Wednesday, September 14, 2011

Corporations Are Hoarding Trillions

We've been hearing it from a number of reliable sources. Trillions of dollars are being withheld from the economy. Which is why the economy is flat. ABC News reports this. USAToday. The Salt Lake Tribune. Consumers don't have money to spend. Government revenues are down. So where are these phantom trillions?

Corporations have it.

The same corporations who are demanding more tax cuts. Presumably to sock away with the trillions they're holding now.

Why aren't they spending it? Because they're afraid. (The polite word is "cautious".) Afraid to invest in product or equipment or hiring because consumers aren't buying. And consumers aren't buying because they're either unemployed or afraid of being unemployed. Also because their pay hasn't risen much in recent decades, which is the sort of thing that adds to the trillions corporations have in their private stash. It's a circular problem, one bad habit leading to another. We underpay American workers and they cease to be good consumers, and they pay fewer taxes, which causes our infrastructure and schools to deteriorate, which hurts our business economy down the road. The only beneficiaries of this dynamic are the companies who are paying themselves too much and investing too little, but that benefit won't last forever.

In the 1930s the behavior was called HOARDING. It was considered foolish, antisocial and unpatriotic, and rightly so. Money hidden in the mattress does nobody any good. Scrooge was a hoarder. Picture America's biggest corporations as so many Scrooges.

The Economist magazine has a good discussion of the foolishness of corporate hoarding. The problem is contained in this pull quote:

"If cautious firms pile up more savings, the prospects for recovery are poor. Economies will be stuck in the current—and odd—configuration where corporate surpluses fund government deficits. If firms loosen their purse-strings to hire workers and to invest, that will allow governments to scale back their borrowing."

The Economist is a highly respected financial journal, not a liberal talking shop.

The Republican talking points deny the main problem. They recommend fixing the recessionary cycle by feeding more money to the companies already refusing to spend the trillions they have.

From Republican presidential candidate and former pizza CEO Herman Cain comes this arrogant, self-righteous screed, explaining why corporations aren't using their trillions to add jobs.

"It's their money. It's their money. It's their money."

If that isn't clear enough Cain says they can burn their trillions at their corporate picnic if they'd like, but why should they hire anyone? Businesses are in the business of making money, he says, not of employing people. Why would they want to employ people when there's low demand for goods?

Why is there low demand for goods? Because corporations aren't employing people.

Why would any sane person recommend giving the holders of these idle trillions more tax cuts? They aren't doing anything with the cash they already have. We might give them tax cuts proportionate to the new hires they make. Employed people pay taxes and buy goods. That's part of the Obama Jobs Bill.

The point is, these trillions are only "their money" because the taxpayer rescued their sorry hides after they drove the economy to the brink of collapse. They've responded by taking that rescue money and keeping it. They've accepted that taxpayer help and helped themselves. They've used that taxpayer cash to buy competitors and lay off workers, to export factory jobs and white collar jobs to China and elsewhere where workers come cheap.

Republicans cite "uncertainty" but this top market analyst says that's plain foolish.

"I don't buy it simply because there's always uncertainty. You never know what an employee will cost two years from now. You never know what regulations await in the future. You never know what tax rates will be five years from now. Uncertainty isn't black and white. All that exists is the perception of uncertainty, and that perception usually isn't drawn up by a careful analysis of the future. It's typically an extrapolation of the recent past -- often a terrible mistake." (In other words corporations are scared and greedy.)

Here's an interesting article about where these cash rich corporations stash their billions. Written in 2008 when the economy was teetering.

Business Insider offers a financial parable, pitting the hoarder's prospects against those of the productive business owner. The hoarder doesn't come out well.

And for an alpha and omega view of hoarding, there's this essay from a religious blogger. Hoarding money is un-Christian, apparently.

Godless fools.

Or are they? Godless, yes. Fools? Maybe the plan is to hold these trillions and make the economy crash so angry Americans elect another Republican president. Our economy is cyclical, why not our political system? Wash, rinse, repeat. We may see the cataclysm Bush caused happen all over again. Don't worry about the Republicans. Their friends are the ones holding all the money.


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