I must hat-tip John M. Mason at Seeking Alpha for inspiring this post. He weaves some recent news articles into a story which I shall sharpen, with my own viewpoint and commentary.
First, consider that “Recovery in U.S. is lifting profits, but not adding jobs” (says the New York Times). As percentages of national income, corporate profits today are they highest they’ve been since the 1950s, and employee income is the lowest it’s been since the 1960s.
So what are companies doing with their profits?
- “More U.S. Profits Parked Abroad, Saving on Taxes” (says the Wall Street Journal).
- “U.S. Firms Send Record Cash Back to Investors” as dividends, share buybacks and mergers (says the Wall Street Journal).
In other words: Companies just don’t feel that they have many productive opportunities / uses for their money, in the U.S. And do feel that they face unpredictable, yet ever-growing regulation – as well as relatively high taxes. So, they don’t hire (in the U.S.). Instead, they dispose of their profits in ways that accomplish little but to reward their shareholders, thus raising the stock market.
Connect that, folks, to the market’s recent highs. But what does a rising stock market accomplish? Little but to make the wealthiest households feel wealthier.
And so, to the extent that rising consumer spending has contributed something to U.S. recovery, that spending has come more from the wealthier households. “Wealthier Households Carry the Spending Load”, says the Wall Street Journal. Meanwhile, Wal-Mart and Target, who serve less-wealthy households, have reported slower sales.
This is an economy suffering from the anti-market, anti-growth policies of the Obama administration. Not surprisingly, it is also an economy skewed to the wealthy.
I say “not surprisingly”, because I know that the two things are connected. It is precisely the middle and working classes which [Read more…]