There certainly are logical reasons to think that Obama’s policies are dampening economic growth. Investors and entrepreneurs have little reason to produce and take risks, after all, when they know the burden of government is going to climb. Especially when you add uncertainty to the mix.
Here’s a chart showing Federal Reserve data on the cash holdings of non-financial corporations. As you can see, there’s been a big jump in recent years. That’s certainly an indication that people are keeping money on the sidelines.
On the other hand, there’s been a long-term upward trend in the amount of cash companies are holding, so it’s a good idea to be cautious about drawing any sweeping conclusion from the recent jump. All we can say for sure is that bad policy reduces incentives for productive behavior. This is why bigger burdens of government are associated with slower growth.
And if there is a lot of very bad policy, a nation can suffer a lengthy period of stagnation or decline. Roosevelt and Hoover in the 1930s would be a good (or should we say bad?) example of this worst-case result.
[…] He apparently believes that we can reduce inequality by pricing poor people out of the job market. He also blames companies for sitting on piles of cash, presumably unaware that firms only will invest if there are profitable opportunities. […]
[…] we shouldn’t be surprised that corporations are sitting on record piles of cash. Simply stated, it doesn’t make much sense to invest if there’s little hope of future […]
[…] shared data on the cash reserves of companies and suggested it was bad news that those firms thought it made […]
[…] He apparently believes that we can reduce inequality by pricing poor people out of the job market. He also blames companies for sitting on piles of cash, presumably unaware that firms only will invest if there are profitable opportunities. […]
[…] you want some empirical evidence about the impact of Obama’s statism, check out this picture of how much money companies are keeping on the sidelines and this one about loanable funds that banks have deposited at the Fed. Both are compelling signs […]
[…] previous post looked at some Federal Reserve data and suggested some reasons why businesses are keeping money on the […]
[…] He apparently believes that we can reduce inequality by pricing poor people out of the job market. He also blames companies for sitting on piles of cash, presumably unaware that firms only will invest if there are profitable opportunities. […]
[…] He apparently believes that we can reduce inequality by pricing poor people out of the job market. He also blames companies for sitting on piles of cash, presumably unaware that firms only will invest if there are profitable opportunities. […]
[…] the thing. Corporations are sitting on huge piles of cash. Even banks have over $1 trillion in “excess reserves” parked at the Fed. They have […]
[…] the thing. Corporations are sitting on huge piles of cash. Even banks have over $1 trillion in “excess reserves” parked at the Fed. They have […]
[…] and non-financial companies sitting on trillions of dollars because of the negative economic environment created in part by […]
[…] commented on the failure of Obamanomics, with special focus on how both banks and corporations are sitting on money because the investment climate is so grim. Not exactly flattering to the White […]
[…] commented on the failure of Obamanomics, with special focus on how both banks and corporations are sitting on money because the investment climate is so grim. Not exactly flattering to the White […]
[…] want some empirical evidence about the impact of Obama’s statism, check out this picture of how much money companies are keeping on the sidelines and this one about loanable funds that banks have deposited at the Fed. Both are compelling signs […]
Dan, wouldn’t an even better / worse example be Cuba, the USSR etal….all now ‘dead in the water’ having “enjoyed” the (rotten) “fruits” of their communist (supremely regulatory) ideology?
Keith Barridge
Perth Western Australia
[…] Of course, Obama said in 2008 than he wanted high tax rates for reasons of “fairness,” even if such policies didn’t lead to more tax revenue. That destructive mentality probably helps explain why not only banks, but also companies, are sitting on cash and afraid to make significant investments. […]
[…] posts on this blog have featured charts showing that Obama’s policies are not working (see here and here). I even showed a cartoon making the same point.And I cited a column with data comparing […]
[…] posts on this blog have featured charts showing that Obama’s policies are not working (see here and here). I even showed a cartoon making the same point.And I cited a column with data comparing […]
[…] recently posted data showing how companies are sitting on lots of cash, presumably in part because the business climate is not conducive to investment and job creation. I […]
Dan,
Accounting question. Is this figure net cash?
If companies are issuing debt to build up the cash account on their balance sheets then the net cash position is not actually increasing because it is being matched on the liability side by the obligation.
[…] recently posted data showing how companies are sitting on lots of cash, presumably in part because the business climate is not conducive to investment and job creation. I […]
[…] previous post looked at some Federal Reserve data and suggested some reasons why businesses are keeping money on the […]