Schumer and Sanders issue joint proposal to limit stock buybacks and dividends.

https://thehill.com/homenews/s...orate-share-buybacks


This is the same Chuck Schumer who periodically would strong arm everyone on wall street to write checks to his campaign.

James Surowiecki, whom you may know from his regular New Yorker column, had this to say:

All these "stop share buybacks" plans are basically Underpants Gnomes Economics:

Phase 1: Ban share buybacks

Phase 2: ???????

Phase 3: Higher wages for workers!

I didn’t watch south park. I had to look that up.
https://en.m.wikipedia.org/wiki/Gnomes_(South_Park)

quote:

Originally posted by jon-nyc:
James Surowiecki, whom you may know from his regular New Yorker column, had this to say:

All these "stop share buybacks" plans are basically Underpants Gnomes Economics:

Phase 1: Ban share buybacks

Phase 2: ???????

Phase 3: Higher wages for workers!

That’s funny but silly.

There’s an understandable reason. The tax cut was not supposed to be used for buybacks. Yet it was.

So, this is punishment. Understandable punishment due to unexpected behavior.

They may be selling it as intended to produce higher wages, but that’s not the reason.

Supposed by whom?

quote:

Originally posted by jodi:
I didn’t watch south park. I had to look that up.
https://en.m.wikipedia.org/wiki/Gnomes_(South_Park))

I never saw it either but it went around as a meme for a while.

Some in the GOP (Susan Collins comes to mind immediately) sold the tax plan as a way to funnel more to wages and investment than to increased dividends and stock buybacks.


I don't agree with Chuck...seems like it's feeding a particular base, kinda like the wall is feeding a different base.

edit: There have been buybacks but there's also been investment. I haven't seen an unbiased analysis of how that's balanced (or not) out.

So maybe Susan Collins had her own Underpants Gnomes economics.


But its odd to suggest that corporate america was supposed to follow the intentions of one particular senator (or even a handful of senators) who voted on the bill, or "be punished." One would think for clarity's sake that would have been written into the bill.



And why is it considered obvious that share buybacks decrease investment? So obvious that it can just be assumed?

That's one of the (many) reasons why I thought the tax cut was such a stupid idea. As we've seen many, many times before, giving corporations tax cuts doesn't guarantee more jobs or more investment. It can just as easily turn into buybacks and dividends.

I'm with WTG, it was most certainly sold as a means to increase US jobs and US corporate investments that would lead to more US jobs. But we have history to tell us that wouldn't happen, at least not to the extent that was promised.

If she does, so does Mnuchin. At least if you believe the snippets of comments made by each of them.

But that's my point about it being like the wall. Each side is looking at pieces of the puzzle and not the whole.

Democrats: "The wall doesn't work and it's immoral".

Republicans: "Democrats don't care about border security"

as for an analysis of the effects of the tax bill, here's something I dug up after a short search. Seemed like it was reasonably fair.

https://www.washingtonpost.com...m_term=.0d58febad7e4

edit: And one from the NYT

quote:

As we've seen many, many times before, giving corporations tax cuts doesn't guarantee more jobs or more investment. It can just as easily turn into buybacks and dividends.

I guess this is the intuition fueling this. But again, this isn't obvious.


Why is it clear that, say, Proctor and Gamble can invest $100MM more productively than it's investors can (at the margin)? Or AIG? (they led the finance sector in buybacks)

It's not even clear that Apple can do so anymore. Apple's own investors don't think they can. But maybe Chuck and Bernie know better.

quote:

Originally posted by jon-nyc:

quote:

As we've seen many, many times before, giving corporations tax cuts doesn't guarantee more jobs or more investment. It can just as easily turn into buybacks and dividends.

I guess this is the intuition fueling this. But again, this isn't obvious.


Why is it clear that, say, Proctor and Gamble can invest $100MM more productively than it's investors can (at the margin)? Or AIG? (they led the finance sector in buybacks)

It's not even clear that Apple can do so anymore.

Or, for that matter, they (the companies) and their investors can create jobs better than the government can (e.g., by taking the revenue and putting it infrastructure projects or fund basic research and moon-shot projects that spur the next generation of innovations that create the next wave of new jobs)?

Also, it's good whenever you hear any economic proposal to imagine the voice of Thomas Sowell in your head saying "and then what?"

It's already well remarked upon that there are fewer and fewer benefits and more and more costs to going public. In fact we now have a term 'Unicorns' for large companies (over $1B) that are still private.

A lot of these companies find it easier and less onerous to raise money in the private markets. As a result fewer of the best investment opportunities are available to average investors. This type of thing will only make it worse.

"And then what?"


Say you're a company that wants to do some share buybacks or dividends to return money to investors.

But a good sized but non-critical portion of your workforce is low skilled, and therefore Chuck and Bernie say you can't do your buybacks.


Do you pay above-market wages to those people? Or outsource that function to a specialized firm that probably has sh1t benefits as well as low wages?

quote:

Originally posted by jon-nyc:
"And then what?"


Say you're a company that wants to do some share buybacks or dividends to return money to investors.

But a good sized but non-critical portion of your workforce is low skilled, and therefore Chuck and Bernie say you can't do your buybacks.


Do you pay above-market wages to those people? Or outsource that function to a specialized firm that probably has sh1t benefits as well as low wages?

I'm not arguing Chuck's idea because I don't know enough about it, but I have a few comments.

quote:

...to return money to investors.

Not forgetting that 90% of stocks are owned by 10% of the population.

quote:

But a good sized but non-critical portion of your workforce...

Can't help thinking there's a contradiction in that statement. How can a good-sized portion of your company be non-critical?

IMO, at least Chuck is presenting something. It may (or not) be a good idea, but it is bringing focus to the absurdity that is our run amok capitalistic society.