Occupy Wall Street may be getting less attention in the corporate media these days, but the movement’s message about the brutal and inequitable nature of contemporary U.S. business is front and center in an unlikely arena: the debate among the Republican contenders.
In recent days, Newt Gingrich and Rick Perry have assailed the business track record of Mitt Romney, using terms such as “vulture capitalism,” “looting” and “job killing” to describe his activities at buyout firm Bain Capital in the 1980s and 1990s.
Showing how frustrated personal ambition can outweigh ideology, Gingrich and Perry are espousing views far from their usual postures. It is the hypocrisy of frontrunner Romney, however, that is of greater significance. While being attacked from the faux Left by Gingrich and Perry, Romney has been veering to the Right. In his victory speech after the New Hampshire primary, he attacked President Obama for supposedly promoting “the politics of envy” and “resentment of success.” Channeling Ronald Reagan, he vowed that “the path I lay out is not one paved with ever increasing government checks and cradle-to-grave assurances that government will always be the answer.”
Yet a look at Romney’s record at Bain shows not only Gordon Gekko-like business buccaneering, but also a willingness to embrace those very government checks and assurances he is now repudiating. Companies acquired and managed by Bain during Romney’s tenure showed no hesitation in taking taxpayer handouts in the form of state and local economic development subsidies.
A comparison of the 1999 Bain portfolio obtained by the Los Angeles Times to the information in the Subsidy Tracker database my colleagues and I at Good Jobs First created (as well as other sources), yields examples such as the following:
Steel Dynamics Inc. In 1994 this company, among whose financial backers at the time was Bain, got a $77 million subsidy package—including grants, property tax abatements, tax credits and reimbursement for training costs—for its steel mill in DeKalb County, Indiana (Fort Wayne Journal Gazette, June 23, 1994).
GS Industries. In 1996 American Iron Reduction LLC, a joint venture of GS Industries (which had been taken private by Bain in 1993) and Birmingham Steel, sought some $20 million in tax breaks in connection with its plan to build a plant in Louisiana’s St. James Parish (Baton Rouge Advocate, April 6, 1996). As the United Steelworkers union noted recently, GS Industries later applied for a federal loan guarantee, but before the deal could be implemented the company went bankrupt.
Sealy. A year after the 1997 buyout of this leading mattress company by Bain and other private equity firms, Sealy received $600,000 from state and local authorities in North Carolina to move its corporate offices, a research center and a manufacturing plant from Ohio (Greensboro News & Record, March 31, 1998). In 2004 Bain and its partners sold Sealy to another private equity group.
GT Bicycles. In 1997 GT, then owned by Bain and other investors, decided to move its manufacturing operations to an enterprise zone in Santa Ana, California. Being in the zone gave the company, which was later purchased by Schwinn, special tax credits relating to hiring and the purchase of equipment (Orange County Register, July 9, 1999).
Since Romney arranged to share in Bain’s profits after he left the firm in 1999, it is legitimate to look at cases of subsidy grabbing by Bain companies after that time. Some of these involved firms that had been acquired during Romney’s tenure but which didn’t get their subsidies until after he departed. For example:
Stream International. In 2000, this operator of call centers, then controlled by Bain, agreed to open a facility in Kalispell, Montana, but only if local officials provided $4 million in grants and tax breaks (The Missoulian, February 8, 2000). U.S. Senator Max Baucus also arranged for a $500,000 grant from the federal Economic Development Administration (AP, March 4, 2000). Later that year, Stream got Silver City, New Mexico to provide tax credits, subsidized training and subsidized rent for another call center (Albuquerque Tribune, July 12, 2000).
Alliance Laundry Systems. In 2000 this maker of washing machines, purchased by Bain in 1998, received a $560,000 grant from the state of Florida in connection with its plan to move a commercial laundry from Cincinnati. (Tallahassee Democrat, June 8, 2000). In 2004 the company received $1.25 million in assistance (including a low-cost loan of $1 million and a $250,000 grant) from the state of Wisconsin. Bain sold the company to a Canadian pension fund in 2005.
Romney’s ongoing profit participation also makes it legitimate to look at subsidies that have gone to companies acquired by Bain after Romney moved into public life:
Burger King Corporation. In 2005—while owned by Bain, TPG and Goldman Sachs—Burger King let it be known that it was considering moving its headquarters from the Miami area to Houston. After local and state officials put together a $9 million subsidy package, the company agreed to stay in South Florida but move to a new building. Two years later, Burger King dropped the idea of a new headquarters altogether and had to repay $3 million of the package (which came from a Quick Action Closing Fund grant) to the state as a result. Bain and its partners sold off their remaining interest in Burger King in 2010.
Quintiles Transnational Corp. When Bain and other private equity firms bought this pharmaceutical services company in 2007 they inherited a $25 million subsidy package that the company had negotiated with North Carolina officials in 2006. The package included an up-front $2 million grant from the One North Carolina Fund, a $2 million matching grant from Durham County, and the promise of up to $21.4 million over 12 years from a performance-based Job Development Investment Grant.
AMC Entertainment. After being promised more than $40 million in subsidies, this movie chain (bought in 2004 by Bain and other private equity firms) agreed to move its headquarters from downtown Kansas City, Missouri to a nearby suburb across the state line in Kansas. The deal was criticized as an egregious case of taxpayer-financed sprawl.
And finally, what about Staples, whose early backing by Bain is frequently cited by Romney as the best example of his business acumen? The chain has long been making use of economic development subsidies, including the period when Romney was still at Bain. In 1996, for example, it chose Hagerstown, Maryland as the site for a distribution center after getting a $4.2 million subsidy package (Baltimore Sun, April 16, 1996).
It’s quite possible that Romney’s recent anti-government comments, like much of what he says, are not meant to be taken too seriously. But as long as he is spouting free-market rhetoric, he needs to be reminded about the extent to which his ascent (and that of the rest of the 1% ) has been propelled by public money.
Re-posted from the Dirt Diggers Digest