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Mitt Romney's business background has played a starring role in his campaign, but some of his Republican rivals are trying to use it against him, suggesting Romney made his fortune at the expense of U.S. workers. The debate could grow louder in South Carolina. As we just heard, the unemployment rate there is high, near 10 percent. And NPR's Scott Horsley reports that a PAC supporting Newt Gingrich has threatened to spend millions on anti-Romney advertising.
SCOTT HORSLEY, BYLINE: Even as he claimed victory in the New Hampshire primary last night, Mitt Romney fired a defensive salvo. He said GOP rivals challenging his business background are trying to put free enterprise on trial.
MITT ROMNEY: The country already has a leader who divides us with the bitter politics of envy. We have to offer an alternative vision. I stand ready to lead us down a different path where we're lifted up by our desire to succeed, not dragged down by a resentment of success.
HORSLEY: You can certainly hear resentment in Randy Johnson's voice. Johnson is one of the workers who lost their jobs at an Indiana paper company after Romney's investment firm bought their plant in 1994.
RANDY JOHNSON: He made money. If that was his goal, he made a lot of bucks. Is that what we want, people that are worried about money more than the workers?
HORSLEY: The scrutiny has also shined a spotlight on the lucrative business known as private equity, where Romney made his fortune. Steve Judge, who heads a private equity trade group in Washington, says the business model is pretty simple.
STEVE JUDGE: We buy companies that have significant potential for growth. We invest capital and effort and expertise to improve their performance and, hopefully, increase their value.
HORSLEY: There are a number of ways to do that. A neglected company, like Dunkin' Donuts, might use an infusion of private equity money to grow, open new stores and hire new workers. That's a win for everybody. But Colin Blaydon, who heads the Tuck Center for Private Equity and Entrepreneurship at Dartmouth, says, sometimes, boosting value can also mean cutting costs.
COLIN BLAYDON: You might ask your employees to take lower pay. You may shift the jobs somewhere else. You may replace people with robots.
HORSLEY: In that case, the gains are not so widely shared. Private equity firms can also multiply their profits through financial engineering: borrowing most of the money to purchase a company, then quickly recouping their own investment through dividends and management fees. It's a bit like a homeowner who puts $5,000 down on a house, then quickly withdraws $10,000 in home equity loans. MIT professor Howard Anderson says some companies crumbled under the resulting debt load.
HOWARD ANDERSON: Sometimes, a company couldn't sustain the debt, and they had already taken money out.
HORSLEY: In fact, of Bain's top 10 investments, four of the companies ended in bankruptcy. But Bain still walked away with more than half a billion dollars in profit. Newt Gingrich told Fox News that doesn't sound like the free market.
NEWT GINGRICH: It's one thing to say, look, if a company has failed despite your best efforts, and you've put money into it, and you take a loss right along with all the workers, that's free enterprise. But if the rich guy is taking all the money, and the working guy is being left an unemployment check, that's not sound, healthy capitalism. That's the kind of thing that I think, frankly, makes people very suspicious of Wall Street.
HORSLEY: Steve Judge, of the private equity trade group, insists firms like Bain could not survive if they routinely drove companies into bankruptcy. Dartmouth's Blaydon adds that while private equity's bareknuckle cost-cutting may be painful, it's really what any good manager should do.
BLAYDON: That's what we want in our economy, if our economy is going to be more valuable and more competitive.
HORSLEY: But workers, like Randy Johnson, are not so sure. Bain Capital made more than $100 million off his company, even though his plant shut down and the company wound up in bankruptcy.
JOHNSON: To this day, I still don't understand why people think that making profit over good jobs, helping communities, families - at what point does the profits take control?
HORSLEY: That's a question Romney's rivals will be asking in South Carolina. And if he wins the GOP nomination, it may be a question voters are asking in November. Scott Horsley, NPR News.