Federal Reserve Chairman Ben Bernanke said last week that there is “unusual uncertainty” in regards to the country’s economic outlook. In tune with the Chairman’s words, America’s uncertainty about the economy has caused both consumers and companies to become very resistant to spending.

As a result, companies have a record-breaking amount of cash on hand, sitting at $1 trillion and growing. Even with strong profits, companies are fearful of relinquishing cash into an uncertain economy, contributing to the stagnant job-growth rate.

“Companies remain nervous about the economy, their costs, and their products — not an environment that encourages spending and commitment,” said Howard Silverblatt, a senior index analyst with S&P, according to Chris Isidore of CNNMoney.com.

Uncertainty in foreign markets help account for this hording of cash, as American companies monitor the debt problems in Europe and fear of a slowdown in China. As more economists fear deflation, or an overall drop in prices, businesses worry that they will be unable to obtain profits, and are therefore not hiring staff and investment workers.

“Businesses look at the chaotic and uncertain world, I don’t think it’s all surprising they sit on cash,” said Allen Sinai, chief global economist for Decision Economics, according to CNNMoney.

As consumers save more and spend less to deal with their own economic uncertainty, businesses are also concerned that insufficient demand exists for their products. The increased savings by Americans is a good sign that we are realizing our own vulnerability and inability to endlessly live off credit, but it is slowing economic growth in the short term. For example, retail sales have fallen in the past two months, down from an increase earlier in the year.

“Consumers are clearly worried about the lack of job growth and even more about the lack of income growth,” said Ken Goldstein, economist with the Conference Board, the business research group.

State and local governments are not immune to the country’s economic problems. Due to a decrease in tax revenues, they have been forced to cut almost 100,000 jobs already this year. Couple this with the full depletion of stimulus funds expected in the second half of this year, and it is no small wonder businesses are resistant to spending.

“These are fundamental concerns,” Goldstein said. “There’s a reason why businesses and consumers are nervous about where we are, and where we are headed in the next three to nine months.”

With this wide lack of spending by both consumers and businesses, many forecasters are beginning to be concerned with the possibility of a double-dip recession. This notion is not entirely new, as many forecasted the stimulus would only act as a temporary plug in the drain of our economy. Without ever addressing the real problems at the heart of our economic decline, we will continue to drift into poverty as a nation, indebted to the rest of the world. The bailout was nothing more than a band-aid on a gaping wound.

Every time we treat the wound ineffectively, it prolongs the length of time it needs to heal correctly. American consumers are starting to save more, which is a long-term investment in our economy. Businesses need to start fueling the economy, which in turn will lead to job growth and higher consumer spending. It is not clear that the nation has learned this lesson yet, however, and if not Americans will continue to live as a nation of debt. Until we are able and willing to rebuild our industries here in America, reduce our national and individual debt and balance our trade deficit, no amount of policy action will fix the economic problems facing our country. In fact, they will probably make matters worse.

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