The merits of capitalism are normally reserved for debate in classrooms, or for economists to ponder at think tanks and the Federal Reserve. But for the past week, the hallmark American system of free enterprise has been thrust into the court of public opinion by the most unlikely group – Republicans running for president and scrutinizing Mitt Romney’s tenure at the private-equity firm Bain Capital.
Republicans, by their very nature, are supposed to like capitalism.
Yet these candidates — namely Newt Gingrich but also the back-runner Rick Perry — charge that on Romney’s watch, Bain profited while some companies in which he invested went bankrupt and workers lost jobs. The problem with their criticism is, for the most part, that’s one of the ways capitalism is designed to work.
The prosecution has lobbed plenty of insults at Romney — “crony capitalism,” “backdoor socialism,” “vultures” — in an effort to drag him down from his front-runner status. They portray him as a ruthless tycoon who casually dishes out pink slips before speeding away in a Maserati.
But go too far, and they run the risk of abandoning the capitalist roots that conservatives (and plenty of liberals) say make America great. That’s caused the accusers to back off a bit from their charge.
“I love capitalism,” Perry testified Thursday. “I mean, free-market capitalism in the state of Texas has created over a million jobs. We understand how capitalism needs to work, but this corrupt and fraudulent activity that’s been going on in Washington, D.C., between them and Wall Street has to stop.”
Exhibit A was a documentary, produced by a so-called super PAC that supports Gingrich, which depicts Romney as a crusher of the American dream for thousands of workers who lost their jobs under Bain’s leadership.
“Now, this rattled a number of so-called conservatives, who say that to challenge where the money went and to challenge what deals were cut is to be anti-free enterprise,” Gingrich argued, referring to his accusations against Bain. “I’m not going to back down or be afraid to say we, the American people, have the right to know, and any candidate for president has an obligation to tell us, and I think that these extraordinarily wealthy institutions are going to somehow bring enough pressure to bear to say, ‘You better shut up,’ tells you just how bad-off the system has gotten.”
The defense has had help from a number of expert witnesses. Perhaps the most important one emerged Thursday, as Chamber of Commerce President Tom Donohue explained that in the little-understood world of private equity, risks are required.
“Anybody’s look at private equity would have to say he pulled a great firm and he had a pretty good track record, and nobody in that track record has 100 percent,” Donohue testified. “This economy is about risk. If you don’t take risk, you can’t have a success.”
Romney has also benefited from the defense of his onetime rival, now in the role of character witness, John McCain, whose campaign in 2008 accused Romney of stripping away jobs at Bain-backed companies and reselling them for profit. On Thursday, McCain told Fox News that just as some of those people lost their job, so did workers at General Motors when the carmaker was bailed out — an argument that falls in line with what Romney himself has said.
“That’s how capitalism works in the world,” McCain told lawyer Megyn Kelly.
A host of other conservatives have taken the stand to defend Romney from Gingrich and Perry, including Rush Limbaugh, Sean Hannity, Laura Ingraham, Jim DeMint, Karl Rove, Mike Huckabee (“Bad companies have to die to make way for stronger companies”) and Rudy Giuliani — who is decidedly not the former Massachusetts governor’s No. 1 fan.
Analysts cite 1994′s Kennedy v. Romney showdown as a reminder that Romney’s history at Bain contributed to his downfall in his bid for a Senate seat — though skeptics argue that the late Ted Kennedy would have beaten Romney regardless of whether Bain was brought up or not.
Should Romney emerge victorious, which many observers expect, an appeal is likely, as Democrats have readied their own similar Bain charges for months. However, it’s unclear whether the public would be receptive to another round of litigation.
“I am virtually certain that the people attacking Romney for this will 1) not win a lot of votes in the Republican Party, and 2) that they’ll regret it personally,” said expert witness Kevin Hassett, a former adviser to the campaigns of McCain and George W. Bush, who was a senior economist on the Fed’s Board of Governors. “They do Romney a favor by trying it out now, because he hones his skills. … It’ll become old news by the time Obama brings it up.”
Observed pundit Amy Walter, ABC News’s political director: “It looks as if Perry and Gingrich are flying by the seat of their pants. In fact, it looks as if they are just desperately swinging about hoping to cause Romney to stumble.”