In normal times this kind of money is spent on things like research and development, acquisition of other entities, and other investments which create higher returns than interest rates of bank accounts and short-term CDs. None of which has to do with current and projected demand. The basic explanation is that the economy is so shaky, these kind of endeavors are too risky.

Your second sentence is in conflict with the first.  The reason people have spent money on these projects and acquisitions in other times is because they believed that they would eventually bear fruit and make money for their companies.  And the reason similar investments are now seen as too risky is precisely because demand projections are so very low.

if you work at a company that saw retail sales fall 40% in 2009, and you read the papers and know that millions of your potential customers are still suffocating under mountains of debt, still stuck in underwater mortgages, still recovering from the catastrophic loss of retirement savings that they now need to rebuild, then it is pretty hard to justify an investment in expanded production and more workers.  Almost 10% of us officially are unemployed, while the real unemployment rate is much higher.  Those people aren't buying much stuff beyond the necessities.

In this environment, the opportunities for growth through investment and expanded production are limited.  There are people who have lots of money.  But those people are saving more of it than ever before and looking for safe vehicles.  If we put some of that money in the hands of people who are desperate to buy stuff, businesses would have a reason to expand again.

I suspect businesses have also developed an extremely conservative mindset about their cash-on-hand, because of the enduring traumatic memories from the panic-inducing credit freeze in 2008, when companies feared not being able to get enough overnight cash just to stay in business.  That's why they sock more of their cash away in a mattress than they did before.

We could add that the systems of labor protection in this country have been decimated.  So for any manager who decides that the path to increased profitability lies in extracting the work of 10 people from a team of three or four, there is nothing standing in his way.  Pretty soon, I expect to see us hiring child labor again.

Trope, a very interesting discussion. This "recession' scared the crap out of most companies in terms of their "cash"--there were moments when credit was completely frozen. No company wants to be in that position again--which, imo, upped the premium on holding more cash. One of Obama's objectives in the investment write off is to get that cash working and hopefully a large chunk of that will be geared to "green" improvements.

I think your overall thesis about Corporate outlooks on taxes is true, in fact it's kind of a principle not to make business decisions on the basis of tax consequences. Corporate managers are tasked on product development, market expansion and maintaining profit margins. Companies rarely hire ahead of demand, though incentives might change that. But the thrust when coming out of a recession is to lever profits by not hiring, which is what has been happening, and one of the reasons for excellent corporate profits right now.

That's not to say Corporations won't lobby for favorable tax treatment and push the envelope whenever they can.

The great problem on unemployment is that the small businesses and micro businesses don't have the easy credit terms of giants and the corollary, the community banks don't get the same deals the monopoly banks do. Thus the real engine of growth is being stymied.

As I've argued  before, I think the best leverage and the best arguments Progressives have in  a single issue is that of making the large banks competitive again by separating them into smaller pieces. It has been argued that there is no economy of scale fort a bank beyond the level of $100 billion in assets. Yet Jamie Dimon, overseeing $2T in assets, only seeks to be larger.

It also could prove a boon to me in terms of lining up work. [$+;-\> 0] = greater good.

I agree with you that a multiplier effect would occur if demand were to increase. But what makes that the case also doesn't penalize the investors who do not have to anticipate that growth to participate in it. A cumulative wait and see attitude increases the amount of inertia that has to be overcome to start a production boom.