Encyclopedia Brown and the Case of the Cash Reserves
October 11, 2012 7:26 AM Subscribe
What am I missing?-filter: I feel like I have a lot of the pieces of this notion that companies are holding onto enormous cash reserves and waiting to see how the election shakes out, but I can't quite put it all together.
posted by blueshammer to Law & Government (10 answers total) 7 users marked this as a favorite
The 47% speech is maybe the most obvious manifestation of this idea that the economy would improve with a Republican administration because businesses will "be happier" with that.
What are the components of this? We all know capital exists to make more capital, so companies should always been spending on themselves and not hoarding unless they feel like they spending will not give them sufficient returns. Companies feel personal and corporate tax rates are too high, reducing their incentive to make an investment that increases their marginal tax rate, although I don't see how that math works. (I can see "more worth it" vs. "less worth it", but I can't see "not worth it.") But I don't see what their end game is -- if they made an investment last year, then if their preferred candidate wins, as that investment (in personal, in assets, whatever) moves forward in time, it will be taxed at the new rate, so paying current, higher taxes is a small moment of pain. Because if their candidate doesn't win, surely they're not going to forestall domestic investment for another four years. Are their motivations direct (e.g. it is truly fiscally unwise to invest right now because of "uncertainty") or indirect (e.g. proving a point, like McConnell saying his #1 job was to deny the president a second term)?
Or is this idea that companies are sitting on cash an urban legend? If not, is there precedent for this level of intransigence between the corporate world and Washington?
I'm happy to do outside reading on this matter.