The GOP's Weird War on Wealth
It’s not unusual for Mitt Romney to be interrupted by hecklers at campaign stops. On the Sunday before the New Hampshire primary, his rally in Exeter was briefly held up when a group of Occupy Wall Street protesters began chanting “Mitt kills jobs!” Romney always handles these outbursts the same way. He affixes a rigid grin to his face, gamely notes everyone’s right to free speech, and then leads the crowd in a cheer while police hustle the protesters away. But the latest attacks on his business background are nothing to grin about, because they’re being launched by his fellow Republicans and backed by millions of dollars in advertisements. Even as Romney moved closer to wrapping up the nomination by winning comfortably in New Hampshire, they’ve threatened to damage his campaign and his arguments against Barack Obama.
Newt Gingrich, whose support collapsed under sustained attacks by a Romney-allied group, has emerged as the fiercest critic. In New Hampshire, he accused Romney and Bain Capital of “looting” the companies they acquired. “Is capitalism really about the ability of a handful of rich people to manipulate the lives of thousands of other people and walk off with the money?” Gingrich demanded to know. Sensing this could hurt the frontrunner, other candidates piled on. Rick Perry called Bain “vulture capitalists.” Jon Huntsman said, “Romney enjoys firing people. I enjoy creating jobs.”
The attacks on Romney’s private equity career are harmful in two ways. First, they validate the central charge that Obama and Democrats plan to make against the likely Republican nominee, lending the imprimatur of bipartisanship to what Romney had hoped to dismiss as a left-wing disdain for capitalism. A Romney spokeswoman sought to cast the charges as “attacks on free enterprise.” But that’s a much tougher argument to win when it has to be made against conservative Republicans rather than liberal Democrats.
The attacks also hurt Romney by drawing a distinction between the financial engineering of private equity firms such as Bain Capital and other forms of free enterprise—the criticism being that the former is unworthy of admiration. Should such a belief take hold, it would badly undermine the whole basis of Romney’s campaign: the idea that he alone among the candidates possesses invaluable business expertise that he would bring to bear in turning around the U.S. economy. That’s precisely the distinction Gingrich is trying to make. “I think there’s a real difference between entrepreneurial capitalism that creates jobs,” Gingrich told Bloomberg Television on Jan. 10, “and when you rig the game and leave behind people who in effect have lost their future because you got richer.”
The fact that these charges are suddenly dominating the Presidential contest guarantees they’ll have broad currency. And that threatens more than just Romney’s electoral prospects. It means the charges could color perceptions of the entire buyout industry, a field little understood outside financial circles. Already, the favorable treatment for private-equity earnings—the so-called carried-interest tax—has become a hot issue in Washington. Many Democrats, encouraged by prominent figures such as Warren Buffett, argue the tax should be brought into line with marginal rates. If large numbers of Americans come to see private equity as exploitative, that argument will gain force.
To blunt such negative perceptions, the Private Equity Growth Capital Council—the industry’s lobbying group—plans to launch a public relations campaign this month. “There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle,” Steve Judge, the group’s interim president and chief executive officer, said in a statement. “While the business model has evolved over time, the fact of the matter is private equity provides capital and operational expertise to companies that are often underperforming or on the brink of failure.”
While that’s a portrayal Romney would gladly embrace, his rivals are likely to present the industry, and Romney’s enormous success within it, in much less favorable terms. On the day after the primary, a group supporting Gingrich released a brutal 28-minute video depicting Romney as having practiced a ruthless form of capitalism that bankrupts companies and destroys families. “Under Romney, Bain was making billions,” a narrator ominously intones, “at the same time, contributing to the greatest American job-loss since World War II.” To drive this theme home, Gingrich’s campaign has purchased $3.4 million of air time in South Carolina to run ads in advance of the state’s Jan. 21st primary.
The anti-Romney video contends that Bain Capital is “worse than Wall Street.” In his New Hampshire victory speech, Romney made clear that he was going to fight back. “President Obama wants to put free enterprise on trial,” he said. “In the last few days we have seen some desperate Republicans join forces with him.” If those Republicans are as desperate as they appear to be, their attacks could resonate long after they have exited the field.