In Tuesday’s Wall Street Journal the following graphic appears. In it, the IMF analyzes this period of “economic recovery” as compared to all other U.S. economic recoveries since World War Two.
The dark green indicates the strongest recovery with the dark orange indicating the weakest recovery. What the data shows for (this) the recovery period from 2009-2011 is the strongest business and financial sector recovery of any previous recession. Moreover fixed investment in equipment and software is the strongest of any previous recession/recovery. The data further shows the weakest employment, personal spending, and housing recovery of any previous recession.
Interpreting this data suggests there is plenty of money as corporate earnings have been strong and bond prices have risen. The S&P 500 stock index has also risen noticeably. Manufacturing orders are also high in this recovery. Further, fixed investment in equipment and software has never enjoyed a stronger rebound. But businesses aren’t hiring, houses aren’t being built, and individuals aren't spending – even though there is plenty of money available. It seems reasonable to deduce businesses are replacing workers with machines and computers at an even faster pace than usual. Why?
One word: ObamaCare
ObamaCare requires businesses to purchase health insurance for all of their employees. While to many, health insurance coverage is an inalienable right, and providing employees with health insurance is considered a moral imperative, the simple fact of the matter is employers and business owners are going to use their capital as they see fit.
If the government is going to (attempt) force them to provide health insurance, then they aren’t going to hire additional employees…and they aren’t! Or, and they are doing this, they will hire elsewhere. Since Obama took office in 2009, fully $200 billion has found its way to other countries where lower taxes and less regulation takes place.
Since (domestic) hiring is slow and unemployment is high, individuals are not spending money; hence the weak spending recovery (called PCE or personal consumption expenditures in the chart).
Put simply, capital is very easily transferred to more favorable environments. Just like water seeks its own level, capital seeks its most efficient use – taxes and government mandates cause capital to seek more hospitable environments. In other words, until these nonsensical taxes and policies are rolled back, there will be no full recovery. Ironically, this is harming the very people (the middle class) this administration purports to help.
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