PLANK MAY 30, 2012
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Is asking voters to compare Romney’s vulture capitalism to Solyndra a good idea? The Romney campaign and its cohorts seem to think so. Within the past few days, American Crossroads, Karl Rove’s super PAC, released an ad that counters Obama’s attacks on Bain by highlighting Solyndra, a bankrupt solar panel company that had been given a government-backed loan guarantee, as well as the auto industry bailout. George Will made the Bain-Solyndra comparison on This Week; Paul Ryan did the same on Fox News Sunday; Michael Barone piled on in National Review Online.
The underlying argument is that the White House has been making the same risky bets as a private equity firm, bets that produced their own failures. (The grim-voiced narrator of the Crossroads ad, which is captioned, “President Obama is playing Wall Street games with our money,” asks, “Obama’s attacking private equity. But what’s his record on public equity investing?”)
It’s not the smartest response in the world. First off, Romney allies typically explain away Bain’s failures as just the way capitalism works—sometimes, bad companies are swallowed by the market. Solyndra, whose solar technology was priced out of the market by cheaper Chinese solar panels, is a pretty classic example of this, and by citing its Adam Smithian demise in response to attacks on Bain, Romney allies have diminished their ability to dismiss Bain’s loser companies as just the natural cycle of capitalism.
But the larger risk of this approach is that comparing any of Bain’s failures to Solyndra asks voters to examine private equity alongside public stimulus. The former is a game in which a tiny group of stakeholders set out to create as much value as possible for themselves: buying companies, often loading them up with debt they can’t bear, and extracting exorbitant fees for themselves before they reintroduce the company to the public and it either fails or succeeds. It’s essentially a no-risk racket, one Timothy Noah describes in fuller detail here.
Then there’s government stimulus, which is aimed at benefitting the public, and which the Obama administration has distributed with considerable success. Take the Department of Energy loan guarantee program through which the administration backed Solyndra. That program has been hugely effective for shoring up projects that the private market underinvested in. A recent, independent audit (pdf) by the former national finance chairman for John McCain found that it was due to come in about $2 billion under budget, and had subsidized mainly low-risk, critical electricity projects. The American Crossroads ad goes a step further and offers, as a comparison with Bain Capital’s failures, the government’s auto bailout, which an independent group found saved 1.45 million jobs, when no private equity dollars could be found to do the same.
On balance, the White House seems to be playing Wall Street games—if that’s what you want to call massive investment in underfunded public infrastructure—pretty decently, and in a manner that produces more value for the public than private equity firms. Bain and Solyndra are really nothing alike. And by insisting that they are, Romney boosters have given Obama’s campaign an opening to brag about what American Crossroads is calling Obama’s public equity presidency—and all its successes.
6 comments
This strategy looks like a good example of identifying an issue that has gotten Republican base voters excited for the last 2-odd years and then convincing yourself that the broader electorate cares about it as a counterpoint to Democratic criticism of Bain and private equity. In other words, it's a product of the same bubble mentality that convices the likes of Tom Ricketts to believe that rehashing Jeremiah Wright is the ticket to defeating Obama. I'm frankly surprised that a guy like Karl Rove -- who, for all his obvious failings as a human being, is a pretty good campaign strategist -- would waste money on such a muddled message. Maybe he decided that, in order to keep his sugar daddies funding American Crossroads' more effective ads, he can occasionally design a crappy ad campaign that makes them feel better about their sagacity.
- wildboy
May 30, 2012 at 2:46pm
Ah, McGillis, you give the average voter too much credit. The point is not to win a logical argument, but to confuse the Bain issue. By bringing up Solyndra--which is also not GM or Chrysler, as you suggest--the Republicans are simply sowing doubts. It's a very effective maneuver.
- polcereal
May 30, 2012 at 3:49pm
@polcereal - Agreed. Any Democratic response to this would be wise to ignore Solyndra altogether, and focus on Crossroads' real mistake, which was to lead off with the auto bailout. There's a reason why Obama's strategy has been described as "Bin Laden is dead, General Motors is alive." Time spent talking about the American auto industry is a big win for Democrats.
- Dausuul
May 30, 2012 at 7:50pm
From the article: " It’s essentially a no-risk racket, one Timothy Noah describes in fuller detail here." A no risk racket? That anyone could do? This statement falls flat on its face by simple inspection. If anyone could do it, then anyone would. And they'd all make money at it. Wouldn't they? I mean, why would anyone be a security guard if they could pool their money with other like minded workers and invest instead and make a lot more money that way? Either everyone is missing a massive easy-money opportunity, or your statement if flat out wrong. Which is it? From the article: "On balance, the White House seems to be playing Wall Street games—if that’s what you want to call massive investment in underfunded public infrastructure—pretty decently" Massive? A ~hundred billion on infra spread over a few years? Sorry, that isn't massive. Pretty decently? If Bain picks a winner 80% of the time (which you claim anyone can do), and the whitehouse has picked a winner less than 20% of the time, then you have an odd way of defining "decently" Your article needs to square the fact that Obama's investment track record has fallen far short of Bain. And then it needs to explain why the failure is reasonable given your statement that it's so easy to do. You claim Bain was only interested in creating value for themselves. Didn't Obama go into this wanting to create value for the taxpayer? Be it jobs, infra, etc? When we see how much of these investments were completely lost...no jobs, no new infrastructure, no competitive technology. Just a small handfull of donors that made out like bandits. Hmmm. PS. The fact that Obama is backing away from Bain and instead focusing on the governorship shows this was seriously effective. Rove was right. Again.
- seattleeng
May 31, 2012 at 1:58am
I'm kind of surprised they're denigrating "playing Wall Street games". I thought "playing Wall Street games" was the entirety of Romney's plan to fix the economy.
- Attrill
May 31, 2012 at 2:07am
The mainstreaming of political extremism begins with a strategy of portraying the mainstream a already extreme. Thus the Karl Rove strategy from the start has been to cite those examples where right wing outrageousness is practiced on the other side. Any example will do, however tenuous. Thus, the outrageousness of George W. Bush's recess appointment of John Bolton to the UN after he had already been REJECTED by the Senate gets washed away by creating the fake controversy over Obama's appointment of "czars" who require no Senatorial advise and consent at all. Thus the outrageousness of Trent Lott's embrace of Strom Thurmond and his Dixiecrat white supremacy gets whitewashed in the pseudo-history of a Fox News that points out that it was Democrats from the South who opposed civil rights without mentioning that it was precisely these Southern Bourbon Democrat's opposition to equal rights for blacks and other marginalized minorities that made Richard Nixon and other Republicans think these were people who really belonged with them.
- TedFrier
May 31, 2012 at 6:47am