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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Saturday, January 14, 2012

In his debt

The rush to look at Mitt Romney's career at Bain Capital has prompted a quick lesson in modern capitalism -- one that can hold deeper political trouble for the likely GOP nominee.

The Globe's Beth Healy offers a simple primer on venture capital -- which Romney loves to tout with stories about Staples -- and leveraged buyouts, the focus of the searing King Of Bain video that is just beginning to makes its presence felt.

Romney has boasted about Staples for years -- how a small investment was turned into a thriving chain that has produced about 88,000 jobs, virtually all the 100,000 in job growth Romney claims to have fostered.

That's the bright side -- investing your money and those of other capitalists to make businesses grow.

There's also a dark side and that's leveraged buyouts, where the targeted company is purchased with a combination of capital and debt, which the new company is expected to pay off quickly, often by taking on additional debt.

And instead of building from the ground up, the firm bought by leverage is expected to slim down, shedding jobs and operations to get there. The investors take their profits quickly and move on, leaving those left behind to fend for themselves

Here's the pitfall ahead for Romney: he wants to run on a record of a businessman who used debt creatively to wield profit for investors -- and secondarily, if at all, for companies, their employees and communities.

But if leveraging debt to build is an accepted business practice, why is it so wrong on a governmental level when the goal is the same: to build an economy, communities and jobs?

Just one more flip-flop for Our Man Myth to negotiate.

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