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Even Fed chairman Ben Bernanke is calling out the private sector for not doing its part to help the frail economy

The best kind of Federal Reserve chairman is the one who doesn’t believe he owes anyone anything. That is when we start to hear the truth about the economy more directly.

Seven years into his term, and unlikely to renew his engagement in Washington, Ben Bernanke has reached this state. He started out as a diplomat and an able politician who avoided offending people and adopted the appropriate Washington plumage to survive. Now he is the truth-teller we need.

He has spent seven years dealing with a do-nothing Congress with little more than perhaps quiet exasperation. Now that his term is nearly over, he is a bolder man. In his testimony before the Joint Economic Committee of Washington, he pulled no punches. He declared:

“Monetary policy is not omnipotent. We are pushing pretty hard at this point.”

Bernanke has chided Congress before, subtly, on its refusal to take action with the budget and revise fiscal policy. He was not so subtle this time. Bernanke noted that long-term health of the economy is “not the Fed’s job” – “that’s the private sector’s job and Congress’s job.”

Congress, we can leave aside. We know that austerity is painful and counterproductive, as the travails of Europe have shown us. If we didn’t know it, Bernanke made it clear. Bernanke’s mention of the private sector, however, is important. While Congress and the Fed discuss what to do about the slow economy, there are a few voices notably absent: those of any important CEOs willing to do their part to increase hiring.

The corporate and financial side of America – the private sector – is not doing its part to help the economy. Congress, as utterly useless as it has been in producing decent legislation, can only do that – legislation. Companies and banks actually hold the purse strings and hiring power, and they are not loosening them to help the economy.

Take a bill introduced by Democratic Representative John K Delaney of Maryland this week. The bipartisan bill - with 13 co-sponsors from the Republican and Democratic ranks – is devoted to improving the country’s weakening infrastructure by luring corporations to contribute to the effort.

Many of these corporations, in protest of “high corporate taxes” that they rarely actually pay, hire expensive lawyers to avoid the entirety of their tax bills. Yet they use the nation’s roads for trucking, our waterways for shipping, our bridges and city streets and airports. In small towns, one big corporation can make the entire economy, as FedEx is in its Tennessee headquarters. But how about the towns and the states that these companies just pass through on their way to making money? They don’t get the same economic benefit to help with their maintenance.

While major corporations are happy to use infrastructure, they contribute very little to its maintenance as long as they don’t pay their full compliment of taxes. Yet convincing these corporations to pay their full tax burden is a lost cause, as was evident yesterday when Apple CEO Tim Cook smilingly explained openly to Congress how Apple uses Irish subsidiaries to lessen its US tax bill. The lawmakers mostly met Cook’s testimony with adoration. The message of his appearance on behalf of corporations everywhere was: allow us to pay lower taxes, and we will stop avoiding them.

As this ego-fed debate continues, the nation’s infrastructure needs repair – hundreds of billions of dollars in repair, according to many studies – and that money isn’t coming from the government. So Washington has to think carefully: how can it persuade corporations to do their duty and pick up part of the tab for the services they use?

The answer is in Congressman Delaney’s bill, which proposes that companies be allowed to repatriate their foreign earnings at a lower tax rate – as low as 8%, probably – if they use some of the money to buy new infrastructure bonds. The bonds, of which only $50bn will be sold, will raise about $750bn for infrastructure investment.

With its bipartisan support and solid negotiation technique – a simple quid pro quo – the Delaney bill is likely to be successful, or at least should be. It is perhaps the first constructive answer to both a government and a corporate problem.

Still, there remains a question of whether the offshore tax holiday was ever really a plausible corporate problem, or one hyped by CEOs as an excuse to inflate their company’s coffers and their stockholders’ wallets rather than invest in new initiatives. Once the offshore-profits issue is out of the way, what excuse will companies have left for not investing money in the American economy and American workers?

The issue of offshore profits and a tax holiday was a red herring: US companies have not been hurting for cash. The stock market is at record highs overall, and particularly so for big companies. The stock market riches are flooding corporations in inflated stock options and paper wealth. Corporate profits, as a percentage of US GDP, are higher than ever,according to the St. Louis Federal Reserve.

The 2004 tax holiday showed that the companies that took advantage actually fired workers, and that was during a good economy. There is no reason to believe they would be any more eager to hire as long as there is the excuse of a weak economy.

The truth is, the weak economy is not out of the hands of corporations. They don’t have a tax problem. They don’t have an economic problem. They don’t have a problem of an unskilled workforce. Instead, they have an innovation problem. These companies could, for instance, invest in new initiatives or expand their business models. Very few, if any, companies are doing that. In fact, a recent study from Accenture raised the question of whether CEOs even believe in innovation as a solution any more. The survey of 512 companies found 51% said they were investing more in innovation but 46% said their companies were becoming risk-averse anyway.

This is fearful thinking, and it’s the same plague that infects Congress. Just as fear has paralyzed Congress, it has scared CEOs. Yet fear is no excuse. Taxes are no excuse. Caution is no excuse.

The excuses have run out. The corporate side of America is not pulling its weight. It is not paying the fair price in economic boosterism or in taxes for all the advantages it enjoys. Instead of hearing Ben Bernanke testifying, or Congress and the Fed trading blame, maybe it’s time to ask some CEOs why they have taken themselves out of the equation of getting America back on its feet.

Even more importantly, it’s worth asking why we have let them.