The U.S. economy is barely recovering, even as the Federal Reserve does everything in its power to stimulate it. The economy would be doing far better if companies were reinvesting their cash back into it. Yet the most profitable companies, Apple (NASDAQ:AAPL) and other large tech companies, are slowing the U.S. economic recovery by stashing billions of dollars abroad. Read more to find out why companies aren't reinvesting your cash, why this is Congress' fault, and what should be done about it.

How a vibrant economy works

Let's use Ford (NYSE:F) as an example.

Say you buy a new car from Ford for $10,000. Where does your money go?

$8,640 Cost of goods sold $650 Selling, general, and administrative expenses $275 Advertising $120 Taxes

This leaves $315 in profit for Ford.

From there, Ford reinvests $145, or 46%, of its $315 profit back into the business. The company also pays outs $75, or 24%, of its profit as dividends to its shareholders.

Adding it all up, with your purchase, $9,905 was recycled back into the economy.

What happens when you buy from Apple

Now let's look at Apple. Say you buy five laptops for $10,000. Where does your money go?

$6,240 Cost of goods sold $570 Selling, general, and administrative expenses $260 Research and development $65 Advertising $749 Taxes

This leaves $2,117 in profit for Apple.

Apple reinvests $656, or 31%, of its profit back into the business. Apple then pays outs $603, or 28%, of its profit as dividends to its shareholders. Apple then puts the remaining cash in the bank, taking $859 out of the economy.

So, with your purchase, only $9,141 was recycled back into the economy.

Now, we all want to save some money now and then. The problem is that Apple is already sitting on $150 billion in cash. Roughly $100 billion of that is excess cash, meaning cash and current assets minus all of the company's liabilities.

Stagnation

When savings sit idle, economic growth slows, unemployment rises, and wages fall. I use Apple as an example because it is the largest company hoarding cash, but it is not the only one. U.S. companies are sitting on nearly $1 trillion worth of foreign earnings, with the top 10 public companies excluding financials sitting on roughly $300 billion worth. Rounding out the top three public companies holding excess cash are:

Company Excess Cash 1 Apple $96 billion 2 Google (NASDAQ:GOOGL) $46.8 3 Microsoft (NASDAQ:MSFT) $38.7

Why is this happening?

Congress

The first reason is that the U.S.' corporate tax rate is the second-highest in the world.

The big reason, though, is that companies are waiting for another tax holiday. This is the unintended consequence of the 2004 Repatriation Tax holiday that Congress passed in an effort to stimulate the economy. The hope was that by incentivizing companies to bring back foreign earnings with onetime low tax rates, U.S. firms would invest the money, spurring on the economy.

The last tax holiday failed to stimulate the economy, however. Most of the money went to share buybacks, rather than investments in the real economy. The tax holiday also had the unintended consequence of prompting more companies to hoard cash abroad and reclassify earnings as foreign in the hope that Congress would implement another tax holiday.

What you can do

The best solution would be for Congress to reform the corporate tax system by lowering the rate and closing loopholes. While that would take a while to pass, in the short run I continue to push for a repatriation tax holiday that gives dividends to shareholders, as consumers are more likely to productively use cash than companies that are just hoarding it.

As shareholders, it is your money that is sitting abroad going unused. That is $106 per Apple share, $140 per Google share, and $4.70 per Microsoft share. While you may not own shares directly, Apple, Google, and Microsoft make up a combined 6.7% of the S&P 500, so most investors have some stake in them.

If companies cannot find ways to invest excess cash in profitable endeavors, they should distribute the cash to their millions of shareholders, who I'm sure could find ways to put the cash to productive use.