'Hoarding cash'?

'Hoarding cash'?

July 10th, 2011 in Opinion Free Press

The Associated Press declared recently that corporations are "hoarding cash" instead of hiring new workers. Excluding banks and other financial corporations, U.S. companies recently had roughly $1.9 trillion on hand, the AP noted.

That raises the obvious question of why companies are choosing to "sit tight" rather than invest their money in expanding operations. After all, in a good business climate, a successful company might well earn more by expanding than by leaving its money "on the sidelines."

Unfortunately, we're not in a good business climate. We're in an economic crisis. And the Obama administration and Democrats in Congress are prolonging the crisis by threatening higher taxes and imposing heavy regulation through programs such as ObamaCare.

That is creating uncertainty about what the economy is going to be like just a few months down the road. That uncertainty makes it riskier than usual for companies to hire new workers or otherwise expand. What happens if they do so and then Congress hits them with higher taxes? They may not be able to afford to keep the workers they've hired. And what happens when countless ObamaCare regulations roll out over the next few years, and companies learn bit by bit just how much those regulations are going to cost them? That's discouraging investment, too.

It's no wonder companies are reluctant to hire. As commentator Michael Barone, of the American Enterprise Institute, put it, "It's hard to avoid the conclusion that the threat of tax increases and increased regulatory burdens have produced something in the nature of a hiring strike."

That doesn't mean companies are greedily "hoarding cash." They just don't want to lose their investment due to unwise government policies.

Companies would like to hire. Washington needs to get out of the way so they can do so economically.