The key sentence in Kevin Warsh And Stanley Druckenmiller’s Wall Street Journal op-ed on our “asset rich income poor economy” is this:
Higher asset prices are not translating into meaningful increases in capital expenditures, and the weak growth in business investment is proving to be an opportunity-killer for workers.
I do think there’s one word missing from that sentence. Here. Higher asset prices are not translating into meaningful increases in capital expenditures here. Over the last half dozen years large, cash-rich companies have expanded operations, manufacturing, and development but they haven’t done so here. They done it in China, India, and any number of other countries around the world.
For me the singular test that should be applied to any proposed policy is does it increase capital investment here? Want to increase personal income taxes on the highest income earners? Does it increase capital investment here? Want to end a payroll tax holiday? Does it increase capital investment here? More infrastructure spending, wind farms, solar energy, tighter restrictions on coal? You get the picture.
The frustrating thing is that measures that could actually be expected to increase capital investment here don’t seem to be able to make it into the national discussion.