Rather than encouraging greater private-sector spending, which Republicans insist is the natural consequence of cutting government spending, the shift to austerity in the U.S. has companies sitting on their hands. That slowdown in corporate investment could lock the economy into below-average growth, Bloomberg adds. In other words, corporate hoarding is both a symptom of shaky economic growth and a contributing factor to it.
As corporate America withholds investment, it’s also achieving record profits, paying record CEO salaries, shrinking the portion of the pie that goes to workers, and sending rock-bottom amounts to the Treasury in taxes. This chart from The Economist shows that while profits have vaulted back above their pre-recession highs, corporate tax payments haven’t:
There is some international momentum for revising the corporate tax code. But with conservatives continuing to demand further cuts in the United States, and European leaders unwilling to enact stimulus even as they acknowledge the failure of austerity, western policymakers do not seem prepared to take all the steps that corporate America’s actions suggest are necessary.