Nagging unemployment: whose fault is it anyway?

I work in IT and subscribe to a number of email IT newsletters. One of my favorites is Keep the Joint Running written by Bob Lewis, President of IT Catalysts of Eden Prairie MN. Obviously his topics deal with managing IT operations but he often pulls in real world information to support his points. They are always well thought out, well researched and accurate. The following paragraph is from his newsletter from July 19th. I won’t add any other comment at this point, just present the info as it stands:

Here’s a widely reported fact: American business is sitting on $1.8 trillion of cash. If they invested just half of it in employment, America’s execs could fund three million jobs, each lasting three years and paying $100 grand a year including benefits.

Think that might get the economy moving again? It’s their fault unemployment is still high.

Ask the execs who are sitting on top of the money and what do you get? “The regulatory environment is uncertain.” It is, of course, a nonsensical argument. The future is always uncertain in some way, shape or form.

We’re blaming the execs; they’re blame-shifting to the politicians; but the problem is structural — it’s nobody’s fault.

Businesses don’t hire employees because they can afford them. They hire employees so they have enough capacity to satisfy demand (the reason business tax cuts wouldn’t create jobs, by the way). No demand, no hiring. The way to generate demand? Other companies have to hire people.

If everyone hired at the same time they’d all be fine. But nobody is going to be first, and so everyone sits on their cash.

We want it to be somebody’s fault, but it isn’t. It’s how we’ve structured our whole economy.


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8 thoughts on “Nagging unemployment: whose fault is it anyway?

  1. Nice inaugural post, Ed!

    According to an agitated caller I heard on TMJ the other day*, “all of our problems, it’s all the government’s fault!”

    Clearly, it is because The Government is doin’ it wrong. He didn’t specify which Government he was talking about, but given that it’s on TMJ, it was either Barrett or Obama, more likely the former than the latter.

    So you heard it — it’s all the government’s fault!

    And clearly we can do nothing better than shut it all down, because that would solve all the problems!


    Anyway, good post!

  2. Well didn’t you hear that the right is saying its all the unemployed’s fault because they rather sit on their butts collecting benefits than working?

    Now isn’t that the biggest case of “cranial rectal inversion” you have ever heard of?

    BTW where was Mr. Smarty Scott Walker during all the flooding coverage we have here in Milwaukee county? The flooding is all over along with major major sewer back ups! Oh yeah he sold parks to MMSD to build retention ponds that when I went by them looked pretty empty but not a lot of Tosa’s basements! Oh yeah Walker lives in Tosa maybe he’s bailing out his basement you could only hope!

    1. MMSD is governed by the City of Milwaukee, not the county. I know you are looking for anything you can to sling at Walker, but let’s keep it in his jurisdiction.

  3. It also doesn’t help when taxes are so low for the rich and corporate that the incentive is to keep (and hoard) their profits instead of reinvest to expand their companies. The risk-averse nature of corporations, especially in an era where the stockholder comes first, makes hiring and expanding an absolute last resort.

    The answer- higher capital gains and progressive taxes change those incentives, moving the advantage away from the stockholder and away from the rich, corporate hoarder. It’s no coincidence that employment and standard of living boomed in the ’50s and ’60s when tax rates on the rich were much higher than they are today.

    Very good work, Ed.

    P.S. Also mention the hundreds of millions of dollars pumped into political campaigns from corporations and rich individuals. Think they could have created some jobs with some of that cash?

  4. So let me get this straight – you think taxes are so low that the rich/corporations are hoarding profits and are unwilling to invest. So you want to raise taxes that make them UNABLE to invest?

    Plus, you are comparing apples and oranges. The economy of the 50s and 60s was vastly different than it is today. We produced everything we needed then. We are in a global economy now, we have to compete with other nations. How do we compete with a nation like Ireland when their corporate tax rate is half to one third of what ours is? Tell me why I should create jobs in the US when it’s so much cheaper to do it almost anywhere else?

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