Wall Street Journal: It’s Business Investment, Stupid!

The Wall Street Journal has an editorial (paid subscription) that explains America’s sagging growth rate (see previous post).

Here, from the Journal’s editorial (the headings are mine):  

Business on Strike

Business spending on the likes of new factories, equipment and software [see chart] has subtracted from growth for three straight quarters. Apart from a stretch in 2014, the last three years have been historically weak.

This matters because business investment spurs the growth and productivity gains that produce more jobs and higher wages. As resilient as consumers have been, they can’t drive growth by themselves.

The investment plunge is a signal that business is on strike. . . CEOs will be risk-averse and conservative with their balance sheets until they see signs of a growth rebound, even though they’re sitting atop piles of cash and the cost of capital is at all-time lows. They will also hold off investing until they have a better sense of the future tax and regulatory burdens they are likely to face next year.

Afraid of Clinton

the .   .  . Democrats [convention] promised more of the policies that have stifled growth the last eight years. “Wall Street, corporations and the super-rich are going to start paying their fair share of taxes,” Clinton declared.

Start? The richest 1% already pay about 38% of federal income tax revenue[. W]hich sage economic advisers have told her that raising taxes on business will yield more business investment[? I]f you tax something you get less of it. Obama’s unprecedented wave of regulatory costs is another main reason business isn’t investing. Yet Clinton promised more costly rules on finance, health care, drug prices, mandated wages and benefits, and more.

Trump No Help

Normally all of this would help the [other] party[, but] Trump is talking more about law and order and terrorism than the economy. . . restricting the labor force with immigration controls and raising the prices of imports with new tariffs. . . would harm the economy. . .

Trump does say he’ll reduce regulation and cut taxes, but he offers few details and these are hardly his main talking points. In his Cleveland acceptance speech, [they seemed] an afterthought.

the House GOP’s “Better Way” [agenda] would reform the business tax code, ease rule-making and otherwise remove barriers to investment and job creation. The Tax Foundation estimates the package would make the economy about 9% larger and lift wages by 8%. . . Trump should read it.

The editorial worries “another lost decade of slow growth” will lead to “more economic anxiety” and “more political unrest”.