Sunday, September 12, 2010

American Corporations Profit, Lose Souls

81% of Americans rate the US economy as "poor." With unemployment at above 9%, that's not surprising.

So who's to blame for the fact that people can't find jobs? Consider the following statistics:

September, 2006: Corporate profits: $1.6 trillion. Unemployment: 4.4%
July, 2010: Corporate profits: $1.6 trillion. Unemployment: 9.6%

If big business was in trouble, it would be understandable that they would not be hiring. However, the truth is that American corporations are refusing to add new jobs to their payrolls even as they enjoy very robust profits.

Republicans are claiming that the reason that businesses are not hiring is because of the "uncertainty" created by "new government regulations." But I don't think those claims stand up upon examination. Consider this Washington Post article by Neil Irwin,

"What role is government policy playing in fostering corporate caution?

The executive class in the Chicago region is none too pleased with many of the policies of President Obama, their former hometown senator. They criticize his willingness to let Bush-era tax cuts expire at year's end for households that make over $250,000 and allow the capital gains tax rate to increase. They dislike aspects of his landmark health-care law, and some fear that the financial overhaul legislation enacted this summer will make it harder for them to get loans.

"Congress has been very tough on businesses," said Jason Speer, chief executive of Quality Float Works of Schaumburg, Ill., which makes the industrial equivalent of toilet ball floats, items that sell for up to $1,200 and are used to measure water levels in farm and industrial equipment. The company also makes the metal balls that go on the top of flagpoles.

Fundamentally, executives objected to Obama's policies on the grounds they would make the United States a less competitive place to operate in the long run.

But when Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers.

None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring."

So to summarize:
During the first year of Obama's Presidency:
1. Quarterly growth in GDP rose from a rate of minus 6.8% to plus 5.4%,
2. Corporate profits increased by more than 50%.
3. The economy went from hemorrhaging nearly one million private sector jobs per month to positive growth in the number of private sector jobs.
4. The Dow Jones Industrial Average rose about 18%.
5. The federal government bailed out the automobile and banking industries, saving them from widespread liquidation.

Does that sound to you like an environment that is, "very tough on businesses"? Let's face it, businesses are not hiring because they don't have to. And it's not difficult to discern the chain of thought among corporate executives: If businesses refuse to hire, then unemployment stays high, which causes angry voters to put the Republicans back in power, who then protect tax breaks and an unregulated business environment.

Of course, as the sub-prime lending crisis demonstrated, businesses don't actually prosper in an environment of deregulation, but that's a story for another day.

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