Hoarding For Uncertainty

When many corporations began to see a turnaround in profits after the “Great Recession” abated somewhat in 2010, employment remained stagnant.  Reflecting longstanding antagonism towards corporations, many liberals were quick to decry the “greed” of corporations.  Defenders of cautious corporate governance pointed to the uncertainties that corporations face: escalating health care costs exacerbated by a health care reform policy that featured flatly fictional cost estimates, weak consumer demand as many consumers focused on paying down debt, tightened credit markets resulting from both rational reaction and new government mandates on financial services companies, and a general hostility among many powerful political elites (including key congressional leaders and the President) towards business generally.  Taken in combination, defenders argued, all these factors give corporations little choice but to hedge and horde rather than invest or expand employment.

This argument has generally received a derisive response from anti-corporation zealots.  As in earlier times of economic turmoil, corporations make for a nicely impersonal target for populist ire, and those who don’t join the mob are treated as heretics always have been throughout human history.

Trouble is, now school districts are doing exactly the same thing, hoarding cash in reaction to uncertainty about higher costs and reduced revenue in the future.  It’s hard to just throw around easy populist explanations about “greed” on this one.  Rather, it supports what defenders of corporations have been saying all along — that the extremely high uncertainty about the future that has been produced as a result of the bipartisan political machinations in Washington, D.C. (Republicans are a huge part of uncertainty about government funding levels for education just like Democrats are a huge part of the uncertainty about the cost of new government mandates on corporations and the financial sector) causes everyone to “hunker down” and limits the ability of so-called “stimulus” spending to actually work.

Intelligent economic policy has to address this problem instead of just blaming “greed”.