Thursday, July 12, 2012

It's not a cash flow problem

The GOP is fond of saying that high taxes and government spending is what is keeping businesses from hiring. They claim that it's being unsure about the economy, and a lack of loose funds, that is resulting in sub-par job creation.

But looking at the account balances of these companies, money doesn't seem to be the issue. After all, they've got more of it on hand than before the recession. In fact, many companies are posting record profits. So, what gives?

As I've mentioned before, the driving force of the economy is demand. A company that is meeting the market's demand has no incentive to expand, since they will be spending more money to produce products that no one will buy. Only when they know they'll sell more is it reasonable for them to expand and hire. Still struggling in a slow recovery, and with high unemployment, demand doesn't seem to be budging much.

It's at times like these when government spending is important to maintain, not reduce. Government is the only institution that can pump money into the economy through job creation, and start the cycle of growth all over again. But with stagnant, ineffective governance, that cycle doesn't get started. So, we're left with slow growth, and no way to pick it up.

Just keep in mind that, despite what Republicans say, it's not the fault of the government that businesses aren't hiring; it's a calculated business decision.

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