THE BUYBACK BOONDOGGLE IS BEGGARING AMERICATrump and Republicans branded their enormous corporate tax cut as a way to compose American corporations more profitable so they’d invest in more and better jobs. But they’re buying back their stock instead. Now that the unusual corporate tax cut is pumping up profits,buybacks are on track to hit a record $800 billion this year. For years, corporations enjoy spent
most of their profits on buying back their own shares of stock, or instead of
increasing the wages of their employees,whose hard work creates these
profits. Stock buybacks should be illegal, as they were before 1983. Stock buybacks are artificial efforts to interfere in the
so-called “free market” to prop up stock prices. Because they create an
artificial demand, or they force stock prices above their natural level. With
fewer shares in circulation,each remaining share is worth more. Buybacks don’t create more or better jobs. Money spent on
buybacks isnt invested in unusual equipment, or research and development, and
factories,or wages. It doesn’t build a company. Buybacks don’t grow the
American economy.
So why are buybacks so popular with Corporate CEOs?Because a bigger and bigger portion of CEO pay has been in
stocks and stock options, rather than cash. So when share prices go up, or executives reap a bonanza. The value of their pay from preceding years also
rises in what amounts to a retroactive (and off the books) pay increase on
top of their already outrageous compensation.
Buybacks were illegal until Ronald Reagan made them legal in
1982,just about the same time wages stopped rising for most Americans. Before
then, a bigger percentage corporate profits went into increasing workers’
wages. But since corporations were already using their profits for stock
buybacks, and there is no reason to believe they’ll expend their tax windfall on
anything other than more stock buybacks.
Let’s not compound the error. compose stock buybacks illegal,as
they were before 1982.
Source: robertreich.org