Obama’s Policies Lead Only to Pessimism among Business Leaders
By Jeremy Weltmer
Tuesday, August 3, 2010 9:37 am
There need no longer be any speculation about how businesses view the present economic climate. As Veronique de Rugy of the Mercatus Center has indicated,
“The above chart illustrates one of the greatest economic costs of the current recession: lack of businesses investment. Using data from the United States Federal Reserve Bank, Mercatus Center Senior Research Fellow Veronique de Rugy shows the changes in American businesses’ cash reserves since 1975. Billions of dollars in cash reserves is shown in red and cash reserves as a percentage of total business assets is shown in blue to provide historical parity. By both measures, companies are holding onto more cash than they have in 48 years, over $1.8 trillion.”
Historically, companies do whatever they can to optimize their return on capital, whether it be in terms of R&D, expansion, hiring, or acquisitions, yet in the present climate, they have chosen to sock away an unprecedented proportion of their revenue to protect against a rainy day. Now, one could chalk this up to an extremely dour outlook on the present economy, but the NFIB’s monthly survey of business leaders offers more insight.
As the recession has dragged on for almost three years now, “Economic Conditions” coming in as the most important indicator on the decision-making process regarding expansion should surprise no one. More importantly, whereas some disagreement exists among business leaders on every other issue, respondents resoundingly indicate that the Political Climate makes the present a bad time to expand.
Moreover, the chart of the “single most important problem” respondents currently face reveals even more.
As the Cato Institute indicates in its analysis
, “thirty percent of respondents said their single most important problem is “Poor Sales.” “Taxes” and “Government Regulations and Red Tape” come in second and third place at 22 percent and 13 percent respectively. Combining the two, the biggest problem facing small businesses according to respondents is government
. [In his recent op-ed about the survey, Paul] Krugman waves the government problem away by pointing out that taxes and regulations ranked higher in the 1990s when the economy was strong. However, he ignores the trend. Concern about taxes and regulations trended lower as the 1990s moved into the 2000s, but have been trending higher
in the last couple of years,” just reaffirming the notion that the only thing that businesses have left to fear is government itself.
Between what business leaders are saying and what their business choices are showing, one can see that there is a clear cause to business’s reticence: a fear of government policy making it impossible for them to do business as they do now. Every American knows the effects of businesses hoarding cash instead of hiring, building, and investing. The rainy day for which they are saving is the tomorrow that the politics of today will produce, and no amount of government policy can cure business of the cost of regulation.