Romney Makes the Rich Richer and the Poor Poorer

Republican presidential candidate Mitt Romney claims that his business experience will enable him to turn the American economy around. For 15 years from 1984 to 1999, Romney was the head of Bain Capital, one of the world's largest private equity funds. That sounds impressive, and seems to give substance to his claim. But, wait a minute. Let's stop for a moment and compare the job of the United States President with that of the leader of a private equity fund.

The President tries to lift the economy in a manner which benefits everyone, both creating jobs and increasing income across the board. In the process, the President doesn't attempt to create a profit; by definition government isn't in the business of making a profit.

By comparison, creating a profit for investors is the sole purpose of a private equity fund. The New York Times writes (5/23/12), "The business of private equity firms is buying and selling companies, all done with the goal of earning big returns for themselves and their investors. Sometimes that means jobs are created; sometimes it means jobs are lost. In fact, job creation was actually never part of the industry's mission statement, just a nice happenstance if it occurred."

Private equity firms acquire companies that are financially distressed, and manage them in a fashion that will create a profit for its investors. There are several ways to do this. The Times notes,"Most private equity firms raise money from outside investors that they combine with large amounts of money borrowed by the companies they are acquiring."

The borrowed funds can allow them to declare a steady stream of dividends for its investors. In addition, the equity firms can streamline a company's operations, in the process bringing in new management and slashing jobs. But the bottom line is always the same. Not to create jobs and provide help for the average worker. But rather, to make a profit for investors.

The New York Times notes in another article (5/22/12), "Under Mr. Romney's leadership Bain Capital engaged in the less attractive practice of putting more debt on seemingly successful investments in order to take dividends out. In at least four instances of Bain Capital investments during Romney's tenure, these "recapped" companies . . . subsequently went bankrupt, costing thousands their jobs."

The Times continues (5/23/12) . . . in the case of GST Steel, a manufacturer based in Kansas City, MO., that Bain bought in 1993, the company, according to a Reuters article this year, issued new debt that was used to pay tens of millions of dollars in dividends to its buyout owners. That sent GST's debt levels and interest payments soaring, which eventually pushed it into bankruptcy."

As a result, 750 workers lost their jobs and were denied severance, health insurance, and full pensions they had earned and were promised. Meanwhile management executives got $9 million in severance and retention payments while the company was in bankruptcy. (John J. Falcicchio, 5/22/12).

Well, given his business experience, can't Mitt Romney modify his previous goal, that of making a profit for investors and himself, and adopt a new one appropriate for an American president, lifting the economy across the board and, in so doing, helping everyone.

Apparently, it would be easier to teach Romney's famous dog Seamus new tricks than it would be to get Romney to change. Romney has wholeheartedly endorsed Paul Ryan's budget designed to reduce the federal deficit. The Ryan plan's reductions fall heavily on the middle class and the poor, necessitating cuts in Medicare, Medicaid, the Environmental Protection Agency, educational services for children, women's health, housing,transportation, food stamps, unemployment benefits, Pell Grants, student loans,
and job retraining.

At the same time, Romney continues to protect the wealthy, just as he did investors in private equity firms. While everyone else suffers, the Bush tax cuts for the rich remain firmly in place under the Ryanplan. The failure to rescind these tax cuts is a major contributor to the budget deficit, allegedly a problem of great
concern to Republicans and Romney.

Mitt Romney's protective bubble created by his $250 million of personal wealth seemingly prevents him from understanding the problems faced by average Americans or sympathizing with them. In a Romney presidency,his world view would not change. The rich would get richer and the poor poorer.