Big business sitting on vast cash reserves, refusing to hire. GOP stalling economy.

[RBInMaine]

Make no mistake, the only thin hope the TeaPubs have of winning in 2012 is if they can stall the economic recovery, and they are working overtime to do just that. Big corporations are enjoying VERY robust profits and are sitting on trillions in cash reserves. But they are not expanding and hiring, at least not to the levels they should. And of course their water-carriers in Congress are doing all they can to "starve the beast" resulting in less in the pockets of the lower and middle classes who SPEND money which helps the economy. These rotten horrid cynical right wingers are on their knees praying for a double-dip recession. Actually hoping that the country will suffer economically so that their rich owners have more mansions and that it will help them politically. What total scum.

I don't think a double-dip will happen. This summer will most likely show continued improvements in the economy, and there is no doubt things slowed in May due to Japan, high oil and food prices, and storms all over the country. In addition, we lost of tens of thousands more jobs in state and local government due to reduced state budgets. Still we ADDED 54,000 jobs. No, not enough, but is was still a net GAIN even with all these tough conditions.

The point is, we need to put the blame where it damn well belongs: corporate America and the right wing.

[alc]

1. my large (f 500) corp is hiring and expanding

They think a recession is the best time to expand if you have the money. Construction is cheap (land and labor), and the labor market is full of people looking for a job so a good time to hire for R&D and other positions. When the recession starts to end we in in position to take over market share from our competitors who didn't expand and enter new markets.

Management is "smart" about where they hire and expand. For execs, "smart" means the best ROI. They've determined that means overseas construction and temps/contract for US workers. It doesn't matter how many articles are posted about how regulations/taxes/unions/benefits don't affect hiring. Companies can invest anywhere in the world and they will invest where they see the best ROI (shareholders demand it and sometimes it's legally required).

If an article wants to argue that regulations don't restrict hiring, it needs to show how ROI for a new US factory is better than ROI for building that factory in Mexico (and 30+ other locations)

When health reform kicks in, it will likely have a HUGE affect on us. We don't know if that's good or bad. We could just pay the fine and stop providing insurance (but how many employees will quit because of that?). We may have to pay slightly more, or much more. The regulations aren't fully written yet so we don't want to do a lot of hiring since we don't know what those employees will cost us in 3 years.

[cantbeserious]

2. If There Is No Demand For New Products Or Services There Will Be No Investment

Corporations "hoard" cash waiting for the right time to invest that capital.

Corporations are legally required to make a profit by their articles of incorporation.

Corporations are not legally required to hire out of any sense of moral obligation or if retained earnings are saved and growing.

The real culprits in the current economic situation are the legal rules of the game which have been manipulated by politicians for the corporations.

Five aspects of this manipulation are

1) Free Trade Policies that destroy rational tariffs and pit every American worker against overseas labor,

2) Tax policies that allow larger corporations to spread their earnings over global operations thus eliminating any tax liability completely,

3) Irrational Minimum Wage Policies that place a lid on wage growth thus slowly reducing consumer demand as the price of all goods and services rise over time,

4) The slow and steady destruction of collective bargaining laws that destabilizes unions, and

5) Unchecked campaign finance laws that corrupt the political process with unlimited contributions by any special interest group with an ax to grind.

So, in sum, the corporate cash piles are a result of the above factors and not the direct set of problems to be addressed.

[girl gone mad]

3. Corporations are sitting on mountains of debt..

not piles of cash.

http://www.marketwatch.com/story/the-biggest-lie-about-us-companies-2010-08-03

The biggest lie about U.S. companies
Commentary: Healthy balance sheets? They owe $7.2 trillion, the most ever

BOSTON -- You may have heard recently that U.S. companies have emerged from the financial crisis in robust health, that they've paid down their debts, rebuilt their balance sheets and are sitting on growing piles of cash they are ready to invest in the economy.

You could hear this great news pretty much anywhere -- maybe from Bloomberg, which this spring hailed the "surprising strength" of corporate balance sheets. Or perhaps in the Washington Post, where Fareed Zakaria reported that top companies "have accumulated an astonishing $1.8 trillion of cash," leaving them in the best shape, by some measures, "in almost half a century."

Or you heard it from Dallas Federal Reserve President Richard Fisher, who recently said companies were "hoarding cash" but were afraid to start investing. Or on CNBC, where experts have been debating what these corporations are going to do with all their surplus loot. Will they raise dividends? Buy back shares? Launch a new wave of mergers and acquisitions?

It all sounds wonderful for investors and the U.S. economy. There's just one problem: It's a crock.

American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.

http://financialedge.investopedia.com/financial-edge/0910/Rising-Cash---And-Rising-Debt-Too.aspx

There are two sides to every balance sheet and you cannot talk about cash without also talking about debt. In the case of those companies, adding debt to the picture changes the view significantly. Pfizer and Wal-Mart both have more debt than cash (by a large margin), and Cisco's nearly $40 billion in cash looks less impressive after backing out the $15 billion in debt that the company carries. That still leaves four companies with substantial cash piles, but those are pretty much the top four non-bank cash-holders in America.

While cash balances tick higher, corporate debt is moving to record levels. Non-bank companies borrowed $289 billion in the first quarter of 2010, and corporate debt outstanding was above $7.2 trillion. In fact, during the same week in which that Bloomberg article was published, corporations issued another $34 billion in debt, led by the likes of Hewlett-Packard (NYSE:HPQ). According to an analysis from Smithers & Co, net debt as a percentage of net worth is at the highest levels in at least 60 years.

http://globaleconomicanalysis.blogspot.com/2010/08/are-corporations-sitting-on-piles-of.html

That corporations are sitting in piles might be dandy if it were true, but unfortunately it is not an accurate representation, at least in an aggregate sense.

John Hussman mentioned the corporate cash situation in Cheering the Asset and Ignoring the Liability.

Put simply, there is a lot of apparent "cash on the sidelines" because the government and many corporations have issued enormous quantities of new debt, often with short maturities, while other corporations have purchased it. It is an equilibrium. The assets that are held in the right hand represent debt that is owed by the left. You cannot call that pile of short-term marketable securities an asset without calling it a liability. The cash on the sidelines is evidence of debt incurred to fund economic activity that is already in the past. It will remain "on the sidelines" until the debt is retired. The government debt has been issued to finance deficit spending. At the same time, a great deal of corporate debt has been issued over the past year apparently as a pre-emptive measure against the possibility of the capital markets freezing up again.

What's fascinating about the "corporate cash" argument is that few observers recognize that a great deal of this cash is not retained earnings but new debt issuance. Brett Arends of MarketWatch puts present levels of corporate cash in perspective: "According to the Federal Reserve, nonfinancial firms borrowed another $289 billion in the first quarter, taking their total domestic debts to $7.2 trillion, the highest level ever. That's up by $1.1 trillion since the first quarter of 2007; it's twice the level seen in the late 1990s. Central bank and Commerce Department data reveal that gross domestic debts of nonfinancial corporations now amount to 50% of GDP."

This is how corporations cook the books. They aren't about to use that debt to hire more workers (liabilities).

[flpoljunkie]

4. Business is not expanding or hiring because of a lack of demand.

We need more government stimulus and an extended payroll tax holiday--both of which would be blocked by the Republican House.

[Avant Guardian]

5. They aren't expanding and hiring because...

...trickle down economics does not work.

[Harmony Blue]

6. The point of the tax cuts

theoretically is that businesses would take more risks. But it is clear that a Capital Strike is taking place, but the problem is how do you go about proving collusion?

[Avant Guardian]

8. No demand = no hiring

Capitalism 101

[Arkana]

7. Not all of them.

Tech companies in particular are hiring in huge numbers.

[Dawson Leery]

9. The private sector is failing to create jobs.

This is the time that the government should step in, but it will not because of those who control the house.

[girl gone mad]

11. Unfortunately, this attitude is not confined to the House.

At the signing of a small-business-related bill on Monday, President Barack Obama made a surprising declaration about the things the government can and can't do to try to jump start the economy.

"Government can’t replace -- can’t create jobs to replace the millions that we lost in the recession, but it can create the conditions for small businesses to hire more people, through steps like tax breaks," Obama said.

http://www.politico.com/blogs/joshgerstein/0910/Obama_government_cant_create_jobs.html

[Lorien]

10. The DLC is part of the Right wing. The Dems can use their bully pulpit to fight for us

but they don't.

[libodem]

12. Exactly

No headline was ever more true.

[Imajika]

13. This conspiracy theory that business isn't hiring in order to hurt Obama....

...is absolutely, utterly and completely stupid. Business is about one thing, and pretty much only one thing - MAKING MONEY. First off, many business and corporations are very Democratic friendly and send lots of cash to Democratic candidates and organizations. Second, even if all businesses were Republican, they still compete with one another. This conspiracy theory assumes that businesses would intentionally lose money in order to hurt Obama, and that's just dumb. A few might be run by such right wing ideologues they'd be willing to take a hit to hurt progressive politicians and causes, but they have competition that want to make money NOW. That competition that isn't so fanatical would invest, hire, make money and effectively wipe out the right wing ideologue businesses. Forget this conspiracy theory, it's idiotic.

The problem right now more than anything else is that there is not enough demand. Putting more money in the pockets of middle America would stimulate demand and that would cause business to invest and hire more. What we need is more stimulus spending, possibly some additional tax cuts for lower and middle income workers and most definitely higher taxes on the wealthy. And higher taxes on the wealthy will NOT hurt them. When the economy is roaring, the wealthy make EVEN MORE money. Wealthy people get that way because we provide an environment in which they thrive. A more progressive tax system is good for EVERYONE.