Cut corporate taxes. Watch companies expand and invest. Everyone benefits.

That is the theory of trickle down economics, as popularized in the early 1980s by then U.S. President Ronald Reagan.

Canada was not immune. Corporate Canada has enjoyed more than a decade of corporate tax cuts and increased incentives to invest.

But as the global economy lurches from one financial crisis to the next, companies are instead sitting on a growing pile of cash.

In Canada, the mountain has reached $526 billion. That’s up 40 per cent since the end of the recession in 2009.

In the U.S., it's $2.23 trillion (U.S.), including cash and other liquid assets. Apple Inc. alone has $100 billion (U.S.) in cash and could soon have a lot more if this week’s projections for sales of its iPhone5 hold.

Meanwhile, record low interest rates have enticed consumers to pile up record levels of debt, while governments have attempted to spend their way out of the recession.

Both are tapped out. Yet Canada’s economic growth rate remains a tepid 1.8 per cent. The only source left for future growth is the private sector. But it’s not spending.

In frustration, Bank of Canada Governor Mark Carney has begun admonishing corporate Canada for doing too little with their piles of cash.

If Canadian companies aren’t going to spend that money buying machinery and equipment, opening plants and hiring new workers, then they should pay out the excess to shareholders and let them give the economy a much-needed jolt, Carney said.

But would that work?

Some studies say even a modest increase in dividend payouts would help boost consumer spending.

“Corporate businesses are flush with cash, which they still seem hesitant to deploy, presumably due to the uncertain economic outlook. This obviously leaves scope for firms to increase dividends, which could boost personal income and consumption significantly,” Capital Economics Canadian economist David Madani wrote in a note to clients.

Even paying out just 5 per cent of corporate cash would be enough to boost personal disposable income by 2.5 per cent, Madani estimates. Assuming just half of this was spent, while the rest is saved or reinvested, consumption could increase by over 1 per cent, he wrote.

While that might not sound like much, consumer spending accounts for 70 per cent of all economic growth. In comparison, business investment accounts for just 12 per cent of the economic growth, Madani estimates.

Other studies have found that shareholders are behaving much like companies these days. In the face of an uncertain economic future, and few other places where they can earn higher returns, they’re saving rather than spending their dividends.

Some 85 per cent of dividends are being reinvested in shares of companies, up from 60 per cent in the mid-1980s and early 1990s, according to a report by National Bank chief economist Stéfane Marion.

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Many shareholders are using dividends to build their retirement nest egg.

“At the end of the day, the firepower of higher dividend payments on the real economy may not be all that large. ‘Animal spirit,’ be that of corporations or investors, is being tamed by both cyclical uncertainty and strong structural undercurrents,” Marion wrote in a note to clients.

Most shares are held by foreign investors, pension funds or the very rich —and none are likely to go out and spend it in a way that will stimulate the Canadian economy, says Hugh Mackenzie, a research associate with the Canadian Centre for Policy Alternatives.

The target of Carney’s scolding, Canadian business leaders, have been quick to defend their track record.

Having lived through the financial crisis of 2008, when access to credit seized up, they say it’s no wonder why they’re hoarding their cash, especially when the global economic forecast is so uncertain.

The sovereign debt crisis in the euro zone has plunged parts of that region into recession. The U.S. is headed for a fiscal cliff later this year when a series of tax cuts and spending stimulus programs come to an end.

And China’s red-hot growth rate, which has fuelled higher prices for oil, copper and other basic commodities, is being throttled back.

Some Canadian companies heavily invested in the resource sector have recently announced plans to reduce — not increase — their spending on new projects, machinery and equipment. They include some of Canada’s cash-rich firms, such as Talisman Energy Inc.

Even critics of current policies say private corporations can’t reasonably be expected to behave contrary to their immediate interests.

A better solution is to raise corporate taxes and have governments spend the additional public revenue building roads and bridges and other infrastructure projects, some say.

“What we should be doing is to re-open the debate about whether we’ve radically over-achieved on cutting corporate tax burdens,” the policy alternative centre’s Mackenzie argues.