Last night, Mitt Romney made a rapid-fire “winning” case that tax cuts for businesses will magically create jobs. He’s horribly wrong.
Fact: tax rates are the lowest they’ve ever been in history, and yet businesses are sitting on record high cash assets. This highest since 1959 according to the Wall Street Journal.
The Fed’s latest Flow of Funds report showed that U.S. nonfinancial companies held $1.7 trillion in liquid assets at the end of March. But newly released IRS figures show that in 2009 these companies held $4.8 trillion in liquid assets, which equals $5.1 trillion in today’s dollars, triple the Fed figure.
…real pretax corporate profits have soared, from less than $1.5 trillion in 2009 to $1.9 trillion in 2010 and almost $2 trillion in 2011, data from the federal Bureau of Economic Analysis shows.
That is nearly $1 trillion of increased profits over two years, while actual taxes paid rose less than a tenth as much, BEA reports show. Dividends, wages and capital expenditures all grew less than profits, while undistributed profits rose. The result: more cash.
If businesses aren’t hiring with these kinds of numbers, what the hell will they do when taxes are even lower and the deficit skyrockets higher than now? I know, I know — the Confidence Fairy will come along and POOF! Jobs! Sorry, but that’s simply not going to happen, and it’s certainly not a solid economic plan.
UPDATE: Forgot the link for the blockquotes. It’s a post by David Cay Johnston.