Presidents and Businessmen
Mitt Romney, whose reported net worth is somewhere north of $200 million, argues that he knows how to make all Americans wealthier. In what is perhaps the deepest irony of this presidential season, Newt Gingrich echoes William Jennings Bryan — who declared, “No one can earn a million dollars honestly.”
Paul Krugman has attacked Romney’s honesty in earlier columns. But on Friday, he dissected Romney’s argument that, because he is a successful businessman, he knows how the economy works:
But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.
The solution to America’s problems is not simply to increase corporate profits. That’s a notion that those who have gained from globalization love to repeat. They have done well by slashing costs. However,
Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.
But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.
During his tenure at Bain Capital, Romney and his partners purchased 77 companies. 22% of those businesses were shuttered. But Bain made money even when firms went belly up. Romney has said that, by the same logic, he would have let GM and Chrysler fail. Besides the jobs at both companies, the multiplier jobs — at auto parts plants, tire plants, steel companies — would have also gone down the tubes.
Romney succeeded because of a narrow focus on profits. Countries are about more than making profits. Krugman reminds his readers that the last two presidents who claimed to be businessmen — George W. Bush and Herbert Hoover — left shipwrecks behind them.
6 Responses to “Presidents and Businessmen”
Just a couple of comments. One I may have already pointed out in previous comments, but here it goes anyway.
1. Article 2 of the constitution provides for 7 specific responsibilities of the President. Five of those are foreign policy or military related, one is requirement to give update to congress on the state of the union and the last one is authorizations to fill key government positions with the consent of the senate.
We have come to think of the president more like a king than what the founding fathers envisioned the President’s role. The congress is responsible for domestic policy, which includes economic policy. The president can make recommendations, but the leadership has to come from congress and over the past 15 years, they have done an awful job. I won’t go into specifics here, but anyone who follows congress will find many actions that created the problems we have today.
2. One has to question the comments about companies being broken up and jobs cut by Bain and then look at actions at GM when the government bailed out GM. Pontiac was eliminated cutting many jobs. Hummer was sold, again eliminating many jobs and Saab was sold, again eliminating jobs. Last, Saturn was eliminated, with more jobs lost.
In addition, hundreds of dealers were forced to close their doors by GM and Chrysler, even if those dealers were profitable and had been in business for years, been a good community partner and was a good member of the GM/Chrysler family.Here again, hundreds of jobs were lost in sales, maintenance and repair of those cars.
Although we all can agree that all of this had to happen to make the these companies profitable, with the exception of dealer closings that had no impact on the manufacturers, a good political marketing manager could develop political ads that state the Obama administration took over GM and immediately eliminated 37% (3 out of 8 ) of GM’s product lines, forced hundreds of dealer closings and cut XXX number of jobs through their corporate actions.
Once everyone begins to realize that our problems comes from congress and not the President will things start to change.
Don’t like healthcare law, well who passed it?
Don’t like the country not operating with a budget? Well who has not passed a budget?
Don’t like the country spending 1.3 trillion more than it takes in? Who passes appropriation bills?
Don’t like earmarks? Who includes them in bills that have nothing to do with spending?
Next time you hear something governemnt has done that you do not like, just ask, who authorized that action. 99% of the time the answer will be congress!
“businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.”
Amen to that line. And lets not forget in the business world there are different types of businessmen. Some actually build stuff, others find ways to make money of the ones who actually build stuff. Romney is one of the latter.
I find it funny that Gingrich, who really had no business running for Pres anyways, is so angry at losing his grip on it that he’s decided to take a flamethrower to the guy who ousted him. Letting Gingrich back into elected politics was bad for the GOP, for all the reasons they should have known with their history of him.
“We have come to think of the president more like a king than what the founding fathers envisioned the President’s role. The congress is responsible for domestic policy, which includes economic policy. The president can make recommendations, but the leadership has to come from congress and over the past 15 years, they have done an awful job. I won’t go into specifics here, but anyone who follows congress will find many actions that created the problems we have today.”
Oh, so true that is! And there are so many who want the president to be our king (in 2008 and 2009, the messiah!) and to see us all, especially those with more and all business people it seems, made into serfs.
Don’t forget also that along with seeing the president as a king has come having the executive branch make regulations that rule over us as laws, taking Congress’s rightful place. (The same is true for legislating courts!)
Although I think there are a lot of skills a CEO would possess that would help him/her as a president, I agree that it does not translate directly that a good CEO will be a good president. That isn’t really a fair criticism though, since the only profession that would translate directly would be prior experience as president. The question then becomes what profession would translate most closely?
I think you could make a strong case for a candidate that has been both a successful businessman and a successful politician. In theory that candidate would have demonstrated organizational, efficiency and budgetary skills in both the private and public sector and have a good working knowledge of both, as well as interactions between the two sectors.
DaGoat@3:00
“I think you could make a strong case for a candidate that has been both a successful businessman and a successful politician. In theory that candidate would have demonstrated organizational, efficiency and budgetary skills in both the private and public sector and have a good working knowledge of both, as well as interactions between the two sectors.”
So true, but there is one other characteristic that would make a good President. And that is a CEO that realizes that they do not have all the answers, they have the ability to surround themselves with thinkers that come up with new and innovative ideas and are not threatened when someone does not agree with them when they make a point.
This is where I think we have our greatest problem today. It comes from a position of “all the Presidents men”. If you do not think like the president, do not accept 100% the presidents position and do not support that position through voicing concerns about the outcomes of those positions behind closed doors, you are not long for any presidents inner circle.
And right now we need people in Washington that think like those from a silicon valley business or a company like Apple where the inner circle can develop ideas that are way out of the main stream to bring American politics into the 21st century and out of the mid 20th century practices.
In all of history, you can look back and find presidents that have been transformational. They come along few times and when they do, it is years apart. Right now I do not see anyone currently in an elected office that may possess those characteristics, but I could be wrong.
I agree that being a successful businessman doesn’t necessarily qualify someone to be President. The goals of government are not as simple and straight forward as those of running a business. Krugman is right about that. And yes, businessman don’t have a useful view of economics needed to determine what is needed for a recovery. Seemly few people do.
But his point would seem to be moot concerning Romney, who was governor of a state. And by all accounts a successful one. The arguments Krugman is using would be effective applied to Herman Cain, but not so against Romney.
No one can be in truth can be said to have a background to fully qualify them to be President, except for someone who was or is President. If this is your important criteria for President you are pretty much stuck with voting for Obama this time, since there are no ex-presidents running. But in spite of all of the talk about voting for the most qualified candidate most people vote for the man whose policy positions they agree with.
In general we are not counting on the President’s executive abilities to manage the government in a way that a CEO manages a company. His appointments are people who are concerned with forming policy, not with how to implement the laws that result from the policies.
I believe that Romney would be able to handle the job. But this is based more on his experience as governor than his time as a CEO of a company.
What I don’t accept about him are the policies that he will try to implement. His economic policies are the same ones that got us into the mess that we are in now. As much as you can fault Obama for his attempts at recovery from the recession, he didn’t cause the recession. Romney and the Republicans are promising a return to the policies that caused the recession. It would be crazy to vote for that.
(And no, the bureaucrats don’t just write whatever regulations that they want to, they write regulations to implement the laws passed by Congress.)