Monday, May 21, 2012


David Axelrod explained on CNN yesterday (talking about the campaign's video on GST Steel), why this sort of thing is fair and highly relevant:

UPDATE: President Obama gave an even clearer explanation today of why Governor Romney's experience at Bain is relevant to the campaign and puts the governor on notice that "this is what the campaign is going to be about." After all, Governor Romney is the one who argues that his Bain experience equips him to be president, so it's only fair to talk about Bain. And even if we allow that Romney did a good job for himself and investors at Bain, what Romney doesn't seem to realize that the president's job "is not simply to maximize profits." His job is to move the country forward in a way that allows everyone to succeed, not just some.

I can't improve on the president's explanation of the themes of the campaign, but maybe it would be helpful to the discussion to introduce the concept of negative externalities that I vaguely remember from various economics classes. The idea is that business activity, such as the smells and noises from a factory, can impose costs on the community. Those costs are an externality if the business has no incentive or legal obligation to pay for them. If the owners of a business decide to reduce wages, or fire employees, or even shut the whole factory down, to maximize their own return, that imposes similar kinds of costs on the community in the form of say, reduced business at local stores and restaurants. Or the costs of unemployment insurance or food stamps for employees who are not able to find new jobs right away. Or abandoned homes. Now if you're supposed to be looking out for the whole community, as opposed to worrying only about the interests of the business's owners, you have to address all those costs. You could make business pay for the costs they impose on the community, or you could make the community pay to clean up those externalities, or you could just tell the community to suck it up. But you have to address those costs somehow.

If Mitt Romney wants to deflect attention away from his record at Bain Capital, he could make something like the following speech:
I'm proud of my record at Bain Capital, but I understand that in the job I'm seeking, I would have much broader responsibilities. In addition to creating a profitable environment for businesses, I also have to worry about how to pay for the pollution they might cause. And how to deal with the costs of layoffs and shut-downs. And how to pay for the transportation networks that businesses require, and the health care and education of potential employees, so that companies can find productive workers in this country. So I have a plan to address all of those issues.
Romney is saying the opposite of that. He wants to make it easier for business to avoid the negative consequences of their actions. He is proposing that we reduce regulation of pollution and reduce regulation of dangerous financial practices. He makes fun of government investment in infrastructure. He wants to cut back drastically the social safety net. That means that when businesses take actions to reduce their costs, they are able to shift all the negative consequences, such as the cost of higher unemployment, to the rest of us. Mitt Romney proposes to do even less than we are doing now to ameliorate those consequences. That means he has not fundamentally changed his mindset from that of the Bain partners whose concerns were limited to increasing profits in the short term, and who did not have to worry about any broader social issues, including unemployment, pollution, health care, pensions, education, or infrastructure. Therefore Mitt Romney has no grounds for complaining when people bring up his record at Bain. Because he is the one still saying that his record is directly transferable to how he plans to run the government.

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