Economics 101: Healthy economies include low unemployment rates. Low unemployment rates mean consumers are consuming/buying goods. Consumers buying go
August 21, 2010

Economics 101: Healthy economies include low unemployment rates. Low unemployment rates mean consumers are consuming/buying goods. Consumers buying goods stimulates the economy, creates growth.

Economics 101 corollary: Sluggish economies include high unemployment rates, tight credit. In sluggish economies, consumers buy less, pay down debt, and the economy remains sluggish.

Until the unemployment rates drop, at which time more consumers have more money with which to consume.

Makes sense, right? Well, yes, until you read this Washington Post article where they interview corporate CEOs about why it might be that they're sitting on piles of cash and not hiring. Then it just gets really, really weird.

According to these CEOs, it's not really the national debt, the deficit or a need for more stimulus that's keeping them from hiring and allowing them to hoard cash. No, it's the consumer, who sparks a big no-confidence vote in them.

They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.

They really don't address the question of why they're hoarding trillions in cash instead of reinvesting in their business or {gasp} hiring again. They have some vague objections to legislation that's passed in this Congress, but nothing specific.

But when Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers.

None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring.

What we have here is the corporate Catch-22 boogie. We know it and they know it. We, the consumers, cannot and will not be spending anything until we're employed again. They the businesses, can, but will not, hire until we spend again. They would prefer to pay existing employees overtime than to hire new employees to fill the ranks of the employed.

I don't buy it. It sounds like the kind of political gobbledegook that gets spit out when the answer is right there in front of everyone like a pink elephant in a tutu. These guys are holding out for a Congress that they believe will give them the tax breaks and regulatory relief they expect and have been used to receiving in the past.

I called it a Catch-22, but really, it's a siege. They are mounting a siege against the middle class in this country -- their own customers, by the way -- in order to get leverage and the right to rewrite rules, including union contracts and pay rates that are below those of the past.

This is why small businesses really do need Congress' intervention. If they can get credit, they'll hire and we'll get some creative new industries going instead of just caving into the fat cats with trillions waiting to be sent off to Haley Barbour or some other teabag organization to defeat progress.

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