published Sunday, July 10th, 2011

‘Hoarding cash’?

The Associated Press declared recently that corporations are “hoarding cash” instead of hiring new workers. Excluding banks and other financial corporations, U.S. companies recently had roughly $1.9 trillion on hand, the AP noted.

That raises the obvious question of why companies are choosing to “sit tight” rather than invest their money in expanding operations. After all, in a good business climate, a successful company might well earn more by expanding than by leaving its money “on the sidelines.”

Unfortunately, we’re not in a good business climate. We’re in an economic crisis. And the Obama administration and Democrats in Congress are prolonging the crisis by threatening higher taxes and imposing heavy regulation through programs such as ObamaCare.

That is creating uncertainty about what the economy is going to be like just a few months down the road. That uncertainty makes it riskier than usual for companies to hire new workers or otherwise expand. What happens if they do so and then Congress hits them with higher taxes? They may not be able to afford to keep the workers they’ve hired. And what happens when countless ObamaCare regulations roll out over the next few years, and companies learn bit by bit just how much those regulations are going to cost them? That’s discouraging investment, too.

It’s no wonder companies are reluctant to hire. As commentator Michael Barone, of the American Enterprise Institute, put it, “It’s hard to avoid the conclusion that the threat of tax increases and increased regulatory burdens have produced something in the nature of a hiring strike.”

That doesn’t mean companies are greedily “hoarding cash.” They just don’t want to lose their investment due to unwise government policies.

Companies would like to hire. Washington needs to get out of the way so they can do so economically.

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hambone said...

Demand for goods and services has more to do with it than anything else.

The only thing that will help is massive spending by government on infrastructure.

But that won't happen because Obama might get the credit for creating all the jobs!

July 10, 2011 at 1:08 a.m.
nucanuck said...

Lowering taxes without commensurate spending cuts has brought us to the end of America's world leadership. Finding the balance between taxes and spending is the only hope for eventually righting the American economy.

Divided we will fall and divided we are. Arguably America peaked in 1971 when Nixon killed what was left of a gold backed currency in favor of fiat. From that fateful day we began an irresposible monetary policy that has now reached the point of collapse. Corporate money flows into Washington have neutered our government, leaving obedient eunichs unable to govern.

High ideals gave way to greed. By 1973 earnings went flat for the middle class. By the early 1980s tax laws were changed allowing much more rapid wealth agregation. The tax cuts allowed debt to begin to spiral upward.

The currency will need a sound foundation and taxes and spending will have to be brought into balance. To get there we will endure a humiliating default and the worst period in American history.

I hope I am wrong.

July 10, 2011 at 1:18 a.m.
EaTn said...

Many American corporations have been disengaged from America for some time. No longer do they feel their patriotic duty to provide jobs and services ahead of profits. If you're looking for fault don't just point the finger at them; look around, their mentality is everywhere around. The "we" generation has been replaced with the "me" generation which is obvious in places like the voting booths. People are falling through the cracks in this country, and the sad thing is many are blase about it. It's grab what you can and let the other suckers sink--that just leaves more for those left.

July 10, 2011 at 5:08 a.m.
rick1 said...

hambone, The only thing that will help is massive spending by government on infrastructure.

$100 billion of Obama's stimulus money went to infrastructure already and it did not work. Even Obama said the shovel ready jobs weren't so ready. By the way where did that $100 billion go? And you want to spend more money on this failed program?

Everyone wants to place blame on Bush, Reagan , Nixon and the Republicans. Open your eyes and use your brain and start looking at the facts and stop playing the blame game. Obama's stimulus and economic policies are a failure. It did not work under FDR either, FDR's Treasury Secretary Henry Morgenthau, Jr.admitted FDR's New Deal stimulus spending program had failed:

"We have tried spending money. We are spending more money than we have ever spent before and it does not work. And I have just none interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job, I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!"

This excat quote could be said todday. It was true then and sorry to say it is true today.

Nancy Pelosi said ObamaCare would create almost 400,000 jobs immediately. Of course Pelosi has done very well the past few years as her financial holdings have increased 63%. I would guess that she and her husband had cut back on hiring and expanding their busineeses during the last few years also.

Professor Jacobson at Legal Insurrection said it best on how to improve our economy:

"The only way for Obama to stimulate the enormous private sector job growth needed to ensure Obama's reelection is for Obama to announce he is not running for reelection, which would unleash a wave of investment and economic activity not seen since the Great Depression."

July 10, 2011 at 8:51 a.m.
fairmon said...

How many examples can be found through out history where anyone spent themselves into prosperity or borrowed themselves out of debt? Of course the answer is zero so why does anyone think the federal government can do either of those?

Stimulus money whether directly mailed to people or in the form of tax cuts used to buy imported goods stimulates an economy other than the U.S. Enabling American businesses to produce goods and services at competitive prices is the only viable solution to stimulating our economy and balancing the trade deficit. It can be done without adverse impact on worker compensation.

Stop all the governments selecting of winners and losers through favoritism using the tax codes that is now an over 4 ft high stack of 8 1/2 X 11 pages and growing. Assign an independent non-political or special interest team to review all the legislatively imposed cost that are not additive or essential public protection and abolish them. Establish a no exceptions business tax rate of between 18-22%. OR, even better adopt as written fair tax proposal H.R. 25 and S.13 that are in committee. 80 independent economist have endorsed this proposal and support it. However, congress and the mega wealthy oppose it for selfish and self serving reasons.

Infrastructure improvements are badly needed but currently would require more borrowed money and would either be temporary or an endless need to borrow. Spending cuts and revenue increases are necessary and would result from the appropriate sources with implementation of the fair tax act. It will only happen once people are educated and understand it then it may be unstoppable.

July 10, 2011 at 10:05 a.m.
rick1 said...

I agree with the fair tax, but do think the politicians will ever give up the control they over us with the current tax system?

July 10, 2011 at 11:14 a.m.
hambone said...

So, from the TFP opinion and the post here. I'm being told that businesses are not signing those new cotracts and not filling all those increased orders they have because they don't know how much tax they will pay on all that new profit. They are not hiring the new employees they need because of Obamacare.

rick1, the last paragraph of your 8:51 post is the most accurate statement here.

Remember what McConnell said that the GOP's #1 priority was to make sure Obama was a one termer.

July 10, 2011 at 12:32 p.m.
rick1 said...

Corporations look to the future before they expand their business. They look for indicators that indicate if the business environment is going to be positive or not. When there is uncertainty like there is now with the EPA pushing through cap and trade, increased regulations with costs embedded in these regulations, the cost of ObamaCare, and not knowing if taxes are going to go up, business will not invest and expand. Take away the uncertainty, make it a more business friendly environment, businesses will expand. Have you ever heard of a business hiring and expanding because their taxes were increased?

Of course the republicans only want Obama as a one term President, just like the democrats would want a republican President to be one term. That is why we have elections every four years. Have the democrats ever sat out an election when there has been a republican in the White House because they wanted him to be more than a one term president?

This is Obama’s economy and even the head of the DNC Debbie Wasserman-Schulz said it was Obama’s economy. FDR’s New Deal spending, George Bush stimulus and Obama’s stimulus were all failures. History has shown us this and yet politicians who caused the problems now want to fix the problems.

In 1987 the stock market crashed and Reagan did not get the government involved. He allowed the free market to correct its self and we came back much quicker and stronger than if the government had been involved. This recession ended in June 2009 and unemployment is still over 9 percent when we were told it would not go over 8% with the stimulus.

His policies are a failure and it will take years for our economy to recover. I’m not a McConnell fan by any means, but he is right. Obama should be a one term president.

July 10, 2011 at 1:19 p.m.
fairmon said...

rick1 said...

I agree with the fair tax, but do think the politicians will ever give up the control they over us with the current tax system?

Representative Charles B. Rangel former chairman of the ways and means committee stated in an interview on TV that he did not support the fair tax proposal because it took away congress's ability to manipulate things as they deemed to be necessary. You can read the supporters very convincing testimony to the committee at:

fairtax.org

The only way to succeed is for people to understand it and support it to the point congress has little choice if they want to stay in office. The support will have to come from those at or below the poverty level and up to the top of the mid range in income. As you know the probability of people taking the time to do that is not likely.

There are only so many resources and so much wealth in the world. When one nation increases consumption and wealth it stands to reason another will have less unless more resources are available and more wealth is created. Wealth is only created by manufacturing, mining, farming and fishing. All other activities are in support of these or services paid for either directly or indirectly by the wealth creators.

July 10, 2011 at 1:57 p.m.
rick1 said...

Harp:

That is an interesting comment from Rangel. I suspect what he was really saying is that he and others on the Hill would have to pay their taxes if we had a Fair Tax.

You are correct educating the people to understand and realize they will benefit from the Fair Tax will be a challenge. For the most part the media does not support the fair tax so they will put their negative spin on it and of course politicians will use scare tactics to convince people the Fair Tax will hurt them.

I wish people would realize just because someone is a Congressman, or Senator does not make them an expert. There are so many politicians that have never work in the private sector, have never met a payroll or wrote a budget but yet they know what is best for our economy. Look at Dodd and Frank neither one of them have ever worked in the banking/financial industry and yet they are given the power to write the most radical finance reform bill when both of them played a major role in the finical collapse. But people but their faith in government thinking they are the experts and know best.

You are correct on resources and wealth and I wish more people would understand this and realize government cannot create wealth.

July 10, 2011 at 2:25 p.m.
hambone said...

rick1, doesn't the antics of the GOP contribute to business's uncertainty about the future?

Will unemployment drop in your good business climate without demand for goods and services?

Can business hire customers?

July 10, 2011 at 2:27 p.m.
EaTn said...

Wealth is money, and unless businesses get into barter exchange, they depend on the government for uniform and stable money to purchase goods, pay labor and stockholders.

July 10, 2011 at 2:49 p.m.
rick1 said...

hambone:

Sorry, but this is one is on Obama. He has been in office since January 2009 and the economy is not getting better. Home prices continue to fall, forclosures continue to rise along with unemployment, and consumer confidence has fallen to a near two year low.

Don't try to blame the republicans, the public is not buying it anymore. These are Obama's failed policies and what the the voters will remember, is Obama telling everyone the stimulus would keep the the unemployment rate below 8 percent, Pelosi said Obama Care would create almost 400,000 jobs immediatley, Biden saying last April "Well, I'm here to tell you, some time in the next couple of months, we're going to be creating between 250,000 jobs a month and 500,000 jobs a month."

It is Obama's antics that have contributed to business uncertainty, not the republicans.

July 10, 2011 at 2:54 p.m.
hambone said...

Government can create wealth. The less tax you pay the more wealth you have.

So rick, let the GOP have their way and don't raise the debt ceiling, and lets see what happens!

July 10, 2011 at 4:06 p.m.
rick1 said...

Lets look at Obama's has handled the debt ceiling. For the most part he has been on the golf course, taking vacations or campaigning. Then he shows up at the last minute and continually warns of an immediate catastrophe, and holds meetings in secret.

After hearing the lack of jobs that were created in June, Obama is now calling for an extension of this year's payroll tax cut. WSJ.com addressed this by noting that "Mr. Obama called for an extension of this year's payroll tax cut. So he wants to increase the deficit by extending a payroll tax cut that has coincided with higher joblessness, while raising other taxes in a way that would reduce investment that would create jobs."

Does Obama have a clue? Or does he want to sabotoge our economy even more? I feel he knows exactly what he is doing and it is not for the good of this economy.

July 10, 2011 at 4:51 p.m.
Momus said...

Hambone wrote "...because Obama might get the credit for creating all the jobs!"

You hit the nail on the head with this statement. The market is ripe for investing and expansion. Any new taxes will be quickly loop-holed or passed on to the consumer. Big business is holding american jobs hostage. As long as Obama is president there will be no compromise and no recovery. If the Repulicans/Big Business win things will be a lot better. Jobs will return, the economy will recover, regulations will be relaxed, the divide between rich and poor will increase, unions will be outlawed, no health care, no Social Security and the bottom 90% will be no better that they are now, but Obama won't be President.

July 10, 2011 at 4:53 p.m.
charivara said...

Is it possible that the debt issue is a straw man concocted by Republicans to redirect the gaze of working Americans from the chaos their economic policies, which created this debt, have caused? Look at policies which include low taxes on the very wealthy, “they invest their wealth in jobs”, low taxes on corporations “they create employment”, and watering down of regulations to control corporate greed, “regulations cost jobs.” Their policies have succeeded only in creating wealthier rich people who pay little tax, corporations hoarding cash and paying little tax, and over 9% unemployment. Now Republicans want working Americans to pay for the economic mess and the huge debt their policies have substantially created. And, judging by the responses to this editorial, the Republicans have convinced at least some to buy (pun intended) their voodoo economics.

One question for all of you misguided defenders of the Republican policies: What have they ever done to improve your family’s economic situation? If you make more than 1 million dollars a year, you don’t need to respond, I already have the long list of answers. The rest of you?

July 10, 2011 at 5:20 p.m.
charivara said...

Is it possible that the debt issue is a straw man concocted by Republicans to redirect the gaze of working Americans from the chaos their economic policies, which created this debt, have caused? Look at policies which include low taxes on the very wealthy, “they invest their wealth in jobs”, low taxes on corporations “they create employment”, and watering down of regulations to control corporate greed, “regulations cost jobs.” Their policies have succeeded only in creating wealthier rich people who pay little tax, corporations hoarding cash and paying little tax, and over 9% unemployment. Now Republicans want working Americans to pay for the economic mess and the huge debt their policies have substantially created. And, judging by the responses to this editorial, the Republicans have convinced at least some to buy (pun intended) their voodoo economics.

One question for all of you misguided defenders of the Republican policies: What have they ever done to improve your family’s economic situation? If you make more than 1 million dollars a year, you don’t need to respond, I already have the long list of answers. The rest of you?

July 10, 2011 at 5:20 p.m.
charivara said...

Is it possible that the debt issue is a straw man concocted by Republicans to redirect the gaze of working Americans from the chaos their economic policies, which created this debt, have caused? Look at policies which include low taxes on the very wealthy, “they invest their wealth in jobs”, low taxes on corporations “they create employment”, and watering down of regulations to control corporate greed, “regulations cost jobs.” Their policies have succeeded only in creating wealthier rich people who pay little tax, corporations hoarding cash and paying little tax, and over 9% unemployment. Now Republicans want working Americans to pay for the economic mess and the huge debt their policies have substantially created. And, judging by the responses to this editorial, the Republicans have convinced at least some to buy (pun intended) their voodoo economics.

One question for all of you misguided defenders of the Republican policies: What have they ever done to improve your family’s economic situation? If you make more than 1 million dollars a year, you don’t need to respond, I already have that long list of answers. The rest of you?

July 10, 2011 at 5:21 p.m.
fairmon said...

rick1,

I don't think Obama really knows what he is doing. He is not listening to the advisory team he selected to make recommendations for achieving economic growth. He is still campaigning and posturing to special interest and contributors to his campaign fund.

The republicans unwilling to eliminate some subsidies and deductions are also not being objective. They both know there has to be and will be some pain regardless of what is done but both want to delay it past 2012 elections.

Demand and subsequent production of goods is the only creation of wealth. Money spent buying products not made in America doesn't help the economy. Tax code changes that promote growth of the U.S. economy and increase employment are essential. Both parties may have to alienate some of their supporters to achieve that.

July 10, 2011 at 5:25 p.m.
rick1 said...

Harp

Who does Obama have on his economic team? His former team economic team, Austan Goolsbee, Christine Roemer, Larry Summers and Peter Orszag and some of his low level economic team members have all fled. They were also big supporters of the stimulus.

Even his new Chief of Staff Bill Daily said “Sometimes you can’t defend the indefensible,” in response to Obama's economic polices while speaking said at a National Association of Manufacturers meeting.

Right now both sides are playing politics and only care about getting re elected next year.

The Flat Tax is the best way nto handle the tax situation in this country as we have said before.

charivara: "Is it possible that the debt issue is a straw man concocted by Republicans to redirect the gaze of working Americans from the chaos their economic policies, which created this debt, have caused?"

Yes, Bush was irresponsible with the budgets he signed into law and should have used his veto pen more often. Don't forget when Obama was a U.S. Senator he was voting for these budget increases. When Bush left office he ran the Federal debt up to $10.6 trillion and in a little over two years Obama has it at $14.3 trillion.

Everyone benefited from the Bush tax cuts not just the wealthy. http://www.taxfoundation.org/blog/show/22958.html

Please tell me what regulations were watered down during the Bush years? In fact Bush imposed over $60 billion in new regulatory costs during his two terms in office.

I know it is all of the republicans fault and the democracts are totally innocent right? Look at the democracts and how they are in bed with the likes of Wall St and big banks and big corporations like Big Pharma. If you don't think both parties are dirty you are in a sorry state of denial. What will you do when you find out Obama is nothing but a myth?

July 10, 2011 at 6:30 p.m.
hambone said...

Like I said, let the GOP have their way and not raise the debt ceiling. I don't care any more!

But I am too old and I refuse to learn Chinese!

July 10, 2011 at 7:01 p.m.
charivara said...

I’m sorry if I implied that only the Republicans are responsible for the mess we are in. The Democrats also share some of the responsibility. However, if I had to choose between the two, the Democrats have a much better record of looking out for the interests of the working people than the Republicans do. In 2012 I will hold my nose and vote Democrat.The only other alternative at this time is to further increase the strangle hold that the wealthy and corporations have on our democracy to further their own interest.

July 10, 2011 at 9:01 p.m.
Plato said...

If I hear this bogus "uncertainty" argument one more time I think I'll puke.

Corporations have record cash reserves becasue purely and simply demand does not exist for higher production or expansion of capacity not becasue they are "afraid of new taxes". The Republicans will blockade any new tax initiative, in the unlikely event one would even by floated. Even so if demand were present for increased production who except a moron would leave the additional business on the table becasue they had to pay tax of the profit? The argument is so illogical an above average third grader can see through it.

The only uncertainty present right now is the uncertainty the Republicans in congress have created by holding the debt ceiling hostage to their demand for spending cuts.

July 10, 2011 at 10:03 p.m.
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