New study says $2 trillion corporate cash hoard not Obama’s fault
Fortune — About a year or so ago, corporate balance sheets, for some, became exhibit No. 1 of how President Obama was killing the recovery.
The argument was over cash. Ever since the financial crisis, corporations have hoarded an increasing amount. The pile reached $2.2 trillion at the end of last year, up from $1.5 trillion at the end of 2007, according to data from the Federal Reserve. (First quarter data is due out later this week.) That may have made sense during the financial crisis and its immediate wake. But as corporate profits have rebounded the question was why weren’t companies using that money to make hires or open new plants or expand their business somehow.
That morphed into this Republican talking point: Companies weren’t spending money because of Obama. The President had pushed through banking reform, instituted the healthcare law and threatened to raise taxes on the wealthy. Conservatives argued that those moves and the threat of more were discouraging companies from investing in the U.S. economy, resulting in fewer hires and an anemic recovery.
But a new study, Multinationals and the High Cash Hoarding Puzzle, released this week by the National Bureau of Economic Research refutes the idea that either taxes or regulation have played a part in the growing corporate cash hoards. The study, which is authored by two Georgetown economics professors, Lee Pinkowitz and Rohan Williamson, and Rene Stulz from Ohio State, looked at U.S. corporate cash holdings since the 1950s, in addition to the cash holding habits of companies in 45 other nations. And they didn’t just look at absolute cash, but cash as a percentage of assets to compensate for the fact that U.S. companies are larger than they used to be.
In general, what they found is that corporate cash has gone up, and is higher at U.S. companies than similar overseas firms. But the study also found that the biggest increase in corporate cash actually came in the early 2000s. It has grown much slower since the financial crisis.
cj — Were you at trial the basis for the conclusion that the Obama Administration is not responsible for cash hording would be inadmissable. 🙂 Apparently Liberals believe they can read my mind as to why all of my companies are hording cash. Someone has to put forth effort to create lies I suppose in an effort to protect Saint Obama. Let’s hope he shares the fate of Tom Barrett of Wisconsin.