Obama, the Great Divider — Literally

The Republican message for 2012 is as irrefutable as  1 + 1 = 2. And Obama threw himself headfirst into the bear trap with his veto of the Keystone project.

One one hand, we have nearly a fourth of working-age Americans without jobs, the worst proportion since the early 1980s. On the other, we have $2 trillion of cash sitting idle on corporate balance sheets, as President Obama complained in a February 2011 speech to the U.S. Chamber of Commerce. We have investors languishing for lack of returns, and unemployed people languishing for lack of work.


Standing in between prospective workers and prospective investors, preventing capital from employing labor, is Barack Obama. Someone really ought to to draw the cartoon: a $2 trillion cash pile gathering cobwebs on one side, an endless line of unemployment on the other, and Barack Obama in the middle, keeping them apart.

Under Obama, the United States has suffered the steepest drop in private investment since data were kept, as well as the slowest recovery.

Graph of Fixed Private Investment

The flip side of the investment bust is the worst employment-to-population ratio since before the great Reagan recovery:

FRED Graph

To put this in perspective, $2 trillion of idle cash represents two years’ worth of American investment in equipment and software. Why would corporations rather earn rounding-error levels of interest at the bank than put their money to work  in profitable ventures?

First, because U.S. corporate taxes are the highest in the industrial world, and Obama wants to keep them high; second, because trillion-dollar-plus budget deficits imply higher tax rates in the future, and Obama will do nothing to reduce the deficit; third, because ObamaCare sets a high threshold of labor costs for startups with more than 55 employees; fourth, because regulatory costs across the board make numerous projects uneconomical; and fifth, because the arbitrary intervention of the federal government in regulatory affairs multiplies the risk associated with any investment decision.


That’s why the Keystone Pipeline cancellation was so devastating. High energy prices and vulnerable foreign supplies make North American energy alternatives a no-brainer investment, with high prospective returns (as opposed to the wind-and-solar boondoggles pushed by the Obama administration). If you arbitrarily cancel the flagship project, what message does that send to investors?

This isn’t an investors’ strike, but a lockout. This isn’t unemployment, but a government shutout. If Republicans win the presidency and both houses of Congress in November, 2013 will be the hottest year the U.S. economy and stock market have had since 1994.

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