WaPo columnists look at the national debt

by Michael Smith.

In today’s Washington Post, Fareed Zakaria reports that America’s 500 largest nonfinancial companies are sitting on $1.8 trillion in cash. Why aren’t they investing? The political climate in Washington is creating fear and uncertainty. In other words, who knows which industry might catch Barney Frank’s eye next?

John, in your line of work, I’m sure the importance of a predictable business environment never comes up at the water cooler, so be sure to spread the word!

Meanwhile, Ruth Marcus has discovered that the national debt is an urgent problem. Who’s next, Nancy Pelosi? I’m not anxious to hear Ruth’s battle plan, but it’s good to know she hears the cannon fire in the distance.  

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  1. John Lumbard says:

    We do indeed worry that businessmen are reacting to the anti-business climate (in Washington and in the media) by holding onto their cash, avoiding new initiatives, and avoiding hiring. The unemployment rate will be stuck near 10% for a long time.

    However, we ARE bullish on stocks. Fear of a double-dip recession has caused blue chip companies like Microsoft, IBM, and AT&T to sell at ten times earnings. Exxon sells at 8 times, and Pfizer sells at 7x. These companies—scores of them—have done a spectacular job of navigating their way through a difficult economic environment, and now they’re boosting earnings growth by purchasing their own shares at bargain prices. When stock prices are this low the effect can be very powerful. It will be less powerful when stock prices are higher, so don’t wait!

    Another positive for stocks and the economy is the palpable sense of fear in Washington right now. It’s quite likely that Congress will behave responsibly in the months and years immediately ahead. It is nevertheless essential that voters seize on this rare and wonderful opportunity to change the rules under which the Congress operates, so that it will more difficult to act irresponsibly in the future.

    A lot of this pain would have been avoided if we had passed the balanced-budget amendment to the Constitution that was put up in 1995. Congress was one vote short!

  2. Michael S says:

    I hope there’s fear inside the Beltway, because there’s plenty outside of it. With luck, we’re done with the public-spirited self-sacrifice that helped pass healthcare. Those who voted for it knowing that it would cost them their jobs–whether to save an historic law that the folks back home were too dumb to appreciate or to save the Obama presidency–may be more dangerous than the typical unprincipled careerist. Heaven forbid that John “Cap’n Trade” Kerry finds more of these shmoo-like critters in time to pass an energy tax! It’s like strategizing against the terrorists: how do you deter people who aren’t afraid to die? OK, I’m getting a bit partisan here…

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