American companies are sitting on a record $1.2 trillion in cash reserves – money that is not being invested in the U.S. economy.
Why? Uncertainty. In fact, according to former Michigan Gov. John Engler, the only sure thing about the U.S. economy is uncertainty.
In his new role as president of the National Association of Manufacturers, Engler recently outlined five major policy dilemmas that have American businesses keeping more than $1 trillion in investment capital socked away in their corporate mattresses.
* Despite years of debate, the United States lacks a national energy strategy to increase domestic supplies and stabilize prices.
* Overlapping and contradictory environmental regulations deter utilities from investing in new technologies that could improve energy efficiency and air quality.
* Asbestos litigation threatens to bankrupt major sectors of the economy, but Congress has yet to pass a victims’ compensation fund that could reduce costly lawsuits and help sick people pay their bills.
* Congress is still squabbling over a comprehensive highway bill that could help repair America’s roads and bridges, reducing freight and traffic delays. Billions would come to Washington state, and projects could start this summer.
* Businesses are deterred from expanding to more affordable areas because those areas lack the high-speed broadband those businesses need to transmit voice, video and data.
Until these policy decisions are made, many businesses will be unwilling to risk their investment capital.
Think of it this way. Would you buy a new car if you thought you were about to lose your job? Of course not. You’d sit on your money until you were more certain of your situation. That’s exactly what many U. S. companies are doing.
But the impact of this delay is more serious than you might imagine. Consider, for example, that when you don’t buy that new car, the car salesman doesn’t make a commission, so he decides not to buy that new television he’s had his eye on and the electronics store loses another sale, which convinces the manager not to hire that new employee he’d been considering.
Multiply this one “non-purchase” by $1 trillion and you get an idea of the impact indecision and uncertainty has on the American economy.
Engler says the solution is for Congress to make some decisions – soon.
* Enacting a national energy strategy could pump more than $165 billion into the economy over the next five years.
* Streamlining environmental regulations could unleash $21 billion in new investment in the same period.
* Ending the nightmare of asbestos litigation would increase victims’ compensation by $65 billion and save America’s job providers $85 billion.
* Passing the highway bill would pump $242 billion into the economy over five years.
* Modernizing telecommunication law and speeding the deployment of broadband would add $600 billion by 2010.
Predictability is one of the most important components of business success. Simply put, an employer cannot plan, make decisions about hiring and expand or invest in new equipment if he or she has no idea what they’ll be facing.
As Engler points out, “Tomorrow’s winners on the global economic playing field will be found in countries that educate, innovate and invest. Will the new ideas, new products, and new ways of doing business be developed here at home or somewhere else?”
What Congress decides – and how soon – will determine the answer to that question.