Despite last week’s second-quarter reports, showing corporate profits are up and big business has recovered almost 90% of what it lost in the recession, American corporations aren’t increasing their hiring. Economist Robert Reich says it’s for three reasons: companies are moving production overseas; they’re investing in labor-saving technologies; and they’re spending their impressive profits to buy back their stock from American taxpayers, all the while pushing up share prices. Bottom line: maybe we’re in an era where higher corporate profits don’t correlate with higher employment. A lack of new jobs means a lack of consumer confidence and all this sets the backdrop for the Obama administration’s very public debate over who should lead the new Consumer Financial Protection Bureau (CFPB), charged with writing and enforcing consumer-protection rules on products ranging from mortgages to credit cards. Liberal Democrats are pushing for Harvard Law professor Elizabeth Warren, who opponents see as too activist-y, while Republicans want someone they see as more neutral, like FDIC Chairman Sheila Bair. What can the CFPB do to bolster consumer confidence if higher profits no longer mean higher employment? And how much will that be determined by who leads it?
Robert Reich, Chancellor's Professor of Public Policy at the University of California, Berkeley’s Goldman School of Public Policy and former Labor Secretary during the Clinton Administration
Aparna Mathur, American Enterprise Institute (AEI) resident scholar in economic policy studies