Biden’s business investment fantasy

PResident Joe Biden says his policies will result in the creation of tens of thousands of high-paying manufacturing jobs. His claims are a fantasy.

Because of the comparative energy advantage, the US manufacturing sector, which tends to be energy-intensive, has the potential to be a growth engine for the US economy. In the United States, manufacturing accounts for $2.3 trillion of GDP, about 10% of total GDP. The manufacturing sector employs about 12 million people. The sector accounts for 20% of the country’s capital investment, 35% of productivity growth, 60% of exports and 70% of corporate R&D spending.

But companies are reluctant to invest when there is political or fiscal uncertainty. In 1983, Ben Bernanke, former Federal Reserve Chairman and recent winner of the Nobel Prize in Economics, wrote a paper on investing. Bernanke introduced the concept of investing as an option. When uncertainty is introduced into the investment equation, business defers investment. Business is waiting. It defers capital spending until uncertainty subsides. When political risk is high, investment paralysis sets in.

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During the Obama administration, the risk was heightened. Then-President Barack Obama had an ambivalent attitude towards free markets. Obama believed “A market doesn’t work by itself. It has to have a social and moral and ethical and community basis. Otherwise it’s not stable.”

Like Biden, Obama was wrong. Free market capitalism is stable. Adam Smith’s “invisible hand” leads the market. Free individuals, working in a system where the rule of law is paramount, will make informed investment decisions guided by the mechanism of market prices. Under Obama, companies were reluctant to invest. During the period 2008-2017, annual corporate capital expenditures were below the average for the previous six decade periods dating back to 1948. From 2010 to 2017, business investment grew by just 4.5% on average. Business investment averaged about 6% from 1948 to 2007.

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In contrast, business investment under the Trump administration’s Tax Cuts and Jobs Act rose 9.4% compared to the pre-tax cut trend. For companies, real investments increased by 14.2%. However, President Donald Trump’s unworldly trade policies derailed the investment boom triggered by the law. Researchers at the University of Chicago found that “an uncertain outlook for trade policy gives companies in all industries reason to delay investments while waiting to see how trade disputes unfold.”

Back to 2022. As shown in the chart below, data from the Federal Reserve Bank of St. Louis shows that President Joe Biden’s anti-corporate sentiment and his war on fossil fuels are causing companies to delay investment.


(Federal Reserve Bank of Atlanta)

The CEOs of America’s largest companies, who make the investment decisions, are pessimistic about the economy, not only because of rapidly rising interest rates, but also because the Biden administration is disrupting the pricing mechanism through rhetoric and anti-corporate actions by various governing agencies. The chair of the FTC rejects free market capitalism. The National Labor Relations Board is undermining the unions’ voting process. Both the Securities and Exchange Commission and the Treasury Department are joining forces in their climate protection activism. CEO confidence is at its lowest since the Great Recession.

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The central concern returns: free-market capitalism, small government, and the rule of law are the guideposts to national prosperity. The manufacturing renaissance that America’s comparative advantage in energy and the country’s lead in advanced technology could make possible will not begin during the Biden administration. A manufacturing renaissance is a Biden fantasy.


James Rogan is a former US Field Service Officer who later spent 30 years in finance and law. He writes a daily note on finance and economics, politics, sociology and criminal justice.


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