NCPA - National Center for Policy Analysis

CASH HOARD REFLECTS FEARS OF OBAMA PLANS

November 6, 2009

One of the reasons job creation is lagging despite signs of an economic recovery is that the nation's big businesses are hoarding their cash rather than investing it to expand, says Nolan Finley, the Editorial Page Editor of the Detroit News.

According to the Wall Street Journal:

  • The nation's largest companies are sitting on nearly $1 trillion in cash, or roughly 10 percent of their assets, the largest stash of idle money in 40 years.
  • This is a symptom of the uncertain tax and regulatory environment created by the Obama administration and a Congress that is increasingly hostile to business.
  • Companies aren't going to invest money in job-creating ventures until they can gauge the impact of policies ranging from health care reform to climate change.
  • Similar cash stashing occurred during the Depression and for similar reasons; it prolonged that economic disaster and will prolong this one.

A lot of money is sitting in reserve that could stimulate an economic recovery far more efficiently than Washington's spending spree.  But to encourage it off the sidelines, Obama has to scale down proposals that have businesses wary of the future, explains Finley.

Source: Nolan Finley, "Cash hoard reflects fears of Obama plans," Detroit News, November 3, 2009.

For WSJ text:

http://online.wsj.com/article/SB125712303877521763.html 

 

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