There is a very real reason why American business continues to hold $2.3 trillion in cash and cash equivalent assets on their balance sheets, earning record profits while unemployment remains over 9%. That reason is "uncertainty."
It is very difficult to criticize small business or even the companies of the Fortune 500 for not adding additional labor when their future expenses remain largely unknown.
Consider the following factors: American unemployment has elevated to recent historic highs, health care costs have continued to rise, consumer spending has become stagnant, future tax rates have not been determined, EPA regulations remain in question, and oil costs are near historic highs.
All of the above are economic conditions which American business has faced since the onset of the great recession. American economic growth, particularly relating to hiring, remains held hostage by uncertainty.
Uncertainty can to a degree be reversed by stability which the federal government can provide. For example, it can legislate into existence what the federal tax code will be for the next decade, and uncertainty is replaced with the ability to value the advantages of investing in plant and equipment capital expenditures. Further, it can legislate into existence cost containments to health care expenses, and uncertainty is replaced with the ability to increase hiring for your labor force.
The benefits which occur from long-term federal commitments to economic initiatives have historically led to sustained long term growth.
One such example occurred in the Eisenhower administration’s decision to develop the interstate highway system. The stability created by infrastructure spending continued for much of the next four decades. The federal budget for transportation was traditionally renewed with a 6-year commitment establishing the long-term funding to develop appropriate resource allocation.
President John F. Kennedy and later President Lyndon Johnson set America on a course to win both the Space Race and later initiate the “Great Society” program. Both initiatives laid out long-term policy that provided stability to our economic growth as a nation.
The Reagan administration’s commitment to both a tax code change and a long-term increase in defense spending created the greatest post-recession employment increase in American history, as the country added 6.8 million jobs in the 23 months.
As the prior examples support, the federal government can provide stability through long-term commitments which facilitate the growth of the economy.
Time magazine called the 2000s the “decade from hell.” From the tech bubble crash in 2000 to the 9/11 attacks to Hurricane Katrina to the bursting of the housing bubble to the great recession of 2007-2009, America has been in crisis mode for much of the past 11 years.
No man, woman, or government is capable of insulating the nation from all the uncertainty which existed in the 2000s or exists today.
Doing nothing may be good politics for our political parties, but it is bad policy because it holds job growth hostage to uncertainty. This is tragic because job creation is truly a bipartisan initiative.
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