Companies like Microsoft are raising billions of dollars by issuing bonds at ultra-low interest rates, but few of them are actually spending the money on new factories, equipment or jobs. Instead, they are stockpiling the cash until the economy improves.
The development presents something of a chicken-and-egg situation: Corporations keep saving, waiting for the economy to perk up — but the economy is unlikely to perk up if corporations keep saving.
American corporations have been saving more money since the financial collapse of 2008. But a recent rush of blue-chip bond offerings — including a $4.75 billion deal last month by Microsoft, one of the richest companies in the world — has put even more money in their coffers.
Corporations now sit atop a combined $1.6 trillion of cash, a figure equal to slightly more than 6 percent of their total assets. In the first quarter of this year it was 6.2 percent of assets, the highest level since 1964, when it was 6.4 percent.
They aren't hiring, though. As I wrote about back in July, some of these corporations are using this opportunity to cut jobs, force unions to make concessions, and still make a tidy profit for the shareholders.
Still we keep hearing that the private sector is our best hope for job creation.
US transportation system failing, warns a story in today's WaPo:
The United States is saddled with a rapidly decaying and woefully underfunded transportation system that will undermine its status in the global economy unless Congress and the public embrace innovative reforms, a bipartisan panel of experts concludes in a report released Monday.
U.S. investment in preservation and development of transportation infrastructure lags so far behind that of China, Russia and European nations that it will lead to "a steady erosion of the social and economic foundations for American prosperity in the long run."
Which reminded me of Laura's post last month, where she mentioned President Obama's proposal to invest $50 million in updating road, rail, and air systems.
Think of the jobs that would be created! Instead, we're being held hostage by myopic people who are more interested in scoring political points than actually solving the very real problems that face this country.
cross posted at MainSt/workingamerica.org