Here’s a thought from the folks at The Economist: Corporate profits are nearly all in, and they’re approaching the highs last seen before the beginning of the recession.
Just how are the big businesses doing it? And why is no one benefiting? Well, lay offs and capital cost cutting are padding profits for now. Companies are sitting on cash, about $1.8 trillion as of mid-July. It’s not sustainable, but it’s getting them though the quarters. And it’s all about keeping the shareholders happy now, or as happy as anyone can be these days. Never mind that such cuts are likely to end in weaker companies down the road.
Meanwhile today, the brethren of the big businesses at the smaller end of the scale showed once again that they are suffering. A survey out from the National Federation of Independent Business shows small business confidence slipped for the second time in two months, and is now down for the year so far. More small businesses are now thinking of cutting employees than adding them, a grim thought when you consider that small businesses tend to be the ones who hire us out of recessions and the unemployment rate is 9.5 percent.
And as if the news couldn’t get worse, productivity numbers released by the Department of Labor were down for the first time since the dismal last quarter of 2008. That’s very troubling, because it shows companies aren’t doing more with less any more, they’re just doing less.
That’s a recipe for a grim summer. But if that weren’t enough, we’re now well into the politicking season, so hope for Washington to come up with any kind of solution or stimulus is pretty dim.
Repeated attempts to ram a bill through the Senate that would have at least eased credit for small businesses by providing capital to small banks and provided tax credits for small businesses getting off the ground failed as Republicans held tightly together to block Main Street relief. It’s unlikely the bill would do a lot immediately to boost small business spending, but it would be a sign that our leaders cared about something more than getting reelected.
And frankly, the small banks could use some help, since we’re already past the 100 mark for bank closures this year. Small businesses are also still having trouble getting financing, so a bill aimed at making such financing easier to get would seem to make sense.
But again, the hope for help from Washington is pretty dim. It’s campaign season after all.
Here’s how President Barack Obama saw it when speaking to a group of Democratic donors in Austin Monday: “The other side has resisted every attempt. We’ve got a bill right now that was pending in the Senate to provide assistance to small businesses. Now, this should be as American as apple pie. Small businesses create two out of every three jobs in America. So we put together a package, paid for—doesn’t add to the deficit—that would help small businesses get loans, would eliminate the capital gains rate for small business start-ups,” Obama said. “And yet we still can’t get it moving through the Senate, because these folks—their basic theory is, we don't want to do anything that helps the president move the country forward, because they’re thinking about the next election instead of the next generation.”
For those who like to see things from the optimistic side, there’s always hope that the next election will bring politicians to Washington ready to tackle our economic problems. And that the next quarter corporate leaders at big companies ready to spend a little of the cash they’re sitting on investing in the future instead of squeezing every penny in the present.
But that hope’s pretty dim right now. And in its place, as J. Jennings Moss points out in Portfolio.com, is anger.
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