And They’ll Have Cash! Cash! Cash! till the Government Takes It Away

Posted by hllf on Jul 15, 2010 in Politics |

I love it when the media reports things that should be obvious to all as news-worthy items. A recent example of this is an article in the Washington Post by Fareed Zakaria, entitled “Obama’s CEO Problem.” The article starts out like this:

The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.

Seriously? Private sector spending would “probably” work better than government spending? I can just see Mr. Zakaria, sitting there, scratching his head, saying to himself, “This is so odd; I just don’t get it. My entire life, I was taught the government is the answer to all our problems, the private sector is the cause of all evil, but now I am starting to think the private sector spending might be better? Huh.”

Now the fact that companies are “hording” cash and not spending it is neither news to me, nor is it one bit surprising. But Mr. Zakaria and the Washington Post apparently thought this was such odd behavior, they had to ask these CEOs directly to find out the reason. He writes:

I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.

“For fear of offending people in Washington?” So our own CEOs are afraid to speak out, because they know the consequences of incurring this administration’s wrath. And I suppose I can’t blame them. After all, when you have a President who can call the CEO of BP into a private meeting, and shake him down for 20 billion dollars, no one is going to feel safe.

And this is not a case of me siding with BP. In fact, this is completely separate from the oil spill. I do not defend BP; however, I do defend the U.S. Constitution and the rule of law. If there was wrongdoing by BP, fine. If they are found responsible and have to pay, fine again. But we have a legal system that decides this, not the President of the United States. Let’s take a quick look at the U.S. Constitution, shall we? Here is a portion of the text from the 5th amendment, so important, the Founding Fathers put it in the Bill of Rights:

No person shall be deprived of life, liberty, or property, without due process of law.

Yes, “due process of law.” Not the due process of the President. And yes, 20 billion dollars in cash is property, property which the President has deprived BP. Whether you hate BP is irrelevant. whether you think they deserved it is irrelevant. The second we start to say, “Who cares. They are evil. They are destroying the environment. They just got what was coming to them, and screw the rule of law,” that’s when we stop being the wonderful and great country we are and start to behave like the former Soviet Union. It is such a dangerous path. We have the Constitution and the legal system for a reason. No one person ever can be permitted to have the power to make these decisions, and yet, our President thinks he does. Remember checks and balances, folks?

But let’s return to discussing the article. So Mr. Zakaria goes out and asks all these CEOs why oh why are they hording all this cash. Here is what he finds out:

Economic uncertainty was the primary cause of their caution. “We’ve just been through a tsunami and that produces caution,” one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington.

Oh really? You mean that all these new potential regulations are causing uncertainty? The fact that we signed into law a health-care bill with thousands of pages that no one has read in full yet, the fact we are about to pass a so-called financial reform bill that is 2,300 pages that also no one has read yet, makes these CEOs think twice about spending their cash? Folks, if this isn’t ground-breaking reporting, I don’t know what is. I’d like to personally thank the Washington Post, because without them, I would still totally be in the dark!

Sarcasm aside, Of course this is why they are holding on to their cash! No one yet knows what the impact is going to be of all these regulations. We have the largest tax increase in this country’s history coming in six months. As an individual, if you had some extra cash lying around, yet knew that in six months, you may be required by the government to have to come up with thousands of dollars, would you go out and buy that big screen TV? Well, some might, but you see my point. Mr. Zakaria continued:

One CEO told me, “Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what’s in store for us for the future.” Another pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations.

I’m stunned, folks. I thought all these new regulations were going to be the answer to all our problems. Now check out this next paragraph from the article, and keep in mind my post yesterday about the speeches at the Aspen Ideas Festival and how even the liberals are turning against the President’s policies:

Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.

The sad thing, folks? It has taken 18 months for these people to finally realize this. All of this was clear as crystal during the entire campaign! Obama is doing exactly what I knew he would do! None of this surprises me one bit. We do get what we vote for.

For those of you who would like to read Fareed Zakaria’s article in its entirety, you can find it here.

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