Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they've yet to amp up hiring or make major investments -- the missing ingredients for a strong economic recovery.
Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.
And as for business executives?
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.
Businesses blame consumers. They think there will be inadequate consumer spending for many years. They're being cautious because consumers are being cautious. Of course, unlike the corporations, consumers aren't sitting on piles of money. They aren't spending because they have nothing or too little to spend. Which brings us back to the idea of helping consumers attain enough money and confidence so that they will resume spending, which brings us back to the idea of more stimulus. Not bailouts for failing corporations or subsidies for thriving corporations, but jobs programs. Corporations are sitting on the money they already have. They don't need more help, and they aren't helping. But consumers have too little money. They do need help. And when they gain enough income and confidence they do tend to spend, which is why bottom-up stimulus is much more effective than top-down.
Republicans want what they always want: less taxes and less regulation, the economic model that drove the economy into the ground, the model championed by Reagan, which began the steady expansion of the income gap, and the steady erosion of the middle class. It also was the model championed by Bush-Cheney, which all but destroyed the economy. The banking crisis, the health care crisis, and the environmental crisis in the Gulf of Mexico are but a few of the many proofs that less regulation leads to disaster. But less regulation is all the Republicans have to offer.
As economists such as Paul Krugman and Joseph Stiglitz (video) warned, the Obama stimulus was far too little. It prevented things from getting worse, but it didn't make things significantly better. Unemployment is not abating. It's again getting worse. As Krugman wrote last month:
I really don’t think people appreciate the huge dangers posed by a weak response to 9 1/2 percent unemployment, and the highest rate of long-term unemployment ever recorded
He was referring to this post by Brad DeLong:
However, even a minor and hasty acquaintance with the Great Depression teaches that the belief that the government should stand back and wash its hands because the self-regulating market quickly returns to full-employment equilibrium is the most arrogant belief possible.
And even a minor and hasty acquaintance with the Great Depression teaches that having the government stand back and wash its hands is the most risky strategy conceivable.
Businesses aren't creating jobs, and they have no intention of doing so unless they see signs that consumers will again resume spending. Consumers won't be spending as long as they have nothing or too little to spend. It's a feedback loop. There is only one way to break it. It has to be the government. The government has to create jobs. Infrastructure. Clean energy. Mass transit. There are plenty of social goods for government to fund, and there are plenty of people who are willing and able to be trained and employed. It has to happen. And only the government can do it.