Oh, please. The U.S. Dept of Defense is going to spend $720 billion this year. The percentage of that to the GDP just means the amount spent grows every time the economy grows and shrinks every time the economy shrinks. I’ll say it again: conservatives treat military spending just as liberals treat social spending, a sacred rite.
Tea partiers and other fiscal conservatives need to get the facts on military spending. Don’t take the word of war conservatives. The U.S. spend far more than any other country. The world is no bigger, there are fewer wars, and the U.S. has operations all over the world, sometimes for decades. All spending must be cut.
How about reducing the demand for more military spending? How about more trade agreements and other peaceful cross-border activities that make war a truly ridiculous alternative? Conservatives who are unwilling to cut military spending have zero credibility on reducing deficits and the size of government.
Companies like Microsoft are raising billions of dollars by issuing bonds at ultra-low interest rates, but few of them are actually spending the money on new factories, equipment or jobs.
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This situation underscores the limits of Washington policy makers’ power to stimulate the economy. The Federal Reserve has held official interest rates near zero for almost two years, which allows corporations to sell bonds with only slightly higher returns — even below 1 percent.
Sounds like a case of capital on strike, or planning is on-hold until opportunities emerge.
There is uncertainty, domestically and abroad. There is a backlash, warranted or not, against business, free enterprise, and capitalism. How do businesspeople know that a factory, office, or some other permanent structure will not be seized by a hostile government or its allies? The backlash against wealth creation is palpable. Its evident in the tone in this article from which I’m quoting.
As well, there is a backlash in the U.S. against opening factories overseas, even though that would benefit firms and employees at home. Economic growth is faster in many places around the world than in the U.S. Firms need to enter those markets if they are to continue growing. The impact at home is that absent growth, firms must layoff employees and close some operations.
When businesspeople make a commitment, they need some assurance that it will be able to function and serve its purpose — whether that’s making something or housing office workers. Right now, that assurance is not present.
Also, there is an implication in the article that firms are supposed to issue debt to hire employees. It is not, unless its part of a project that has an end to it. Ongoing salaries and expenses need to be paid out of operating cash flow. The analogy for the implication is like a family using their credit card to pay for living expenses and not paying off the debt by the next bill.
There is a cost to offering bonds; the interest payments. Businesspeople must have some concrete objectives with which to deploy that capital so they can make the required return, which is over and above the cost.
Some businesspeople are re-financing their existing debt to lower interest debt, similar to a family re-financing their mortgage. That, as with a family, increases cash flow.
An anti-proverty program threatened.
The U.S. Government imposes 12,000 specific tariffs on imported products. Here are the top 25. Tariffs increase the cost of products, making you less likely to buy them. Tariffs are supposed to discourage you from buying them and also protect domestic makers of these products and the jobs that produce them. Since there are usually more customers than workers for a given product, every customer pays more than if there was no tariff and those workers supposedly keep their jobs. Everybody (customers) pays a little higher price for something so fewer people (employees and owners) can get the bigger benefit. Nice theory but it doesn’t work.