The Obama campaign has trotted out a two minute commercial (shades of Orwellian 2 minute hates?) attempting to demonize Mitt Romney and Bain Capital for their handling of a steel “mini-mill” that eventually went bankrupt. The ad features workers who allegedly lost their jobs at the mill talking about how Romney is an example of “vampire” capitalism, and how he didn’t give them enough of his money, even though he was wealthy enough.
But more instructive is the number of things the ad doesn’t tell you, as well as the things the ad got wrong. Let’s discuss them, and then talk about how Obama has helped create jobs.
First, by the time GST declared bankruptcy, Romney had been gone from Bain for two years; he was saving the Salt Lake City Olympics from economic implosion. But before then, Bain Capital announced a $98 million plant modernization, and merged with another firm to form one of the largest mini-mill steel producers in the U.S. That according to Reuters. Bain loaded the firm up with debt and took out a dividend, but it reinvested part of the dividend in the operation. It reportedly spurned a potential offer to buy the firm around the end of 1997. But, according to the same Reuters report, the management proved incompetent, cheap imports undercut prices, and the firm was unionized, a factor common to steel companies that couldn’t survive the new low-cost environment.
Second, within a year or so either side of the GST bankruptcy, 44 other steel firms went bankrupt and disappeared. Including one-time 800 pound gorilla Bethlehem Steel. Bain Capital’s involvement with them? None.
What else did Bain do about steel and jobs? Let’s see. How about Steel Dynamics? In the mid-1990s, Bain invested in and raised capital for another mill that became one of the largest U.S. steel companies. It too was a “mini-mill,” using technology and innovative management to respond to a market facing severe problems from cheap imports. Bain sold its stake in 1999, making a massive return for its investors, while Steel Dynamics is now generating $6 billion in revenue and employing more than 6,000 people. Quite different from Solyndra, yes?
So the story is a little different than Obama would have you believe. But then again, with a record like his, one can almost forgive his attempt to point the finger at someone else. Someone who hasn’t forgotten the magnitude of the economic crisis we face. Obama recalled that the U.S. recently experienced “the worst crisis that we’ve seen since the Great Depression. And sometimes people forget the magnitude of it, you know?… Sometimes I forget.”
So let’s take a look, and see if we can help him refresh his memory a little.
During President Obama’s Time In Office, The Nation Has Lost 572,000 Jobs And The Unemployment Rate Has Increased To 8.1%.(Bureau Of Labor Statistics, http://www.bls.gov, Accessed 5/4/12)
Nearly Twenty-Three Million Americans Are Unemployed, Underemployed, Or Have Stopped Looking For Work. (Bureau Of Labor Statistics, http://www.bls.gov, Accessed 5/4/12)
“In April, The Percentage Of Adults Working Or Looking For Work Fell To The Lowest Level In More Than 30 Years.”(Christopher S. Rugaber, “US Hiring Slows Sharply With Just 115K Jobs Added,” The Associated Press, 5/4/12)
In April 2012, “More Than 340,000 Workers Dropped Out Of The Labor Force.””April’s jobs report was, in a word, disappointing. The economy added only 115,000 jobs. Hiring slowed. More than 340,000 workers dropped out of the labor force.”(Charles Riley, “Why Obama Can’t Match The Reagan Recovery,” CNN Money, 5/4/12)
More Than Half Of All Recent College Graduates Under The Age Of 25 Were “Jobless Or Underemployed, The Highest Share In At Least 11 Years.””About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years. In 2000, the share was at a low of 41 percent, before the dot-com bust erased job gains for college graduates in the telecommunications and IT fields.”(Hope Yen, “1 In 2 New Graduates Are Jobless Or Underemployed,” The Associated Press, 4/22/12)
Under President Obama, Gas Prices Have More Than Doubled From The Nationwide Average Of $1.85 Per Gallon When He Was Sworn Into Office To $3.79 Per Gallon Today.(U.S. Energy Information Administration, http://www.eia.gov, Accessed 5/10/12)
Since President Obama Took Office, Median Household Income Has Declined By $4,300.”Yet real median household income in March was down $4,300 since Obama took office in January 2009 and down $2,900 since the June 2009 start of the economic recovery, according to an analysis of census data by Sentier Research, an economic- consulting firm in Annapolis, Maryland.”(Mike Dorning, “Obama Fails To Stem Middle-Class Slide He Blamed On Bush,” Bloomberg, 4/30/12)
Obamacare Has Made Health Care “Less Affordable” And Has Caused “Insurance Premiums To Rise.””At the moment, the new law is making health care slightly less affordable. Independent health care experts say the law has caused some insurance premiums to rise. As we wrote in October, the new law has caused about a 1 percent to 3 percent increase in health insurance premiums for employer-sponsored family plans because of requirements for increased benefits. Last year’s premium increases cast even more doubt on another promise the president has made – that the health care law would ‘lower premiums by up to $2,500 for a typical family per year.'”(D’Angelo Gore, “Promises, Promises,” FactCheck.org, 1/4/12)
No wonder he doesn’t want people looking at his record. I know, I know, it’s all Bush’s fault. We’ve heard it before, and it doesn’t fly anymore. Joe Biden and Debbie Wasserman Schultz both say it’s Obama’s economy, and Obama isn’t shy about taking credit for some things, like GM, even though his contribution seems to be slim on that one. But since “it’s Bush’s fault,” let’s look at the stimulus packages of both presidents, and see what we can learn.
Economists John F. Cogan and John B. Taylor analyzed both the Bush (2008) and the Obama stimulus spending to see whether increased government spending had the desired “multiplier” effect that Keynesian theory posits. Keynesians argue that when government spends money, say on construction workers, the workers then go out and buy products like refrigerators and thus goose economic activity. It didn’t work either time. Both in 2008 and 2009, stimulus spending had no effect on consumption. Individuals and states used the money to pay down existing debt instead.
Of the $862 billion stimulus in 2009, which Obama had claimed would build roads and bridges and “invest in the future,” Cogan and Taylor found that only $4 billion was devoted to infrastructure projects as of January 2011. Fully half of all stimulus spending went to fund Medicaid. And the strings the federal government attached to Medicaid funds — insisting that states could not restrict eligibility rules or reduce benefits — were bad policy.
Further the stimulus funds were not targeted to help “those hardest hit by the economic crisis.” Instead, “the states hardest hit by the recession received the least money. States with higher bankruptcy, foreclosure, and unemployment rates got less money. And lower-income states also received less.”
The key, apparently, was politics. Having an entirely Democrat congressional delegation in 2009, when the bill passed, increased the per capita stimulus dollars that the state received per person by $460. In addition, the states that Obama won by the largest percentage margin in 2008 got the most money.
Large Democratic donors did well too, including Solyndra owner George Kaiser; Tesla Motors owners Leon Musk, Larry Page, and Sergey Brin; NRG Energy owners Warren Buffett, Steven Cohen, and Carl Icahn; and Fisker Automotive’s Al Gore.
All of a sudden, Bain Capital doesn’t look so bad.