How the Current Political Climate Has Significantly Affected Business Growth - Essay Example

? Business Growth Business Growth As the United s is preparing for the next presidential election, the question on how the current political climate in the United States is effecting business growth in the country could be responded to through the support of relevant statistics that measure performance, from the time President Barack Obama assumed office. According to IAC Search & Media (2012), business growth is defined as “a business that generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Businesses that grow are often seen in the technology industries” (par. 1). In terms of measuring business growth in the United States therefore, one needs to gather and evaluate pertinent data that indicates the performance of businesses that is indicative of growth over the period under review. In the Econographia (2012) site, the historical record of the country’s economic performance is effectively captured and visually presented using graphical illustrations. One of the most relevant indicators of business growth that was disclosed was the ability to create jobs, specifically in the private sector. As revealed, from the post-war period until the tenure of President Obama, the creation of private sector jobs have been illustrated to exhibit a declining trend, except during the periods where governance was headed by Dwight David “Ike” Eisenhower, 34th President of the United States, and both George H.W. Bush (41st President) and George W. Bush (43rd President), which signified the lowest trends, as shown in Figure 1, below. Obama’s tenure manifested the fourth lowest number of private sector jobs created. As explained, “the data points are operationalized as monthly average change in private sector jobs by presidential tenure, from the month preceding their first full month in office .. to last month in office” (Econographia: Private sector job, 2012, par. 2). Figure 1: Private Sector Jobs per U.S. President From this figure, it was apparent that the current political climate has actually created more private jobs, when compared to the past administration. However, as emphasized by Kiely & Farley (2012), “by using private-sector jobs, the president makes his job-creation record look better. The U.S. has gained about 55,000 private-sector jobs since Obama became president in January 2009, but overall there has been a total job loss of 552,000 — all because of the decline in government jobs” (p. 1). Seeing the political climate through the eyes of the American Institute of Economic Research (AIER), Steven Cunningham, the Director of Research and Education has indicated through his economic review that there is an eminent recovery that could spur optimistic potentials for business growth. As disclosed, the business cycle conditions that are being monitored by the AIER have captured rising business growth indicators which confirms supposed continuing expansion (Cunningham, 2012). A copy of the statistical indicators of business cycle changes for the period February to June 2012 are presented in Annex A. From the statistical indicators, it was revealed that positive changes were noted for the following primary leading indicators for the cyclical status April to June of 2012, to wit: (1) new orders for consumer goods; (2) new housing permits; (3) index of common stock prices; and (4) change in consumer debt. For primary roughly coincident indicators, the following were optimistic and expanding changes: (1) non-agricultural employment; (2) index of industrial production; (3) personal income less transfer payments; (4) manufacturing and trade sales; and (5) gross domestic product. Finally, for primary lagging indicators, the following exhibited expanding status: (1) manufacturing and trade inventories; (2) commercial and industrial loans; (3) ratio of consumer debt to income; and (4) change in labor cost to manufacturing output (Cunningham, 2012). As the indices revealed, the current political climate shows signs of expansion of business cycle, which is indicative of steady recovery and growth. However, Cunningham (2012) stressed that “the proposed year-end expiration of the payroll and Bush-era tax cuts could mean recession going into 2013. But for now, the trends translate into a growing economy, if not a roaring expansion for the second half” (p. 1). The data presented in Econographia regarding Obama’s three-year tenure in terms of jobs and GDP corroborates Cunningham’s assertions. As revealed, “the performance of the economy over President Obama’s tenure to date has been much discussed in light of the severe contraction that began in December 2007 .. and the policies implemented to correct course and restore growth. Since the enactment of the Recovery Act .. both GDP and net private sector jobs have experienced steady growth” (Econographia: The Obama Record, 2012, par. 1). The performance is vividly illustrated in Figure 2, below: Figure 2: Quarterly Real GDP. 2007 to 2012 Source: Econographia, 2012 Likewise, the comparative and cumulative private sector job growth for Bush and Obama is shown in Figure 3, where it was apparently explained that “for every net job created over the Bush recovery window, over 3 net jobs were created over the Obama recovery to date” (Econographia: About Job Recoveries, 2012, par. 7). Figure 3: Cumulative Private Sector Job Growth: Bush vs. Obama Recoveries Source: Econographia, 2012 In sum, this indicator is likewise evidencing that the current political climate have spurred business growth through private sector employment. Finally, the link between corporate taxes and business investments were also noted to have manifested a downward trend, which indicates that a lower corporate tax burden does not necessarily increase private business invesment. As explained, “this decline in business investment suggests that by retaining more and more of their earnings, corporations are failing to make economically productive use of their capital .. and shortchanging growth” (Econographia: Does a lower Corporate Tax burden, 2012, par. 4). Therefore, political policies must closely evaluate the appropriate level of corporate tax rates imposed to effectively set a level that encourages private investment. Overall, the current essay has presented how the current political climate has significantly affected business growth in terms of affecting and influencing the levels of private sector jobs, indices in business cycle changes, and links to GDP and private investments. Annex A: Statistical Indicators of Business Cycle Changes Source: Cunningham, 2012 References Cunningham, S. (2012). Strength Beneath the Surface. Retrieved from American Institute for Economic Research Retrieved from http://www.aier.org/article/7752-strength-beneath-surface Econographia. (2012). About jobless recoveries … Retrieved from http://econographia.com/ ------------. (2012). Does a lower Corporate Tax burden increase private investment? Retrieved from http://econographia.com/ -------------. (2012). Private sector job creation in the post-war era, Ike - Obama. Retrieved from http://econographia.com/ -------------. (2012). The Obama Record after 3 years - Jobs and GDP, Retrieved from http://econographia.com/ IAC Search & Media. (2012). What's the Definition of Business Growth? Retrieved September 3, 2012, from uk.ask.com: http://uk.ask.com/question/whats-the-definition-of-business-growth Kiely, E., & Farley, R. (2012). Obama’s Economic Sleight of Hand. Retrieved from http://factcheck.org/2012/06/obamas-economic-sleight-of-hand/ Read More