Mitt Romney Campaign Hypes Bain Jobs At Steel Dynamics, Quiet On Jobs At Staples, Domino's
Dave Jamieson Posted: 05/17/2012 6:23 pm
Earlier this week, the campaign for GOP presidential hopeful Mitt Romney released a video [ http://www.mittromney.com/embed/video/american-dream ] called "American Dream," touting the investment of Romney's former private-equity firm, Bain Capital, in an Indiana manufacturer called Steel Dynamics, Inc (SDI). The case of Steel Dynamics, the underlying message went, proves that Romney knows how to create quality jobs.
"Steel Dynamics started with an empty field and a big dream," the narrator intones. "SDI almost never got started. When others shied away, Mitt Romney's private-sector leadership team stepped in." Today, the ad notes, SDI employs more than 6,000 workers. "Anything is possible in America," the narrator says.
A major producer of carbon steel, SDI has the sort of middle-class jobs that both Romney and President Barack Obama say they can bring to communities still battered by the economic downturn. But by the Romney campaign's own math, a lot of the jobs created through Romney's efforts at Bain were of a different sort -- retail and food-service positions, many of them low-wage and part-time, the kind of gigs that don't necessarily support middle-class families.
Romney himself has claimed to have helped create more than 100,000 positions through the private-equity investments made at his time with Bain. As the Washington Post has noted [ http://www.washingtonpost.com/blogs/fact-checker/post/mitt-romney-and-100000-jobs-an-untenable-figure/2012/01/09/gIQAIoihmP_blog.html ], that figure in itself is highly debatable, depending on whether you credit Romney with jobs created after his Bain tenure, and whether you stack Bain-induced job losses against him. But even in giving Romney roughly 100,000 jobs, most of those positions appear to come from [ http://www.washingtonpost.com/blogs/fact-checker/post/romney-vs-obama-on-job-creation/2012/01/03/gIQA31g3YP_blog.html ] the growth of office-supplier Staples (89,000 jobs), sporting goods retailer Sports Authority (15,000) and pizza chain Domino's (7,900). Given that many jobs in retail and fast food don't provide a true living wage, they aren’t exactly fodder for "American Dream" campaign ads about middle-class jobs.
The Steel Dynamics ad counters the Obama campaign's narrative that Romney's time at Bain led to plant closings and economic suffering. But it also aims to paint a much rosier picture of whatever jobs Bain investments did happen to spur.
"[I]t is very likely that the jobs that [Romney] created were on average much worse than the jobs he killed," the economist Dean Baker said in an email to The Huffington Post. "Unfortunately, there would be no easy way to break this down, since private equity companies don't have to disclose much. Of course this would just be mirroring the larger economy, but if he wants to take credit for his job creation record at Bain then it is reasonable that he also be held accountable for the quality of those jobs."
On the question of job quality, Romney campaign spokeswoman Andrea Saul said the candidate stands by the positions created by Bain investments. "We will put Mitt Romney’s record of job creation up against President Obama’s any day," Saul said in an email. "President Obama has never held a job in the real economy, has never met a payroll, and believes that more government is the answer to everything."
Salaried managers at Staples and Sports Authority typically make salaries in the mid-five figures, but the much larger pool of workers on the store floors average between $8 and $9 an hour, according to Glassdoor.com, a website based on worker feedback. As Bloomberg's Matt Townsend noted [ http://www.bloomberg.com/news/2012-02-27/romney-record-on-retail-job-growth-shows-more-low-wages-than-middle-income.html ] in February when reporting on Bain's success stories, a lot of full-time sales associates at both Staples and Sports Authority would find themselves toiling beneath the federal poverty line for a family of three.
Obama campaign spokesman Danny Kanner argues that Romney's time at Bain wasn't about job creation, be it at Steel Dynamics or Staples. His "focus was never on strengthening companies or creating jobs, it was about getting a high return on his investment, no matter the cost to workers, companies or communities," Kanner said in an email. "These are the values he promises to bring as President by giving more budget-busting tax cuts to the wealthy on the middle class’ dime and letting Wall Street write its own rules -– the same scheme that benefited a few, but devastated the middle class and crashed our economy."
Job growth in retail and restaurants has been outpacing other sectors of the economy, but many of the jobs are low-paying and come with little opportunity for advancement. So when it comes to Bain's history with Staples and Domino's, the Romney campaign might avail itself of the jobs statistics, but it likely won't talk much about the jobs themselves. As Romney made clear speaking at a pipe maker in North Carolina last week, better to talk about manufacturing work than pizza delivery jobs.
Mitt Romney's Bain Capital invested in Specialty Retailers Inc., now known as Houston-based Stage Stores Courtesy of ACBJ Washington Bureau
Houston Business Journal by Allison Wollam, Reporter Date: Thursday, May 17, 2012, 1:18pm CDT - Last Modified: Thursday, May 17, 2012, 2:11pm CDT
I spoke to Michael Glazer, CEO of Houston-based Stage Stores Inc., this week about how he’s settling into his new role at the helm of the home-grown apparel retailer.
It didn’t come up in conversation, but Stage Stores has a distinct connection to Mitt Romney's former business dealings while the Republican presidential candidate worked for private equity investment firm Bain Capital.
Bain Capital purchased Stage Stores' predecessor known as Specialty Retailers Inc. in 1988 for $300 million in a deal involving cash and junk bonds.
The investment turned out to be lucrative for Romney, but no so much for Stage Stores.
The clothing retailer went bankrupt in 2000, less than three years after Bain Capital cashed out its stake at a huge profit, four years after the retailer staged its initial public offering and changed its name to Stage Stores. Romney had left the day-to-day operations of Bain Capital in February 1999 to lead the Salt Lake City Olympics organizing committee.
A recent report in Vanity Fair suggested Romney may not likely trumpet that investment [ http://www.vanityfair.com/politics/2012/02/mitt-romney-201202 ] while campaigning for president. The article describes the deal as a highly leveraged purchase, financed with junk bonds from Drexel Burnham Lambert, of a department-store company that went bankrupt soon after Bain and Romney cashed out.
Obama's campaign accused Bain of using those risky junk bonds to grow Stage Stores at a dangerously fast and debt-laden pace. Bain still points out that Romney left the firm before the retailer sank into bankruptcy.
Still, with those controversial days now squarely in the rear-view mirror, the revitalized retailer has managed to rebound quite nicely, bringing in $1.5 billion in sales in 2011 and expanding to employ a staff of more than 13,000 employees.
To read more about what's next for Stage Stores, see my Q&A with Michael Glazer in the May 18 print edition of Houston Business Journal.
Romney was asked by blogger Ed Morrissey of HotAir.com about new attacks this week from President Obama and his allies over Bain’s role in the 2001 bankruptcy of GST Steel, which resulted in massive lay-off at the steel manufacturing plant.
The company, said Romney, was a misleading example of his 15-year tenure at Bain.
Back in April, Bain told Bloomberg News that they do not track the jobs created or eliminated by their investments. That’s not surprising: the firm’s mission is to create wealth for their investors — not jobs.
“They’re in the business of financial engineering,” said Howard Anderson, a venture capitalist who made some early investments with Bain Capital, told Bloomberg News last summer. “They represent the investor, let’s make no bones about that.”
When pressed for how they calculated the 100,000 jobs number, the Romney campaign cited investments made by Bain in three companies: Staples (90,000 jobs), Sports Authority (15,000 jobs), and Domino’s (25,000 jobs.)
Romney added in a few more companies into the calculation in a Jan 7 primary debate sponsored ABC-News and Yahoo. ”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,” he said. “There’s a steel company called Steel Dynamics in Indiana, thousands of jobs there. Bright Horizons Children’s Centers, about 15,000 jobs there. Staples alone, 90,000 employed. That’s a business that we helped start from the ground up.
None of those calculations, however, take into account the number of people laid-off at companies that failed — like GST Steel.
It’s also unclear how much credit Romney should get for creating any of the positions that were added by the firms.
Staples was the idea of entrepreneur Tom Stemberg, now a prominent public supporter of Romney’s campaign. Bain made a $2 million investment in the office supply company, according to the Boston Globe, a minuscule amount when compared to the firms other investments which frequently ran into the hundreds of millions of dollars.
The investment in Dominos was made near the end of Romney’s tenure at Bain. The firm completed its acquisition of the pizza company in September 1998 – two months before Romney left Bain to go run the Winter Olympics.
But even at those investments made while Romney was at the firm, a number of people at companies bought by Bain told Bloomberg News that he had little involvement in the day-to-day operations of the companies. Rather, Romney left the oversight and daily management to his associates and executives running the businesses.
“Romney clearly was running all of Bain Capital,” said Scott Garrett, the former CEO of Dade Behring, a medical device company bought by Bain. “He wasn’t involved so much in a deal-by-deal basis.”
This isn’t the first time the Romney campaign has relied on questionable statistics to make their case.
While technically accurate, that number isn’t correct. The campaign is counting job losses from the start of the Obama administration, a time frame that only counts the later part of the recession. Overall, more men than women have lost jobs during the entirety of the nation’s economic struggles.
It was one of the best smack-downs of his otherwise clunky campaign. Mitt Romney took Newt Gingrich’s beloved fantasy about building a lunar colony and dumped it in the large pile of loony Newtisms.
“I spent 25 years in business,” Romney told a bemused Gingrich at the GOP debate in Jacksonville, Florida, in January. “If I had a business executive come to me and say they wanted to spend a few hundred billion dollars to put a colony on the moon, I’d say, ‘You’re fired.’”
Channeling his inner Donald Trump, this was the moment when the numbers-driven chief executive Romney displaced the pandering, fuzzy math candidate Romney.
So what would CEO Romney think of the candidate now campaigning in his name? What if the candidate walked up to the brains behind Bain and asked for some of their precious capital?
First, the private equity execs would not stand for the inflated numbers padding out Romney’s resume.
The former Massachusetts governor claims to have helped create 100,000 jobs at Bain, but that includes many years after he left the firm. Back when he was running to the left of Ted Kennedy for the Massachusetts Senate seat, Romney claimed in interviews and TV ads that he helped created just 10,000 jobs.
It’s strange that Romney likes to count jobs added after he left Bain because he does not take the same approach to job losses after he left the firm.
Talking to the right-wing talker and blogger Ed Morrissey this week, Romney said it was unfair to suggest that he was responsible for a steel factory that closed after his departure. “The problem, of course, is that the steel factory closed down two years after I left Bain Capital,” he said. “I was no longer there. So that’s hardly something that was done on my watch.”
Burnishing your legislative record might be standard in congressional races. Bike paths magically become “economic development.” Symbolic votes turn into historic battles for constituent groups.
But a tenfold exaggeration in your numbers would get you laughed out of the C-suite. Or possibly fired by someone like Mitt Romney.
Then there’s the small problem of the budget that doesn’t add up. At the core of any business plan is a spreadsheet proving how you’ll turn your brilliant idea of a lunar colony into a vastly profitable monopoly mining precious metals.
Romney’s big idea is that he can turn round the economy by cutting the deficit and government spending. So what does his spreadsheet show?
Hiding your numbers is not the best way to get investors or voters to trust you – or to prove your executive skills. Unless you’re a risk-management executive at JP Morgan Chase, the number-hiding strategy is generally unacceptable.
What we have seen of the numbers add up to this: a complete contradiction of Romney’s strategy.
It isn’t physically possible to cut the deficit while also cutting taxes and raising defense spending. And we’re not talking about small tax cuts or small hikes in the military budget, which already represent around one-fifth of federal spending. The United States already spends more [ http://www.globalissues.org/print/article/75#WorldMilitarySpending ] on defense than the combined budgets of the next 20 military powers.
At this point, the private equity masters of the universe might just look at Romney’s record running other similar entities. Take the government of Massachusetts, for instance: a four-year period otherwise airbrushed out of the Romney campaign at this stage.
Romney’s campaign says he’s a turnaround specialist. He could start by turning around his own nonsensical promises from the primaries. Drop the idea of cutting taxes beyond the Bush tax cuts and the notion of increasing the Pentagon budget. Don’t just attack the White House budget, write your own and reveal the numbers.
If you’re a turnaround CEO, campaign like one. Otherwise the voters might treat you like the board of Bain Capital.
There’s one idea, though, that TED’s organizers recently decided was too controversial to spread: the notion that widening income inequality is a bad thing for America, and that as a result, the rich should pay more in taxes.
TED organizers invited a multimillionaire Seattle venture capitalist named Nick Hanauer – the first nonfamily investor in Amazon.com – to give a speech on March 1 at their TED University conference. Inequality was the topic – specifically, Hanauer’s contention that the middle class, and not wealthy innovators like himself, are America’s true “job creators.”
“We’ve had it backward for the last 30 years,” he said. “Rich businesspeople like me don’t create jobs. Rather they are a consequence of an ecosystemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.”
You can’t find that speech online. TED officials told Hanauer initially they were eager to distribute it. “I want to put this talk out into the world!” one of them wrote him in an e-mail in late April. But early this month they changed course, telling Hanauer that his remarks were too “political” and too controversial for posting.
Other TED talks posted online veer sharply into controversial and political territory, including NASA scientist James Hansen comparing climate change to an asteroid barreling toward Earth, and philanthropist Melinda Gates pushing for more access to contraception in the developing world.
TED curator Chris Anderson referenced the Gates talk in an e-mail to colleagues in early April, which was also sent to Hanauer, suggesting that he didn't want to release Hanauer’s talk at the same time as the one on contraception.
Hanauer’s talk “probably ranks as one of the most politically controversial talks we've ever run, and we need to be really careful when” to post it, Anderson wrote on April 6. “Next week ain't right. Confidentially, we already have Melinda Gates on contraception going out. Sorry for the mixed messages on this.”
In early May Anderson followed up with Hanauer to inform him he’d decided not to post his talk.
National Journal e-mailed Anderson to request an interview about what made a talk on inequality more politically controversial than, for example, contraception or climate change. Anderson, who is traveling abroad, responded with an e-mail statement that appeared to swipe at the popularity of Hanauer’s speech.
"Many of the talks given at the conference or at TED-U are not released,” Anderson wrote. “We only release one a day on TED.com and there's a backlog of amazing talks from all over the world. We do not comment publicly on reasons to release or not release [a] talk. It's unfair on the speakers concerned. But we have a general policy to avoid talks that are overtly partisan, and to avoid talks that have received mediocre audience ratings."
You can read the full story of Hanauer and his warnings about the decline of the middle class on Thursday as part of National Journal’s Restoration Calls [ http://www.nationaljournal.com/restoration-calls ] series.
Update: 4:09 p.m.
In a May 7 email to Hanauer, forwarded to NJ, Anderson took issue with several of Hanauer's assertions in the talk, including the idea that businesspeople aren't job creators. He also made clear his aversion to the "political" nature of the talk.
"I agree with your language about ecosystems, and your dismissal of some of the mechanistic economy orthodoxy, yet many of your own statements seem to go further than those arguments justify," Anderson wrote.
"But even if the talk was rated a home run, we couldn't release it, because it would be unquestionably regarded as out and out political. We're in the middle of an election year in the US. Your argument comes down firmly on the side of one party. And you even reference that at the start of the talk. TED is nonpartisan and is fighting a constant battle with TEDx organizers to respect that principle....
"Nick, I personally share your disgust at the growth in inequality in the US, and would love to have found a way to give people a clearer mindset on the issue, without stoking a tedious partisan rehash of all the arguments we hear every day in the mainstream media.
"Alas, my judgment - and it is just a judgment, and that's why my job title is 'curator' - is that publishing your talk would not meet that goal."
On the same thread, he responded to a follower, calling same-sex relationships "unnatural" and suggesting that they will inherently "result in disease":
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