Trickling down?

The theory of trickle down economics is dead, as US companies are holding onto their cash rather than creating jobs.

Give the tax breaks and incentives to the people NOT corporations.

For months, companies have been sitting on the sidelines with record piles of cash, too nervous to spend. Now they’re starting to deploy some of that money – not to hire workers or build factories, but to prop up their share prices.…

About ray m

  • Yes, companies are sitting on piles of cash and not investing them.  They are even borrowing more cash due to the record low interest rates combined with the potential for future inflation that would make dollars borrowed today even cheaper to pay back in the future.

    Could there be some reasons that companies are not investing in new plants, equipment or employees:

    1 – Consumers remain nervous about their job prospects and therefore are not spending as much as they previously had spent.  Without this demand, it is hard for companies to increase production,  You cannot sell what people will not buy.

    2 – American consumers have hit the reset button for what they consider “normal” expenditures.  This results in less purchases and less demand for products driving a slower expansion as people seek to reduce their own debt or build up reserves for their retirement, etc.

    3 – What will the tax code look like in a couple of months?  No one really seems to know as Congress has put off any substantive work on the issues until after the election.  Will personal tax rates increase?  Will corporate tax rates decrease (yes, there has been talk of this)? Will foreign earnings of US corporations be taxed immediately at the higher US rate or will they continue to be subject to foreign rates only until repatriated?

    4 – What will be the impacts of the regulations being drawn up for Health Care Reform?  How much will this cost businesses?  Will new regulatory burdens cause them to reconsider how many employees they hire or retain and where?

    5 – What will come out of the Deficit Reduction Commission?  How will this impact businesses?

    These are but a few of the questions facing businesses.  Staring this much uncertainty in the eye, it is hard to see why a business would expand right now.  There is no way to tie down the variables to make a good case for expansion.  However, there can be a good case made to giving back cash to shareholders now, before the potential increase in capital gains and dividend taxes on 1/1/11 if Congress continues on its path of doing nothing with taxes.  In this case, distributing money to shareholder now at lower tax rates makes economic and business sense for the shareholders who own the company.

    Resolve some if not all of the uncertainty and you will have more investment.  Leave it as it is and companies will sit on the sideline, its the prudent thing to do.

  • How about a undistributed profits tax just like during the depression.  Congress is already working on raising tariffs. Pretty soon we will all be waiting in soup kitchen lines.

  • The middle class wages have been pretty stagnant for close to 30 Years.  Much of our economic growth over the last few decades was based on credit and the inability to pay it back.

  • NAFTA and the WTO is good for Americans.  Sorry I couldn’t disagree more.