Corporate Cash Stays Home

Where have all the profits gone, long time passing? What hasn't gone into raises for corporate board members and executives apparently isn't going anywhere.

Cash is rolling into corporate coffers by the truckload, but spending, relatively speaking, is being doled out by the capful.

According to John Lonski, senior economist for Moody's Investors Service, corporate cash flow relative to capital outlays has reached the highest level since 1959 for non-financial companies. And if being flush with cash weren't enough, corporate credit rating upgrades are outpacing downgrades, meaning that companies' balance sheets are getting cleaner and borrowing capacity is rising.

All told, not since the Eisenhower administration have business wallets been so fat — and many business leaders so determined to sit on them.

Some of the reasons for the caution are both obvious and understandable, analysts say.

The threat of repeat terror attacks, in the wake of Sept. 11, 2001, is a shadow that did not darken previous economic recoveries. The government warnings issued Sunday may only deepen those concerns.

So 9/11 did it. Not the Iraq war or Bush's absurd economic 'policies' or the fact that incomes have been stagnant for two decades and disposable income has dropped precipitately. No, it's fear that another terrorist attack might hurt business. Does that mean that corporate strategists have already caved in to terrorist demands and are therefore objectively pro-Al Qaeda?

Second, the bursting of the technology-sector bubble in 2000 is a still-fresh reminder to those who control the corporate purse strings that the hangover from an ill-considered capital investment binge can last for years.

The dot-com bubble didn't burst because they were willing to finance new ideas; the dot-com bubble burst because they were so greedy and so entranced with the internet and so afraid somebody else would beat them to the next Google and so 'optimistic about the future' that they were willing to fund new ideas like your Uncle Max's brainstorm for selling his Automated Zipper on the web. Bad ideas suddenly became magically plausible if they got attached somehow to cyberspace. If their caution was because they recognized how stupid greed had made them, I'd applaud it, but they're blaming 'unpredictable market forces'.

Third, gasoline prices are at record highs, which is depressing consumer spending.

Hasn't it dawned on them that if they'd put some of that excess cash into salary raises for the millions of their workers below the executive level who are scratching to get by thanks to the corporate fixation on keeping wages depressed that a 40-cent/gal hike wouldn't be such a spending-stopper? The sad answer is that, unlike in other recoveries, No, it hasn't. A wage-hike is so off the table it isn't even being discussed as a last-ditch desperation measure to get the economy rolling again by putting money into the pockets of the people who have historically driven it: Us.