“In the business I had, we invested in over 100 different businesses and net-net, taking out the ones where we lost jobs and those that we added, those businesses have now added over 100,000 jobs.”
— Mitt Romney, Jan. 7, 2012
Last week, when we first looked at the former Massachusetts governor’s claim that “we helped create over 100,000 new jobs,” his campaign provided a list that included the growth in jobs from three companies that it said Romney helped to start or grow while at Bain Capital: Staples (a gain of 89,000 jobs), The Sports Authority (15,000 jobs), and Domino’s (7,900 jobs).
As we noted, “This tally obviously does not include job losses from other companies with which Bain Capital was involved — and are based on current employment figures, not the period when Romney worked at Bain.”
In Saturday’s ABC News-Yahoo debate, Romney expanded on the list: “There’s a steel company called Steel Dynamics in Indiana, thousands of jobs there; Bright Horizons Children's Centers, about 15,000 jobs there; Sports Authority, about 15,000 jobs there, Staples alone, 90,000 employed. That's a business that we helped start from the ground up.”
Last week, when we looked at this 100,000 figure, we evaluated it along with Romney’s claims about President Obama’s job creation figures, which overall earned One Pinocchio. Earlier, we had ruled that it was all but impossible to prove or disprove Romney’s claims on job creation. But in light of Romney’s comments during the debate and some additional research, we have come to a new assessment.
By all accounts, Romney was a highly successful venture capitalist. While running Bain Capital, he helped pick some real winners, earning his investors substantial returns. High finance is a difficult subject to convey in a sound bite, so Romney evidently has chosen to focus on job creation.
This is a mistake, because it overstates the purposes of Bain’s investments and has now led Romney into a factually challenging cul-de-sac.
Romney never could have raised money from investors if the prospectus seeking $1-million investments from the super wealthy had said it would focus on creating jobs. Instead, it said: “The objective of the fund is to achieve an annual rate of return on invested capital in excess of the returns generated by conventional investments in the public equity market and the private equity market.”
Indeed, the prospectus never mentions “jobs,” “job,” or “employees.”
Second, it has become increasingly hard to understand how Romney’s personal involvement played a role in creating these jobs, especially years later. He clearly is adding up all the jobs now at the companies that are thriving, arguing these numbers far outweigh the job losses at companies that failed. But as the Wall Street Journal reported Monday, the failure rate one can attribute to Bain Capital changes significantly if one counts five years from an investment or eight years from an investment.
Bain, in fact, rejected the Journal’s analysis, saying it “uses a fundamentally flawed methodology that unfairly assigns responsibility to us for many events that occurred in companies when we did not own or control them, and disregards dozens of successful venture capital investments.”
In other words, Bain appears to be rejecting a central premise of Romney’s calculation — that years after the investment ended, one can attribute either good news or bad news about the company to Bain’s involvement.
Romney is generally careful to use phrases such as “helped create.” He also acknowledged Saturday that we “were investors to help get them going.” But even that overstates the case.
Bain may have provided management expertise or money when others would not, but a company such as Staples — one of the biggest contributors to Romney’s job figures — was largely the brainchild of entrepreneur Tom Stemberg. Stemberg presumably should get most of the credit for inventing a killer new business category. (Left unsaid, of course, is all the jobs that might have been lost at small stationery stores unable to compete with the low prices of Staples, Office Depot and so forth.)
Moreover, should Romney even get any credit for jobs at Domino’s, as his campaign claims? The deal in which Bain Capital bought Domino’s closed on Dec. 21, 1998, according to a Domino’s news release that referred to “Milt Romney.” Less than two months later Romney had left Bain to run the Salt Lake Olympics, meaning he had barely any role in running the company once it became part of the Bain investment portfolio.
When Romney made a run for the governorship, the Boston Globe reported in 2002 that he had not been involved in the details of many deals toward the end of his Bain experience: “These days, Romney can say he hasn't inked a deal in many years. Even during the end of his tenure at Bain, from 1994 to 1999, he played the role of CEO and rainmaker rather than delving into the details of buyouts.”
Interestingly, when Romney ran for the Senate in 1994, his campaign only claimed he had created 10,000 jobs. In one ad, a narrator said: “Mitt Romney has spent his life building more than 20 businesses and helping to create more than 10,000 jobs. So when it comes to creating jobs, he's not just talk. He's done it.”
Now, apparently, those 10,000 jobs have increased tenfold, apparently in part because of Bain investments in which Romney had at best a tangential role.
In the 2008 presidential campaign, as far as we can tell, Romney never highlighted any number for jobs created, having learned a lesson from how ruthlessly he was attacked by Sen. Edward Kennedy in that Senate race for jobs lost through Bain investments.
We asked the Romney campaign for a response, but did not get one.
The Pinocchio Test
Romney certainly has a good story to tell about knowing how to manage a business, spotting opportunities and understanding high finance. But if he is to continue to make claims about job creation, the Romney campaign needs to provide a real accounting of how many jobs were gained or lost through Bain Capital investments while the firm managed these companies — and while Romney was chief executive. Any jobs counted after either of those data points simply do not pass the laugh test.
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