Rick, Romney, and the Country-Club Republicans

From here on out, the Republican primary is a contest between insurgent, extremist Tea Party/Evangelicals and what remains of the party’s pragmatic corporatists.

This division was evident in June, when Ralph Reed invited Mississippi Governor Haley Barbour to Washington to speak to the Faith & Freedom Coalition convention. In fact, the only “news” to report at the June event was Barbour’s avuncular talk about pragmatism in politics:

Remember, purity in politics is the enemy of victory. Okay?

We can’t start out with the idea as the Faith & Freedom Coalition that our candidate’s got to agree with us on every single thing. We cannot expect our candidate to be pure. Winning is about unity. …

Conservatives, religious people, small government people, we are not going to have purity. We are not going to have a perfect candidate. There’s been only one perfect person that has ever walked on this earth. And there ain’t gonna be another one in this election.

Barbour was addressing the party’s evangelical base: the Republican faithful who reject evolution, global warming, and probably photosynthesis. In other words, a crowd wildly enthusiastic about Michele Bachmann and Rick Santorum and only mildly enthusiastic about Mitt Romney. (Rick Perry was not yet officially in the race.)

There was no doubt about whom Barbour spoke. The first question asked by a reporter as Barbour left the stage focused on his attempt to sell Mitt Romney to a Christian audience.

Barbour is the Republican establishment, with a pedigree that begins before the Reagan administration and a million-dollar-assets portfolio he built lobbying for tobacco companies. From 1993 to 1997, he was chairman of the Republican National Committee. He has run for the U.S. Senate, and today is governor of Mississippi.

The establishment that Barbour represents is deeply concerned about Rick Perry. He scares them because they believe he will sweep the primary and lose the general election, that he’s a born-again Christian reincarnation of Barry Goldwater.

Writing in 1964, Malcolm X described the Johnson-Goldwater race: “[T]he shrewd capitalists, the shrewd imperialists, knew that the only way the people would run towards the fox would be if you showed them a wolf. So they created a ghastly alternative.”

Barbour and the other country club Republicans fear that when confronted by the lupine Rick Perry, voters will run toward the vulpine Barack Obama. Yet Perry is their own creation.

In 1989 he was a telegenic Democratic legislator with a bankable narrative: fifth-generation rancher in partnership with his father, Texas A&M graduate, a stint in the Air Force, owned and rode a horse, etc.

He was brought into a state party being built by Karl Rove, on the promise of a spot on a statewide ticket. In 1990 he upset incumbent Democratic Ag Commissioner Jim Hightower, after raising $1.3 million to Hightower’s $745,000.

Rove, at the time a political consultant, helped Perry’s campaign along by announcing to reporters that Hightower’s office was under investigation by the Justice Department. Rove’s announcement was the initial release of information about an FBI investigation (which would result in prison sentences for two Hightower aides). It was conducted by an FBI agent with whom Rove had a long history.

Rove was decidedly in the Perry camp.

Perry’s election as lieutenant governor in 1998 was critically important to George W. Bush, who needed a Republican successor in place when he openly began campaigning for the presidency.

By 2010, Rove and the country club Republicans in Texas wanted Perry gone. He had done what they needed him to do, backstop George W. Bush, and they wanted a predictable professional in the Governor’s Mansion. So they went to work for his opponent.

Rove, and former G.W. Bush aide Karen Hughes, helped shape U.S Senator Kay Bailey Hutchison’s primary challenge of Perry. Barbara Bush campaigned with Hutchison. George Bush the elder endorsed her. Dick Cheney endorsed her. As did James Baker, who had served as the senior Bush’s secretary of state and organized the legal and public-relations campaign that secured the presidency for George W. Bush in 2000.

It was remarkable, open defiance of an incumbent governor. And Perry made fools of all of them, easily dispatching the senior U.S. Senator from Texas.

I don’t think establishment Republicans will allow Perry to walk away with the party’s presidential nomination without a fight. But can they salvage the Romney candidacy?

CANDIDATE ROMNEY—Let’s assume the establishment prevails. No one is paying much attention at the moment. Romney’s problems in a race against Barack Obama will become evident when opposition researchers, independent advocacy groups unleashed by the Citizens United Supreme Court decision, and the media begin to educate the public on Romney’s road to riches.

Romney made his millions running a private equity company, Bain Capital, which he cofounded with Bill Bain in 1984, after Bain responded to Romney’s resignation from Bain Consulting with a $200,000 check intended to keep Romney in the Bain family.

Private equity companies make their money through leveraged buyouts, in which they acquire companies, then borrow against them with the intent to flip them and make a substantial profit within a few years. They manufacture no product, and create wealth only for their principals and investors, when they sell the heavily leveraged companies for huge profits.

“The amounts of money are so vast that it is truly a matter of time before the taxation of private equity is front and center of the public agenda,” Boston University business professor James E. Post optimistically told the New York Times in 2007. “Increasingly, this world of private equity looks like a world of robber barons, and Romney comes out of that world.”

The following deals that Romney did while at Bain will complicate a Romney campaign against Barack Obama.

Pad & Paper in Indiana. Consider how things turned out for Ampad, short for American Pad & Paper Company, of Marion, Indiana. It was acquired by Bain and spun off as an independent company in 1992. Bain borrowed $400 million against Ampad, and a company that was viable when it was acquired was suddenly burdened with debt.

Under Romney, Bain forced Ampad to lay off hundreds of its employees. In response, Ampad workers went out on strike. By 2001, Ampad had lost so much money, business, and jobs that it was forced to close its doors. Stockholders were wiped out, and creditors were paid fifty cents on the dollar.

Bain made an overall profit of $100 million on the deal — a fact that was not lost on Senator Ted Kennedy’s campaign researchers, who used the Ampad story to erase Romney’s double-digit lead over Kennedy in the 1994 Massachusetts Senate election.

Steel in North Carolina. In 1993 Bain acquired GS Industries, a North Carolina steelmaking company, and borrowed heavily to upgrade the company’s production facilities in order to compete with foreign manufacturers. The debt burden forced the company into bankruptcy, and by 2001 every employee and executive was out of work. The federal Pension Benefit Guaranty Corporation stepped in to pay the pensions of the bankrupt steel maker.

Medical Supplies in Illinois. In 1994, while Romney was running for Senate in Massachusetts, Bain and Goldman Sachs sank $85 million into the leveraged buyout of Illinois medical instrument manufacturer Baxter International, whose name was later changed to Dade Behring. Romney has said he was unaware of the details of the deal because he was preoccupied with his 1994 Senate race in Massachusetts. Dade Behring CEO Scott Garrett told the New York Post that Romney was involved and was being briefed on the situation.

Romney was certainly in the deal when Dade Behring purchased a rival company owned by DuPont in 1996, laid off 700 workers in Illinois, then merged the companies with a German competitor, which moved much of the production overseas, costing an additional 1,000 jobs.

The story (at least for the workers) got worse.

Bain pressured the company to cut its most profitable division in order to secure a $421 million loan, of which $365 million was used in a stock buyback that provided huge profits for Romney, his partners, and investors. In 2002, Dade Behring, milked dry by Bain, filed for bankruptcy. The Boston Globe reported that Bain’s acquisition of Baxter International resulted in the loss of 1,700 jobs.

Mattress Wars. The above accounts were gleaned from mainstream media sources: the Boston Globe, New York Times, New York Post; and bankruptcy records. A great deal of detailed information on Romney’s career as a vulture capitalist is readily available in Josh Kosman’s 2009 book, The Buyout of America: How Private Equity is Destroying Jobs and Killing the American Economy.

Kosman devotes nine pages to Bain’s acquisition (under Romney’s direction) of a controlling interest in the Sealy mattress company in 1997. As Kosman relates, Bain used Sealy and its largest domestic competitor, Simmons, which it also acquired, as cash cows for Bain partners and investors.

The $791 million deal cost Bain $140 million up front, plus $651 million borrowed against Sealy (which was ultimately forced into bankruptcy).

Under pressure from Bain, Sealy cut costs and increased production to provide greater returns for investors. Research and development were left to competitors, as Swiss mattress company Tempur-Pedic began offering a better product and cutting into Sealy’s domestic market share.

Bain’s response to its loss of market share recalls the joke about the produce-stand operator who was buying watermelons for $3.00 and selling them for $3.00, then realized he could solve his problem by buying a bigger truck. After acquiring Sealy, then Simmons, in 2001 Bain tried to vertically integrate its mattress operation. It bought the retail outlet Mattress Discounters for $212 million — a deal that quickly went sour when the company filed for bankruptcy in 2002.

By 2004 Sealy’s debt burden made the entire venture unsustainable and Bain sold the company to another corporate raider, KKR. A decade after Bain’s acquisition of Sealy, the company had gone from 28 percent to 20 percent market share, but was more profitable than ever, producing less and charging much more for its products.

Along the way Bain had busted unions and reduced Sealy’s workforce in places like Tennessee, shipping some jobs overseas. According to Kosman, job losses are hard to quantify because Sealy often used subcontractors. The company today employs fewer workers and subcontracted workers than it did in 1997. While Romney supporters continue to point to Sealy as a success, since the publication of Kosman’s book Romney no longer claims he saved jobs at Sealy.

Ted Kennedy used Romney’s history at Bain to take the momentum out of Romney’s well-funded campaign for the U.S. Senate — at a time when the economy was in far better shape than it is today. In an economy ravaged by the plundering class, Romney might be a hard sell.

BACHMANN’S BUNGLE—The best take-away from the CNN-Tea Party Express debate last month was Rick Perry’s response to Michele Bachmann, when she accused him of issuing an executive order requiring the Merck pharmaceutical company’s HPV vaccine for pre-adolescent girls in Texas, because he had received a contribution from Merck.

“If you’re saying that I can be bought for $5,000, I’m offended,” Perry said. It turns out that Perry received $28,500 from Merck. Merck’s Austin lobbyist, Mike Toomey, has given $48,000 to Perry’s campaigns, more than his client gave Perry.

Merck also contributed $337,000 to the Republican Governor’s Association (RGA) since Perry began to coordinate the organization’s fundraising in 2006, according to Texans for Public Justice (TPJ).

TPJ, a good-government advocacy group, also reported that the RGA is Perry’s single largest donor, at $4 million. Much of that $4 million, according to TPJ, was money that Perry donors rerouted through the RGA. (See Rick and the RGA on Page 4.)

And Mike Toomey is considerably more than Merck’s lobbyist. He is Perry’s former chief of staff and a permanent fixture at the Capitol in Austin, where he has made enormous wealth off the business of government. (Although he makes his money off government, Toomey is a zealous advocate of limited government; he joined Perry and Americans for Tax Reform anti-tax advocate Grover Norquist on a trip to the Bahamas in 2004.)

GOVERNOR TOOMEY—I covered Toomey in the Legislature in the ’80s, when he was an ambitious and volatile junior member of the Republican minority in the House. He was then, and has remained, obsessed with tort reform — the closing of the courthouse door to individuals trying to sue corporate defendants for damages.

Toomey went from the Legislature, to the lobby, then into the administration of Bill Clements, a Karl Rove client who was the first Republican to be elected governor of Texas since Reconstruction.

Then it was back to the lobby, then two years, from 2002-2004, as Perry’s chief of staff. When he is working as a public servant, Toomey turns his client list over to his partners, who immediately realize the added value of having a colleague inside the governor’s office.

Toomey doesn’t just lobby for Merck. He has worked for Texans for Lawsuit Reform, a pressure group that has contributed $221,000 to Perry and millions to Republican legislators in a successful effort to remake the State House. He has also represented insurance interests.

Toomey is so influential, in fact, that reporters and lobbyists often refer to him as “Governor Toomey.” He also directs the Make Us Great Again Super PAC supporting Rick Perry, one of the big-money combines made possible by the Citizens United Supreme Court decision. Toomey is also the co-owner, with Perry campaign consultant Dave Carney, of a private 2.7-acre island on Lake Winnipesaukee in New Hampshire.

Bachmann bungled the opportunity she created by shifting the focus of the post-debate discussion, with the absurd claim that Merck’s HPV vaccination can cause mental retardation. In a subsequent issue, we will refocus the discussion on Perry’s cronies and the influence they are buying.