Robert Samuelson explains the phlegmatic recovery, correctly in my view, as due to insufficient business investment:
The U.S. economy continues to stumble. It’s creating jobs at a goodly clip, but other aspects of growth are less impressive. Business investment has been lackluster. The housing recovery is improving but remains short of where many economists thought it would be. Consumer spending, representing slightly more than two-thirds of total spending, has been soft. The economy has a tentative quality that repeatedly disappoints forecasts of stronger growth.
My main explanation for this — as I’ve argued before — is the hangover from the 2008-2009 financial crisis and the Great Recession. These events changed economic psychology, precisely because they were unanticipated and horrific.
How, then, does he explain the continued low business investment—other than in housing construction—since the end of the dot-com bubble? The recession of the early Aughts was largely due to a lack of business investment rather than a lack of consumer spending. That was misdiagnosed by the Bush Administration which applied its one-size-fits-all remedy—subsidizing consumer spending—to the problem with weak, short-lived results.
Let me provide an alternative explanation. There’s been plenty of business investment. Just not here. The investment has been in China, Malaysia, Thailand, Viet Nam, and dozens of other countries.
Clearly, they’re going where the grass (and the greenbacks) are greener. For business investment to return to the U. S. of A. something will need to change. What?
The problem is obvious: too many old, married white people.
The question is also where business investment for new companies is supposed to come from. Mid- and large-sized businesses have essentially had unlimited access to capital markets in recent years, hence companies like Apple sitting on piles of cash and still going to bond markets to raise more.
Small businesses (especially NEW small businesses) don’t have that option, so they have to use a mix of their own money, commercial bank loans (which have gotten harder to get since the recession), angel investors, or, if they’re making something in tech and are lucky, VC funds. Cash from people’s savings, or a HELOC are common ways to get the money to start a small business, but high debt levels (and the crash which has left many homes either underwater or closer to the waterline than they’d like to be) have really reduced these sources.
For younger people especially, student debt + issues in the housing market (difficulty getting a first mortgage, slow recovery in housing prices in many markets leaving new owners without a lot of equity, etc.) along with consumer debt are major barriers. And that’s a demographic that is perfect for business formation, since they’re less likely to have kids or health issues, both of which make risking it all starting a new venture harder to swallow. (And, of course: The SBA is a total joke at doing anything to actually help anyone start a business.)