Rubinonmics-Style Pessimism Getting Lamer and Lamer

In one of the lamer recent attempts to convince us all that the economy stinks, Rubinomics foot soldier Gene Sperling says that there is alot more that should get you depressed about the economy than just the housing bust (which, btw, Ben Bernanke says isn't affecting the broader economy). What are those things?

1) Corporate spending on goods and equipment. Here is the doom and gloom, hide the children: "This important indicator of the health of the U.S. economy fell into negative territory in the fourth quarter of 2006. Economists now predict real investment growth by companies of only 2 percent to 4 percent for 2007 -- a yawner at best." So, a relatively small part of the economy did bad a few months ago and is predicted to do OK, but not great, this year. Simply devastating. Bizzyblog says it best: "In sum: 14% of the economy is doing just fine, and 86% of the economy is seriously rocking."

2) Companies are buying back stock. Apparently it is a bad sign that companies are returning surplus cash to investors rather than tying it up in inventory. Sperling seems to think that if businesses were really bullish they'd be stocking up on goods. There is something to that logic, but it is too thin a reed to make broader determinations. To begin with, the inventory adjustment that took place at the end of 2006 is now reversing - inventory buildups quickened in Q1 over Q4's pace and manufacturing production is accelerating. Secondly, inventories are a short term focus for businesses, not the stuff of strategic thinking. Buying back stock, however, is bullish. It means that corporate managements have a more optimistic view of thier prospects than the market does. Of course, Sperling circumvents that logic with a conspiracy theory, that corporate managers are just engaging is massive market manipulation.

3) US companies are expanding overseas. We have dealt with this one before. Faced with an incredibly tight labor pool here at home and rising wages, US companies tend to turn their sights abroad where they can continue to expand without the constraints of the current US labor market. At 4.5% unemployment it is natural that corporate capex would be flowing disporportionately abroad. Why this has to spell doom for the US economy I do not know. Much of this capex will go to produce goods that will eventually come back into the US, keeping distribution assets humming, accountants accounting, retail clerks clerking, etc and so forth. US corporations are merely side-stepping an impediment to growth, not reaching for the brakes on their US operations. Of course, Sperling knows this as he makes this oblique reference to it..."It also raises larger social and political issues over whether there is a growing disconnect between the profit and share performance of American businesses and capital investment and job growth in the U.S."

So what is the "social and political issue"? Apparently Sperling doesn't like that US companies can invest abroad and hire foreigners, when he thinks they should be doing so only in the US. This is an ever so thinly veiled version of the protectionism and trade isolationism that these phony 'citizens of the world' truly believe in.

Here is previous fun with lame Rubinomics-style pessimism.