Health care reform passed. Now it looks like financial re-regulation will, too. For a long time, businesses have been complaining that they can’t hire and they can’t invest because of all the uncertainty the Obama Administration has injected into the system. Who can make plans when no one knows what the American health care system will look like or how various prongs of our financial system will be forced to change?
Well, increasingly, we have answers to those questions. So maybe it’s time to stop blaming the government for the state of the economy and job creation.
Maybe, instead, it’s time for business leaders to—ahem—lead and make some decisions about the futures of their companies. Jeffrey Immelt, the CEO of General Electric, said as much yesterday on CNBC. When asked about Administration-generated uncertainty, he gave the standard line—that business people like clarity and certainty, and that big new pieces of legislation take things in the other direction. Then he added: “Look, GE has a lot of cash. Investments like the one we’re making today, $200 million in clean energy, you know, we’re going to do that with or without the government. I think it’s wrong for us to use that as an excuse.”
GE is investing in energy? Wait, don’t executives there know that Washington is gearing up for a big energy bill? I’m guessing they do. And yet, somehow, they are plowing ahead.
Now, I am sympathetic to businesses being somewhat hamstrung by economic uncertainty. Are we coming out of this recession once and for all, or are we headed toward a double dip? That is the sort of thing that makes it tough to decide whether or not to hire or open a new plant. But where we are in the business cycle is far from anything the President controls. As people with a sense of history like to point out, the U.S. economy has grown and contracted under all sorts of Presidents and policies.
Executives love to go on TV nowadays and talk about how the President should show more confidence in the economy. That probably wouldn’t hurt. But you know what would actually help? If these same executives did that themselves by going out, taking some risks (what they’re paid millions of dollars to do!) and expanding their companies.
We’ve heard a lot about how much cash companies have sitting on their balance sheets. We’ve also heard a lot about how they’d be happy to spend this money were it not for all the uncertainty being kicked up in Washington. But, as Barry Ritholtz points out, corporations have been increasingly hoarding their cash for decades. Between 1980 and 2004, the average cash-to-assets ratio went from 10.5% to 24%.
The economy could really use some of that money being put to work right now. Apparently, GE execs aren’t afraid to spend hundreds of millions of dollars on what they think is a business of tomorrow. Wouldn’t it be great if other executives spent time coming up with similar plans for their own companies—instead of yammering on about how hard it is to make decisions?
Private enterprise is what will ultimately save the economy and create jobs. It’s easy for the people at the wheel to come up with excuses about why they aren’t doing that. Fundamentally, though, the power resides with them.