Saturday, June 07, 2003

The Economy: It Takes Money to Create Money

Unemployment figures are at a nine-year high of 6.1%. A major reason for this: companies aren't making enough money:
Richard Yamarone, economist with Argus Research Corp., said the financial markets are mistaken to see signs of recovery in yesterday's report, which showed a marked downtrend in hiring that he expects to continue for the rest of the year.

"Businesses cannot spend what they don't have," he said. "Anemic economic growth will not be sufficient enough to provide the necessary gains in corporate profitability, which are needed to fuel greater business investment and new hiring."
This should come as shock to Capitol Hill legislators, who respond to bad economic news by calling for the government to further reduce corporate profitability by, just to name a few examples, extending government unemployment benefits, threatening U.S. companies that lower their tax burden by incorporating abroad, and creating new government entitlements such as prescription drug benefits. All that money comes from somewhere, and it's usually businesses, since they're the ones generating the wealth in the first place.

No comments: