What Is Apple Going To Do With Its $97.6B In Cash?

In a previous post, I mentioned that one of the factors that I believe to be holding back the U.S. economy is that corporations are holding on to piles of cash, rather than infusing the money into the economy. This week I learned that Apple Computer has $97.6 billion dollars in the bank. $97.6 billion, really? That certainly begs the question: what is Apple going to to with all that cash?

I have a couple of ideas. How about paying a dividend on the stock, currently trading at nearly $450 per share? Here is another thought: how about hiring some American workers? I wonder how many new jobs Apple could create with even 1/10th of that amount, or $9.76 billion? Perhaps even 1/100th?

There is “good news” from Apple regarding their cash, however. As Paul R. La Monica reported in CNN’s Tech Buzz earlier in the week (http://money.cnn.com/2012/01/25/technology/thebuzz/), “Apple CFO Peter Oppenheimer said that the company ‘was not letting [the cash] burn a hole in our pockets.'” I have not yet seen any details as to how they plan to spend it, but one of the concerns that Apple seems to have is that a good portion of that money (reportedly $64 billion) is held offshore and if it were infused into the U.S. economy, the company would have to pay taxes on it.

Let me get this straight…this California-based, U.S. company has a mountain of cash which it is not spending, and is being held specifically in a location where most of it is not subject to U.S. taxes? In other words, under their current plans, they are not creating jobs, not stimulating the economy, and are positioned to not pay U.S. taxes for a large share of their profits. Is there any question that Apple’s fiscal policies are helping to keep the U.S. economy in it’s current state? How many other examples of this kind of fiscal policy can be found within U.S. companies?

The Perfect Storm of the U.S. Economy

Veteran and well-known economic forecaster Nouriel Roubini said in July of 2011 that the United States economy is headed for a “perfect storm” in 2013. I think we are already in a “perfect storm” in the United States economy, though the optimist within me wants to believe that we are at the tail end of the storm. When people use the phrase “Perfect Storm,” it seems as though they sometimes forget the “storm” part of that phrase, and the fact that in the movie of the same name, nearly everyone died. But it has definitely been a storm. The factors that combine to create the “perfect storm” in the U.S. economy are: the lagging economy, consumer confidence, disagreement over how large government should be and how to solve this disagreement, high unemployment and the tendency by government and business to contribute to it.

The U.S. economy continues to lag, with consumer confidence still shaky, but perhaps making a comeback. See chart below. In order to stimulate the economy, people and companies need to be spending money. This generally happens when confidence is high.

Americans desire services that typically only governments provide, such as schools, roads, clean water, social security, health care for seniors and national defense, but they don’t want to pay for them. Any discussion about an increase in tax revenue or rate increases by a politician or government organization is instantly dismissed by large numbers of the voting public whenever possible. This has happened on many occasions in cities, counties and states across the country. When there are discussions about reducing government, this is met with a similar enthusiastic opposition.

Whether one philosophically agrees with the size of the government as it stands right now or not, it is what it is. We have gotten where we are and it takes time and leadership to make a change one way or another. However, doing nothing at this time will not fix the situation. Governments either need more money to pay for the services that the public expects, or they need to make hard decisions to cut services to the point where the budget can cover what remains.

It strikes me that there is an opportunity here to educate the public on what is costs to provide the services that they want. How many years in a row do we have to cut school budgets in California, for instance, before people have finally had enough? Is this how we really want the trend in education to continue? Does anyone really think that by continuing to cut education budgets, somehow their children will receive a better education, and not a worse one?

The final component in the structure of my “perfect storm” is that it seems that at a time when unemployment is very high in this country, government agencies and businesses focus their cost-reduction efforts on reducing labor, leading to the vicious cycle we see in the unemployment figures. Technology and the availability of cheap labor in other countries around the world allow corporations to replace American workers. At this point, I should also remind the readers that corporate savings accounts are at all-time highs. Corporations, including banks of all size, are saving money, and not hiring people or making loans to small businesses, even when there is sufficient equity or profit potential in the deal.

It is my sincere hope that we are at the tail end of one aspect of the “perfect storm,” that being the economy and consumer confidence. The other factors that remain, and will make it difficult to steer out of this storm, must be addressed using real leadership, compromise, intelligence, and in the interest of the well-being of the people of this country. The country cannot come out of this storm quickly if the focus is on individual gain or shareholder profits at the expense of the people.