What it will take for the economic recovery to begin


At a time when we’ve lost faith in political leaders and businesses are afraid to spend, where will the economic recovery come from?

Corporate America and corporations overseas sense the uncertainty. They can’t get a read on tax policy or public policy. We’re on a pendulum where every two years the voters get fed up and change the party in power. If you’ve ever owned a business you know that businesses need to make decisions based on multiyear cycle. Yet they don’t know what the rules are right now.

So American corporations are sitting on over $1 trillion in cash. The companies afraid to invest in factories, hire people or open new offices. It’s not just happening in the United States, either. Barron’s  says there’s $4.5 trillion total sitting in the hands of big companies around the world that they are afraid to invest in their businesses.

When business confidence returns (notice I said “when,” not “if”) and companies start putting money to work, our economy and those overseas will go through recovery. We’re reducing debt on the household level and government is trying to do the same at all levels, but the real generators of jobs, the private industries, have to wait until they decide it’s safe to spend again.

Part of what drives unemployment is companies discovering they can keep the doors open with skeleton crews. When they start to hire again, their hiring needs will accelerate more rapidly than we realize because they’ve been getting by on skeleton crews. When things grow, they burst at the seams, and hiring feeds on itself. This is a natural economic cycle that takes longer to play out because this was a debt-based recession.

It really fits Winston Churchill’s famous quote, something to the effect of, “America eventually does the right thing after it’s tried every wrong alternative.” That’s kind of what we’re going through politically. Once we get our political act together and people feel like they can trust institutions again, that’s when you’ll see real economic growth occur again.

Editor’s note: This segment originally aired August 25, 2011 for network affiliates and was rebroadcast Sept. 5.

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