Among Newt Gingrich’s more disingenuous statements in the debate this week was his claim that he had not been attacking Bain or capitalism, just asking questions. That’s nonsense, of course.He was the one who accused Mitt Romney of “looting” firms. It is his super PAC that is running the “King of Bain,” which is replete with misrepresentations and distortions. And sure enough, when he was safely away from the debate stage yesterday he went at it again.
He proclaimed: “The Bain model was to go in at a very low price, borrow an immense amount of money, pay Bain a great deal of money and leave. Now, I’ll let you decide if that’s really good capitalism. I think it’s exploitative. It’s think it’s not defensible.” That does not even pass the straight-face test for a description of what private equity firms do.
He speaks in generalities and invectives because, as we have seen in the “King of Bain” examples, there aren’t really specific cases that support that cartoon version of what private equity firms do.
Gingrich’s claim that he is for “real capitalists” is simply disingenuous. Where does he think the capital for capitalism comes from? Moreover, he’s picked a particularly inaccurate line of attack given that Bain’s style was the opposite of what Gingrich describes. Bain’s style was to invest and then try to manage the company to be successful. As Jonathan Macey explained:
Newt Gingrich’s political action committee is sponsoring a film called “When Mitt Romney Came to Town” that accuses Mr. Romney and his former company, Bain Capital, of taking over companies, looting them, and then tossing their workers out on the street. Jon Huntsman’s attacks on his rival include the description of private equity as a business that “breaks down businesses [and] destroys jobs, as opposed to creating jobs and opportunity, leveraging up, spinning off, [and] enriching shareholders.”
This is anticapitalist claptrap. Private-equity firms make significant investments in companies, mainly U.S. companies. Most of their investments are in companies that underperform industry peers. Frequently these firms are on the brink of failure.
Because private-equity firms are, by definition, equity investors, they make money only if they improve the performance of their companies. Private equity is last in line to be paid in case of insolvency. Private-equity firms don’t make a profit unless their companies can meet their obligations to workers and other creditors.
Do we suppose Gingrich is so ignorant as to not understand how private-equity markets work? Perhaps. There is a great deal that he “knows” that simply isn’t so. More likely, however, this is standard operating procedure for Gingrich. Say whatever he thinks will fly. Deny he said it. Attack again. Throw out incendiary rhetoric. And then repeat.
No wonder Gingrich’s negatives are sky high and his campaign inevitably becomes about him. The Republicans are looking for someone who can articulate conservative principles and make the election about President Obama’s failed economic policies. It’s impossible to imagine if Gingrich were the nominee that a general-election race wouldn’t be all about him — his rhetoric, his extreme and unworkable plans (Chilean Social Security or maybe send it to the states?) and his record of feeding at the Washington trough. The historian from Freddie Mac (who has the nerve to decree what is and what is not real capitalism) will not be able to effectively mount an attack on Obama’s crony capitalism. In fact, it would allow Obama to try to claim the high ground, arguing that Gingrich made a fortune off the housing crisis. He took his money and Freddie left the taxpayers with a huge bill. Now if that’s not “looting” I don’t know what is.
Romney to date has won the battle about Bain with primary voters. He’ll need to keep it up and challenge Gingrich to defend his accusations. In doing so, Romney can continue to demonstrate that at least one of the candidates understands both capital and capitalism.