How does the private sector create jobs? Any first-year econ student could explain it: businesses make profit on products and/or services, and add jobs as they maximize profits (in other words, reach a high level of productivity) but have the opportunity/need to expand sales. Without maximized profit, there is no pressure to expand, and therefore no job creation; otherwise, businesses improve profit performance through efficiency … which maximizes profits in the end. John Hinderaker knows this, and he’s a lawyer, not a first-year econ student, but apparently another lawyer named Barack Obama hasn’t quite figured that out yet. In his press conference yesterday, Obama blamed Bain for wanting to maximize profits, as opposed to, er … every other business in the real world:
Well, first of all, I think Cory Booker is an outstanding mayor. He is doing great work in Newark and obviously helping to turn that city around. And I think it’s important to recognize that this issue is not a “distraction.” This is part of the debate that we’re going to be having in this election campaign about how do we create an economy where everybody from top to bottom, folks on Wall Street and folks on Main Street, have a shot at success and if they’re working hard and they’re acting responsibly, that they’re able to live out the American Dream.
Now, I think my view of private equity is that it is set up to maximize profits. And that’s a healthy part of the free market. That’s part of the role of a lot of business people. That’s not unique to private equity. And as I think my representatives have said repeatedly, and I will say today, I think there are folks who do good work in that area. And there are times where they identify the capacity for the economy to create new jobs or new industries, but understand that their priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers.
And the reason this is relevant to the campaign is because my opponent, Governor Romney, his main calling card for why he thinks he should be President is his business expertise. He is not going out there touting his experience in Massachusetts. He is saying, I’m a business guy and I know how to fix it, and this is his business.
And when you’re President, as opposed to the head of a private equity firm, then your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off and how are we paying for their retraining. Your job is to think about how those communities can start creating new clusters so that they can attract new businesses. Your job as President is to think about how do we set up a equitable tax system so that everybody is paying their fair share that allows us then to invest in science and technology and infrastructure, all of which are going to help us grow.
And so, if your main argument for how to grow the economy is I knew how to make a lot of money for investors, then you’re missing what this job is about. It doesn’t mean you weren’t good at private equity, but that’s not what my job is as President. My job is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but 10 years from now and 20 years from now.
So to repeat, this is not a distraction. This is what this campaign is going to be about — is what is a strategy for us to move this country forward in a way where everybody can succeed? And that means I’ve got to think about those workers in that video just as much as I’m thinking about folks who have been much more successful.
If you don’t know the role of profit and productivity in the cycle of job creation, it means you need to think a little more about the economy before declaring that you know more than those who have mastered that cycle, Mr. President. Here’s a hint: “Paying your fair share” to the government doesn’t have a lot to do with it.
John puts it succinctly:
Obama displays his trademark incoherence as he tries to explain why Bain Capital is central to the campaign. Asked a multi-part question that included his views on private capital, he starts to say that the distinctive feature of private capital is that the people who run such firms are focused on making a profit. Then you can see the wheels turning as he realizes that what he just said didn’t make any sense, since it didn’t distinguish private capital from any other business. So he backs up and starts over, explaining that as president, he has to think about more than just making a profit; rather he has to think about all Americans’ well-being. That is true enough, of course, as far as it goes. But right now the form of well-being that Americans are most concerned about is a better job market. Businesses grow when they are profitable, and they hire employees when they grow. Obama reveals himself as just another in a long line of liberals who claim they want more and better jobs, but can’t bring themselves to endorse the profits that alone make jobs possible.
In other words, Obama’s the latest in the long line of incoherent public-sector officials who think they know better how to create jobs than people who do it for a living.
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