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The Pain of Bain

What did Mitt Romney know about Bain Capital operations and when, precisely, did he stop knowing it? I don’t have the answer and, to be honest, I’m not sure how much I should care. 

The controversy right now is over whether Romney had significant responsibilities at Bain after February, 1999, when he took charge of the Salt Lake City Olympics. The timing matters politically because, after that date, Bain invested in a number of firms that outsourced jobs in politically embarrassing ways. Romney has said he had no active role in decision-making after leaving for Utah. But media outlets, particularly the Boston Globe, have produced evidence that Romney continued to attend meetings and, of course, remained on the firm’s corporate filings as its chief executive. The Globe also reported today that Romney’s story about Bain “evolved” in 2002, when he was running for governor and his Democratic opponent attacked him for Bain’s recent investments. It was then he adopted his current position—that his work for Bain ended when the Olympics began. Previously, he had described his role after 1999 as a “part-timer.”

The shift certainly has the whiff of deception about it. Even more damning information may yet come to light, reflecting more poorly on Romney's character. But, substantively speaking, this controversy is largely telling us something we already knew: That Romney helped develop and then employed business practices that generated large profits for investors, made companies more efficient, and frequently led to layoffs. (The seminal text on this issue remains the Romney profile Ben Wallace-Wells wrote for New York magazine last fall.) 

By itself, this shouldn’t disqualify Romney from being president. As writers like Matt Yglesias have pointed out, outsourcing is an almost inevitable by-product of capitalism and not necessarily a bad thing. When firms can produce the same goods for less money, they can then sell those goods at lower prices, enabling many more people to buy them. Firms also can make bigger profits, attracting more investment for growth, creating new jobs even as they shed old ones. In theory, an economy in which companies are frequently outsourcing can still be an economy that grows quickly and spreads prosperity broadly.

But the key phrase there is “in theory.” And that gets to the real problem with Romney, one that the Obama campaign’s new, devastating advertisement (see below) captures perfectly.

The question isn’t is whether outsourcing can be a sound, legitimate business practice. The question is how we, as a society, react to it, given that outsourcing inevitably causes a lot of very real, very serious human pain. One response is to minimize outsourcing, by, for example, creating financial incentives that discourage it. An example would be industrial policy that subsidizes domestic manufacturing. Another response it to let the economy operate as freely as possible, with minimal interference, but then intervene after-the-fact to help those who lose their jobs—by redistributing income through the tax code or by creating universal programs that provide economic security and opportunities for new work. (The Scandinavian countries do this exceptionally well, with good results.)

Liberals have argued amongst themselves over which combination of these strategies makes the most sense. But the conservative answer to outsourcing—the answer Romney has long espoused—is essentially to do nothing. Remember, Romney’s economic policy is to weaken the safety net, to reduce regulations on what corporations can do, and to give the wealthiest Americans huge tax breaks. The theory behind this is that, by eliminating government meddling in the market and letting the rich keep more of their money, the economy as a whole will grow faster. But experience, here and abroad, suggests otherwise.

In the end, the issue with Romney isn’t his business practices. It’s his governing strategy, which fails to blunt the harsh impact those business practices have on ordinary Americans. Like the Obama campaign ad says, Romney isn’t the solution. He’s the problem.

Update: My colleague Alec MacGillis, who was writing about this last week, has more details on the pre-1999 history of Bain and why it tells us everything we need to know about Romney's business practices.

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