The anti-business president's pro-business recovery

This White House has "vilified industries," complains the U.S. Chamber of Commerce. America is burdened with "an anti-business president," moans the Weekly Standard.

Would that all presidents were this anti-business: According to the St. Louis Federal Reserve, corporate profits hit $1.37 trillion in the first quarter -- an all-time high. Businesses are sitting on about $2 trillion in cash reserves. Business spending jumped 20 percent last quarter and is up by 13 percent against 2009. And the Obama administration has cut taxes for small businesses and big ones alike. Maybe the president could be anti-me for a while. I could use the money.



The reality is that America's supposedly anti-business president has led an extremely pro-business recovery. The corporate community has recovered first, and best. The populist tone that conservative magazines and business groups decry is partly in reaction to this: As corporate America's position is getting better and better, the recovery is looking shakier and shakier. Unemployment is high. Housing looks perilously close to a double dip. Job growth is weak. Businesses aren't hiring. The 71,000 jobs the private sector added in July aren't sufficient to keep up with population growth, much less cut into the ranks of the unemployed.

That is the catch-22 of the recovery: Businesses will start hiring when the economy recovers. And the economy will start to recover when businesses start hiring.

 

Recently, it has been popular to blame the tension between skyrocketing corporate profits and weak job growth on the White House and the Hill -- hence the Chamber of Commerce and Weekly Standard quotes. Something must have gone wrong, right? And it's probably Washington's fault.

In fact, no: A look at the history of financial crises shows that our slow, halting recovery is right on schedule and the business community's caution is predictable.

Not all recessions are created equal. Recessions caused by financial crises take a lot longer to dig out of than their more common cousins. One is like the flu. The other, a car crash. When the flu goes away, you're good. When a collision spins to a stop, that's when the long, slow process of healing begins.

In "This Time is Different: Eight Centuries of Financial Folly," Carmen Reinhart and Kenneth Rogoff study every financial crisis of the past 800 years. It's an exhaustive study, and its conclusions are depressing for a country that believes itself exceptional even in its suffering: We're not special.

If you consider unemployment, housing prices, government debt and the stock market, Rogoff says, "the U.S. is just driving down the tracks of a typical post-WWII deep financial crisis." In some areas, we're even a bit ahead of the game: Economic output usually falls by 9 percent. We held the drop to 4 percent.

Even the unevenness of our recovery is predictable. "Housing and employment come back much slower than equity and gross domestic product," Reinhart says. GDP usually falls for two years and then recovers. Equity can move even faster, which helps explain corporate America's rapid revival. But employment tends to fall for five years. And housing? That's usually a six-year slide.

So business may be back, but customers aren't. You can see this in a recent survey that the National Federation of Independent Business -- a conservative small-business group -- conducted of its members: Overwhelmingly, they said their "most important" economic problem is slow or declining sales.

It's easier to understand, then, why only 6 percent said this was a good time to expand. But that shouldn't obscure what is, in fact, sort-of-good news (the frustrating stuff recoveries are made of): Businesses can expand; they're just biding their time.

"If you're running a business, you can't start hiring on speculation," says Joseph Kasputys, chairman of IHS Global Insight. "You have to wait until you see market signals that things are getting better. The smart businesses are looking for the early signs so they get the first advantage. They're ready to move."

That's a lot better than a world in which they have no capital and so cannot move.

So what can we do to speed things along? More government stimulus -- either through direct spending or further tax cuts -- could offer some quick help, but Senate Republicans won't allow anything large enough to make much of an impact. The Federal Reserve could step into the breach, but so far, it's been reluctant to do so. The Republicans want to see the Bush tax cuts extended and Obama's health-care and financial-regulation bills repealed, but none of that will make a big short-term difference.

Instead, we're left with that frustrating old standby: time.

A financial crisis "is not something that policymakers can undo quickly," Reinhart says. "If you look at the big, historic panorama, deleveraging takes time. It's not pretty. That's not the answer people want to hear, but these [recoveries] are lengthy."

So businesses are watching consumers, consumers are watching businesses, and everyone is pointing at Washington. But given the history of financial crises -- and in the absence of further government intervention -- there's not much left to watch but the clock.


This White House has "vilified industries," complains the U.S. Chamber of Commerce. America is burdened with "an anti-business president," moans the Weekly Standard.

Would that all presidents were this anti-business: According to the St. Louis Federal Reserve, corporate profits hit $1.37 trillion in the first quarter -- an all-time high. Businesses are sitting on about $2 trillion in cash reserves. Business spending jumped 20 percent last quarter and is up by 13 percent against 2009. And the Obama administration has cut taxes for small businesses and big ones alike. Maybe the president could be anti-me for a while. I could use the money.

The reality is that America's supposedly anti-business president has led an extremely pro-business recovery. The corporate community has recovered first, and best. The populist tone that conservative magazines and business groups decry is partly in reaction to this: As corporate America's position is getting better and better, the recovery is looking shakier and shakier. Unemployment is high. Housing looks perilously close to a double dip. Job growth is weak. Businesses aren't hiring. The 71,000 jobs the private sector added in July aren't sufficient to keep up with population growth, much less cut into the ranks of the unemployed.

That is the catch-22 of the recovery: Businesses will start hiring when the economy recovers. And the economy will start to recover when businesses start hiring.

Recently, it has been popular to blame the tension between skyrocketing corporate profits and weak job growth on the White House and the Hill -- hence the Chamber of Commerce and Weekly Standard quotes. Something must have gone wrong, right? And it's probably Washington's fault.

In fact, no: A look at the history of financial crises shows that our slow, halting recovery is right on schedule and the business community's caution is predictable.

Not all recessions are created equal. Recessions caused by financial crises take a lot longer to dig out of than their more common cousins. One is like the flu. The other, a car crash. When the flu goes away, you're good. When a collision spins to a stop, that's when the long, slow process of healing begins.

In "This Time is Different: Eight Centuries of Financial Folly," Carmen Reinhart and Kenneth Rogoff study every financial crisis of the past 800 years. It's an exhaustive study, and its conclusions are depressing for a country that believes itself exceptional even in its suffering: We're not special.

If you consider unemployment, housing prices, government debt and the stock market, Rogoff says, "the U.S. is just driving down the tracks of a typical post-WWII deep financial crisis." In some areas, we're even a bit ahead of the game: Economic output usually falls by 9 percent. We held the drop to 4 percent.

Even the unevenness of our recovery is predictable. "Housing and employment come back much slower than equity and gross domestic product," Reinhart says. GDP usually falls for two years and then recovers. Equity can move even faster, which helps explain corporate America's rapid revival. But employment tends to fall for five years. And housing? That's usually a six-year slide.

So business may be back, but customers aren't. You can see this in a recent survey that the National Federation of Independent Business -- a conservative small-business group -- conducted of its members: Overwhelmingly, they said their "most important" economic problem is slow or declining sales.

It's easier to understand, then, why only 6 percent said this was a good time to expand. But that shouldn't obscure what is, in fact, sort-of-good news (the frustrating stuff recoveries are made of): Businesses can expand; they're just biding their time.

"If you're running a business, you can't start hiring on speculation," says Joseph Kasputys, chairman of IHS Global Insight. "You have to wait until you see market signals that things are getting better. The smart businesses are looking for the early signs so they get the first advantage. They're ready to move."

That's a lot better than a world in which they have no capital and so cannot move.

So what can we do to speed things along? More government stimulus -- either through direct spending or further tax cuts -- could offer some quick help, but Senate Republicans won't allow anything large enough to make much of an impact. The Federal Reserve could step into the breach, but so far, it's been reluctant to do so. The Republicans want to see the Bush tax cuts extended and Obama's health-care and financial-regulation bills repealed, but none of that will make a big short-term difference.

Instead, we're left with that frustrating old standby: time.

A financial crisis "is not something that policymakers can undo quickly," Reinhart says. "If you look at the big, historic panorama, deleveraging takes time. It's not pretty. That's not the answer people want to hear, but these [recoveries] are lengthy."

So businesses are watching consumers, consumers are watching businesses, and everyone is pointing at Washington. But given the history of financial crises -- and in the absence of further government intervention -- there's not much left to watch but the clock.

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/06/AR2010080606238.html

 

Business leaders say Obama's economic policies stifle growth

By Lori Montgomery
Washington Post Staff Writer
Wednesday, June 23, 2010

The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama's closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an "increasingly hostile environment for investment and job creation."

Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and "harm our ability . . . to grow private-sector jobs in the U.S."

"In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore," Seidenberg said in a lunchtime speech to the Economic Club of Washington. "By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses."

Seidenberg's remarks reflect corporate America's growing discontent with Obama. The president has assiduously courted the nation's top executives since taking office last year, seeking their counsel on economic policy in the wake of the recession and issuing dozens of invitations to the White House. In return, the Roundtable has generally supported the president's policies; it was the only major business group to back Obama's successful push for an overhaul of the health-care system.

In recent months, however, that relationship has begun to fray. First, Democrats included a provision in the health-care bill -- over the Roundtable's objection -- that reduced corporate subsidies for drug coverage to retirees, a move that could cost big companies millions of dollars. Then the EPA unveiled rules to regulate greenhouse-gas emissions even without climate-change legislation, creating uncertainty about the future cost of energy.

The final straw, said Roundtable president John Castellani, was the introduction of two pieces of legislation, now pending in Congress, that the group views as particularly bad for business. One, a provision of the administration's financial regulation overhaul, would make it easier for shareholders to nominate corporate board members. The other would raise taxes on multinational corporations. The rhetoric accompanying the tax proposals has been particularly harsh, Castellani said, with Democrats vowing to campaign in this fall's midterm elections on a platform of punishing companies that move jobs overseas.


"We had been working very closely with them," Castellani said, but things kept popping up that were "not just an irritant but a distraction" to promoting economic growth.

White House spokeswoman Jennifer Psaki disputed that notion. "The president has consistently pursued policies designed to create a better climate for American businesses in order to foster job creation, innovation and economic growth," she said via e-mail. "We have always had an open door to the business community, and we look forward to an ongoing dialogue."

A White House official said the administration has a "very good relationship" with Seidenberg and expects that to continue. Seidenberg is one of a number of chief executives who have met several times with Obama and repeatedly with senior officials. In February alone, he was invited to dinner with Obama and to the president's Super Bowl party.

Seidenberg, whose company is at odds with the Federal Communications Commission over a plan to regulate broadband providers, first expressed his concerns about the direction of Democratic economic policy in a meeting last month with White House budget director Peter Orszag. When Orszag asked for specifics, Seidenberg polled the members of the Business Roundtable and a sister organization, the Business Council. The result was a 54-page document, delivered to Orszag on Monday, chock full of bullet points about actions taken or considered by a wide array of executive agencies, including the White House Middle Class Task Force and the Food and Drug Administration.

"We believe the cumulative effect of these proposals will help defeat the objectives we all share -- reducing unemployment, improving the competitiveness of U.S. companies and creating an environment that fosters long-term economic growth," Seidenberg wrote in a cover letter for the document, titled "Policy Burdens Inhibiting Economic Growth."

In his speech, Seidenberg said he has been "encouraged" by the administration's response to the letter, which includes an offer of additional meetings to discuss the specific complaints. And he denied that his relationship with Obama has deteriorated, saying he has visited the White House more times in the past year than "in the previous 16."

Obama "is not ignoring us," Seidenberg said. The problem, he said, is translating those discussions into policy actions that do not simply expand government, but help a nervous private sector "create work" in uncertain times.
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/22/AR2010062205279.html

 

U.S. Chamber echoes anti-business attacks on Obama, Democrats

By Walter Alarkon - 07/14/10 12:23 PM ET

The U.S. Chamber of Commerce is blasting the Obama administration and congressional Democrats for policies it says are expanding government and hindering an economic recovery.

The powerful business lobby group said Democrats and the White House have “neglected America’s number one priority” — creating jobs.

“Instead of continuing their partnership with the business community and embracing proven ideas for job creation, they vilified industries while embarking on an ill-advised course of government expansion, major tax increases, massive deficits, and job-destroying regulations,” the chamber wrote in an open letter to President Obama and lawmakers.

The chamber’s broadside comes after weeks of Republican attacks on the Obama administration for being “anti-business.” Both the chamber and GOP leaders in Congress have criticized the Democrats’ Wall Street reform package as another round of new regulations on top of the healthcare reform law that will add red tape and uncertainty for the private sector in the midst of a tepid recovery. The chamber is reportedly planning to spend $75 million in congressional midterm campaigns to go after Democrats and policies they don’t like.

The chamber will continue their press for more business-friendly policies on Wednesday during a jobs summit with both Democratic and GOP lawmakers.

Obama has pushed back against suggestions that his policies have hurt the private sector, pointing to tax cuts included in the $862 billion stimulus, which was supported by the chamber. White House officials touted the job creation effects of the stimulus Wednesday, releasing a report suggesting the tax cut and spending package increased employment by roughly 3 million jobs since it was enacted early last year.

The chamber, however, is now casting its lot with Republicans. They called on Congress to pass a number of measures championed by GOP leaders, including an extension of all of the Bush-era tax cuts set to expire at the end of the year, including those for people making more than $200,000. Democrats and the White House have pledged to extend only those for people making less than that amount.

The business group also called on Congress to cut the corporate tax rate, reduce the deficit through entitlement reforms and spending cuts, pass pending free-trade agreements and allow more oil-and-gas drilling.

“Government’s role is to establish the right conditions in which the private sector can do what it does best — foster economic growth, create innovative products and services, generate wealth, and, in the process, produce expanded revenues to educate our children, care for the sick and poor, and defend our nation,” the chamber wrote.

http://thehill.com/business-a-lobby...usiness-attacks-on-obama-dems?page=1#comments

 

Dear Obama, Here's Why Everyone Thinks You're Anti-Business

Joe Weisenthal | Jul. 11, 2010, 10:50 PM

Last week The White House began a major offensive to convince the private sector that it's not actually anti-business.

It probably won't accomplish all that much on that front, but what's important is the acknowledgment that this is becoming a real issue.

But why?

After all, The White House continued wholeheartedly with the bailout of Wall Street, one of the most pro-business (if not, exactly, pro-capitalism) experiments ever undertaken.

Mike O'Rourke of BTIG has some good thoughts on why:

Throughout 2009, we argued adamantly in favor of the economic policies the President’s team laid out to respond to the financial crisis. We also credited the President, who is often accused of having socialistic tendencies, for ignoring calls from world renowned economists, some of who have Nobel Prizes, to nationalize the U.S. Banking system. The President’s modus operandi throughout most of 2009 was to “speak loudly and carry a toothpick.” He seized every opportunity to fuel the fire of populism and direct the public’s anger to corporate America, yet he saved the banks. Here in 2010, it is a somewhat different story. In an effort to make use of his supermajorities in both houses of Congress before they disappear, the President spent the first 6 months ensuring that health care reform and financial reform are passed while the populist fires are still burning. Needless to say, spending the first half of the year re-regulating two major industries in the midst of an economy where the Unemployment Rate has hovered at or just below 10% for nine months hardly promotes thoughts of being business friendly. Although we all know financial reform was necessary, no industry, whether Financial, Health Care or Energy, feels comfortable hearing about sweeping rule changes, especially when many of the unintended consequences will not unfold for years.

The BP spill and the deepwater drilling moratorium only cemented anti-business fears. The Administration talks about safety being the issue, but the people in Louisiana see it as a jobs issue. The statistical likelihood of another such accident occurring again in the next year is small. We are told that the government wants to study the situation and safety issues, yet the irony is the MMS regulates this industry and is being berated by the Administration for being corrupt. If there was ever a prime example of why the opposition does not like big government, it is this corruption. For those looking at the jobs lost in this situation, one can understand the frustration. A government that inadequately or corruptibly regulated this situation to begin with is telling people out of work that they cannot go back to work until they examine the situation. Going forward, the best regulator of the deepwater drilling industry will be the fact that no publicly traded energy company will want to see half its market capitalization evaporate in the span of weeks and be forced to post tens of billions in escrow for a clean up - it does not help profit margins. Now that the judicial branch has weighed in multiple times to end the moratorium, the more the Administration fights, the more it appears anti-business, or even worse, anti-jobs.

http://www.businessinsider.com/dear...inks-youre-anti-business-2010-7#ixzz0w3NqtxZ9

 

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The numbers speak for themselves.

 

Fed set to downgrade outlook for US
By James Politi in Washington
Published: August 8 2010 19:15 | Last updated: August 8 2010

The Federal Reserve is set to downgrade its assessment of US economic prospects when it meets on Tuesday to discuss ways to reboot the flagging recovery.

Faced with weak economic data and rising fears of a double-dip recession, the Federal Open Market Committee is likely to ensure its policy is not constraining growth and to use its statement to signal greater concern about the economy. It is, however, unlikely to agree big new steps to boost growth.

Smaller measures to help the economy could initially take the form of a decision to reinvest proceeds from maturing mortgage-backed securities held by the US central bank, thereby preventing the Fed’s balance sheet from shrinking naturally.

Investors will also examine closely any changes to the pledge made by the FOMC in June to “employ its policy tools as necessary to promote economic recovery and price stability”, which could be hardened if policymakers choose to signal the potential for more aggressive move to boost the economy in the future.

But even if that happens, most economists believe that it would take several more months of poor data for the Fed to actually begin a new round of asset purchases on the scale of those carried out during the recession.

In congressional testimony last month, Ben Bernanke noted “unusual uncertainty” in the economic outlook and in a speech last week the Fed chairman warned of a “considerable way to go” before the US achieves a full recovery.

Although Fed policymakers still believe the basic trajectory of the economy remains one of moderate expansion, there may be more attention given to heightened dangers of a sharp slowdown. “The FOMC will have to tone down its assessment of the economy in view of recent weak indicators on real growth, real consumption spending and employment,” said Brian Bethune and Nigel Gault, economists at Global Insight.

The latest poor reading came in Friday’s monthly employment report, which showed the US private sector creating only 71,000 jobs in July – not enough to keep up with population growth, let alone bring down the unemployment rate. That followed news a week earlier that growth in US gross domestic product slowed from an annualised rate of 3.7 per cent in the first quarter to 2.4 per cent in the second quarter.

“Given how low inflation already is, and given the potential for the recovery to falter, we expect Fed officials will highlight downside risks and signal a bias to ease in the FOMC statement,” said Jim O’Sullivan, chief economist at MF Global.

There is little, if any, doubt that the FOMC will maintain interest rates at their current low target range of 0-0.25 per cent.

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Kudlow: Panic setting in at WH over economy
POSTED AT 10:30 AM ON AUGUST 8, 2010 BY ED MORRISSEY

The predicted Republican tsunami in the midterms has prompted some to wonder whether Barack Obama can do what Bill Clinton did after the 1994 Republican sweep — move back to the center for his own political survival. Larry Kudlow doesn’t sound optimistic, and instead sees the White House moving leftward in panic at the failing economy and falling polls. And Kudlow says there’s good reason for panic:

The departure of Christine Romer puts Larry Summers and Tim Geithner in the driver’s seat for economic policy — and Kudlow says that’s bad news indeed. Geithner’s already on record saying that extending the 2001 and 2003 tax cuts for wealthier earners will put the recovery in peril, when the evidence above shows that Obama needs investors to put their cash into the private sector instead of having the government seize it. Kudlow calls it Geithner’s war against investment, and with Romer out of the way, he expects it to escalate.

This explains James Pethokoukis’ warning about the rumored write-off at Fannie for underwater mortgages. That will either drop a bomb on Wall Street or on the national debt, which has already hit the crisis stage. Kudlow hears the same rumors (although it’s not clear whether he heard them from Pethokoukis’ column), and more. The Fed will extend its lax monetary policy even further at its meeting this month and may announce further expansion of the money supply, a move that will further depress an already sinking dollar. It’s a kitchen-sink, flailing approach to command-economy policies that clearly have failed to produce a real recovery and instead have delivered exactly what the same kind of approach delivered the last time it was tried in the 1970s: stagnation.

If this is an example of what the White House will do after losing a midterm election, don’t expect Barack Obama to be the second coming of Bill Clinton. He looks a lot more like the second term of Jimmy Carter, only even more inept.