This week Senator Cory Booker (D-NJ) introduced a bill to force corporations to do with the Trump tax cuts what Trump promised they would: share the bounty with the common worker.
Well, in many cases (all documented) they HAVE “shared the bounty” with the common worker. ATR’s been keeping a list:
List of Tax Reform Good News
Thanks to the Tax Cuts and Jobs Act Passed by the Republican Congress and Signed Into Law by President Trump, 434…
What Sen. Booker therefore means, since he would NEVER be so dishonest (wink) as to claim that no corporations at all were “sharing the bounty”, is that he’d like them to share MORE of it with the worker. Fair, enough, but not really something you can legislate without unintended consequence.
There are too many moving parts in a corporate balance sheet to legislate what corporations do with their money. Historically, initiatives which try to force a corporation to route more money to the Wages & Salaries line are compensated for by the Corporation by cutting fringe benefits, delaying raises, outsourcing jobs, or automating them out of existence. Within two years, the profit margins are right back to where they were originally, and the employees were the ones who took it in the shorts.
Senator Booker correctly points out that the increased stock buybacks mainly benefit the wealthy class. As of 2013, the top 1 percent of households by wealth owned nearly 38 percent of all stock shares, according to research by New York University economist Edward Wolf.
Hmmm…….the second sentence doesn’t prove the allegation in the first sentence. While I have no doubt that Dr. Wolf’s analysis is correct, according to Forbes:
Of working-age Americans with an employer-sponsored retirement plan available to them, 16% had a defined benefit plan, and 63% had a defined contribution plan such as a 401(k). (20% did not participate).
(I assume that the 1% outstanding from those numbers are self-employed individuals with access to SEP plans.)
So, to summarize all that, a lot more than just the very wealthy benefit when the stock market rises due to buybacks.
With that in mind, I am not as critical of stock buybacks as you folks on the far (far!) left. I can agree with you that it would be NICE to find a scheme that would enable MORE Americans to benefit MORE from stock buybacks, and “share THAT bounty” a little better, but any plan that would limit a corporations ability to engage in buybacks………does not necessarily benefit the average guy.
32% of Americans participate in a 401K through their work
Just to make sure that everyone knows that you and I are working off the same statistics — — only about 38% of Americans work for a corporation which provides them with an employer sponsored plan. That’s the problem we need to solve, not some Rube Goldberg/Cory Booker-scheme which would somehow magically force corporations to move money from one balance sheet bucket to another.
The question now is will such disclosures have any effect on causing corporations to moderate CEO greed, so a little more is shared with employees.
Won’t matter; you’ve pointed out the reasons why yourself. The vast majority of CEO pay comes from stock options, not cash. That stock is restricted stock that was voted into existence by the shareholders (meaning THEY paid for it, not the employees) for one purpose and one purpose alone: to compensate executives. If you make that go away, the employees get precisely $0.00 of it, because it wouldn’t exist.
Obviously, with almost all major corporation CEO’s making about a million in cash, you can reduce that to zero if you like, and divide that among the employees; they’ll all get a fraction of a cent per hour in raises.
Exec compensation in the Fortune 100 is absurd; but the employees don’t benefit if you change it.
President Bill Clinton tried to stop the escalation of CEO pay with a tax trick that backfired. He shepherded a tax regulation that made any CEOs salary over $1 million not deductible for tax purposes — with a loophole. Stock option rewards based on performance were exempted from this restriction.
Wasn’t really a loophole; it was intentional. The idea was that stock option compensation would align the CEO’s financial best interests with the stock performance; the better the stock did, the richer the CEO.
Didn’t really work out precisely as planned, but it was indeed planned. :-)
Stock options incentivize the CEO to the short-term goal of increasing stock prices over the long-term health of the company. The CEO can then exercise their options for a huge profit — with the added assistance of the buyback.
This is indeed the unintended consequence. It is not good.
Rubin was an ex-CEO of Goldman Sachs and well understood the potential for helping corporate America.
True. But Rubin also gets a lot of the credit for the booming economy of the late 1990’s. Clinton was more interested in foreign and domestic policy, and pretty much outsourced the economics to first Lloyd Bentsen, then Robert Rubin.
There was no real question about the amount and the urgent timing. It would take hundreds of billions, and it must happen in a few days. Fed Chair Ben Bernanke told a committee of legislators: “If we don’t do this, we may not have an economy on Monday.”
This is a good time to point out that the only group that opposed the bailouts, preferring to avoid moral hazard, let the rich financiers go broke, and let a new economy rise from the ashes was the group that was later to be known as the Tea Party. I suspect it was a suicidal fantasy, but the right path forward was probably some sort of compromise between the Paulson/Bernanke path and the Tea Party path.
Note that there was no significant increase in income inequality from that time until the Reagan years beginning in 1981.
Uh…….no no no no no NO no no no no:
Inequality, which dropped from WW2 through to the late 60s, has been rising at about the same rate since the late 60’s. There was no change to the rate of increase of inequality during the Reagan years, and counterintuitively to those who believe the solution to inequality is higher tax rates, inequality jumped when Bush/Clinton raised rates.
Paulson assumed (questionable) that the banks were solvent in that they could pay their debts, but frozen in that they had to use their capital reserves to do so, and then could not make loans to businesses.
Hm. IIRC, his concern was a lack of trust between the banks. They needed to trust each other in order for short term notes to flow; if you think your counterparty is going out of business overnight, you’re not going to give them credit. The system then seizes up. In my view, that was a legitimate concern, in that we had already seen some of that behavior occurring with WAMU and some of the other regionals. So, in this singular area, I think his concern was accurate.
Why would they give up the opportunity to continue the same level of salary and bonuses just to benefit the American economy and their less worthy citizens. In this, Paulson was undoubtedly correct. After all, what would Gordon Gecko do?
Because they’re not stupid. They may get their bonus in 2008, but if the economy were to *really*crash, they’d never get anything else.
Paulson’s concern related to compensation, again IIRC, was that the retail and investment banks needed to retain their best players in order to unwind the mess. If suddenly people who were used to making 1M were making 100K, they’d seek other areas of employment. Not sure where they would have gone, but that was the voiced concern.
Pelosi and Democrats tried to block the advancement of funds after the switch, but they were powerless to do so.
Uh……how’s that work? They were in the majority between 2006 and 2010. They could have blocked it if they had wanted to. What they were concerned about was the market flashcrashing, and the Dems getting blamed.
Paulson gave no thought to the idea that the government could first buy the problematic mortgages and then offer the banks any top up needed for capital reserve requirements. How could an ex-Wall Streeter think like that?
Hmmmm. Congress had approved 1.5T for TARP. The total value of the nonperforming loans was well in excess of that. So, how do you figure that Congress would have agreed?
Thus do massive transfers of wealth upward to the wealth class happen so quietly.
In a financial crisis, the little guy always gets screwed. They have to unload assets at bargain prices, and anyone with cash snaps them up.
No matter who occupies it, the White House is in the grip of the fallacy that the best people to regulate Wall Street are people from the street itself. To the contrary, the worst people to have any position that could in any way influence any policy regarding Wall Street are people from that street.
Hm. Personally, I think it’s generally a good idea to have people who understand something running it. Apparently you disagree.