Serious Implications

“Eaton required its 70,000 workers to take furloughs equal to a month of unpaid leave last year. Its cash and short-term investments rose 46 percent from a year earlier to $773 million.”

Psychiatrist and full-time right-wing pundit Charles Krauthammer announced this week that we are having a “capital strike.” Corporations are sitting on a lot of cash. Here’s some of what he had to say:

There are three major areas a corporation, small or large, has to worry about: health care costs, energy costs and the cost of money. In each of these, the administration either has or is planning regulations worth thousands of pages which (a) are going to raise costs, as we know, but also are going to interact in ways that nobody understands and are going to create uncertainty. If you’re trying to figure out who you’re going to hire and how many, and you have no idea if you’re going to be able to afford the extra health care costs, you’re not going to hire.

Uncertainty? Have corporations never faced uncertainty before? Are things different now? I believe Krauthammer needs his head examined for the following reasons:

1. Health care costs have been rising much faster than inflation for years, but the annual increases have fluctuated significantly. Over the past ten years, health insurance premiums have increased between about 4 percent to over 12 percent per year. What’s so uncertain? Premiums are going up either a lot, or a whole lot. Futhermore, companies have adapted to rising insurance costs by purchasing policies with diminished coverage or dropped health benefits all together. The timetable for phasing in the new rules is available for corporations to make their plans.

2. Energy costs have fluctuated for years, especially during the last administration, and are subject to the effects of speculative trading on the commodities exchanges. There is a way for corporations to avoid fluctuating energy costs: it’s called a futures contract. With oil being “probably the most tactical and political product in the world.” One would think highly paid corporate CEOs would understand energy prices are a risk factor now, and have been for years. That’s why there are futures contracts.

3. Cost of money is a problem for small businesses. Corporations in the S&P 500 are sitting on a $1.18 trillion mountain of cash, which is the “capital strike” Krauthammer refers to. Big companies have their own cash to invest. Small companies need banks to lend. The reluctance of banks to lend is not the fault of the Obama adminstration. Here’s Obama:

“But given the difficulty business people are having as lending has declined and given the exceptional assistance banks received to get them through a difficult time,” he said, “we expect them to explore every responsible way to help get our economy moving again.”

It’s normal for an incumbant administration to be rightly or wrongly blamed for bad economic times. But with the “capital strike,” corporate leaders appear to be the culprits. Any corporate leader who would deliberately obstruct economic growth at a time of national crisis is no patriot.