The problem with socialism, as former British Prime Minister Margaret Thatcher once said, "is that eventually you run out of other people's money." That's the problem with Mitt Romney's cut-throat species of leveraged buyout capitalism too. Eventually you run out of ways to make a fortune on somebody else's dime.
If President Obama wants to be reelected six months from now he needs to adopt as his campaign strategy against Mitt Romney, and Mitt Romney Capitalism, his own version of the Powell Doctrine -- no matter how angry some Democrats might be with him.
Named after former Joint Chiefs Chairman and Secretary of State Colin Powell, the doctrine states that when America goes to war it must do so with overwhelming force in order to achieve a quick and decisive victory against its foes.
Under the Powell Doctrine, when American troops are put in harm's way there will be no more half measures or carefully calibrated sorties of the kind that bogged us down in the Vietnam quagmire for more than a decade. It builds on the insight of Niccolo Machiavelli, the 15th century Florentine (and Karl Rove's favorite political philosopher) who, in his masterpiece The Prince, advised that: "When you strike at a king you must kill him."
Using overwhelming force against Mitt Romney and his spotty record as absentee Governor of Massachusetts and as head of the private equity firm Bain Capital, is essential, no matter how much flak the President can expect to take from Republicans (and even members of his own party) for his criticisms of finance capitalism.
The President needs to make capitalism the issue because the hard reality is that Romney and the Republicans have a roadmap to victory that is as sinister as it is simple: Prevent President Obama from doing anything to reignite the economy or create jobs; if necessary, sabotage the economy directly; use Fox News and the windfall of Citizens United to relentlessly pound Obama for his failure to improve conditions Republicans have largely created in the first place; and finally, promise that Republicans could do better but be sure to keep details of recovery plans deliberately vague, other than to offer familiar supply-side bromides about "pro-growth" policies we know from three decades experience grow only the portfolios of the already wealthy, and not much else.
And, if all else fails, keep Democrats from voting.
With the economy stuck in neutral and Republicans refusing to lend a hand, Obama loses unless our notoriously inattentive public finally gets it through its thick skull that someone like Mitt Romney who "likes to fire people" because it makes him money isn't someone you want as president in charge of creating jobs for the rest of us.
To expose Mitt Romney as the king without clothes Obama must strike, and strike to kill, just as Machiavelli says. He must strike directly at Romney's strongest selling point: His tenure at Bain Capital and the image he means to sell as a "businessman" who understands economics and so knows how to create jobs. That means Obama must tell his own story about how private equity really works, just as Ted Kennedy did when he defeated Romney 20 years ago.
The 2008 economic collapse opened the door for a real debate about the nature of American capitalism which the 2012 election may help to resolve. So, Obama must be relentless in linking Romney to that species of "vulture capitalism" that we know is just as likely to destroy lives and livelihoods for the benefit of a few as it is to create jobs for the many.
That's the lesson we can learn from Romney's own tenure at Bain Capital, where four of the 10 companies bought by Bain while Romney was in charge subsequently went bankrupt with great hardship for workers and stockholders -- but with handsome profits for Romney and his private equity investors.
This is not the way most people think capitalism is supposed to work even as they cling to a simplistic and outdated conception of the free market where rewards are still connected to risk and hard work.
It was Newt Gingrich, not surprisingly, who instinctively apprehended the precariousness of Romney's support among white populist working class voters who saw Romney as an out-of-touch, predatory plutocrat.
In a series of searing advertisements, the bomb-throwing Gingrich tried to explode Romney's undeserved reputation as a "job creator."
"Mitt Romney was not a capitalist during his reign at Bain," Gingrich's advertisement ominously intoned. "He was a predatory corporate raider. His firm didn't seek to create value. Instead, like a scavenger, Romney looked for businesses he could pick apart. Indeed, he represented the worst possible kind of predator, operating within the law but well outside the bounds of what most real capitalists consider ethical.....He and his friends at Bain were bad guys. Any real capitalists should disavow Romney's 'creative destruction' model that made him wealthy at the expense of thousands of American jobs."
It was brutal stuff. And it had GOP oligarchs in boardrooms across America freaking out. That's because Republicans know they have a potentially serious problem on their hands with working class stiffs now that they've gone and nominated a guy who made his riches in mysterious and vaguely malevolent ways.
And so Republicans are desperate to project their own weaknesses once again onto their Democratic opponents by making sure that public resentment and envy is directed -- not at the rich -- but at those do-nothing cops, firefighters and teachers who live next door, with their secure jobs (for now) and adequate pensions (for now) and the peace of mind their neighbors do not have.
It's a lot easier for people to understand how a teacher got a raise or better health care at their expense thanks to those "union bosses" than it is to understand how Mitt Romney and Bain Capital earned their billions while their companies and our economy went kaput through something called "dividend recapitalization" or some other form of financial alchemy.
But those are the stories Obama needs to tell and retell in their every gory detail since there are hundreds of them out there as company after company was swept up by private equity firms in the early 2000s during what the New York Times called "the greatest burst of corporate takeover the world has ever seen."
From 2003 to 2007, according to the Times, 188 companies controlled by private equity firms issued more than $75 billion in debt to pay dividends to the private equity firms, like Bain Capital, that bought them. Indeed, the debt load got so heavy that a disproportionate share of companies that defaulted on their debts - more than half - were either owned or controlled by private equity during the last decade.
One company in particular was 136 year-old Simmons Bedding Company. Its well-trod path to bankruptcy was one the Times called "a tale of these financial times and an example of a growing phenomenon in corporate America."
With access to cheap money, private equity firms like Romney's were able to buy companies like Simmons with other people's money while risking little or none of their own. Then they would use their new company as collateral for further loans to pay off the banks and themselves.
"Every step along the way, the buyers put Simmons deeper into debt," reported the Times. "The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably."
In 1991, Simmons had just $161 million in outstanding debts on its books. By 2009, after being passed through the hands of several private equity firms, the company groaned under the weight of $1.3 billion in outstanding loans. Simmons employees were even forced to pay back some of the loans their private equity owners had taken out to buy them in the first place, when the employee stock fund was ordered by owners to buy company stock as investments.
In 1986, private equity pioneer, and Nixon Treasury Secretary, William E. Simon bought Simmons for $120 million, mostly with borrowed money. Three years later, Simon "sold" the company to his employees and their stock ownership plan for nearly twice what Simon paid for the company -- $241 million.
"The deal was a fiasco for the employees," reports the Times. After the buyout, Simmons stopped contributing to its employee's pension fund, arguing that since workers now owned company stock they didn't need help from management with pensions. But when the housing bubble burst, so did the value of Simmons stock, and with it the employees' nest eggs.
These are the sorts of stories whose details President Obama must repeat again and again and again until they become ingrained in the minds of voters and indelible parts of the national consciousness.
Otherwise, halfhearted and generalized attacks against predatory capitalism will get buried under a landfill of laudatory platitudes about the wonderfulness of capitalism, together with charges that Obama is a radical leftist who hates freedom, hates the free market and probably hates America itself. If you strike at the king you must kill him.
Conservatives know supply-side economics has not delivered for most Americans as promised, and that for those who've met the Bain Capitals of the world face-to-face the experience has not been pretty. That is why when pissed-off Americans complain about people getting something for nothing, Republicans are making sure voters think only about the cop on the beat or the teacher at the blackboard, not the Bain Capital financier who buys companies with borrowed money then pays back the loans by looting his workers' pensions.
While right wing populists like Newt Gingrich (and, to a lesser extent Rick Perry) were ready to play the anti-tycoon card against Romney and Bain Capital, it's been dispiriting to watch Democrats like Cory Booker, Bill Clinton and Ed Rendel recoil in horror at Obama's muted attacks against the American Plutocracy.
This just shows again the bitter truth that the New Democratic wing of the Democratic Party is as much in bed with Wall Street as are the Republicans, putting Democrats in an intolerable ideological No-Man's land where they must look out for the interests of the poor and middle class but in ways that do not offend the swells, whose thinned-skinned over-reactions to President Obama's mild rebukes over the their role in the 2008 financial crisis shows just how quick they are to take offense.
"The biggest flaw in Obama's strategy is not that swing voters can't stomach his populist attacks, but that his fellow Democratic politicians can't," says Daily Beast columnist Peter Beinart. Neither were the Bain attacks likely to be popular with the establishment media, whose upper middle-class orientation causes it to skew right on economic matters no matter what it's reputation might be for "liberal bias," says Beinart.
But Obama can't win reelection with the votes of young, single, and minority voters alone, says Beinart. He needs to hold down his losses among blue-collar whites, "a group with which he has always struggled," and one that might be receptive to a well-made case about the sort of predatory capitalism practiced by people like Romney.
Republicans will accuse Obama of attacking the free market system "that built this country" no matter what he does. But as the Washington Post's business writer Steven Pearlstein reminds us, there are many different kinds of capitalism. And one of the most important debates we're having in the country today is what kind of capitalism we want to have.
There is the robber baron variety, says Pearlstein, "where the economy fell increasingly under the control of a handful of clever entrepreneurs and financiers who ruthlessly used their economic power to enhance their political power, and vice versa."
There was the corporate or "managerial" kind that took hold after the Great Depression where competition was a gentlemanly affair managed between big business, big government and big labor -- and where business cycles were relatively tame and the gap between rich and poor shrank as more Americans joined the middle class.
There is also the "state capitalism" they have in places like China; the "worker capitalism" that was a momentary fad in the 1980s; the "entrepreneurial capitalism" where people make money on bright ideas and new inventions concocted in their garages; and the "shareholder capitalism" where workers are interchangeable and expendable and companies exist only to maximize value for shareholders.
And now there is "financial capitalism," where Pearlstein says "the focus has shifted from running companies to simply buying and selling them for profit." As more of the country's capital gets diverted toward trading and financial engineering, more and more of America's profits will be captured by a relatively small number of investment bankers, hedge fund managers and people like Mitt Romney who run private-equity funds.
Most Republicans will of course cry foul if Obama decides to go after Romney and Bain, charging that the President is now running a divisive campaign instead of one premised on "hope," and that he is now stoking resentments against the wealthy based on populist appeals to the darker impulses of envy and hate.
This is particularly hilarious coming as it does from Republicans who, after their partial victory in Wisconsin (where they kept the governorship but lost the Senate), made it abundantly clear that a centerpiece of their campaign between now and November will be stoking popular envy and resentment against all those overpaid, over-indulged public sector cops, firemen and even teachers who put their lives on the line everyday.
And so, if Obama abandons his attacks on private equity because of Democratic squeamishness over biting the Wall Street hand that feeds it, this will legitimize a species of predatory capitalism that even right wingers like Newt Gingrich and Rick Perry realized could drive a wedge between Romney and blue collar voters.
It's true that with the Republican primary now over, and Newt Gingrich safely retooled as a Romney surrogate, the former Speaker has disavowed his earlier populist attacks on Romney's career at Bain. But it's not because Gingrich was wrong, he wants us to know, only that the tactic didn't work given that Gingrich was competing in the primary of a Republican Party that's the wholly-owned subsidiary of Wall Street.
What all the hand-wringing from Booker and Clinton and the mainstream media over Obama's opening attacks against Bain Capital illustrate, says Peter Beinart, is how difficult it is to run against the financial industry in a political system virtually controlled by the financial industry. But like it or not, says Beinart, "those are the rules of the game that Obama must win this fall."
To govern is to choose, and so if President Obama wants to keep on governing he must choose which side he is on.