We've heard this pat line over and over again, that Obama is "anti-business." The president's detractors say that his anti-business views along with his regulatory excess (is this even true?) are the reason that businesses are not investing. They state it as if it is fact...businesses are not investing.
Is this really true?
I will once again examine this claim. The charts below have been constructed from data from the Bureau of Economic analysis.
Chart 1. Real Total Business Investment (billions $)
This first chart shows that total business investment under Obama beat Reagan, Bush 1 and Bush 2. And you can see that both Bush's--Republicans--were negative, by the way. Only Clinton beat Obama and that was over a period of eight years as opposed to Obama's three. Clinton also had the benefit of a booming economy, the Internet boom and Y2K. In addition, once Clinton started running surpluses, business investment slowed considerably. That's not evident necessarily in the chart, but it is upon examination of the data.
Chart 2. Real Growth in Business Investment compared to growth in GDP
The second chart is even more eye-opening. It shows that the growth in business investment relative to the growth in the economy has NEVER BEEN FASTER THAN NOW! (Again, I went as far back as Reagan.) Business investment is surging as a percent of GDP. In Obama's three years in office, the growth in business investment has been more rapid than Reagan, Bush 1, Bush 2 and even Clinton!
Let me be clear, I am not here to champion or support Obama. There are lots of things that this president is doing wrong--terribly wrong--and I was among the first to point out his hard-core neo-liberal leanings. I spoke about it way back in 2008 when he first selected his economic team.
However, let's call a spade a spade. The claim that businesses are not investing under Obama because of his "anti business" attitude is PURE BULLSHIT!! The numbers speak for themselves.
18 comments:
Norm,
My gut feeling is that most of this "business investment" occurred as ARRA took effect, and as ARRA has wound down, and "austerity" is all the fashion, that investment picture may not reflect the current state of affairs.
I agree, however, "hard core" austerity won't hit until 2013, if then.
Norm,
I say that, as I look at the CPI picture and discussion at Daily Kos - Still waiting on that hyperinflation. Teabagger Epic FAIL!
There was a sharp drop in the increases in CPI from March 2011 to Oct 2011, with the CPI change shifting into a deflationary range by October.
Probably the best single policy Obama has signed into law (a pity he didn't get a much bigger payroll tax holiday along with it).
President Barack Obama, in one of his most dramatic gestures to business, will propose that companies be allowed to write off 100% of their new investment in plant and equipment through 2011, a plan that White House economists say would cut business taxes by nearly $200 billion over two years.
http://articles.businessinsider.com/2010-09-06/markets/30031372_1_tax-credit-railways-and-runways-business-taxes
What would it take to remove the debt-ceiling?
Shaun,
The Debt Ceiling repeal is a "political non starter"
The way to get around it, and make it irrelevant, is to use Beowulf's "platinum Coin" strategy
Thanks Clonal. I think that was around the time I discovered Mike's blog.
But was just curious to know what it would take to get it removed.
Shaun,
A simple repeal of a 1917 law.
Shaun, for a history of the debt ceiling, see - The Debt Limit: History and Recent Increases
Where can I find that data on business investement statistics? I'm having trouble finding the raw data on BEA's website.
Dustin,
At the BEA website, go to National Income and Product Accounts tables, GDP, Real Gross Domestic Product and then use the line for Gross Private Domestic Investment. Select 1980-current.
I believe our Kevin here has come across a report where somebody did a FOIA request to the Obama Admin about what the Presidents lawyers did related to a 14th amendment challenge to the debt ceiling, details to follow...
Resp,
about what the Presidents lawyers did related to a 14th amendment challenge to the debt ceiling
Bear in mind, these are the same lawyers (DOJ Office of Legal Counsel) who told Obama the war in Libya was illegal and that targeting US citizens for assassination was legal.
The President ignored them on the first issue and relied on its authority to justify the second. So an OLC opinion letter probably doesn't matter. If its released, I bet it says the President could do it, which would just make Obama look weaker than usual.
So, your charts have been "constructed from data from the Bureau of Economic analysis" [sic]. But the BEA has thousands of pages of data on its website. Where did these numbers come from? How was the data compiled? Until this information is provided so readers can see and analyze the data for themselves, these charts are meaningless.
Beo,
Yes I believe it was a FOIA request to OLC.
There is some stonewalling but they are appealling we'll see.
but good point if it comes back with an ok on the 14th amendment, O is going to look worse for it...
Resp,
I would argue that the first graph is relatively pointless because it views investment as a numerical value and our GDP now is vastly higher than it was under Reagan, so I would look at it from a percentage standpoint, which is what you did in the second graph, but I'm still kind of confused about it.
I understand exactly how you got your numbers for the second graph and they are accurate, but Obama has not served all 8yrs yet like Reagan did and his investment numbers could be completely different by then. Before Reagan entered office we had extremely high inflation, so high interest rates followed this for years, making it very difficult for Reagan to have increases in investment during his first term. Currently we do not have much inflation right now, so interest rates are low, making it easier to invest.
Although Reagan did not have higher investment, he did have higher increases in consumption in his first 3 years compared to Obama's first 3 years.
Hey, do your thing. Pick and choose: net, gross, proportion of GDP, adjusted by whatever inflation index or deflator. The Soviet Union always reported tremendous investment numbers.
A glance at those charts shows that Obama, with an economy about four times larger (at a guess) than Reagan's, had about 15 or 20 percent more investment in about 37 percent as much time, which means Obama suffered a complete collapse of investment compared to Reagan as a proportion of GDP.
The second chart shows that the collapse of investment was not as sharp as the even more acute collapse of GDP. The Stimulus programs probably account for most of Obama's investment. Outside of them, there is incredibly little. I would have expected more.
Reagan had a boom, not a new depression, and the Reagan boom was led by investment, not by consumption, which was under trend throughout his administration.
Bush2 looks terrible compared to the Clinton internet investment boom that crested just as he left office and crashed on Bush. Bush1 looks bad compared to Reagan.
What matters, by the way, is not mere investment totals (the USSR again) but productivity of investment. You want less rather than more as a share of GDP growth.
The second graph shows that Obama's subsidized government driven investment is unproductive.
Wow..Business investment under Obama is really successful rather than bush.Now i understand it.
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