August 2, 2010

Companies Reluctant to Spend in Uncertain Regulatory Environment

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Mercatus Center Senior Research Fellow Veronique de Rugy uses data from the United States Federal Reserve Bank to illustrate one of the greatest economic costs of the current policy environment: lack of business investment. The above chart illustrates billions of dollars in cash reserves held by American companies (red) and these cash reserves as a percentage of their total business assets (blue). By both measures, companies are holding more cash than in 48 years, over 1.8 trillion dollars. Because of an uncertain policy environment these dollars are being held, not spent on machinery, technology or jobs.

Veronique de Rugy explains the true job impact of the American Recovery and Reinvestment Act before the House Budget Committee.