Are private investment firms good for job creation?


IN FOCUS: GOP Presidential candidates attacking Mitt Romney on his tenure with Bain

RICH KARLGAARD: Well you know these capitalists are central especially to companies that get in trouble. You think about IBM. IBM went from 400,000 employees down to 200,000 employees when they almost went bankrupt 20 years ago. A private equity guy named Lou Gerstner gave them the tough medicine. Now IBM is back on top of the world and they have 400,000 jobs again. Sometime it is necessary to fix these companies to do that.

RICK UNGAR: You know what is interesting, I think the question in and of itself is raising an issue that we have not confronted before. Americans certainly like private free market enterprise. They respect it. They like the kind of things that a Steve Jobs does. He builds something, he provides a product, he provides a service. What we are looking at now though is a part of our capitalist society that is a bit more destructive even if it is necessary. I think what this is all raising is a question of whether Americans do or don't want the symbol of their country to be the type of destructive capitalism where people end up out of work, even though it may be necessary, so that profits can be made. This is the issue.

VICTORIA BARRET: Private equity is a huge field, it has its hand full of Gordon Gekkos but these guys are trying to make a profit by injecting risk capital into really damaged, nearly broken, nearly bankrupt companies. They are trying to salvage them. It does not always work and often jobs do get lost. But, how would you have saved those jobs otherwise? With some large government bailout funded by taxpayers? That is the nature of capitalism is that something has to fail.

BILL BALDWIN: Let's just look at the politics of this. One thing for free market capitalism to prevail in a Republican primary, you are preaching to the choir. I think that is going to be a very tough sale in the general election. Look how hard it is for politicians of any stripe to say that prosperity comes from the destruction of jobs not the creation of jobs. But any economist will tell you that. Politically this is just a tough sell.

DENNIS KNEALE: The record is so clear, David, that it is sad we even have to engage in this debate today. You know capitalism and free market enterprise and businesses; they do not exist to create jobs. That is not their function. They exist to create product, services so they can then create profits for their owners. Along the way they may need to hire more people, that is good, but we have turned it into a politically correct debate guys. It is awful.

STEVE FORBES: First of all the real vulture in this, and I think all candidates would agree, is the Federal Government, sucking the life blood out of this economy through regulations and excessive taxation and trashing the dollar. It is legitimate for Mitt Romney to have to answer questions about, if his company from time to time did take too many dividends and management fees out of companies that subsequently went broke. He has to explain those things, and what he has to do is have a full thrown defense of it and make the case for it. But in cases where they did wrong, say what doesn't always work, most of the time it does, and he has to be forthright about it.

New South Carolina bill would require jobless collecting unemployment to volunteer 16 hours a week

RICH KARLGAARD: I know it sounds a little like FDR Civilian Conservation Core but it turns out that one of the worst things that can happen to a person who is jobless is they become depressed and they get out of the habit of simply waking up and showing up to someplace where they have to be. So, I think this is very good for both the jobless and I think it will provide some modest return on investment of taxpayer dollars who are supporting the jobless.

ELIZABETH MACDONALD: You know I get it. I get this was a good idea in the 20's but we are in a new age with government so out of control that they could just keep these unpaid workers on the government dole for a very long time, making spending even worse. The issue is that it is basically mandatory unpaid labor when people need to take that time instead of volunteering to look for a job. And state officials in South Carolina are already talking about how they could augment, meaning displace existing workers, which could make the unemployment rate even worse in the state.

STEVE FORBES: Let's drop the volunteer work, call it community service. You are working two days a week, the other three days you can be looking for work, but it does give you something to do. You get contacts, you may get some ideas and you also have your self-respect. You are not just getting a handout, you are earning that unemployment while you are looking for a job.

BILL BALDWIN: Chain gangs for the unemployed, I don't like it. There is a better way to motivate these people. Let's give workers, not employers, ownership of unemployment funds. Then when you retire at 66 if you haven't drawn down that fund it is yours, five or ten grand in your pocket. Now I hear Steve squirming next to me, but I want to remind him that this proposal came originally from an ultra-right-wing economist that he happens to like.

MORGAN BRENNAN: I actually really like this idea and I will tell you why. There is a very troubling phenomenon that has been going on in this country for the past couple of years. That is that about 43 percent of all the unemployed have been unemployed for six months or more. The longer you are unemployed, the harder it is to get a job. We are seeing this trend. I think this is a great idea because it gives networking opportunities, it allows you to add something to your resume, it can boost confidence and it also allows you to hone those skills that so many employers say long time unemployed people are getting rusty on.

RICK UNGAR: I am feeling Rich Karlgaard on this, I am feeling him. Look it is a good idea, but there is a condition I have to put on it. If this is really nothing but a cynical effort in South Carolina to come up with a way to drug test people getting unemployment benefits by saying ‘Look if you fail the drug test, you cannot do the volunteer work and if you can't do the volunteer work you can't get unemployment,' then I got a problem. If this is a legitimate effort to pair people's skills with community service, if you do it on a national level to expand America, I love it.

FLIPSIDE: New government rules will require airlines to show all the fees incorporated with low fares

VICTORIA BARRET: This is ridiculous because I think that most people understand that when they see an advertised flight rate it is not necessarily in sum. You have all these fees. What the airlines are arguing, and I have to agree with them, is that it is going to cost them money. These fees vary in different areas. So I think what we will end up seeing is a new ‘transparency fee' friends. You will have to pay for this new ‘transparency' in one way or another. It does not have to be done.

ELIZABETH MACDONALD: Well this is a flipside that is giving me a back ache when you think about it. Look, airline ticket fees, all the fees, are basically as transparent as a bucket of molasses right now. Worse than pharmaceuticals front type disclosures where they submarine the fees. Here is the deal, fees are keeping aloft the airlines and they are the new profit center. Passengers do not see them, not for just blankets, but also bring your pet on board, cashing in your frequent flyer miles, buying a ticket over the internet or over the phone. Not just checking luggage. I think this is also great because the government is also tacking on fees as well. Democracy is all about transparency. I am all for it.

STEVE FORBES: In terms of the fees you are going to have more footnotes and things like that than the actual price. You know if you bring a bag in you are going to pay more. I do like though, on the ticket, they should break it out, especially the fees to the government that they then loot for Bridges to Nowhere. They should have a disclaimer on there: This money is not being used to improve airports and air traffic controllers. It is being stolen by politicians in Washington. That kind of disclosure I would be all for.

MORGAN BRENNAN: I am all for this, I have to echo EMac here. People who need to fly are always going to fly, no matter what the price is. I think this could be potentially good for the airlines in the long run. We have a lot of discretionary flyers who chose over the holidays to take trains and cars, rather than fly because things like all those hidden fees and wondering whether they can check their baggage and how much that is going to cost. I think this is going to be one small thing out of many that needs to be made easier for people to fly. I think this could bring consumers back to the airlines.

RICH KARLGAARD: It is completely unworkable. The thing about the airline industry is they sell the most perishable good of all, an airline seat. When the flight takes off and no one is sitting in it that is lost money. You are always going to come down to an auction in the end and people are always going to play slightly different fees. That kind of pisses people off, but that is the way it works. It is a very dynamic industry, impossible to apply this paperwork.


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