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With this week's decent into campaign ugliness, it's tempting to reminisce back to a simpler time....last May....when all the talk was about the debt.

The people of Iowa and America have watched President Obama for nearly four years, much of that time with Congress controlled by his own party. And rather than put out the spending fire, he has fed the fire. He has spent more and borrowed more.
The time has come for a president, a leader, who will lead. I will lead us out of this debt and spending inferno. We will stop borrowing unfathomable sums of money we can’t even imagine, from foreign countries we’ll never even visit. I will bring us together to put out the fire!  

- Mitt Romney, May 15, Des Moines, Iowa

 

Republicans are fond of telling Americans how they will run the country more like a business.  Mitt Romney used to be a business man.  He doesn't have to tell us how he would run the country.  All we need to do is look at his record at Bain Capital and see exactly how he would run the country.  After all, he is touting his business acumen.  Funny, then, that he should mention the national debt.

To hear Mitt Romney talk, debt is a bad thing.  It's not something businesses do. But the fact of the matter is, Romney would never had made his fortune without debt financing--the very thing that is saying is so bad for the United States.  Let's take a closer look.

Bain & Company started out as a venture capital firm. It was a rough go for the first three years.  The partners had to raise enough capital to invest--they managed to come up with about $37 million.  With that funding, by the end of the 1980's, Romney and his colleagues had a 10-1 return on investment.

But 10-1 wasn't good enough.  As the 1980s drew to a close, Bain Capital shifted from venture capital to leveraged buyouts.  By the end of 1990s, they went from $300 million to $1.2 billion.  It got there by running up debt, charging exorbitant fees of their clients and pocketing the proceeds. In each case, Bain pocketed huge profits based on debt that either they or the company leveraged.  And while Bain leveraged debt to the benefit of many of the companies it invested in, quite a few sunk under the weight of the debt load.  

Curiously, the same New York Times article that I cited above also features this little confession from a more introspective Mitt Romney, back in 2007:

“It is one thing that if I had a chance to go back I would be more sensitive to,” Mr. Romney said. “It is always a balance. Great care has got to be taken not to take a dividend or a distribution from a company that puts that company at risk.” He added that taking a big payment from a company that later failed “would make me sick, sick at heart.”/blockquote>

Given the number of failed companies in Bain's history, he must be very heartsick.

Still, this debt conversation would be much different indeed if Romney discussed some of the more prominent failures like Dade International, DiDi Electronics and Ampad.

There is a tipping point at which debt begins to overwhelm the enterprise.  If anybody knows that point well, it should be Mitt Romney.  If he were more honest about his experiences and what he may had learned from them, he'd have a shot at being able to articulate why it was so important to drive down the National Debt.

Of course, in the midst of a recession, the only recourse the government has is to raise revenue through debt financing.  The United States is not unlike the steel wire company that Bain purchased in 1993--we're in need of some major infrastructure upgrades.  To refuse to invest in the government means that we would not have the capital we need to support economic growth.  There is no case in which Bain was able to turn a company around solely on a little consulting.  Venture capital and leveraged buyouts both require putting money, more often than not, borrowed money, into the enterprise.  Mitt knows know other way.

But remember in the end, the goal wasn't necessarily to make the acquisition more successful, it was to reap a profit through dividends and fees.  Romney always took his cut.  Perhaps the thing that really spooks him isn't the businesses that failed under an unsustainable debt load that he made them take on and he doesn't want the nation to suffer the same fate.  Perhaps the thing that perplexes him the most is that a nation takes on debt financing to maintain the general health, welfare and protection of its citizens.  

There's no way to take a cut of that.  

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