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This from the WSJ:
The U.S. economy reported a 1.9% drop in productivity in the first quarter of the year, underscoring the trend of historically slow productivity growth in the current recovery. The slowdown isn’t entirely understood, but one certain cause is slower than usual business investment. Money that could go to wealth-creating innovations is going instead to financial deal-making.
Companies have announced more than $1.3 trillion of mergers and acquisitions world-wide so far this year, a surge of 23% from the same period last year and the most since the financial crisis. It’s not irrational exuberance that’s driving many of today’s deals—just the opposite. With fewer opportunities for growth but plenty of credit available to fund deals, mergers are often the most sensible way for a company to expand. . . .
In the U.S., the combination of loose monetary policy and restrictive government has created one of the great ironies of the Obama era. The labor-force participation rate of 62.7% persists at a 1978 level, and Americans who have jobs see little wage growth. But it’s a boom time for the Wall Streeters Mr. Obama vilifies, especially the attorneys and financiers who arrange corporate mergers.
Small companies are also struggling to find new customers and markets. A recent survey from the National Federation of Independent Business shows that the availability of credit is not the problem; business owners aren’t borrowing because they don’t know what to do with the money. Merely 5% of business owners reported that all their credit needs weren’t met. NFIB says that interest “rates are low, but prospects for putting borrowed money profitably to work have not improved enough to induce owners to step up their borrowing and spending.”
It is the story of this era. The Kauffman Foundation, which tracks new businesses, says its data show 2013 was “the second consecutive year to show an entrepreneurial activity decline in the United States.” Being an entrepreneur always takes guts. It takes special courage during an Administration that has twice set the annual record by issuing more than 81,000 pages of regulations.
But you wouldn’t know the challenges of the overall economy by observing the financial economy. The boom in corporate mergers has investment banks reporting surging advisory revenue. Dealogic reports that, world-wide, markets posted the best first quarter ever for equity capital deals, with initial public offerings, secondary stock sales and convertible bond offerings up 27% from the same period last year. Corporate debt issuance remains robust.
What are companies doing with all the money they raise? Not necessarily funding future prosperity. A recent note from Strategas Research Partners points out that much of the money flowing into companies in recent years was directed to “financial, rather than economic, risk-taking.” Strategas says that as of the end of last year the dollar volume of stock buybacks had soared 287% since the post-crisis low and the value of mergers and acquisitions was up 179%.
Senator Elizabeth Warren and others on the left want to blame all this on the companies. But what she doesn’t understand is that this is a perfectly rational market response to the sheer weight of the Obama regulatory apparatus that punishes innovation and risk-taking. The progressive urge is to command businesses to make more investments, but if there’s an opportunity, no one needs to be commanded to exploit it. Washington simply needs to allow it.
Capital expenditures support business expansion. In the U.S. they shrank in the first quarter by 3.4%, according to the Commerce Department’s measure of nonresidential private fixed investment. Such investment is needed not only to create new productive capacity, but to replace assets that are worn-out and obsolete. A separate Commerce measure, tracking net investment—meaning new investment minus the capital assets that are consumed—shows that even in an era of easy money, American businesses aren’t eager to spend on expansion.
Commerce has data through 2013 for this statistic. And in constant dollars, over the first five years of the Obama Administration net private nonresidential fixed investment was the lowest since the mid-1990s when the economy was much smaller. Even near-zero interest rates haven’t been able to offset ObamaCare, Dodd-Frank, new EPA emissions rules, the highest corporate tax rate in the developed world, and myriad other threats from Washington.
This White House has offered an abundance of taxpayer-funded stimulus plans. But the only true and lasting economic stimulus is one that gives people a reason to invest their own money. That will require a sharp reduction in the regulatory and tax burden that continues to inhibit business activity. Workers far from Wall Street desperately need relief.
And with yet more bad news on the Obama economy, this from Zero Hedge:
In what was an "unambiguously" unpleasant April jobs payrolls report, with a March revision dragging that month's job gain to the lowest level since June of 2012, the fact that the number of Americans not in the labor force rose once again, this time to 93,194K from 93,175K, with the result being a participation rate of 69.45 or just above the lowest percentage since 1977, will merely catalyze even more upside to the so called "market" which continues to reflect nothing but central bank liquidity, and thus - the accelerating deterioration of the broader economy. . . .
If anyone from the left quotes the bullshit unemployment rate to you of 5.4% as a sign that Obama is providing good stewardship of the economy, feel free to beat them bloody, since they are either partisans lying to you or idiots lying to themselves. Either way, they are in need of an epiphany.
Yet another aspect of the Obama economy that bears mention is that, while we have hemorrhaged good paying middle class jobs under the Obama economy, we have created a lot of low wage positions. Thus, it is not surprising to find that virtually all job gains since the 2007 Recession have gone to immigrants.
Since the beginning of the recession in December of 2007 — said to have ended in June 2009 — the foreign-born population has seen a much greater net employment growth than native-born Americans.
In December 2007 the number of foreign-born workers was 22,810,000. By April 2015, the number had increased to 24,819,000 or a net job growth of more than 2 million.
For native-born workers that number in December 2007 was 123,524,000 by April of this year the number of employed native-born Americans was 123,769,000 or a net job growth of 245,000. . . .
Governments cannot create prosperity. The long history of failed socialist and crony capitalist experiments of the 20th and 21st century are proof positive. What governments can do is create the conditions for prosperity with the minimal necessary laws and regulations. Or they, like Obama and the left are doing now, can strangle economies with heavy regulation and punishing taxes.
Why well meaning people on the left cannot grasp these concepts is beyond me? The closer one comes to free market capitalism, the more wealth is created and the better people fare at all economic levels. The closer one moves towards socialism or crony capitalism, the more regulations and punishing taxes one imposes, the more the economy suffers. There is a reason that the Obama years have been an economic disaster for all but the wealthiest Americans. Talk of economic redistribution sounds wonderful, but in Obamaland, the lower one is on the economic scale, the more one suffers under his administration. Indeed, the only thing that has kept this nation afloat for the past several years is the Fed's near zero interest rates and quantitative easing - i.e., spinning the printing presses at high speed. And the only people that is good for are those in the top few percent of economic wealth who are able to take advantage. We are seeing huge stock market bubbles form here and in Europe. Yes, there is an income gap and the wealthy are becoming wealthier while the middle class has suffered actual declines in economic well being, not to mention record or near record jobless levels. Blame for that rests squarely with Obama and the left.
