These days, too many Americans are certain about things they should be skeptical about, and uncertain about things they need to be confident in. And our economy isn’t likely to improve unless we can reverse these positions.
First, the uncertainty.
“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,” wrote Newsweek columnist Fareed Zakaria recently. That’s the highest amount in decades. “And yet, most corporations are not spending this money on new plants, equipment, or workers,” he added.
Zakaria’s Washington Post colleague Steven Pearlstein has noticed, too. “There’s little doubt that businesses are holding back,” he wrote July 7. “Business investment as a percentage of economic output is at its lowest level in more than 40 years, while hiring continues to lag behind growth in output.”
So why are companies hoarding cash instead of hiring people? Simple. Uncertainty.
President Barack Obama likes to say “let me be clear” in his speeches. Before the State of the Union address, a Washington Post piece mocked Obama by saying that, “the ‘let me be clear’ preface has become a signal that what follows will be anything but.” And that’s true.
It’s not clear what Obama wants to do -- although he seems less than interested in simply enforcing the rule of law. He demanded that BP establish a $20 billion fund to pay claims filed against it by Gulf residents. Well, perhaps BP should have established such a fund on its own. But the president doesn’t have the power to compel it to do so.
And remember the automakers? Last year GM and Chrysler were on the verge of collapse. The administration bypassed the usual bankruptcy proceedings and instead engineered a federal buyout that benefited the United Auto Workers union. American taxpayers are now owners of auto companies, whether we want to be or not.
No doubt other companies were watching nervously. They’re also concerned about the possible effects of cap-and-trade legislation and financial regulation. In each case, legislation that would hurt businesses has passed the House and is being considered by the Senate. It’s impossible to predict what a final bill might look like or what it might cost. Hence, uncertainty. Hence, inaction.