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Sen. Warner: 'Short-term-ism' is Undermining Capitalism

Associated Press

Is corporate America too focused on the short term? Virginia Senator Mark Warner thinks so, and he’s hoping the Federal Reserve is keeping an eye on the trend.

Senator Warner has long decried what he calls “short-term-ism,” the growing tendency of businesses to focus on short term profits at the expense of long-term value creation. It’s a trend he says is undermining capitalism. 

“In the 1980s, 50 percent of profits were reinvested back into plant and equipment and employees and R&D. Now we’re seeing 95 percent of corporate profits used for stock buybacks and dividends."

When Fed Chairwoman Janet Yellen came here to Capitol Hill to testify before the Senate Banking Committee, she told Warner she agrees that corporate America is too focused on the short term at the expense of the long term, and she offered this potential explanation. 

“Sales growth has been slow, and many firms have found they actually don’t need to invest very much in order to satisfy the demand growth that they are seeing."

She also says the sluggish growth in the workforce is playing a role, a phenomenon that Warner says is troubling. 

“First thing you shut down are your worker training programs, your investment in infrastructure and I believe that is a negative long term."

Yellen says she’s hopeful that the slowdown in the job market will be transitory, although she added that the central bank would remain cautious about raising interest rates again. 

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