CASH KILLS.(The Talk of the Town)

Americans, we're constantly being told, have forgotten how to save. We have two trillion dollars in consumer debt and a national savings rate of just two per cent, and the government, after a brief experiment with thrift in the Clinton years, has resumed its profligate ways. There is one glaring exception, though: American corporations, a group that in the past few years has learned to salt away its gains. Microsoft is at the head of the class; its sixty billion dollars in savings make it the richest company in the history of the world. But a host of other companies are sitting on giant piles of cash, too. Exxon Mobil, HewlettPackard, and Intel have more than ten billion dollars each in the bank. If you add up the savings of all the nonfinancial firms in the S. & P. 500, the total exceeds half a trillion dollars, double what it was in 1999, which means that in the past five years American companies have banked almost three hundred billion dollars.

They've done it by being skinflints. They have been slow to hire new workers or give raises to the old ones. They've kept inventories low, in order to avoid being stuck with stuff they can't sell, and they've been extremely cautious about investing in new machines or new factories or new ideas. And as the profits have rolled in they have been content, like Scrooge McDuck, to watch the gold pile up and gather dust.

There's nothing sinister in all this. Conditions called for caution. Companies spent too much in the late nineties, and they needed to pull back. The productivity boom enabled them to produce more without hiring more people, and the uncertainty engendered by the September 11th attacks and the run-up to war with Iraq encouraged frugality and patience.

But it's no cause for celebration, either. Forget the old saw that cash is king. When companies hoard, the economy suffers, because the money is just sitting there; capital needs to be invested in order to create wealth. (If you don't shoot, you won't score.) Workers suffer because fewer people have jobs and it's more difficult to get a raise. Shareholders lose, too. They give companies their money in order to get a good return on it. Good returns are harder to come by when companies have billions of dollars languishing in money-market funds that pay one per cent a year--the corporate equivalent of money under a mattress. If a company can't find anything fruitful to invest its cash in, it should just give it back to the shareholders, so that they can put it to productive use.

This is what Microsoft, among others, has decided to do. After decades of stockpiling, it announced the other day that it will pay a special thirty-two-billion-dollar dividend at the end of the year--a windfall that may make the wait seem worthwhile. A few other companies have increased their dividend payments, too, but, so far, ...