NCPA - National Center for Policy Analysis

Lack of Demand Hurting the Economy

May 5, 2015

Though some investors and even the Federal Reserve try to blame the weather, our nation's economic malaise stems from a larger, fundamental problem. A problem that neither President Obama nor Fed Chair Janet Yellen seem capable of fixing: a lack of demand.

Without a vibrant consumer to buy their goods and services, U.S. companies are hesitant to invest in the future. As such, they do not hire, and they do not build. The administration likes to tout the hundreds of thousands of jobs the economy has added this year, but those jobs are low paying positions that are not growing the economy.

Here are three things to keep in mind:

  • If investors are unable to earn interest on a safe investment such as a Treasury bond or a bank's certificate of deposit, they will naturally seek riskier assets to generate income.
  • For the past seven years, business owners have worried about everything from higher health care costs to additional regulation to a government shutdown. These worries have prevented them from investing in new hires and new infrastructure.
  • The U.S. dollar keeps getting stronger — making it nearly impossible for the Fed to raise rates for fear of creating an even stronger dollar, which would result in a bigger drag on international sales.

Business owners need a commitment from lawmakers to help business owners plan for the future by providing economic incentives such as lower taxes for individuals and corporations, which in turn, spur growth. Companies should be allowed to bring back overseas profits without penalties to stimulate investment at home. And Washington needs to increase the number of H1B visas, so we can keep intelligent engineers, mathematicians, scientists and talented foreign entrepreneurs in the United States.

Source: Trish Regan, "Regan: Lack of Demand Behind U.S. Economic Malaise," USA Today, May 3, 2015. 

 

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