Monday, July 12, 2010

The 'capital strike'

Here are three good insights as to why, as a result of government policies, capital is now 'on strike'.

First, as Michael Barone describes it, American businessmen (and women) don't dare to spend when they have no idea how much of their potential profits they'll be able to keep. The uncertainty has created a 'mattress economy': "People seem to be following this investment strategy. Step one: Go to Mattress Discounters and buy the biggest mattress you can find. Step two: Take it home, and stuff all your money in it. Step three: Lie down, and get some rest."

Second, the Business Roundtable has sent a lengthy letter to the Obama adminstration listing key regulatory issues that impede economic growth and job recovery. Those issues pretty much cover the waterfront: excessive corporate taxation; proposed financial regulatory reform that will reduce efficiency, stifle competition and deter capital formation; failure to adopt trade agreements; the proposed union-backed Card Check Bill; the proposed cap and trade bill, as well as ObamaCare.

Third, a new Harvard Business School study tracks changes in congressional committee chairmanship, since once you're a chairman, you can bring home much more pork. The resulting "fiscal spending shocks appear to significantly dampen corporate sector investment activity . . . when the spending shocks reverse (through a relinquishing of chairmanship), most all of these behaviors reverse."

Makes you wonder why we're doing this to ourselves, doesn't it? We must be nuts!

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