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Herbst writes: "The sorry facts are these: job growth is still half of what is needed to keep up with population growth. Meanwhile, more than 14% of the US workforce is unemployed, underemployed or discouraged from looking for work."

Mitt Romney says tax cuts for the rich will create jobs. (photo: Carlos Osorio/AP)
Mitt Romney says tax cuts for the rich will create jobs. (photo: Carlos Osorio/AP)

Where Are the US Jobs? Ask the Corporate Cash Hoarders

By Moira Herbst, Guardian UK

05 Aug 12


Corporate tax breaks won't boost the economy. If unemployment is to fall, giant companies must invest in job creation.

s it does every month, Friday's jobs report is expected to underscore the desperate need for job creation in America.

This time around, it would be refreshing if the pundit-political class considered a radical but obvious idea: tapping the multitrillion-dollar stockpiles of corporate cash currently sitting on the sidelines and benefiting no one. Compulsive hoarding is unhealthy for individuals. It's even worse for whole economies.

The sorry facts are these: job growth is still half of what is needed to keep up with population growth. Meanwhile, more than 14% of the US workforce is unemployed, underemployed or discouraged from looking for work. The numbers for July aren't expected to budge much. Absent a massive inflow of tax dollars, jobs aren't going to come from the public sector. State and local governments are broke, and the fight over federal deficits has turned into an all-out war in Congress.

Even as the need for fresh ideas and action becomes more urgent, politicians stake out tired and familiar ground each month. President Obama's response to poor-if-slightly-improving numbers is to acknowledge that job creation isn't where it needs to be, but will eventually limp back to health. Mitt Romney says the numbers are catastrophic, and if only the US cut taxes for corporations and the rich, and busted unions, we'd open the floodgates to millions of jobs.

In fact, both approaches only cause more harm - the former because many long-term unemployed are leaving the workforce for good, and the latter because it's a transfer of wealth to people and companies that will hoard money, not spend it.

The only thing that will bring jobs back is more consumer demand. Demand comes from middle and working-class people spending money. That becomes a lot harder when you don't have a job, are afraid of losing the one you have, or are earning less than you used to for the same work. America's middle and lower classes are tapped out. Despite rising productivity, labour's share of the national income in the US has dropped to the lowest point in recorded history.

In times like these, it can make sense to look to government to help stimulate demand. But thanks in part to Tea Party activism and the stress on ever-lower taxes for the richest Americans, the public sector will continue to shed jobs, especially at the local and state level. With government out, we turn to the only other potential source of jobs: big corporations. It turns out that US-based mega-corporations are hoarding cash. How much cash? Record sums. It's about $1.73tn in US assets, according to the Federal Reserve - 50% more than they held in 2007. When you count worldwide holdings of US companies, the figure is a staggering $5.1tn, estimates Reuters' David Cay Johnston. Apple alone has $117bn.

Banks are also stockpiling cash; they're sitting on more than $1.5tn in excess reserves in the US.

Not only are mega-companies not creating enough decent jobs with this cash, they continue to offshore work and underpay workers. Many are not even rewarding investors or accelerating their growth with the money, thereby causing harm to themselves, according to a recent survey by Ernst & Young. Economists also say that cash hoarding is blocking a recovery in Europe.

As the jobs picture continues to darken - especially for the 5.5 million out of work for six months or more - the need to make corporate cash productive becomes critical. According to an International Labour Organization (ILO) study, if US non-financial corporations invested $508bn of their excess cash holdings, US GDP would grow an additional 1% to 1.6% a year between 2012 and 2014 and 2.4m new jobs would be created.

Another study by the Political Economy Research Institute at the University of Massachusetts found that if corporations and banks invested $1.4bn in cash into productive investments and job creation, unemployment would fall below 5% by the end of 2014.

To be sure, the purpose of these companies - and of capitalism itself - is to create profits, not jobs. But as the Great Depression and the Great Recession have demonstrated - and as a famous philosopher-economist once said - capitalism sows the seeds of its own destruction. It's impoverishing the very workers and consumers it needs to expand in the US.

Of course, the question will arise: how can we make quarterly profits-obsessed corporations tap their vast reserves to invest and create jobs to serve their long-term interests? I don't know. But knowing where the cash is in this supposedly cash-strapped country is a start.

We shouldn't forget that the supreme court demonstrated recently that it's quite open to the idea of mandates. Wouldn't it make sense to mandate job creation when corporate cash levels reach a certain level? Or, for a more modest start, mandate corporations receiving taxpayer subsidies to create jobs? At the very least, the US should enforce Section 531 of the Internal Revenue Service code, which authorises taxing companies' excessive accumulated earnings, as Cay Johnston points out.

We can expect that Romney, himself under fire for a private equity career built on destroying American jobs, will again ask Obama: "Where are the jobs?" It's time for Romney to ask that question of his cash-hoarding friends. your social media marketing partner
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