Skip to comments.Paul Krugman: No evidence Obama is scaring business
Posted on 07/11/2010 11:26:56 AM PDT by Attention Surplus Disorder
Paul Krugman: No evidence Obama is scaring business By Paul Krugman Syndicated columist Posted: 07/11/2010 12:01:00 AM PDT
JOB CREATION has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Barack Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Obama.
But no. All the buzz lately is that the Obama administration is "anti-business." And there are widespread claims that fears about taxes, regulation and budget deficits are holding down business spending and blocking economic recovery.
How much truth is there to these claims? None. Business spending is indeed low, but no lower than one would have expected given widespread overcapacity and weak consumer spending. Business leaders are feeling unloved, but giving them a group hug won't cure what ails the economy.
Ask the Obama-is-scaring-business crowd for some actual evidence supporting their claim, and they'll tell you that business spending on plants and equipment is at its lowest level, as a share of GDP, in 40 years. What they don't mention is that business investment always falls sharply when the economy is depressed.
After all, why should businesses expand production capacity when they're not selling enough to use the capacity they already have? And in case you haven't noticed, we still have a deeply depressed economy.
Historically, there has been a close relationship between
the level of business investment and the "output gap," the difference between the economy's actual output and its long-run trend which means that there's nothing surprising about low investment now, given the fact that the output gap is hugely negative.
If anything, it's surprising how well business investment has been holding up.
Alternatively, we can look directly at measures of unused business capacity. Capacity utilization in industry is up over the past year, but still far below historical norms. Vacancy rates at industrial and retail properties are at historic highs. Again, given that businesses have plenty of idle structures and machines, why should they be building or buying even more?
So where's the evidence that an anti-business climate is depressing spending? The answer, supposedly, is that this is what you hear when you talk to entrepreneurs. But don't believe it. Yes, when you talk to business people they complain about taxes, regulations and the deficit; they always do. But the Obama's-socialist-policies-are-wrecking-the-economy chorus isn't coming from businesses; it's coming from business lobbyists, which isn't at all the same thing.
Read the report on the U.S. Chamber of Commerce in the latest Washington Monthly: Peddling scare stories about what Democrats are up to is a large part of what organizations like the chamber do for a living.
Or read through the latest survey of small business trends by the National Federation for Independent Business, an advocacy group. The commentary at the front of the report is largely a diatribe against government "Washington is applying leeches and performing blood-letting as a cure" and you might naively imagine that this diatribe reflects what the surveyed businesses said. But while a few businesses declared that the political climate was deterring expansion, they were vastly outnumbered by those citing a poor economy.
The charts at the back of the report, showing trends in business perceptions of their "most important problem," are even more revealing. It turns out that business is less concerned about taxes and regulation than during the 1990s, an era of booming investment. Concerns about poor sales, on the other hand, have surged. The weak economy, not fear about government actions, is what's holding investment down.
So why are we hearing so much about the alleged harm being inflicted by an anti-business climate? For the most part it's the same old, same old: lobbyists trying to bully Washington into cutting taxes and dismantling regulations, while extracting bigger fees from their clients along the way.
Beyond that, business leaders are, as I said, feeling unloved: The financial crisis, health insurance scandals, and the catastrophe in the Gulf of Mexico have taken a toll on their reputation. Somehow, however, rather than blaming their peers for bad behavior, CEOs blame Obama for "demonizing" business by which they apparently mean speaking frankly about the culpability of the guilty parties.
Well, CEOs are people, too but soothing their hurt feelings isn't a priority right now, and it has nothing at all to do with promoting economic recovery. If we want stronger business spending, we need to give businesses a reason to spend. And to do that, the government needs to start doing more, not less, to promote overall economic recovery.
I wouldn’t risk investment capital on a startup business now. Anybody else feel the same way?
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Krugman is one of the dumbest people in the world, no wonder he works for the NY Times.
There’s no evidence that Krugman knows what he’s talking about.
It just depends upon the meaning of “scaring.”......Business owners are NOT scared...they are prudent and probably getting really pissed about now.....some seem to be finally waking up.....unlike Krugman the zombie.
I haven't seen any.
I’ll still play my low-risk funds for the heck of it. But I am leaning towards diversifying to outsourcing companies because Obamagoo has turned us into a banana republic.
BP was happy to fork over a 20 billion slush fund to the Kenyan. Did it out of the goodness of their heart.
I own a trucking company. Think I’m going to hire drivers? Yeah, right.
With all the new tax laws and regulations, new DOT Regs, and an increasingly combative Federal Gov’t, I’m going to pay overtime before I hire anyone new.
I’m not alone.
There’s also no evidence that Krugman’s IQ is larger than his shoe size.
Re investments: Consider a flyer in some of the pawnshop companies, like EZCorp (EZPW).
He is a shameless LIAR
Of course the businesses are profitable, you moron. They have shed bazillions in payroll! Until the rules change there isn't any reason to hire them back, dummy!
Exhibit A: My very successful firm held Round 2 Layoffs in February - the day after the TOTOS State of the Union “address,” such as it was. Move to admit this into evidence, Your Honor Krugman.
Exhibit B: My very successful firm’s FIRST ever round of layoff’s was January the previous year - that’s right, 0bama’s January inauguration. Our exec’s rightly recognized what we have in our White House and made a pre-emptive purge. Motion to admit Exhibit B into evidence, Judge Krugman.
Pual, you just replaced Ron Paul as the Paultard in Chief.
I live in the start-up and small business world. Scared doesn’t even come close to describing the atmosphere. Try terrified. Or kaput...
lol....Krugman is a retard. My company is not the only one I know of that’s freezing hiring because no one can figure out what the Feds are going to do next, or how what they’ve done recently is going to impact the company a couple years down the road.
I guess you have to have a Nobel to be this stupid.
No you're not. I'm several years removed from my last business, which employed 50, and if I were still there, I know that me and my ex-partners would be very careful about new hires and also about magic number employment levels which trigger new mandates.
Paul Krugman isn't dumb, he's an evil genius.
No evidence except stock market sell off, unemployment, little buying, housing down... No wonder they think anything will work.
“I wouldnt risk investment capital on a startup business now. Anybody else feel the same way?
Well, for me, it would depend mightily upon what flavor business you were talking about. If it was an internet company with no inventory, no employees, no premises, and no overhead, I’d be fine with it, LOL. If it had to transform anything into anything else; if it had to transship items using internal combustion vehicles, if it had to employ people who required employer-paid healthcare, diversity and sensitivity training, no way.
In the largest sense, I completely agree with you. What was once the crowning opportunity of the American Dream (and yeah, I’ll admit to using a corny phrase) = eg; starting your own business, and maybe succeeding if you had the gumption, smarts, and persistence, is now the functional equivalent to standing downrange with a target pinned to your chest at a shooting gallery.
I believe it.
I also believe this “CEOs are just being wusses” meme is going to be the administration’s talking point to try to get over this gathering storm.
“JOB CREATION has been disappointing, but first-quarter corporate profits were up 44 percent from a year earlier. Consumers are nervous, but the Dow, which was below 8,000 on the day President Barack Obama was inaugurated, is now over 10,000. In a rational universe, American business would be very happy with Obama.”
Well,let’s parse this out: First-quarter profits were up so much because of extensive layoffs and employee benefits cuts for most companies- not because of an increase in sales. And the Dow has been up largely because of the bubble effect of printing massive amounts of money and a devalued dollar.
And what exactly will happen Mr. Krugman, when the Dems beloved “stimulus” runs out and high taxes kick in?
Krugman must be shaking, sobbing, spitting and flailing his weak leftist arms to put out this unparalleled pit of fear plate of hogwash. Make no mistake, they’re all trembling with powerlessness at the building backlash coming down the proverbial pike.
I would hope any “CEO’s are being wusses” message backfires as CEO’s, by definition, have 100% more experience than 0bama; however, the public union zombie cheerleaders will probably swallow it and chant, “Bush and CEO’s lied; the economy died!” or something equally brilliant.
I actually thought pawnshops were independent hmmmm. Thanks for that.
I take back my post: Obamagoo isn;t scaring business..he’s driving them further into the underground market. Spoke with a buddy of mine recently who holds multiple domains and he pays some schlub overseas $12/day to admin the sites. That’s PER day.
Krugman uses the word “evidence”, but I don’t think he knows what it means.
Is he getting good results from his overseas admin? I might need one.
Welcome to Galt’s Gulch! Population: Business owners!
Yep. The dude overseas is disciplined enough to do the job. He just hinted somewhere “in central Europe”. He kept saying that instead of paying someone here in L.A. $12/hour, plus UI, plus healthcare etc, he just pays this guy $12/DAY.
You know O is in trouble when Imelt begins bashing him.
My economist brother-in-law refers to the "Italian Model" of the economy as one where a lot of business is underground; everyone knows it; and there's an equilibrium (or understanding) that it's OK as long as it's not abused too flagrantly.
We're a long way from that because of the puritannical and racial/class warfare streaks in our US culture. The administration of penalties is too charged with influence and whimsy.
I agree that he isn’t stupid, but he is no genius. Everything he has done is formulaic. Krugman is the “good boy” who always gave the teacher the answer SHE wanted. As an adult he has done that in economics and politics and has been rewarded for being a capable, reliable, leftwing drone.
krugman is a ****ing liar too.
Today while I was driving my car, there was car with an obama sticker on it. I gave a look to see who it was and it looked like krugman.
ROFLOL! Surly he jests! Does he not consider the extra high unempolyment rate as enough evidence?
That statement pretty well guarantees the market will now roll over an die.
Why, yes. He's got one of them there No-Bel prize thingies ... just like Obama and Gore.
Krugman has two brain cells left, and they are waving “good-bye” to each other.
On the day after the election 2008, my phone stopped ringing and my sales stopped.
It still is not ringing like it did.
I went from selling 265 golf carts in 2007 to 9 golf carts in 2009.
Good point - one I was going to make. There is a world of difference between small/start-up businesses and large corporations that have lobbyists and government “friends.”
In the businesses I am aware of, most people are scared, not expanding, not willing to take risks, feeling like they can’t predict what horror is going to come at them next from an out-of-control and unfriendly government. There is a feeling of not believing what we are seeing and not knowing how to respond. I move in a very educated world and none of us have ever seen anything like this.
What business owners has Mr. Krugmans actually, in reality, spoken to?