Skip to comments.Stimulus Surprise: Companies Retrench When Government Spends (Harvard Business School)
Posted on 05/27/2010 8:18:07 AM PDT by Para-Ord.45
Recent research at Harvard Business School began with the premise that as a states congressional delegation grew in stature and power in Washington, D.C., local businesses would benefit from the increased federal spending sure to come their way.
It turned out quite the opposite. In fact, professors Lauren Cohen, Joshua Coval, and Christopher Malloy discovered to their surprise that companies experienced lower sales and retrenched by cutting payroll, R&D, and other expenses. Indeed, in the years that followed a congressmans ascendancy to the chairmanship of a powerful committee, the average firm in his state cut back capital expenditures by roughly 15 percent, according to their working paper, Do Powerful Politicians Cause Corporate Downsizing?
It was an enormous surprise, at least to us, to learn that the average firm in the chairmans state did not benefit at all from the unanticipated increase in spending, Coval reports.
This is news to anyone who does not have - or chooses to ignore - the simplest, most basic understanding of economics.
In other words, almost all liberals
Businesspeople are intelligent folks. They know that investing in this environment is very risky. Without knowing the per-person payrole cost, one cannot make a business case for adding staff.
1. Longer terms allow congressmen to gain experience
2. Longer terms allow congressmen to gain seniority and bring home more bacon to their constituents.
We know from recent events (or really the entire history of mankind) that politicians do not gain useful experience.
Now we know that congressional seniority offers no benefits either.
There is now no logical or cynical reason for keeping congressmen in office past their shelf life.
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