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TDS Co-Editor William Galston: Why Romney's Bain Problem Could Kill His Candidacy

This item by TDS Co-Editor William Galston is cross-posted from The New Republic.

There is good news and bad news for Mitt Romney out of New Hampshire. The good news is that he won an impressively broad-based victory that did nothing to slow his drive for the Republican presidential nomination. But it also exposed a vulnerability that could soon prove debilitating, if not fatal, to his candidacy.

While Romney is not yet a prohibitive favorite, he will be if he wins in South Carolina. And he will win, as John McCain did in 2008, if multiple candidates to his right divide the anybody-but-Mitt vote. Although emergency conservative conclaves are breaking out all over, none seems likely to lead to a unity not-Mitt candidate in time to make a difference. (If conservatives couldn't even get Rick Perry to leave the race, how can they get either Rick Santorum or Newt Gingrich to stand down? And there's nothing they or anyone else can do about Ron Paul.)

Also encouraging was the success of the campaign's systematic effort to make its candidate broadly acceptable to most factions of the Republican Party. Romney won 39 percent of the moderate vote in New Hampshire (matching his overall share). He did even better (48 percent) among voters who regard themselves as somewhat conservative. He even commanded 33 percent of those who consider themselves very conservative, beating Rick Santorum by 7 points.

While it's easy to downplay these results as evidence of Romney's home-field advantage in the Granite State, it's harder to dismiss a recent Gallup survey: 59 percent of moderate and liberal Republicans consider Romney to be an "acceptable" nominee ... and so do 59 percent of conservatives. Indeed, he's the only candidate that a majority of Republicans deems acceptable.

In short, Romney is well positioned to win the nomination and unite his party. Most of the conservatives who mistrust him are likely to fall into line, however grudgingly, once the general election contest begins and they confront the possibility of a second term for Barack Obama. And Romney is also well-positioned to run a strong race against the President: the country is in a somewhat conservative mood and in principle seems willing to accept a somewhat conservative candidate. Republicans lose favor when they go too far right, as Gov. Kasich did in Ohio and Gov. Scott continues to do in Florida. Romney has been pretty good at keeping his balance so far.

This brings us to the bad news: The waning hours of the New Hampshire contest saw the emergence of a critique that could severely damage Romney's general election prospects unless he figures out how to handle effectively. I'm referring, of course, to Bain Capital, which has become the prosecution's Exhibit A against the candidate.

Bain matters because it goes to the heart of the core case Romney is making: The economy is broken, Obama doesn't know how to fix it, and I do. If his rivals can undermine his record as a job-creator and substitute the narrative of Romney as a "vulture capitalist" who makes money by looting firms and firing workers, his path to the presidency becomes a lot steeper.

The only thing surprising about this issue is how late in the day it took center-stage. After all, an increasing number of blue-collar workers have become Republicans or Republican-leaning independents. The Tea Party movement is hardly sympathetic to Wall Street and the financial sector. And a key element of the Republican base--small business--has long regarded the corporate/establishment wing of the party with suspicion. As a populist whipping-boy, Romney is straight out of central casting.

So what should Romney do? His initial response--claiming that an attack on private equity firms is an attack on capitalism--may get him through the Republican nominating contest, but it won't serve him very well in the general election. Most citizens make an intuitive distinction between business activities that add value to workers and the economy (running an auto company, for example, as Romney's father did) and those that shuffle paper to the advantage only of the shufflers. It would be costly--perhaps fatal--for Romney to end up on the wrong side of that divide.

His campaign is wrestling with (some reports suggest divided over) how best to respond. There's an understandable reluctance to open up to public scrutiny the nearly one hundred deals in which he participated as the head of Bain Capital. But there's really no choice. Romney has to present a counter-narrative, and he can't do that without talking about individual cases. If he doesn't release details on his own terms, they'll dribble out anyway, prolonging the pain. And besides, in a public culture now suffused with anti-elite suspicion, a rich man running for president can't just say "Trust me"--especially if the skills that enabled him to become rich are the heart of the case he's making for replacing an incumbent president.

Since his awkward run for the Republican nomination in 2008, Romney has shown an impressive ability to learn from his mistakes, and he has run a smart, disciplined campaign this time around. Now he faces what may be his toughest test. Can this proud and private man come to grips with the core of his public identity? Can he acknowledge the warts on his record? Can he level with the American people, or with himself? If he passes this test, he'll be a formidable candidate. If not, he'll end up on the defensive. If the economy doesn't improve, it may not matter. If it does, how Romney handles his record at Bain--not in the fall, but in the next few weeks--could prove decisive.