Private equity’s twisted trip down the campaign trail

August 21, 2012, 1:00 PM UTC

FORTUNE – Last summer I wrote in this space that Mitt Romney’s political ambitions would hurt private equity. What I didn’t realize at the time was that private equity would also hurt politics.

We have come to expect a certain amount of half-truths and message spinning in our electoral discourse. But the emphasis by both candidates on Romney’s private equity background, rather than on his gubernatorial record in Massachusetts, has opened the door to something quite different: bald-faced lies.

Private equity is an arcane, secretive business that even many financial professionals don’t fully understand. And politicians are abusing that ignorance. They feel emboldened to say whatever suits their broader campaign narratives, confident that the vast majority of voters have neither the time nor the patience to study a subject that has no other relevance to their daily lives. What follows are some of the more egregious examples. They come not from talk radio hosts or blog commenters, but from the inner circles of power:

  • Romney has repeatedly claimed that while with Bain Capital “we helped create over 100,000 new jobs.” When asked during a primary debate if the figure also included job losses, Romney responded, “It includes the net of both. I’m a good enough numbers guy to make sure I got both sides of that.” The only problem is that Bain says it never kept track of jobs added or lost at its portfolio companies. You’d think a “numbers guy” would have noticed that the numbers were missing, thus making a definitive calculation impossible.
  • Sen. Harry Reid revealed in July that a “Bain Capital investor” told him that Romney had gone 10 years without paying taxes. He didn’t further identify his source, apparently thinking it self-evident that investors in private equity funds would have access to the personal tax returns of their fund managers. They don’t. Not at Bain, not anywhere.
  • Obama adviser David Axelrod said late last year of Romney: “Generally his practice has been to bet other people’s money, not his own.” And Romney agreed in a subsequent television interview when he noted that “the dollars in Bain Capital weren’t my dollars.” The reality is that most senior private equity executives (including those at Bain) are required to co-invest in their firm’s funds, to better align interests. So while it’s true that Romney was managing/risking other people’s money, some of his own fortune was also in play.

With two more months until the election, we’ll surely have more private equity-related lies on the campaign trail. It isn’t a partisan problem. It’s a civic one.

Normally this is where the political press steps in, calling out untruths and holding their creators to account. Unfortunately, such folks have neither the knowledge nor the sources to adequately cover private equity issues. Major media could have done their readers and viewers a big favor by incorporating veteran business reporters into their campaign coverage. Sadly, that hasn’t happened. Instead, the same folks who covered the previous presidential election are covering this one — ignoring the elephantine variable that Romney represents.

MORE: Mitt Romney’s 5-point plan for the economy

I may be among the last Americans who still believe there is something noble about our political process — that the majority of insiders are still more interested in helping people than in accumulating power for its own sake. But this campaign is severely testing that faith, particularly as a mocking tolerance of falsehoods persists. When both presidential candidates and the fourth estate conclude that facts are disposable, we’ve all lost.

In general, few private equity executives want to run for office. Too much scrutiny, too little money. But for those who do still harbor such ambitions, I sincerely hope that they direct their energies elsewhere. Their country needs them to.

This story is from the September 3, 2012 issue of Fortune.