“There are companies sitting on piles of cash, issuing dividends that far overreach their earnings,” she said. “That’s underscoring the concerns by a lot of corporations that they aren’t able to reinvest in a growth story. Then there are also concerns about public policy.”
Plans to enact tax reform that would repatriate offshore capital could put billions of dollars into the coffers of American companies, said Moyo, but much of that money could be paid out in dividends and buybacks, rather than invested in economic growth.
Moyo believes that none of the short-term proposals before U.S. policy makers address long-term concerns like technological change and demographic decline. It’s also unclear to what extent policies like increased infrastructure spending and tax reform will be able to stimulate growth, she said, noting that Japan spent $6.3 trillion developing its infrastructure during its lost decade, yet generated very little economic growth.
“The irony is that we do need infrastructure,” she said. “It’s the backbone of an economy. You have to be able to move things through ports and railroads and roads. The American Civil Engineers Association recently gave U.S. infrastructure a D+ grade, and that does not comport with a developed country looking to increase its economic growth rate.”
In the short term, some sort of fiscal stimulus might be necessary to enhance productivity, but the long-term global economic headwinds loom large, she said.
It is critical that American policy makers invest in social policy and education to support long-term economic growth, said Moyo.
“We need policies to address all the economic factors like debt, income inequality, demographics and technology,” said Moyo. “You can’t fight on one factor alone. There’s an array of factors challenging the economy as a whole. While a fiscal stimulus and/or some form of tax package is necessary to me, it would be foolhardy to say it’s sufficient."