Romney’s Bain & Co. Didn’t Get Bailout: Reality Check
The presidential campaigns are making statements about their opponents. Sometimes, they don’t square with the facts.
The Bain ‘Bailout’
The Claim: Vice President Joe Biden said Mitt Romney “cost the government and American taxpayers $10 million” when he negotiated with the Federal Deposit Insurance Corp. to reduce an outstanding loan from a failed bank to Bain & Co.
The Background: Biden was quoting an article in Rolling Stone magazine with the headline, “The Federal Bailout That Saved Mitt Romney.” The article detailed Romney’s efforts in 1990 to save Bain, a consulting firm from which his Bain Capital LLC was a spinoff. He succeeded in getting the FDIC to cut a $38 million loan by $10 million.
The Facts: Biden’s charge that the restructured loan cost the government and taxpayers is wrong. Although Rolling Stone referred repeatedly to a “bailout,” the article made clear that “taxpayers did not finance” it. While the FDIC is backed by the full faith and credit of the U.S. government, it is funded by assessments from the banks it insures. No federal money was involved in covering losses from a reduced Bain loan. The article said that the FDIC would have passed losses along in the form of higher bank assessments. Biden spokeswoman Amy Dudley said Bain got “a bailout from an agency ultimately backed up by American taxpayers.” The point, though, is that taxpayers didn’t foot the bill.
The Claim: House Speaker John Boehner blamed President Barack Obama’s stimulus spending for the fact that U.S. public debt has topped $16 trillion. “Instead of working in a bipartisan way to fulfill his promise, the president went on a ‘stimulus’-fueled spending binge that stuck every American man, woman and child with a $50,000 share of this $16 trillion national debt,” said Boehner, an Ohio Republican.
The Background: Maintaining that Obama’s policies are responsible for driving up the debt is a central Republican campaign theme.
The Facts: Boehner’s suggestion that the Obama stimulus was the primary driver of an expanded budget deficit and the resulting debt is inaccurate. There’s no doubt that Obama administration initiatives, including tax reductions supported by Republicans and increased spending, contributed to deteriorating public finances in Obama’s presidency. The debt was $10.6 trillion at his inauguration in 2009. The budget deficit has averaged 9.4 percent of gross domestic product in the past three years, compared with 1.9 percent in the three years before the 2007 financial crisis. A Bloomberg Government study examining the deficit before and after the crisis found that 61 percent of the deterioration resulted from the economic downturn. Twenty-four percent could be attributed to stimulus measures. The remaining 15 percent was from increased spending on defense, Medicare and Social Security, which had nothing to do with stimulus or economic conditions.
Senate Democrats’ Budget
The Background: Republicans maintain that Democrats, who control the Senate, have failed to adopt a federal budget and say that is a sign of unwillingness to confront tough fiscal choices to reduce deficits. The Republican-led House in March passed a budget calling for more than $5 trillion in spending cuts. It didn’t advance in the Senate, where Democrats said it would take too much from lower-income Americans while giving tax breaks to the wealthy.
The Facts: Schumer is incorrect. Senate Democrats haven’t adopted an annual budget in three years. Faced with the prospect of endorsing entitlement cuts and tax increases or producing a plan showing huge deficits, they have opted to skip writing a full budget. Democrats maintain that a 2011 deal to raise the government’s debt limit amounts to a budget because it includes caps on so-called discretionary spending, one of the things usually decided by lawmakers’ annual budget. That agreement, though, lacks many of the other facets of a budget, including long-term plans for taxes, entitlements and the deficit. It isn’t necessary for Congress to adopt a budget to keep the government running. Entitlements such as Social Security, which represent three-fifths of all spending, run on autopilot unless lawmakers intervene. The fact that the two parties are unable to compromise on their differences means there is no road map to fiscal stability.
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