Is America’s big businesses hoarding their record profits instead of investing it in development and new jobs so that the economy will remain stagnant and perhaps push President Obama out of the White House? That’s the intriguing premise that columnist Dan Froomkin explores in a recent piece.
Froomkin’s column delves into a question that many observers of the economy and big business have been wondering in recent years: What the hell are the nation’s top banks and businesses doing with the huge amounts of cash they are stockpiling? Why aren’t they investing the money back into the economy, thus creating millions of new jobs and as a result being rewarded with a workforce that is spending once again?
Froomkin writes that American corporations have more than $3 trillion of cash on hand at the moment, which is nearly four times as much as the 2009 stimulus bill.
“They’ve been making money, and they haven’t been spending it. So it sits there,” said Jared Bernstein, a former economic adviser to President Barack Obama who is now at the non-partisan Center on Budget and Policy Priorities. “The economy has been growing since the second half of 2009, and the vast majority of households have seen very little of that. It’s got to be going somewhere.”
The big banks have cash reserves of nearly $1.6 trillion, according to a recent report by the Federal Reserve —an unbelievable 80 times the $20 billion they held in reserve in 2007, when the economy was still relatively healthy.
And these companies wouldn’t have to do huge amounts of reinvesting to make a huge difference in the American economy. Froomkin references a recent study by Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts Amherst, which found that if America’s largest banks and non-financial companies moved just some of their enormous cash reserves into productive investments instead, it would give the economy a huge boost, creating about 19 million jobs in the next three years and lowering the unemployment rate to under 5 percent.
But what’s stopping them from doing that? Froomkin suggests it might be a desire on the part of these conservative-leaning companies and CEOs to see Obama swept out of the White House.
Pollin believes there may be some truth to the allegation that these CEOs are playing politics with the American economy. “There’s probably some truth in it,” he said, but “there’s no way to get at that really analytically.”
Pollin said they are being short-sighted if they think they would be better off just because Mitt Romney in the White House might lighten their regulatory and tax burdens.
“The big thing I don’t think enough business people recognize is the simple analytics of austerity,” Pollin said. “Austerity is bad for business. Forget about whether it’s bad for teachers, hospital workers, or the poor—it’s not good for business because it reduces demand. And when it reduces demand, it reduces opportunity for business to expand their business.”
In other words, Mr. CEO, give Americans a job and they might reward you by buying your product. We’ve always heard that money talks louder than politics or anything else, but apparently that maxim doesn’t work when the president looks like Barack Obama.