Bain Capital and whether Obama understands the economy

A lot of commentators, including some Democrats, are suggesting Mr. Obama's criticism of Mitt Romney's ties to Bain Capital show he does not understand how the economy works.  What these comments suggest to me is that the commentators are the ones where the failure to understand is found.

Perhaps the commentator's could explain to we the audience how Mr. Romney's economic ideas differ from the  ideas of the Coolidge/Hoover era Republicans who led the nation into the great depression, with its 25%  unemployment.  Or how his ideas differ from the ideas of the Republicans who seized control of both houses of Congress in 1995, and led the nation into the Great Recession and the economic morass we are still attempting to climb out of?


Perhaps the commentators could convince me it was just dumb luck that Democrats could control both Houses of Congress for 14 year, 24 year and 8 year stretches between these two periods of Business Republican domination without managing to blow up the economy.  Perhaps the commentators could make the case the rising inequality, bubbles in housing and equities followed by spectacular economic collapse that marked the only two periods of Business Republican domination of government in the last 100 years were just coincidence.

The question isn't whether Bain Capital acted wisely or legally, or even whether hedge funds are a leech or a building block of our economy.  It is whether the ideas that made the folks at Bain Capital lots of money can be translated to Government successfully and history suggests the answer is a resounding no.  Business and Government have different purposes and goals, and business Republican's have a long history of demonstrating success in business is often an impediment to success in Government.  In the private sector firing a bunch of people and paying off investors often makes for resounding success because the fired folks aren't the businesses problem.  That approach does not work for Government because the laid off people are their problem, and are crucial to the consumer base on top of it.

Even the publication I read most regularly, the Economist, has gone down this "Obama doesn't understand" road. Yet that esteemed publication some months ago published economic data that suggested the initial collapse of 2008 was in fact worse than the initial collapse of 1929.  Mr. Obama's bad luck was that, although he has done a
remarkable job of preventing another Great Depression, since the Republicans left the scene of the crime as the collapse was happening, they now can come back and argue Mr. Obama is the cause of the countries economic problems, and offer the same solutions they offered that twice crippled the economy.  


Back when the great depression first began, luckily for FDR (unlucky for the country), Republicans remained in control for the first three years of the Great Depression, at which point unemployment was 25% so it was readily apparent to voters who really did not understand how to create jobs.  Democrats elected FDR and controlled both house of Congress for the next 14 years.

Bring back the item veto

One of the huge issues that Republican's and Democrats beat each other over the head with is earmarks.  Earmarks, those dollops of Federal dollars that members of Congress hand out to their districts to curry favor are made possible by the budget process where the President, when he gets a budget from Congress, faces an all or nothing choice.  He can either veto the entire budget, or swallow any objections and sign it.

Some states, including California, provide the chief executive with the power to veto individual expenditures while still approving the overall budget.  It is called the line item veto here in California.  Item veto's are not a cure for all government fiscal impropriety, but they are a useful tool, particularly in the sense that they give taxpayers one person to hold accountable for funding programs that really don't deserve taxpayer dollars.

Back in the early 1990's, Republicans trying to get back into power in Washington by hammering Democrats on the deficit, pushed through a bill giving the President a line item veto.  A year or two later the Supreme Court held it was unconstitutional.  One would think the Republicans, who by that time controlled both houses of Congress, would have proposed and pushed a constitutional amendment to allow the line item veto.  But, since they were now the ones handing out earmarks to curry favor with voters, they evidently lost interest - probably in part because Bill Clinton was President and they didn't want to give him the power to veto their pet projects.  The notion of a line item veto sank into oblivion.

It should be revived.  Whats happening in Europe is an object lesson on how hard it is to control government expenditures.  An item veto would be a useful tool.