Companies, Sitting on Even More Cash, Still Won't Hire

Remember those news stories from a few years ago about how so many companies were holding on to their cash—an estimated $1.2 trillion—afraid to spend it because of all the economic uncertainty created by President Obama’s policies?
 
As National Public Radio reported in August 2011, “In a recent report, Moody’s said the 1,600-plus U.S.-based companies it rates had $1.2 trillion in cash at the end of 2010—11.2 percent more than they did a year earlier.”
 
Well, the uncertainty factor continues to swirl around Obama’s economic policies: How much will ObamaCare cost employers?  How much inefficiency will Dodd-Frank create?  Will corporate taxes go up in order to pay for Obama’s expanded welfare state?  Will Obama punish companies that don’t repatriate their overseas earnings because of the higher U.S. tax rates?  And so on.
 
The result is that two years after Moody’s estimated companies were sitting on about $1.2 trillion, we learn that companies are now sitting on $1.79 trillion.
 
And sadly, the reason is still the same: Companies are reluctant to hire because of the economic uncertainty created by Obama’s policies. So we see stories like a recent one in The New York Times with the headline, “With Positions to Fill, Employers Wait for Perfection.”
 
But employers aren’t waiting for perfection; they’re hemming and hawing while they hope—probably in vain—that some economic clarity will emerge.
 
And yet these companies have to do something with that cash. Thanks to Federal Reserve Bank Chairman Ben Bernanke’s near-zero interest rate policies, the companies can’t make anything leaving the money in the bank.
 
So they have jumped head first into dividend-paying and stock-buyback programs. The Wall Street Journal reports that 130 companies announced buybacks last month, nearly twice the number for the previous month. Given the continuing uncertainty, that’s probably the best use of that corporate cash.
 
One day companies may start using their cash surpluses to hire again. But it probably won’t be until the prevailing economic uncertainty is replaced by political certainty—that is, when the one causing the uncertainty is out of office.