“Too Risky”: Despite $1.8 Trillion Surplus, America’s Corporations Will Not Spend Money While Obama Still Alive And In Office
July 5th, 2010 Posted By Pat Dollard.
by Fareed Zakaria
The American economy is sputtering and we are running out of options. Interest rates can’t go any lower. Another burst of government spending — whether a good or bad idea — looks politically impossible. Can anything protect us from the dangers of stagnation or a double dip? Actually, there is a second stimulus that could have a dramatic effect on the economy — even more so than government spending. And it won’t add to the deficit.
The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.
So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.
Economic uncertainty was the primary cause of their caution.
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