Herman Cain's Commentary Archive 2009-2012

September 6, 2010

Of course businesses are hoarding cash; they’d be crazy not to

September 5, 2010
By Herman Cain 

According to the Federal Reserve, businesses are hoarding about $1.8 trillion in cash. There are three reasons for that phenomenon. It’s their money. It’s their money. And it’s their money.

It’s their money to pay down debt. It’s their money to pay dividends to their stockholders. It’s their money to make an acquisition, or save some reserves in case the economy gets worse. In all likelihood the economy is going to get worse.

It’s also their money to burn at the company picnic if they choose.

But the White House and liberals want businesses to just spend it to create jobs to help mask the failed economic policies of this administration and Democrat-controlled Congress. A Washington Post article by Jia Lynn Yang on July 15, 2010 was titled “Companies pile up cash but remain hesitant to add jobs”.

Hesitant? How about no way in this environment of uncertainty!

The likelihood of tax increases, more federal spending of money we do not have, banks tightening their lending requirements, the continued housing and construction crises, the unfolding negative effects of the forced health care bill, the threat of more anti-business legislation, national security threats and a persistently stalled economy encourages uncertainty and discourages economic growth.

Unlike government, businesses spend money to make money instead of creating jobs they do not need or ones that are too risky. It’s called good business.

Last Friday, the Labor Department reported that the unemployment rate for August 2010 was 9.6 percent. This is an added indication that economic and spending policies are not working, and that businesses would rather sit on their cash than spend it recklessly.

Commenting on this latest bad economic news, the president said “We are confident we are headed in the right direction.” Maybe he has forgotten that unemployment went up after passage of the non-stimulus spending bill and has remained high ever since. Or maybe he hopes voters will forget.

To repeat myself and the sentiment of many others, the president, his administration and most members of Congress still don’t get it, and they are certainly not listening to any ideas other than their own. You stimulate the creation of jobs by reducing an employer’s cost to keep people employed (less taxes), and by reducing the cost of a business to grow their business (fewer regulations), and then leave taxes low and cease the regulatory onslaught on American businesses (more certainty). If these things happen, then the economy will grow and jobs will be created.

Job creation is not a complicated phenomenon, but the president and the Democrats have been convinced that less taxes is bad, and more regulations are good. It’s just the opposite and there is plenty of historical evidence to prove it.

During the president’s State of the Union address, he restated his commitment to job creation. When the Economic Report of the President was released last February, he restated his commitment to job creation. Last week when the president gave his speech on the U.S. withdrawal from Iraq, he restated again his commitment again to stimulating economic growth.

Mr. President, businesses are not going to start spending their hard-earned cash on business expansion based on speeches and promises. That’s not hoarding cash. It’s just good business.