Put the Cash Mountain to Good Use

Peter Lattman noted today that the top S&P-rated 500 corporations in this supposedly bankrupt country of ours are sitting on a “mountain of cash” reserves said to be worth more than one trillion dollars, which still ought to be an inconceivably large amount of money. It ought also go without saying, but will say anyway, that millions of people across this land are unemployed, under-employed, or simply counted out entirely from the workforce. One possible remedy for the jobs crisis becomes readily apparent…

The arithmetic is simple even though the numbers are massive when answering the natural question, How many jobs could that cash pile go toward as opposed to all the mergers and acquisitions going on? After all, as Lattman records, that is what that money is being spent on (for example the Heinz-Buffett deal that has already gotten the glare of the Securities and Exchange Commission). Say that these companies were to devote 40 percent to acquiring other firms and doing deals and that sort of thing, and $400 billion is far from chump change.

So that only leaves some six hundred billion dollars left over for hiring, say, entry-level workers who are two, three, or four years out of college with no steady income, working like factotums and losing hope. The economy is often delineated along the private and public sectors, and if the public sector balks, as it will, at the idea of public works projects that would create mass employment, it is up to the captains of post-industrial America to fill the gap. They cannot credibly claim they lack funds to make it happen. (Network TV companies with revenues in the hundreds of millions, for instance, can easily afford to pay their interns.)

Anyway, and these calculations are not from an economist so caveat emptor, but let us wager that a middle-class salary is about 60k. But we are talking about entry-level, so 30k is more realistic, if not exactly luxurious. Also suppose that five years would be enough time to get enough people to get work making enough to live somewhat comfortably at least, which rounds out to $150,000 per head. How much is 150k compared with the hundreds of billions that the S&P 500 is sitting on? And how many people would get a leg up this ladder of opportunity so many talk about?

Simple math says that 60% of their cash reserves could create at least four million entry-level jobs over a five-year period. My math may be wrong, but it sounds like a reasonable idea for corporate America to set aside at most two-fifths of their cash earmarked for acquisitions and the like, and still make cruise ship-size amounts of money in the process, while helping their fellow citizens make ends meet. The motives of the managerial class would not be altruistic but purely rational, and since it is in their interest to make the employee-consumer cycle stronger, investing 60 percent of their reserves for this five-year project is a no-brainer.


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