Reagan’s budget director rips Romney

David Stockman SAYS Mitt Romney, for all his vaunted claims, has never really been a businessman:

Mitt Romney claims that his essential qualification to be president is grounded in his 15 years as head of Bain Capital, from 1984 through early 1999. According to the campaign’s narrative, it was then that he became immersed in the toils of business enterprise, learning along the way the true secrets of how to grow the economy and create jobs. The fact that Bain’s returns reputedly averaged more than 50 percent annually during this period is purportedly proof of the case—real-world validation that Romney not only was a striking business success but also has been uniquely trained and seasoned for the task of restarting the nation’s sputtering engines of capitalism.

Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.

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.



  1. Thank you Pat, for the link to this extensive, but highly illuminating article, by an author with more cred than most of the GOP talking heads, including the GOP Nominee.

    It should be required reading.

  2. Response from the Right:


  3. bejer50 – I didn’t respond yesterday because its too easy, but since you insist….

    I would love to have a President that would take a hold of the federal government agencies and “leverage them to the hilt.” For the first time since Coolidge we may actually have a President who is willing to massively cut government expenditures, especially with entitlements and government pensions. President Romney will cut head counts and skimp on capital spending, which is his forte, as Stockman readily points out. This article solidifies my vote for him.

  4. Austerity in and of itself will not work without revenue increases which is something Europeans are starting to understand. Remember we are in this mess because the prior administration pushed through unreasonable tax cuts for the wealthy and a medicare prescription drug program despite two unfunded wars.

  5. The best way to have revenue increase is to grow the economy and add millions of surplus jobs each month.

    The economy will not grow as quickly if we scare the crap out of the people who actually create jobs in this country. This can take the form of increasing taxes and fees in an irresponsible fashion, continuing to kick the can down the road on the deficit and yes, raising taxes on investment.

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