Corporate America Is Sitting On The Solution To The Jobs Crisis: Report

WASHINGTON -- Corporate America is sitting right on top of the solution to the nation's employment crisis, according to a new report from a group of University of Massachusetts economists.

If America's largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they're hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

"There is no reason that the U.S. needs to remain stuck in a long-term unemployment crisis," Robert Pollin, lead author of the report and co-director of the Political Economy Research Institute, said in a statement accompanying the report's release Tuesday.

"Getting the banks and corporations to move their hoards into productive investments and job creation requires carrots and sticks -- policies such as a new round of government spending stimulus as well as taxes on the banks' excess reserves -- that can both strengthen overall market demand and unlock credit markets for small businesses," Pollin said.

(See, for background, slide 5 of our Nov. 8 story, 6 Things Obama Could Do To Goose The Economy -- Without Congress, and, from 2010: Job Creation Idea No. 9: Encourage Banks To Lend -- Or Else.)

Even as the nation continues to confront massive unemployment, the nation's biggest companies have been hoarding cash. Banks have been able to borrow the money essentially for free from the Federal Reserve, so why not? In fact, according to the Federal Reserve (Table L.109, line 28), banks are sitting on $1.6 trillion in reserves -- about 80 times the $20 billion they held in 2007.

Meanwhile, non-financial companies are keeping their profits liquid, rather than plowing them back into investments, to the tune of about $2 trillion.

Together, that amounts to almost a quarter of the U.S. gross domestic product.

Pollin and his colleagues figured that even accounting for a massive safety cushion, at least $1.4 trillion of those reserves should be considered excess.

Meanwhile, the report notes, small business are having a hard time getting anyone to lend them money.

The report concludes that investing the $1.4 trillion in private businesses would generate an enormous surge in employment. It recommends that the money in particular be channeled toward "small businesses that face larger than normal credit constraints; more labor intensive businesses; and businesses that generate large social as well as private benefits."

CORRECTION: A previous version of this story incorrectly stated the ratio of current bank reserves to those in 2007.

* * * * *

Dan Froomkin is senior Washington correspondent for The Huffington Post. You can send him an email, bookmark his page; subscribe to his RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get email alerts when he writes.

Comments

[Trader Adik]

02:02 AM on 12/14/2011

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[Neets101]

09:23 AM on 12/12/2011

Corporations don't give a rat's patooty about the unemployment crisis unless the situation cuts into profits. There are still new consumers to be had in Asia, and that is where the vampire squid is already.

[gerald4]

11:07 AM on 12/09/2011

Workers work for and are hired by businesses and corporations only to CREATE WEALTH for those same respective businesses and corporations!

PERMANENT non-government JOBS are ONLY created by businesses and corporations in order to CREATE WEALTH for those same businesses and corporations!

This PRIVATELY HELD WEALTH is made, created, and/or acquired mainly (maybe only) when the members of a family (or the citizen businessmen of a nation, city-state, island, tribe, etc.) perform one or more of the following tasks:

1. plant, grow and/or harvest something of commercial value from the earth;

2. extract something of commercial value from the earth;

3. manufacture something of commercial value that is consumable

4. construct a building that is permanently useful for rental income;

5. provide professional services (medical, legal, dental, engineering, architecture, land surveying, technology, accounting, etc.);

6. collect payment for patent and copyright uses;

and then trade, sell, lease or rent these items and/or services to parties outside of their family, in return for a net transfer of gold, currency or commodities from other parties outside of their family into their own family.

[gerald4]

11:15 AM on 12/09/2011

The NATIONAL WEALTH that was created by industrious private businessmen (and the Corporations) in any nation is the only wealth available to be CONFISCATED in the form of TAXATION in order to create funds to form a government with money to build and operate schools, streets, water and sewer systems, repay sovereign national debts, pork barrel projects, green projects, infrastructure projects, wars, streets, bridges, highways, welfare, unemployment, school teachers, policemen, courts, prisons fire fighters, social security and other non-wealth creating government provided bureaucratic services for that family, tribe, city, state, or nation, EXCEPT for borrowing money and obligation future tax collections to repay those loans (Treasury Bonds).

Each nation must have the assets and financial capability to be able to take care of those that cannot take care of themselves, and this capability can only be available if that nation has national wealth available to be CONFISCATED in the form of taxation in order to create funds to pay for that activity.

There are limits to the amount of NATIONAL WEALTH that can be taken from the wealth creators in the form of taxes and paid to the government or borrowed from foreigners to pay for various government activities and expenses, no matter how much these government expenses are deemed as being "necessary" (usually by the elite government bureaucrats). If those limits are exceeded, then that nation’s economy will self destruct!

[gerald4]

10:28 AM on 12/09/2011

Without profitable US businesses, US corporations, and US businessmen, there will not be any jobs for US citizens (that create wealth for those businesses), except for tax payer funded jobs which will also disappear if businesses stop creating WEALTH that can be taxed or CONFISCATED to pay for those government jobs and free government services.

The US government must stop creating new legislation that drives US businesses and US jobs to foreign countries.

The US government should repeal the laws that they created that caused and economically required that US businesses and US jobs to relocate to foreign nations.

[gerald4]

10:26 AM on 12/09/2011

What exactly is preventing the USA from re-industrializing to re-create jobs for US citizens?

US citizens do not want to work for the extremely low wages that are paid in foreign countries to manufacture the things that US citizens consume. This is the main reason why the US manufacturers have closed their US factories, and relocated the manufacturing facility to a country with less expensive labor.

The constant US government activity of "Piling on" more and more environmental regulations with the associated compliance costs onto our industries is also a great incentive to relocate US industries from the USA to various foreign countries.

IMPORT TARIFFS: Only US import tariffs high enough to prohibit imported products from being imported and sold in the USA will create re-industrialization, stop the flow of title to privately owned US assets from the USA to pay for our imported products, re-create the value of the US dollar, and also create manufacturing jobs for US citizens.

Yes, the consumers will have to pay many, many times the current price of each consumer item if these items are made with US labor and in compliance with US environmental requirements in the USA, but maybe this can avert a second USA revolution that might be more bloody than 1776.

[Tad Northcutt]

08:58 PM on 01/28/2012

Damn right I don't want to work for 50 cents an hour. How is that MY fault?

[GloriaY]

01:29 AM on 12/09/2011

The answer is greed. They are sitting on trillions of dollars in the USA, refusing to hire in the USA, but hiring in Mexico, Philippines, India, Indonesia, and every conceivable place but can still collect US taxpayer money in the form of tax loopholes. America needs a change in its tax laws.

[gerald4]

10:16 AM on 12/09/2011

How do you think that any of the US manufacturing businesses could ever possibly even consider creating and/or keeping any jobs in the USA if they are hamstrung with many times more expensive labor costs, many times more expensive electrical energy that is required to be generated in compliance with the EPA, health care payroll tax costs, unemployment payroll tax costs, social security and medical care payroll tax costs, environmental compliance manufacturing costs, fringe (holiday and vacation) benefit payroll costs, OSHA compliance payroll costs, union labor work rules, anti-business laws, and general anti-business attitudes that make manufacturing products in the USA many many times more costly than manufacturing the same product in almost any other foreign country?

[gerald4]

11:20 AM on 12/09/2011

I have heard many people say that one of the problems with the USA today is that people are greedy.

I believe that people were always greedy in the past.

When were people ever not greedy?

I consider you working hard and producing things of value and selling them to others outside of your family in order to enrich your family and accumulate wealth for your family as being greedy.

I consider that if you start a business and hire some people to assist you to help make these things and then make yourself more US dollars defines you as being greedy.

I do not believe that I am greedy when I do not share the "fruits of my Labor" with others who might not have worked as hard as I did, and especially if they spent their assets on expensive food, drink, new cars, big houses, vacations, concerts, entertainment, women, and recreational drugs when I saved my money.

I believe that the USA needs more greedy men like Henry Ford, Thomas Alva Edison, Alexander Graham Bell, George Westinghouse, Lee Iacocca, George Washington Carver, Thomas Davenport, George Eastman, Philo Taylor Farnsworth, Benjamin Franklin, Robert Hutchings Goddard, Rear Admiral Grace Murray Hopper, Edwin Herbert Land, Cyrus Hall McCormick, Elijah McCoy, Samuel Finley Breese Morse, Elisha Graves Otis, Jonas Salk, Wilbur Wright and Orville Wright who were technology oriented and also more than likely motivated by greed for financial rewards to create more industries and jobs for US citizens.

[GloriaY]

10:51 PM on 12/09/2011

You have misinterpreted the term "greedy." Just a gentle reminder that the term aptly applies to the robber barons, bank executives who apply unconscionable fees to their products, i.e. overdraft fees, excessive withdrawal fees, and a host of fees all of which help in reducing the balances on the accounts of the middle
class and working poor. By no means can
anyone refer to the above inventors you
cited as greedy, but what has anyone on Wall Street and the banking community invented? I think that your argument is a stretch. Are you insinuating that the American standard of living is too high? Will you be willing to reduce your standard of living and accept the same reduction for the rest of the citizens of the US?
In fact, no one is being asked to share the fruits of his or her labor, but what is being asked is that those who avoid paying their fair share of taxes via loopholes and other accounting gimmicks contribute to the country that has made them wealthy. Don't forget that if the "inventors" you mentioned simply sat on their projects and failed to employ workers to carry out and expand their industries America would never have been the great country it is, unlike the current situation where those who are in a position to hire are deliberately refusing to do so and are very satisfied to go outside this country to hire workers whom they can pay 50 cents an hour.

[John Steinsvold]

12:34 AM on 12/09/2011

An Alternative to Capitalism (if the people knew about it, they would demand it)

Several decades ago, Margaret Thatcher claimed: "There is no alternative". She was referring to capitalism. Today, this negative attitude still persists.

I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to an essay titled: "Home of the Brave?" which was published by the Athenaeum Library of Philosophy:

http://evans-experientialism.freewebspace.com/steinsvold.htm

John Steinsvold

“Insanity is doing the same thing over and over and expecting a different result."
~ Albert Einstein

[gerald4]

10:22 AM on 12/09/2011

In John Steinsvold's world, how would you get people to work and produce the things necessary for sustaining life?

Most of the individuals in any John Steinsvold's world future socialist USA would want to work at something other than producing the basic food, shelter, clothing and other products required to sustain life.

These producers would strive to become members the a non-producing government elite bureaucrat society, demanding and wanting the disgruntled producers to produce more and more so that privileged individuals of the government elite bureaucratic society class can keep themselves busy as musicians, poets, actors, social workers, philosophers, historians, politicians, bureaucrats, administrators, police, firemen, military, school teachers, judges and other endeavors that do not create any of the food, shelter and clothing necessary for maintaining the lives of the population.

The non-producing members of the government elite bureaucratic society will then let, require, and/or force those that the elite have deemed to be lower class to work harder and produce more and more of the food, shelter, and clothing required to sustain the lives of all of the people including the elite class of bureaucratic government employees.

Under the communist system, some citizens (the non-producing greedy elite family connected government bureaucrats) are "MORE EQUAL" than other citizens (the lower class citizens that make the things that the elite government bureaucrats (and the producers) consume!

[John Steinsvold]

02:11 PM on 12/09/2011

gerald4,

Today, the word "work" implies a means to "make a living". In a way of life without money, the meaning of the word "work" will change completely­. Work will become a stairway to learning, creating and achieving our goals in life without any economic fear.

The best way to motivate people is to allow them to do the work they love to do. One of the goals of a way of life without money is to provide everyone with the opportunit­y to find a match between their abilities and the opportunit­y to serve society. If training is necessary, a free education is provided. Every effort will be made for each individual to find the work they love doing. There will be no pressure. I believe everyone has an ability or talent they want to use for the benefit of society.

As I envision a way of of life without money, we will gain economic freedom in addition to and without infringement on our present freedoms. The ONLY common denominator between a way of life without money and socialism/communism/Marxism is economic equality which, in my opinion, we desperately need here in the USA. Economic equality will eliminate poverty. It will also eliminate materialism which warps our sense of value and corrupts our system. It will also reduce crime dramatically. Otherwise, our government will remain the same. The Democrats will still do battle with the Republicans. Our free enterprise system will still exist.

John Steinsvold

[gerald4]

10:23 AM on 12/09/2011

US citizens would then have traded businessmen, industrialists and Wall Street financial wizards who now control the conditions and terms of their employment (or servitude) for an elite class of family connected (almost royal) government bureaucratic employees who will be controlling our employment (or our conditions of servitude), and they would then dole out our share of the necessities of life to each of us according to our needs, not according to the amount that we produced!

[Davidrfunk2]

12:07 AM on 12/09/2011

Investing, creating new businesses and hiring people involves risk of loss, If your company is profitable (made easier by our business favorable tax system) why take a risk? the only reason to take risk is for the opportunity of reward and greater profit.

[gerald4]

10:28 AM on 12/09/2011

Absolutely correct!

[loki]

11:45 PM on 12/08/2011

But that is their money and they Earned it. God gave it to them as its their right.

Firstly, they earned little of it, sitting in their luxury offices, playing golf and going to high priced parties in private jets and limos while the workers, who are called workers because they do just that, WORK, and make the products, create the services, satisfy the customers ( occasionally) and actually make the companies the the Ruling Class Rich own, successful and profitable. But the Ruling Class Rich reap all the rewards for the labors of the workers.
As we have all seen many times in the past, Corporations continue to pump along just fine without a CEO at the helm, but if all the workers walked out, the CEO wouldn't even know how to unlock his office door on his own. Who really creates the wealth in a company? On arrogant narcissistic ruling class rich spoiled person? Or the 10s, dozens, hundreds or thousands who actually do the work?

LIke Ive said before. take the CEO, and the lowest worker. Put them on their own, no money,no help, no connections, for one month and see who makes it on their own. My money is on the lowest worker.

[new beginning]

07:21 AM on 12/09/2011

Your post shows a breathtaking naivete' about the way people earn their money. It does a lovely job of spouting the class envy left's talking points. But it clearly exemplifies just how misinformed people like you are.

As long as you continue to believe that you are entitled to the money that others have earned, you will always be disappointed with your lot in life. Your choice to be a victim is a handicap that will drag you down for your entire life. Very sad.

[ForGodandcountry]

10:42 AM on 12/09/2011

Wow--Fanned and Faved. I too am one of the 53% who does not but into this tax and spend idealism. That the government has to get us out of it--all they have to do is get out of the way!!

[wiseapple]

12:14 PM on 12/09/2011

The economy belongs to everyone born in this country or a citizen of the country. Citizens are entitled to participate in the economy. But if the economy excludes some, then it is up to others to either provide them jobs or pay what taxes are needed to sustain the excluded ones until they are included. Doing this is merely mending the distorted distribution of OUR economy's wealth that occurs with any economic system- because they are all imperfect.
Your rugged individualistic BS is simply that: rugged individualistic BS.

[afinch9]

07:01 PM on 12/11/2011

microsoft
apple computer
dell computer
hewlett packard
a few of the companies that started in garages and dorm rooms. The ceos were the workers, they did not start with plush boardrooms, offices and private jets. They had the idea and the guts to risk what they had. Until the unemployed of today learn that the government is not going to supply them with jobs and that it is up to them to be the job creators they will remain unemployed.

[Gianni Piazzo]

08:40 PM on 12/08/2011

It's simple. When demand exceeds supply, capital will be employed and additional employees hired. Until then, not.

Any questions?

[gerald4]

10:40 AM on 12/09/2011

Any additional employees that are needed to meet demand will be hired in foreign nations, if at all possible.

Operations in the USA require US citizens be hired and that increases the product cost by many many times.

ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/ichccpwsuppt01.txt

Sri Lanka labor costs is 2% of the USA labor costs.

They can make clothing and other low tech products.

[dlmcons]

08:39 PM on 12/08/2011

Why would anyone take such a chance in this economy and with Obama's administration doing so little to help ? The miles of red taper and regulation any business has to seal with would discourage all but the morons. I ran a business for thirty five years and i got out of it because of the Obama administration's over regulating me and everything i tried to do to grow. I was smart and got out while i could before being regulated into bankruptcy! This president is dooming our Nation.Take it from someone who saw it coming and got out at the right time.ME!

[Davidrfunk2]

12:09 AM on 12/09/2011

Business regulation is at a historic low level not scene since before word war 2

[JimInHouston]

04:31 PM on 12/09/2011

Nonsense. Federal regulations run thousands of pages per year and are virtually never rescinded. Not only are regulation costs high but they are (far worse) uncertain.

[robertmb56]

07:28 AM on 12/12/2011

How can you say that? Have you ever seen the Code of Federal Regulations? Have you tried to find relevant rules/regulations in them? I don't think you have a clue about what you speak.

[CPT America]

04:05 AM on 12/09/2011

What was your company's name?
What kind of business was it?
What regulations are you talking about?
How did these regulations not allow you to grow?

[Steve Adams22]

12:35 AM on 12/11/2011

I work for a 20 person equipment manufacturer. We make electrical equipment. Because of OSHA every product we make must be UL approved. This means any small changes we make need approval - $3k per 'review'. Any decent size change requires 3-30k for the change and an added $2k per year.

So, for these products we have customers that want small changes so it will for them. But those fees may be six months worth of profit - if it works for the customer and they keep buying it. If thier side of the project doesn't work we lose money. So, a lot of those projects don't get done.

[Mile End]

04:32 PM on 12/08/2011

The truth is simple and dirty. Companies won't hire because they have the upper hand in a way they could not have dreamed of five years ago - the employees they have are working twice as hard as ever and live in constant fear of losing their job. Why ruin a good thing by hiring more people when they are making bigger profits working the people they have into the ground... and getting away with it?

[Steve Adams22]

12:40 AM on 12/11/2011

Have you ever worked for a company? If the orders are there they will hire. They may not reinvest much now but if the orders are too much they don't have much choice between overtime, hiring or turning away business. But, if you've ever had to lay people off you would know that you don't hire until you have to otherwise there is too much risk of layoffs soon after and that sucks - even for the people doing the layoff.

[afinch9]

07:07 PM on 12/11/2011

companies don't hire because they cannot product the cheap products demanded by the consumers using american labor. The middle/lower class are dooming themselves with their buying habits.

[Jim chaos]

03:47 PM on 12/08/2011

It is time for the banks to pay the piper for their greed, corruption and hoarding. The tough decisions that are needed to resolve this crisis are not so difficult. Debt forgiveness needs to be enforced and all that taxpayer and private money the banks are hoarding should cover most of it. After that, they can eat the rest. Better them than us. The working poor have sacrificed enough over the years while the financial institutions have increased their wealth in record amounts at the expense of others who are less fortunate

[vobox3343]

02:04 PM on 12/08/2011

Republicans and their ways are holding us all hostage. Unless, of course, you're in the top 5%.

[Gianni Piazzo]

08:43 PM on 12/08/2011

If that were the case, why are registered Republicans in the U.S. at parity with registered Democrats? You've been on this site too long......it is NOT representative of the full picture.
Try the Blaze or Drudge for a broader view that fully encompasses reality.

[AOLsuperuser]

01:14 PM on 12/08/2011

Opportunity is the issue. The government can't create jobs that will not be a burden to taxpayers. This is true, but the govenment can create opportunity. I was not a Bill Clinton fan, but his administration knew how to create opportunity. As one example, he saw a huge growth market in wireless and he then auctioned spectrum and raised billions and billions of dollars that went into the US coffers. This did not take taxes to do. Private money was invested becasue private investors saw an opportunity to get into a profitable business that was previously locked up by the big guys. Clinton's FCC also set aside a means for small business to invest in the pectrum by not allowing the biggest players to participate in a few auctions. The end result is that Trillions of dollars of private investment flowed into the market and into the treasury. We need some of this type "opportunity" fostered and created by the current administration. The problem is that this admin keeps trying to spend more public money or "take" money from the private investors instead of offering opportunity to coax the money out of private investor's bank accounts. Opportunity is the key.

[Gianni Piazzo]

08:47 PM on 12/08/2011

Federal employment is up, but that's about it, so you're right, and the average Federal employee makes double what private sector employees make - and do half the work of those in the private sector. Not a wise use of capital and iIt's a huge braking system on the real economy. Thank
God, we only have to endure this for another year.

[CPT America]

04:08 AM on 12/09/2011

there will always be Federal Employees, FBI, CIA, Military, civil servants of all types of government offices.

So, tell me, what is going to happen in another year that will make all these federal employees disappear?

[gerald4]

10:57 AM on 12/09/2011

The USA needs to generate new NATIONAL WEALTH via re-industrialization, and not mortgage or sell the existing NATIONAL WEALTH including the assets that were created by previous generations of US citizens to foreigners (print and sell US Treasury Bonds to foreigners) and then spend that borrowed money on bureaucratic government employee payrolls, government contracts, to pay for the common infrastructure that we all enjoy, and various other government expenses.

President Clinton was the first one of many past presidents who destroyed the US's domestic industrial jobs and businesses with his NAFTA, GATT, WTO, Most Favored Nation status for China, Financial Services Modernization Act of 1999, H-1b visas, etc.

The "FREE TRADE" legislation that has been created by both Democrats and Republican members of the US Congress allows and ECONOMICALLY REQUIRES businesses to fire US employees and then import the products and the services that US citizens previously manufactured and/or performed.