The Case Against Romney as Job Creator

Writing in Newsweek, former Reagan budget director David Stockman takes a scalpel to Mitt Romney’s claims that he was a job creator at Bain Capital.

“That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system–a regime of crony capitalism–where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.”

“So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise. I know this from 17 years of experience doing leveraged buyouts at one of the pioneering private-equity houses, Blackstone, and then my own firm. I know the pitfalls of private equity. The whole business was about maximizing debt, extracting cash, cutting head counts, skimping on capital spending, outsourcing production, and dressing up the deal for the earliest, highest-profit exit possible. Occasionally, we did invest in genuine growth companies, but without cheap debt and deep tax subsidies, most deals would not make economic sense.”