds more like the Occupy Wall Street protesters that he encouraged to “take a bath” than a Reagan Republican who claims to have invented supply-side economics. In fact, he puts himself in the awkward position of agreeing with the White House, which has trained its firepower on what it calls Romney’s “corporate raider” background. Yet any glee I feel at the latest display of hypocrisy is tempered by a sense of unease about the “establishment” critiques of Romney with which his detractors bolster their attacks. Reasonable people can disagree with the methods of private equity companies like Bain, which use debt and investors’ money to buy up struggling companies and attempt to turn them around, often by cutting the work force. (Controversy arises mostly over the amount of debt these companies are forced to take on, and over the fact that, as the Wall Street Journal puts it, “buyout firms seek to make money not only by eventually selling a business for more than they put into it, but also by extracting fees and sometimes dividends while they own it.”)
As odious as liberals — and now some conservatives — find such practices, it’s hard to argue that Romney should be judged only by his failures. Yet failed companies are exactly what the media has focused on, often to the exclusion of the successes that Romney himself trumpets on the campaign trail. Reporters are naturally drawn to the untold stories in a candidate’s past; after all, there is little to be uncovered by probing the same success stories (Staples, Domino’s Pizza) that Romney offers as his business-world bona fides. And newspapers undoubtedly perform a service to readers when they debunk Romney’s frequent yet false claim to have “net-net” created “over 100,000 new jobs.” Indeed, by tossing out such a misleading number, Romney is almost asking to be undercut by journalists like Ezra Klein and Glenn Kessler at the Post, who have looked at Romney’s numbers and concluded the following:
Whatever you want to say about Romney’s time at Bain, the number he is providing to reporters . . . is not net-net. It takes three successful companies of the hundreds Romney was involved with and uses their employment totals now — long after Romney finished working with them . . . . It would be the equivalent of explaining President Ronald Reagan’s record by choosing the two best-performing states and then attributing their growth from 1980-2011 to Reagan’s presidency.
Unfortunately, the diligent fact-checking that Klein and Kessler apply to Romney’s history of job creation is not a common feature of the stories cited by Gingrich. During Romney’s fifteen-year tenure, Bain Capital worked with more than 150 companies, providing a smorgasboard of case studies from which to choose. After an obligatory paragraph about Staples and a reference to what the Romney campaign calls Bain’s “excellent overall track record,” these articles spend the bulk of their word count detailing bankruptcies in which average workers were laid off and Bain executives made healthy profits. Inevitably, there are interviews with former workers or union leaders, all of whom articulate some variation on comments made to the Times: “They were just trying to milk as much out of us as they could” (William Mowrey, an engineer) or “There was absolutely no concern for the employees. It was truly and completely profit focused” (Cindy Hewitt, an HR manager). Of course, people who feel their lives were ruined by Bain are eager to speak up; more difficult, perhaps, would be to find a current Domino’s delivery driver or Sports Authority cashier to rhapsodize over Bain’s contribution to their paychecks.
The media accounts of Bain’s failures are almost entirely anecdotal. Stories are told through the recollections of former employees, though not all of them blame Bain for their companies’ bankruptcies, giving the articles a strong narrative structure. By prioritizing human impact over economic analysis, the newspaper accounts offer a ground-level view into the world of private equity. Less emphasis is placed on an overview of Romney’s tenure at Bain, making it difficult to discern how representative each case study really is. The New York Times focuses on Dade International, a medical device manufacturer, while New York Magazine’s lengthy feature “The Romney Economy” brings up AmPad, where tensions with the union and waves of layoffs helped sour voters on Romney during his 1994 Senate race against Ted Kennedy. A former Bain partner defends the closure of an AmPad factory in Marion, Indiana: “Those jobs were going to get destroyed internationally. That plant was going to go out of business, and there was nothing Mitt should have done, or could have done, to prevent it.” But the story as a whole renders a negative verdict on the profits-above-people economy that accompanied the rise of private equity. The magazine writes that “it is harder to be so charitable when you look at the broader moral contours of the arrangement.” Though AmPad filed for bankruptcy and the workers the reporter speaks to lost their jobs, “Bain Capital made more than $100 million from AmPad for itself and its investors.” A damning indictment, perhaps, but with or without Bain’s involvement, it’s difficult to see how AmPad, which produced notebooks and copy paper, could have survived the decline of American manufacturing.
Reuters and the Los Angeles Times home in on the same company, which Rick Perry also referenced yesterday while stumping in South Carolina: GS Technologies, a Kansas steel mill. After the company filed for bankruptcy, 700 workers were laid off; because GS had underfunded its retirement fund, the U.S. Pension Benefit Guarantee Corporation was on the hook for a portion of the workers’ pensions. Mass layoffs, a government bailout, former employees left without health insurance — what more could the Perry campaign ask for? Using language usually reserved for President Obama, who evidently enjoy killing jobs in his spare time, Perry denounced Romney and his Bain colleagues for “all the jobs that they killed” and for “getting rich off failures.” Such accusations could just as easily show up in the next attack ad from the Democratic National Committee. The Reuters article quotes a Bain spokesman who points to another steel company that succeeded under the firm’s management, but the majority of the story is devoted to former GS executives and workers who fault Bain for crushing the company with debt and paying out dividends to investors. “Romney cost me lots and lots of sleepless nights and lots and lots of money,” one millworker is quoted as saying. As a piece of investigative journalism, the Reuters reporters likely feel they got to the bottom the story. Certainly they uncovered a stain on Romney’s record that the candidate would rather not discuss. But is it the ultimate goal of journalism to reveal the disconnect between Romney’s public statements and his history? Possibly. I would suggest, however, that a better objective might be to give readers an accurate overall picture of a candidate. The GS bankruptcy is undeniably part of the Romney picture, but by relying on such specific anecdotes to illuminate an entire career, the reader is left without a coherent arm’s-length impression.
What is lacking in all of the above stories is the long view. The Times offers what seems to be a standard disclaimer: “Because financial data for many of the acquisitions are not publicly available, it is difficult to fully tally the wins and losses, the jobs created and the jobs eliminated on Mr. Romney’s watch.” It is impossible to examine everything about Romney’s tenure, and while reporters who write about the available details do so out of necessity, such stock statements as “Romney’s career at Bain included both successes and failures” don’t go far enough in expressing the level of selectiveness at work in most media accounts. Newspapers are interested in failures and the Romney campaign is interested in triumphs, but I would imagine that the majority of Bain’s companies fell into a semi-successful middle ground. Despite asserting that the candidate’s record “has rarely been closely scrutinized,” a Vanity Fair profile concedes the following:
The most thorough analysis of Romney’s performance comes from a private solicitation for investment in Bain Capital’s funds written by the Wall Street firm Deutsche Bank. The company examined 68 major deals that had taken place on Romney’s watch. Of those, Bain had lost money or broken even on 33. Overall, though, the numbers were stunning: Bain was nearly doubling its investors’ money annually, giving it one of the best track records in the business.
That is the last we hear of the Deutsche Bank analysis; the rest of the Vanity Fair article runs through a series of sketches of other Bain acquisitions. Is it really so difficult to assign an overall grade to Romney’s record? The Wall Street Journal, in a Jan. 9 story, demonstrates that it is not. “[A]iming for a comprehensive assessment,” the Journal looked at nearly 80 companies that Bain was involved with during the 15 years Romney headed the firm. By tracking these businesses for eight years after they were sold by Bain, the Journal captures their long-term fates. The author admits that the analysis “could provide fodder for both critics and supporters of Mr. Romney’s presidential ambitions.” Twenty-two percent “either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses.” Unlike other news articles, the Journal’s piece clearly presents its statistics, then offers a few lines of commentary from an industry expert. While one expert feels that more companies failed under Bain’s management than might be expected, another points out that the numbers also “reflect Bain’s investing style, which, particularly during the firm’s early years, was focused on smaller and sometimes troubled companies that Bain hoped to fix or build.” One academic notes that one “potentially mitigating factor is that these bankruptcy filings tended to be clustered during the post-2000 economic downturn.” The Washington Post has also noted the difference between Bain’s early years, when it invested in small start-ups and operated more like a venture capital firm, and its later shift toward the leveraged buyouts that characterize private equity. The successes, like Staples and Sports Authority, that Romney talks about on the campaign trail were mostly start-ups; the bankruptcies highlighted by his opponents tend to be private equity deals. “Romney himself presents his venture-capital side when explaining his business background to voters,” Ezra Klein writes on his blog at the Post. “But the difference between the two kinds of investments is key to understanding whether Romney’s time at Bain is a political asset or a vulnerability.”
The Wall Street Journal’s analysis delivers a mixed verdict on Romney’s achievements, but it identifies the positives and negatives in a manner that allows the reader to decide for himself the merit of various arguments. Most surprising is the amount of pushback the Journal receives from Bain, which contends that the newspaper “uses a fundamentally flawed methodology” and “disregards dozens of successful venture capital investments.” Perhaps Bain expects more from the business-friendly Journal than from left-of-center publications like the New York Times, but considering that the article acknowledges the limitations of its methods, Romney and his firm seem to have been given a fair shake. Despite some experts’ reservations about the relatively high bankruptcy rate among Bain companies, the article concludes that “[o]verall, Bain recorded roughly 50% to 80% annual gains in this period, which experts said was among the best track records for buyout firms in that era.”
Attacks on Romney’s business background are unlikely to dissipate simply because of some even-handed media coverage, however. To Democrats, Romney is a card-carrying member of the “one percent,” who enriches himself at a high price to others. It’s hard to believe that Gingrich and Perry really believe their vitriole about “the ability of a handful of rich people to manipulate the lives of thousands of other people and walk off with the money.” The vagaries of the free market didn’t bother Gingrich when he “reformed” welfare in the 1990s, and Perry has expressed zero concern for the 6.3 million uninsured Texans for whom capitalist competition has failed to lower the cost of health care. Indeed, the Times observes that the sudden distaste for rapacious private equity firms is “incongruous for a party that is traditionally unapologetic about its embrace of corporate wealth creation.” It’s not just incongruous; it’s deeply hypocritical. Romney’s defense — that “our approach was to try to build a business. We were not always successful” — could be seen as simplistic, but it’s also the truth. Some of the companies that failed under Bain, like GS Technologies, manufactured outdated products for an industry quickly moving overseas. Debt may have hasted GS’s demise, or made the bankruptcy harder on workers, but it’s unrealistic to lay all the blame on Bain.
Companies are started for one goal: to make money. Even the AP, in an article generally critical of Romney’s record, allows that, “like any venture capital company, Bain’s main purpose was to generate profits for investors, not to create jobs.” Creating jobs and providing workers with an income are worthy side effects, but they are nevertheless side effects. To think differently, to assume some sort of “corporate conscience” that moves businesses to act against their own best interests, is to delude oneself. As a liberal, I find that fact to be one of the strongest arguments for a social safety net: the free market is not going to care for the elderly or the poor, so the government must. Faulting Romney for cutting jobs when his mission at Bain was to generate income is like complaining that the latest superhero movie is short on character development. “The Incredible Hulk” was never meant to delve into the psyche of its meathead protagonist, and a reviewer who pretends otherwise is missing the point of the movie.
Granted, Romney brought some of this trouble upon himself by asserting, repeatedly and shamelessly, that he created 100,000 jobs. It’s a claim that his campaign has failed to back up with documentation, and which the AP says “doesn’t withstand scrutiny.” Candidate Romney is trying to have it both ways, when voters — and opponents — are smart enough to know that being a successful businessman is not necessarily the same as being a job creator. The way Romney describes his career may be part of the problem. The Post’s Ezra Klein writes that “he’s framed the success of his tenure at Bain around job creation rather than wealth creation — and Bain, as many of its actions and former employees will testify, was not in the job creation business.” In Klein’s opinion, it would have been better for Romney to paint “himself as the guy who understood the creative destruction inherent in capitalism and thus understood how the modern economy worked.” But Romney has thus far been unable to turn the negatives (or perhaps simply the realities) of private equity into a selling point. Given today’s economy, in which voters are less apt to take a nuanced view of the destruction, no matter how creative, that cost them their jobs, it just may not be feasible to spin layoffs and outsourcing into an accomplishment.
Romney also has habit of making tone-deaf remarks, from his gleeful announcement that “corporations are people” to the latest declaration that “I like being able to fire people who provide services to me.” Neither statement is quite so laughable when put into context, but a man who has been running for president since 2007 should know that opposition campaigns aren’t big on context. Gingrich and Perry, to say nothing of the DNC, didn’t feel compelled to add that, by “people,” Romney was talking about underperforming health insurance companies, not factory workers or secretaries. New York Magazine’s John Heilemann remarked during an MSNBC appearance that “Someone said, ‘You could hear David Axelrod’s tail wagging.’” Mainstream media, hungry for sound bytes, hardly performed any better: The AP article detailing Romney’s “missteps” neglected to provide any context for the quotation until halfway through the story, leaving “I like being able to fire people” unexplained for twelve paragraphs as the reporter digressed about Rick Santorum’s chances in New Hampshire and Gingrich’s latest ad buy. As it ran in my local paper, the article didn’t print Romney’s statement in full until after the jump. Too bad for readers who neglected to turn to page A6. Of course, the AP hardly claimed the prize for Most Irresponsible Reporting; pundits and bloggers even left of center took particular delight in seeing Romney’s words twisted around, leading the Post’s Greg Sargent to write:
Let me go on record saying it would be misleading and unfair to clip the video in question in order to quote Romney this way: ‘I like being able to fire people.’ Of course, by Romney’s own standard of accuracy, clipping this down to “I like being able to fire people” is completely fair game. As you’ll recall, the Romney campaign boasted about their ad ripping Obama’s words out of context in order to show him saying it’s politically dangerous for him to talk about his economic record, when in fact he was quoting a McCain adviser saying this.
Romney’s rich-man gaffes — he attempts to convince voters that “I know what it’s like to worry whether you’re going to get fired,” and that “there were a couple of times I wondered whether I was going to get a pink slip” — easily gain traction because voters believe they reveal something fundamental about the candidate: he just doesn’t get it. Romney’s notorious stiffness may not be directly attributable to his wealth, but his inability to connect with voters plays into the stereotype of the clueless millionaire. That perception is only reinforced when he looks for a dollar and finds only $100 bills in his wallet, or when he jokes at with job-seekers in Florida that “I’m also unemployed.” Matt Bai writes in the Times that “there is a real craft to negative campaigning. For an allegation to do real damage, it has to confirm some narrative about a candidate that voters already fear.” Bai believes the latest narrative, in which “Mr. Romney’s private equity firm routinely made money by buying struggling companies and shuttering their plants,” could undermine what Romney has touted as his biggest selling point: real-world business experience. To a lesser degree, the perception of the candidate as a cold-blooded job killer also “might bring to the surface an instinctive concern that he’s emotively challenged.”
Bai is probably correct in identifying Romney’s vulnerabilities. I can accept the fact that the business world is a cutthroat place where only the fittest companies survive, but it’s harder to justify the steep payouts that Bain extracted from failing companies. It’s one thing for Romney and his colleagues to make money off a company’s success; it’s quite another for them to siphon funds from an outfit sliding toward bankruptcy, especially if the collateral damage included employees’ retirement accounts. That said, I’m not sure private equity firms commit any greater crimes of conscience than, say, Bank of America, which awards its CEOs lavish pay packages while pruning its workforce by 30,000 people. Apple CEO Tim Cook is slated to receive $378 million in compensation (including stock options) this year, more than Mitt Romney earned over his entire career at Bain, but few people are whining about Apple’s record of shipping jobs overseas or producing the iPad in Chinese factories. Romney is no Bernie Madoff; he is not the worst of the worst by any stretch of the imagination. But is “not the worst” really good enough for the guy who could be the next president of the United States?
Well, consider the rest of the Republican field. Suddenly “not the worst” is looking a whole lot better.
. . . So Well Read. . . 