When businesses are uncertain about taxes, health-care costs and regulatory initiatives, they adopt a cautious stance. Because it is costly to make a hiring or investment mistake, many companies will wait for calmer times to expand. If too many businesses wait, the recovery never takes off. Weak investments in capital goods, product development and worker training also undermine longer-run growth.The way forward, though, depends on your perspective. Victor Davis Hanson suggests that resolving the certainty in favor of President Obama and the Democrats' vision of forward will keep the resources idle.
So how much near-term improvement could we gain from a stable, certainty-enhancing policy regime? We estimate that restoring 2006 levels of policy uncertainty would yield an additional 2.5 million jobs over 18 months. Not a full solution to the jobs shortfall, but a big step in the right direction.
The only thing more discouraging to investors than class warfare generally is a certain type of class warfare: a hypocritical crusade that emanates from the upper classes and selectively targets enemies on the basis not of wealth, but of the degree to which they have failed to buy exemptions with their wealth. Meanwhile, on the other end, the message is more weeks of unemployment insurance, vastly more food-stamp recipients, and constant promises of mortgage-debt relief, credit-card-debt relief, and tuition-debt relief. If one were to dream up a perfect way to destroy incentives on both the top and bottom ends, one could do no better than what we have seen since 2009.Robert Reich disagrees.
The net result is that those with capital, even if they are small businesses, do not believe that the Obama administration likes them. They feel that regulations will increase, that taxes will increase, that energy costs will increase, and that as they pay more to government and keep less, government will nevertheless become even more arrogant and inefficient — and they will become even more demonized. When people pay over 50 percent in payroll, federal, state, and local taxes and are still caricatured as “not paying their fair share,” a sort of collective shrug follows and bodes ill for the economy at large. One need not be liked to make money, but the constant presidential harangues finally take their toll in insidious ways.
Countless times each day, a contractor chooses to hire only a part-time electrician, a CEO hoards cash rather than opens a new plant, a renting family declines to buy a reasonably priced new house, an indebted graduate heads home to kick back and wait until “something turns up,” and an unemployed worker wonders whether it is not wiser to receive all two years of federal benefits before reentering the work force.
I don’t know whether Mitt Romney’s economic package will bring instant prosperity. But I suspect that the fact alone that it is not what we have seen and heard for the last four years will unleash a pent-up energy of the sort we have not seen in a long time. In short, President Obama has achieved the impossible — he has convinced millions of rational, profit-minded Americans eager to invest, buy, and hire that he doesn’t worry much whether they do.
[Stock prices] are up because corporate profits are up, and profits are up largely because companies have figured out how to do more with less.There is, unfortunately, no compromise between those conflicting visions, out of which a modicum of policy consistency might emerge long enough for some of those idle resources to be put to use in a sustainably productive way.
Payrolls used to account for almost 70 percent of the typical company’s costs. But one of the most striking legacies of the Great Recession has been the decline of full-time employment – as companies have substituted software or outsourced jobs abroad (courtesy of the Internet, making outsourcing more efficient than ever), or shifted them to contract workers also linked via Internet and software.
That’s why most of the gains from the productivity revolution are going to the owners of capital, while typical workers are either unemployed or underemployed, or else getting wages and benefits whose real value continues to drop. The portion of total income going to capital rather than labor is the highest since the 1920s.