Choosing The Right Manager For The Biggest Business On Earth
On Tuesday we’re going to give a manager a new four-year contract to manage the U.S. Government. It’s a big job. The manager we choose will be running the biggest business on earth.
Mitt Romney thinks he’s qualified. In fact, he thinks he’s the only candidate who has actually managed a business and the only one with a track record of success.
As the Republicans are so fond of saying, Barack Obama “never even ran a lemonade stand.”
But what voters need to examine is an apples-to-apples comparison, showing how both candidates ran the same kind of business and how successful they were.
Luckily, we can. The business in question is a national pPresidential campaign. Romney and Obama both ran one in 2008, and each of them is running one now.
Let’s go back to 2008 and look at how Obama did running his first presidential campaign. Compared to his two main adversaries (and to Romney’s early failure), the results were spectacular.
Obama’s campaign was larger and more complex than most Fortune 100 companies by measures such as staff size and locations. His use of the Internet demonstrated an innovative approach to campaigning that paved the way for Romney’s current pop-ups.
The Obama campaign built up steam with a devoted base and never ran a deficit, while the Clinton and McCain campaigns ran into serious financial difficulty. This despite the fact that McCain was starting with a fortune behind him and the Clintons had done it before.
Obama’s 2008 presidential campaign was a business with a million and a half “employees” (active volunteers) and a billion dollars in revenue. Even more impressive, the business grew to that size in about a year. More experienced competitors who began with 10 times as much startup capital didn’t do nearly as well.
This year, the Romney campaign spent more money than Obama through the August reporting period. Yet they managed to open only a fraction as many field offices, all while having fewer than half the number of “employees” (volunteers working for the campaign). Fewer offices plus fewer employees means lower expenses in most businesses, but not when Romney’s in charge.
Arguably, Romney took a different strategic approach in the business of managing his campaign. He focused more resources on advertising and on “outsourcing” his on-the-ground efforts.
Was the strategy successful? Not with Romney’s nearsighted vision for the future.
His ads that imply American workers at Ohio’s Jeep plants will lose their jobs to China have backfired so spectacularly that the CEOs of two car companies felt they had to publicly take the Romney campaign to the woodshed for lying.
Romney knows a lot about “outsourcing,” but outsourcing voter registration drives to an accused fraudster in multiple states was a serious failure in business judgment. That supplier had to be fired, and the Romney campaign had no second source for that essential function. In Romney’s business circles, that’s known as “single-point failure” and managers are supposed to have a risk-management plan in place to avoid it.
During Romney’s tenure as governor of Massachusetts, his state dropped to the rank of 47th out of 50 in job creation. While Obama has been president, the number of government employees has gone down, while private enterprise jobs have risen by millions. Obama came to office when the country was losing jobs at the rate of 5 million per year. So who’s the better turnaround specialist in job creation?
Romney is right that fiscal responsibility is important. So is proper accounting. Romney keeps telling us that the deficit is currently $1 trillion per year. But the deficit was higher than that — $1.3 trillion — the day Obama took over, meaning the trend is in the right direction. Romney may say the opposite, but his proposals will create a turnaround in this positive trend and increase deficits, just as every Republican president has done since Reagan. That’s a turnaround America doesn’t need.
Deficits under the Romney plan are projected by some to be the same or slightly larger than Obama’s for the next four years. I think that’s overly optimistic. In fact, I think it’s hype. Someone should tell the Romney advisors that running a campaign is different from launching an IPO.
A more realistic view is that a Romney administration will double deficits to $2 trillion a year. That projection is realistic, based on the deficit increases caused by his tax cuts and additional defense and Medicare spending, with paltry offsetting cuts in agriculture, Medicaid, veterans’ benefits, Social Security or education.
Some voters may believe the fairytale that tax cuts result in more tax revenue and higher paychecks if the richest people get even richer, but the last 10 years have proved that approach doesn’t work. Fewer voters are likely to believe that the middle class and the Congress they elected will be willing to eliminate the home mortgage deduction. Who among them will want to get rid of the deductions that save the average American money on taxes, like charitable contributions or employer-provided health insurance?
Romney can call these deductions “loopholes” but that’s like advertising a lower price on a container of ice cream when you simply reduce the ounces inside. Yes, that’s how some businesses run. Is a plan to “save” Medicare by cutting the spending — and leaving retirees to make up the difference — the way we want our government to be run?
We’re not choosing what container of ice cream to buy, but we still need to know what’s inside and how much it’s going to cost. We’re choosing a manager for the biggest business on earth and the laws of arithmetic still apply. The kind of “off balance sheet accounting” we saw from Enron doesn’t cut it in the race for the White House. Neither do the imaginary results that sell an IPO.
Romney will do for our country what he did so many times in his business career—pay himself, his managers, and his investors enormous profits while loading the country with crushing debt, selling our most precious assets, cutting labor costs (here or overseas), and bankrupting the retirement fund. If Romney becomes president, that’s what I’ll expect, since that’s how he managed the businesses he controlled.
With Obama, we’ll get a manager who turned the negative trends in deficit spending and unemployment in the right direction, and steered the economy to the highest corporate profits on record. He also showed us how he manages emergencies like Superstorm Sandy and uses intelligence to take out Osama bin Laden, even when we had to violate another country’s airspace.
Choose your manager.
Howard Hill is a former investment banker who created a number of groundbreaking deal structures and analytic techniques on Wall Street, and later helped manage a $100 billion portfolio. He writes and blogs at mindonmoney.wordpress.com. Follow on Twitter: @hhill61
Photo credit: AP/Charlie Niebergall