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Originally Posted by Jim in CT
True, what you said is definitely true.
However, if those businesses are sitting on that cash, instead of spending it, then there must be a reason for that. Most of those businesses are not charities, and it would be reckless of those businesses to spend that money until it makes sense for them to do so. If those businesses had a reason to believe that they could increase profits by spending that money, then they would have every incentive to do just that.
When a business has no idea what its tax rate is going to be, and no idea how much its health insurance costs will be, it makes it harder to know if now is the right time to make an investment.
I don't see what it good it does to blame the business. If the climate makes it better to sit on cash than to spend it, why blame the business for that? Why not focus on fixing the climate, to make it more conducive for rewarding growth?
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Exactly.
When the economy tanked, businesses were forced to check their books and cut the fat. They cut unprofitable programs, reduced (or froze) pay and benefits, laid off nonessential workers and developed ways to run more efficiently. Like you said, the businesses aren't going to spend money just because they have it. They aren't going to hire more people, even though they can afford to, unless those people will directly contribute to the bottom line and that is where the issue lies. Businesses effectively reduced their liabilities which has helped them have more money, but are still having difficulty with reliably increasing revenue. Month to month numbers are all over the place - housing sales are up, then down; consumer spending is up, then down. Until the volatility really stabilizes, businesses will maintain a wait-and-see approach.
My business is right in that same category. Fortunately most of our employees get their benefits from their spouse but if I have to start paying for health care at these inflated costs, people will get laid off. We've cut our expenses and developed ways to operate with fewer people. Yeah, it would be nice to hire at least another full-timer or two but it isn't worth it until the dust fully settles.
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