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Rubio sounds alarm on U.S. business investing: ‘The stock market is not the economy’

The Florida senator says companies are too focused on quarterly earnings and not investing in themselves or their employees.
DIRK SHADD   |   Times  
U.S. Sen. Marco Rubio, R-Florida, addresses the audience as the keynote speaker for the Pinellas County Republican Party's annual Lincoln Day Dinner at the Hilton St. Petersburg Carillon, 950 Lake Carillon Dr., in St. Petersburg Friday evening (05/19/17).
DIRK SHADD | Times U.S. Sen. Marco Rubio, R-Florida, addresses the audience as the keynote speaker for the Pinellas County Republican Party's annual Lincoln Day Dinner at the Hilton St. Petersburg Carillon, 950 Lake Carillon Dr., in St. Petersburg Friday evening (05/19/17).
Published Jun. 20, 2019|Updated Jun. 20, 2019

Florida Senator Marco Rubio wants you to stop focusing on the stock market for a moment. Your job — and America’s future — may depend on it.

If that sounds unusual for a Republican and steady Trump supporter to say, you may have some new reading to do.

Last month, Rubio published “American Investment in the 21st Century,” a 40-page analysis of how U.S. businesses are sacrificing long-term viability for short-term market gains.

“The stock market is not the economy,” Rubio said in a recent phone interview from Washington. “We now have two or maybe three networks who dedicate most of their time to covering the stock market — they’re like the ESPN of stock markets. There’s a lot more to the economy than the stock market.”

Too many U.S. companies, he says, are no longer investing in the things they used to invest in, like capital improvements, productivity, or, for that matter, the workers that allow companies to become more productive in the first place.

“Less investment in our own future productivity represents a lack of will to build an economy and country that can sustain and renew itself for generations to come,” the report states.

In the interview, Rubio put companies’ relentless focus on boosting shares more bluntly.

“They’re eating themselves — they’re committing suicide,” he said. “That’s impacting industries and having a long-term impact on our national security.”

Prominent economists have taken notice of Rubio’s analysis. In an op-ed following the report’s publication, former Treasury Secretary Larry Summers and Anna Stansbury, an economic Ph.D. candidate at Harvard, praised Rubio for thinking outside of typical conservative market orthodoxy.

“We welcome Rubio’s investment is central to economic growth — particularly in the growth of productivity and therefore the growth of workers’ pay,” the pair writes. “The pervasive weakness of investment relative to saving has also resulted in a period of secular stagnation, in which we can attain reasonable growth only with a combination of large budget deficits, extraordinary monetary policies and high levels of leverage.”

Rubio said the report simply grew out of his recent lived experience and readings — though if you listened closely in his run for the presidency in 2016, you could hear someone who was already sounding the alarm about cracks in the business landscape.

In particular, he has bemoaned the loss of America’s industrial base, and the vanishing of “dignified” work that that has entailed. While he does not believe in slowing down technological progress, he says too little is being done to manage the pace of disruption.

“I’ve read a lot on this, and I’m not convinced that tech is going to destroy work,” he said. “But I am certain it’s going to disrupt the labor market more rapidly than it has before.”

Another top threat for Rubio: China. Despite markets’ seemingly negative response to Trump’s trade war, the senator supports confronting what he sees as a rival poised to become more competitive than the U.S.

“We have to get over this notion that just because businessmen from China wear suits like ours, that they’re equivalent to a Western company,” he said. “They’re not.”

China has a nation-focused business strategy, he said, where the state dictates investment priorities from above. Even Chinese firms that have a U.S. presence are often, if not always, backed by the government, he said.

Rubio is not calling for direct U.S. government intervention. But he does say China has an unfair advantage that must be addressed.

“This is a national competition,” he said. “Chinese companies, from construction companies operating here to Huawei, backed by the Chinese government, are able to price and compete in ways that our businesses cannot.” Huawei is one of China’s largest telecom companies.

Among the economists cited by Rubio in the report is Jo Michell, an associate professor in economics at the Bristol Business School in England. Michell has gained prominence in recent years for describing how China’s economy works.

In an email, Michell said Rubio’s report highlights an important trend that he says has been largely ignored by conservative commentators: declining corporate investment, and the consequent tendency for businesses to hold large cash surpluses.

“The report is right to note that historically business investment has been the driving force of sustained capitalist growth,” Michell wrote.

But Michell called some of the analysis in Rubio’s report “faulty.”

“I think the importance of shareholder primacy and short-termism is overstated: this is probably a small part of the story at best,” Michell wrote.

Michell, a progressive, said one response to low U.S. corporate investment is for government investment to fill the gap. Michell backs the Green New Deal, a jobs- and environment-focused strategy put forward by progressive Democrats like Alexandria Ocasio-Cortez.

Rubio does not believe the answer lies in massive government spending increases. Among the specific policy prescriptions he offers up instead:

  • Eliminating the tax preference given to share buybacks
  • Immediate write-offs on capital expenses
  • Incentives for worker retraining by companies

Rubio, a lifelong Miami Dolphins fan, uses the analogy of the National Football League for how he would tackle the problems he lays out. While a given NFL team only cares about winning — whether it’s 3-0 or 50-0 — the league wants to make sure fans are being entertained. So the NFL decided to make rule changes they believed would make for a faster, more high-scoring game.

“Now equate that to the economy,” Rubio said. “I still think companies can be making money, but our national objective needs to be ensuring we are creating productive, dignified work.”

Rubio believes the current hyper-partisan environment has actually made Americans more receptive to unorthodox ideas to address current challenges. Even though he disagrees with her, he said, Elizabeth Warren deserves credit for recognizing that there is a need to “fundamentally reshape the direction of our current policies.”

In the report, Rubio cites both Trump’s and former president Barack Obama’s Council of Economic Advisers, noting that the former’s admits there is now a “disconnect between America’s real wages and America’s corporate profits,” while the latter’s described a “broad-based investment slowdown.”

“The status quo that exists today, maybe it wasn’t even a good idea 20 years ago, but what you’re seeing today is catastrophic,” Rubio said in the interview. “The question is, coming from the right, how do we create a holistic and concise agenda that addresses these issues?”

-- Rob Wile


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