Free Markets, Free People

Policy not profits is the reason for the slow recovery

I‘m always cynically amused by lead sentences like this from the supposedly unbiased media.

Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections – even as a separate report shows corporate profits reaching their highest levels ever.

Of course one has zippity do dah to do with the other. The reason corporate profits are reaching their highest levels ever is because corporations that have survived the recession have done so paring down to a "lean and mean" status by dropping headcount, closing unneeded facilities and cutting spending. Those workers that are still employed are what are necessary to carry the corporation forward in the financial situation and business climate we find ourselves in now. As the economy slowly picks up steam and additional headcount can be justified by additional business, it will be added. But, as we all know, employment is a lagging indicator – i.e. profits and such are going to go up before headcount goes up.

But there’s going to have to be a definite, traceable, unmistakable upward trend with a demonstrable increase in business before corporations add headcount again in the present business climate. And given what this administration and the 111th Congress have done – make war on American business – few are inclined to do that.

So? So it stands to reason that employment is down and will probably stay down until corporations and businesses see a much friendlier and stable business climate than they’re seeing now.

We haven’t been writing about the hostile climate here for our health or amusement. But as can be witnessed here, the subtle yet telling attempt to shift the blame is found in the first sentence. If only greedy corporations would simply start hiring instead of amassing profit, why everything would be peachy keen and our man in the White House wouldn’t be looking at the probability of high unemployment in 2012.

So prepare yourself to see these sorts of exercises in blame shifting at regular intervals over the next couple of years.

Even as conditions are likely to remain miserable for job seekers for years to come, an extraordinary bounce-back is underway in the nation’s corporate sector, with profits rebounding 28 percent over the past year to an all-time high in the third quarter.

Without this narrative, which the entire left and a good portion of the middle will swallow whole, the administration and Democrats haven’t an identified enemy with which to wage political war – and that, of course, is part of our problem now.



26 Responses to Policy not profits is the reason for the slow recovery

  • Are you waiting to see if they come up with an equivalent to the “strike of capital” from the Depression?
    I bet they would cloak it in the language of markets this time.

  • Most corporations don’t pay much taxes in good times or bad.  The corporate contribution to annual tax revenue is a testament to that.  But at this time they don’t trust the credit market and are accumulating cash instead of “investing ” it.  That forces them to show more as profit on the books.
    To me large corporate profits are an attempt at buckling down for a prolonged and/or deepening recession.

    • They also supposedly have a lot of debt, meaning those profits are offset a bit. Also, I don’t know what they are supposed to invest in, more capacity in an economy running at around 70% capacity as it is?

      • Couple of observations…
        Corporations generally do not pay taxes; the collect taxes from consumers in their price structure (unless they are in a very rare elasticity niche).
        When any organism is stressed, it will try to store what it can for long-term survival.
        When you have fungible stuff (like money), you have options about where (geographically) you are going to put it.  I see this as companies very rationally keeping their bags packed, ready if an exodus makes sense.

  • According to the Collectivist mentors of Obama, this is one of those perception-shaping exercises…
    So many people unemployed…so much misery…
    And these fat-cat companies greedily hoarding all these profits when they could be hiring people…AND THERE IS NO REASON FOR THEM NOT TO HIRE.
    Also fits the meme that the flat economy is a TEA Party conspiracy.

    • I think it’s more apt to say that many people (typically on the left) view companies as being “for” making jobs, not “for” making a product or a profit.
      With that view, it’s easy to see why profit going up while there’s no significant hiring is just puzzling and wrong!

      • “Social responsibility” is taught in MBA classes.
        A corporation (or any business form) has one prime directive—MAXIMIZE LONG-TERM RETURNS ON CAPITAL.
        That’s it.  Nothing more or less.  Simple.

      • So they get upset when, say, higher taxes to pay for their boondoggles means these businesses invest LESS. Don’t they know its for the common good? C’mon everyone pull hard for the Plan.

  • Well, if your understanding of economics and business is as bad as this stupid, stupid woman, and if your thirst for class warfare is as high as hers, then of course the first thing you think when you hear “profits” is “they’re taking advantage of someone”.

    Sample of her meaningless, class warfare drivel, commenting on extending the tax cuts: “Expose the Republicans for what they are,  hypocrites who are ready to give hand outs to the connected, but won’t give a hand up to those in economic pain…”

    Got that? Letting people keep their own money is giving them a hand out. Post-modern redefinition of terms to suit the narrative strikes again. They’ll say absolutely anything, the more meaningless the better, to further leftist control of the economy and the political system. Next to the contorsions of meaning perpetrates by this leftist fool, class warfare rhetoric demonizing businesses that make a profit is child’s play.

    • A “fair share economy” to my mind would have EVERY American paying the same percentage of their income for their government, rather than having nearly half of us paying NOTHING.
      Skin in the game, as it were…

    • That’s what I was thinking.  No attempt is made to figure out why companies may be generating such high profits, they simply wonder aloud why that money isn’t being put to better use.  In better times, I assume that people like Heuvel would ignore the laws of supply and demand, insisting that companies making high profits simply slash their prices so that everyone can have item X.

      • So…let’s punish those corporations which will cause them to….oh, right, make more people unemployed.
        Well, clearly we can’t have that – we just have to take them over.  We can select the ‘winners’.  So,  if you want coffee, you’ll have to get it from the American Coffee Corporation (a wholly owned subsidiary of the US government), the only coffee supplier there is – need paper towels, the American Paper Products company ( a wholly owned etc…).   It’ll be just great!
        No more messy profit thingie goin on, we’ll mandate, like insurance, that you have to buy from them!

        • A nation-wide company store, but with laws and guns.  Sounds wonderful…
          Actually, it’ll never happen.  The idea is revolting.  Literally….

          • I do so enjoy the progressive sentiment that corporations are actually some kind of life form that is not actually composed of working taxpayers, stockholders, union employees etc.
            Course we SEE what happens when light suddenly dawns on their pointy little marbleheads – we get a GM bailout – we get Google, offshoring their tax burden and contributing to the Democratic campaign funds.  Those two aren’t corporations you see….No, only OIL companies are corporations specifically, all others are just ‘greedy corporations’.  Like the great things Obama was going to do, YOU get to fill in the blanks about which ones are evil.  So if you feel like Microsoft screwed you, well, you can believe that the government will punish them if you like.   There may be some variation between reality and your belief.

    • Billy HollisWell, if your understanding of economics and business is as bad as this stupid, stupid woman, and if your thirst for class warfare is as high as hers, then of course the first thing you think when you hear “profits” is “they’re taking advantage of someone”.

      Why does an eeeevil corporation pay people like her???  It’s like the NRA hiring Sarah Brady to be a spokesman, or the US Army asking Cindy Sheehan to do a recruiting drive: totally self-destructive.

      • You know why an evil corporation pays her:  because she sells product to customers who demand that sort of psuedo-economic drivel (there’s a lot of ex-humanities and sociology majors out there with lots of time to read nowadays).  It’s not like anybody in that corporation is afraid she’ll actually be succesful enough to affect its existence.  She’s an idiot and so are her theories; they’re entirely illogical from the perpective of actual reality.  There’s nothing to fear from pointless babble, and certainly there are corporate profits to be made from it.  Who really gets the last laugh here?

  • paring down to a “lean and mean” status by dropping headcount, closing unneeded facilities and cutting spending

    A process that the federal government is incapable of doing .. ever

  • The question is: will people buy it?

    Will the majority of our people buy into (again) the class-warfare schtick, blaming eeeeevil companies for our economic woes?  Or will they figure out that the problem is Uncle Sugar, who is stifling investment (read: economic growth and hiring) by making it economically suicidal to run a business in the United States?

    I fear that most people will blame the corporations.  Can you say “October Revolution”?  I think you can…

    • Just wait until a whole bunch more outsource and more of the IPOs go overseas…

    • Its not the 1930’s anymore. Communism was a failure. In bad economic times, the right-center gets elected even in Europe.

      • You know that communism was a failure.  I know that communism was a failure.  But how many Americans, especially those who have no personal memories of the USSR, know it?  And how many people who DO have personal memories of the USSR – people like The Dear Golfer, Van Jones, Valerie Jarrett, SanFran Nan, the entire lineup at MSNBC, the newsrooms at the NYT and the WaPo, et al – have FOND memories?  These people don’t regard communism as a failure: they look at is as a great idea whose time in America just might have come.

  • With the devastation in the news rooms, I am surprised the reporters seem to be so unaware of profit/loss and how headcount fits into that.  On the other hand, government grows during good times and bad, so there is nothing that will lead them to understand profit/loss and the relationship to headcount.

    • You know they secretly (or not so secretly) think that journolist should be federal employees or get subsidies from the government.

  • When the profits go away, so go the jobs.
    Why is it the more advanced the degree, the less the Left can see?