01/20/2012 04:56 pm ET Updated Mar 21, 2012

Rove Auditions for Corporate Coroner

Under the guise of advice for his candidate, Karl Rove uses his weekly Wall Street Journal op-ed to defend Mitt Romney's buyout deals that have been under attack by the hapless and erratic pro-Newt Gingrich operation.

The central tenet of Rove's piece is that while Romney often increased the debt of companies he took over, it is irresponsible to blame their failure on debt while ignoring the economic trends far outside the control of Romney. He cites increased competition, downward price pressure, and a larger stock market decline.

Of course Rove is right that companies don't collapse simply because they have debt. Instead, they collapse because they cannot pay their debts.

As an amateur corporate coroner, Rove claims the only reason Romney-controlled businesses failed was tough macro-economic trends. And, sure, business cycles go up and down. But a company is going to have a dramatically better chance of surviving a downturn if it hasn't been loaded up with debt in order to pay three times returns to a corporate buyout firm.

It's a lot like pneumonia. A patient may die from a completely different infection. But the reason an immune system couldn't fight it off is because it was already depleted by pneumonia. Unmanageable corporate debt turns a treatable illness into a life-threatening crisis.

For example, in order to finance a 4.3 times return for themselves on a South Florida company, Romney's team, "reduced Dade's research and development spending to 6 to 7 percent of sales, while its peers allocated between 10 and 15 percent." Romney's Bain forced the company take out a new nearly half billion-dollar loan in order to buy shares back from Bain. As the New York Times reported, "With the amount of money that Dade owed to creditors and vendors at nearly $2 billion, some executives worried that the company would have little maneuvering room if its financial situation suddenly deteriorated." And then, Rove's business cycle hit: currency and interest rate fluctuations. Other companies survived. Dade didn't. Romney had already fled the scene with his profits.

Rove has repeatedly praised Romney's business smarts but claimed there is no way Romney could know that loading a company up with debt while cutting vital R&D spending would have a negative long-term impact.

What matters about Romney's deals isn't just the layoffs or bankruptcies, it is that Romney benefited no matter what. In a capitalist system, entrepreneurs risk their own capital for potential profit. But in Romney's investments, interests were not aligned and his risk often seemed nonexistent. If a Romney company collapsed, Romney made millions. If a Romney company succeeded, Romney made millions.

A paper company went bankrupt, workers lost their jobs, an entire town was devastated, and shareholders were left with worthless shares. But Romney and his colleagues walked away with over $100 million, 20 times what they put in.

A steel company went bankrupt, fired over 750 workers, broke promises of health insurance, and required a $44 million federal pension bailout. But Romney and his colleagues received $12 million on their $8 million initial investment and squeezed out another $4.5 million in consulting fees.

Is there any investment like this available to average Americans?

For Rove and Romney these failures are to be celebrated as an affirmation of their economic and political ideology. But for everyone else they are evidence of a rigged system where, no matter what, Romney wins.