When Republican presidential nominee Mitt Romney says he'll create 12 million jobs as president, he invites scrutiny of his performance as Massachusetts governor and CEO of Bain Capital.
Running for governor in 2002, Romney said he would initiate a jobs program "second to none in the history of the state." Once elected, however, he showed more concern with balancing the budget. Romney slashed aid to cities and towns by 15 percent and reduced funding for schools by 4 percent. He didn't raise the state sales or income tax for individuals, but in the wake of aid cuts, property taxes increased on the average by 24 percent. Not a great job-producing strategy.
Romney did attract some businesses to Massachusetts, but sometimes with a price. He turned over $100 million in tax incentives to convince Bristol-Myers Squibb to build a $750 million plant. That averages out to $250,000 for each of the 400 employees there.
At one point, Romney ignored business leaders who wanted him to use federal funds for a new highway interchange, which would have created jobs galore. According to David A. Tibbetts, the state's director of economic development under two previous Republican governors, Romney was more focused on his presidential ambitions than economic development. "People had very high hopes for him as governor," Tibbetts told the Boston Globe. "He's extremely bright, talented, and involved in business. In the end he showed no loyalty to the state he was elected to run."
When Romney's four-year term expired, the job growth rate of 1 percent lagged four points behind the national rate. Unemployment fell from 6 percent to 4.7 — the U.S. rate was 4.4 — but 233,000 people left the state.
Romney founded Bain in 1984 and left active management in 1999. Romney is currently a "passive private shareholder" at Bain, although he has served on boards of Bain-operated companies and undoubtedly consulted with his former associates.
You can search the Bain website in vain for news of jobs. From the beginning, Romney's work there was as much about destroying jobs as creating them.
Robert Solow, a Nobel Prize-winning economist, explains how Bain acquires companies. "In a leveraged buyout, the private equity shop buys a distressed company," he told me. "In some cases it decides the company is worth more dead than alive, and just sells off the assets. Jobs disappear. In other cases it may reorganize the company, take a seat on the board and create jobs, but also typically lower wages and benefits. It issues debt in the name of the company and uses proceeds to buy out existing stockholders and finance reorganization. Bain makes most of its profits from selling off the reorganized company, and from stripping the assets of the no-good ones. Nobody can know what the long-run net effect on employment is. But for sure the small investor has no access."
"Take a typical Bain transaction involving an Indiana-based company called American Pad and Paper," Matt Taibbi wrote in Rolling Stone. "Bain bought Ampad in 1992 for just $5 million, financing the rest of the deal with borrowed cash. Within three years, Ampad was paying $60 million in annual debt payments, plus an additional $7 million in management fees. A year later, Bain let Ampad to go public, cashed out about $50 million in stock for itself and its investors, charged the firm $2 million for arranging the IPO and pocketed another $5 million in 'management' fees. Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren't crying: They'd made more than $100 million on a $5 million investment."
As governor, Romney was obsessed with budget balancing. As CEO of Bain, he sought to maximize profits for investors, while viewing workers as potholes on the road to riches. Neither experience suggests job creation in a Romney administration.
And yet Romney says he'll create 12 million jobs. He's right about the number, wrong about the provider. According to respected indices like Macroeconomic Advisers and Moody's Analytics, the economy regardless of the president will add 11.8 million jobs over the next four years.
In short, don't depend on Mitt Romney for your future paychecks. The former governor is no job creator.
Jim Kaplan is a Massachusetts-based journalist who wrote the book "The Greatest Game Ever Pitched." He is a contract adviser/grievance officer for the National Writers Union, Local 1981 of the United Auto Workers. He can be reached at [email protected] He wrote this exclusively for the Tampa Bay Times.