Channeling corporate cash and asset reserves into job creation

U.S. commercial banks and large nonfinancial corporations have been carrying huge cash hoards and other liquid assets, totaling $1.4 trillion. At the same time, small businesses have been locked out of credit markets, preventing them from expanding. In "19 Million Jobs for U.S. Workers: The Impact of Channeling $1.4 Trillion in Excess Liquid Asset Holdings into Productive Investments," Robert Pollin, James Heintz, Heidi Garrett-Peltier and Jeannette Wicks-Lim of the Political Economy Research Institute at the University of Massachusetts Amherst examine the impact that mobilizing these excess liquid assets into productive investments could have on job creation. They find that if we moved those liquid assets into business expansions, U.S. employment could expand by about 19 million jobs by the end of 2014, with unemployment falling below 5 percent.

Commercial banks have been able to build up their excessive in large part because Federal Reserve policies for the past 2 1/2 years have enabled the banks to borrow cash at a near-zero interest rate. And large nonfinancial corporations are using their massive holdings of $2 trillion in liquid assets for various forms of financial engineering, such as stock buybacks, rather than expanding their operations, investing in research, development and productive equipment, and hiring more workers.

If the roughly $1.4 trillion now being held as excess liquid assets were channeled into productive investments and job creation over a period of three years, this could, virtually on its own, solve the country’s employment crisis. If the funds were to begin moving into productive investments early in 2012, about 19 million new jobs would be generated by the end of 2014.

These 19 million jobs would be spread across all sectors, regions, occupations and credential levels. In addition, the authors have sketched an approach in which priority sectors--building retrofits, infrastructure, community health clinics, and small businesses generally--would receive an extra share of the total increase in investments.

They also present regional case studies of Los Angeles and Seattle. Los Angeles’ share of the national $1.4 trillion in new investments and business expansions would expand employment in the region by 785,000 by 2014, and drop the regional unemployment rate to 6.1 percent. Similar benefits would result in Seattle, where employment could expand by over 230,000 jobs and the unemployment rate drop to 5.8 percent.

As the report’s lead author, Robert Pollin, explains, "There is no reason that the U.S. needs to remain stuck in a long-term unemployment crisis. Getting the banks and corporations to move their hoards into productive investments and 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 . Enacting such measures as quickly as possible is the best route for restoring jobs and opportunity in this economy."


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Citation: Channeling corporate cash and asset reserves into job creation (2011, December 7) retrieved 23 May 2019 from https://phys.org/news/2011-12-channeling-corporate-cash-asset-reserves.html
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Dec 07, 2011
The study identifies a very real impediment to economic expansion. That is, that banks are receiving money from the federal government at essentially zero interest.

The obvious solution is for the federal government to stop funding banks at near zero interest rates. Allow interest rates to be reflective of market forces instead.

Unfortunately, the study recommends instead stimulus spending and taxes.

Just another attempt by liberals to sell increases in spending and increases in taxes.

Dec 07, 2011
The most likely effect of getting US companies to unload their $1.4 trillion would be to create lots of productive jobs--but outside the US that would (through substituting US manufactures with imports) up US unemployment even more.

Dec 07, 2011
"In "19 Million Jobs for U.S. Workers: The Impact of Channeling $1.4 Trillion in Excess Liquid Asset Holdings into Productive Investments,""

Some readers may be unaware that this $1.4 trillion number is not some "hard science" figure that should be -- pardon the pun -- banked on.

In reality, the authors, who have clear tendencies towards their preferred outcome, have made a judgment call on the amount of "excess" liquidity. They may be way off. It's hard to tell without seeing their data. But, defining excess liquidity is something that no two economists can agree on. Let alone the hundreds of thousands of businesses they've summed up to reach their number.


Dec 07, 2011
"new round of government spending stimulus"
The old round did not work for the US and has not worked in Japan for over 20 years.
If the govt starts taxing cash, that cash will disappear into other countries.

"Enacting such measures as quickly as possible is the best route for restoring jobs and opportunity in this economy.""
Evidence?
I guess the govt-university complex is launching its campaign to elect Obama.

Dec 11, 2011
Note the absence of 'progressives' posting here, except to call others names.
Socialist policies created the problems and won't fix them.

Einstein describes socialist economic policy:
"Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein"

Dec 11, 2011
"While America is clearly broke, the Obama Administration is redistributing our wealth to other nations, according to Southerland, through the Federal Reserve and the IMF.
Southerland derides the wealth and money flowing like honey around Washington, D.C.s power centers, evidenced by nine construction cranes visible from the U.S. Capitol. He would be hard pressed, he said, to find nine in the entire state of Florida.

Read more: http://dailycalle...gI0q3Jrl
"

Dec 12, 2011
The living organisms are slowing their metabolism under poor living conditions or they seek for better food. The investments into industrial sector have no meaning, if they just lead to higher consumption of unrecoverable resources and growth of their prices. What's worse, there is always great temptation for governmental officers to use the newly collected taxes for their own purposes, i.e. for growth of employment and even salaries in governmental sector. Such result indeed increases the cost and economical overhead of government even more.

The only solution is therefore the finding of better resources, i.e. to start with implementation of cold fusion.

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