Why Bain Matters

It's not just the tax returns. It's short-term profits vs. long-term investments

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NICHOLAS KAMM / AFP / Getty Images

US Republican presidential candidate Mitt Romney addresses the National Association for the Advancement of Colored People (NAACP) annual convention in Houston on July 11, 2012.

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In other words, the job of private-equity guys like Mitt Romney is to think short term, quarter to quarter, and maximize returns for shareholders. This was a plausible exercise, especially in the 1980s and 1990s, when many American corporations had to be restructured to compete in the global economy. By almost all accounts, Bain Capital performed this function honorably and well.

But the efficiencies that Bain and others created led to a major distortion of American capitalism — away from long-term planning, away from research and development (which detracted from quarterly profits), toward higher executive salaries, toward financial gamesmanship as assets were purchased with junkier and junkier bonds. The tax code was tilted to encourage such behavior. And there is a crying need now to rebalance American capitalism, to make sure that the rewards of financial wizardry do not dwarf the rewards of productive manufacturing, to reward long-term development rather than short-term profits.

In the end, the strongest case against Bain capitalism is a metaphor: Mitt Romney made a fortune swapping equity for debt. That's what we've done for the past 30 years in this country, turning a great many of our assets into deficits for short-term gain. We need to do the opposite now.

To read Joe's blog posts, go to time.com/swampland.

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