I am not going to go into a lot of depth but I believe I railed against the tax cuts for corporations here and elsewhere on social media saying the tax cuts would result in stock buy backs and increased dividends. Well I told you so!

When Republicans put together their tax bill last year, it was not much of a surprise to see that its centerpiece was a gigantic corporate tax cut, lowering the statutory corporate rate from 35 percent down to 21 percent. This cut accounted for about $1 trillion of the bill’s total $1.5 trillion cost, but Republicans said it really wasn’t about helping corporations at all.

No, the real target was the workers: Corporations would take the money and use it to create new jobs and raise the wages of those working for them, as trickle-down economics did its magical work.

Democrats, on the other hand, said it was a scam. They charged that workers would see only a fraction of the benefits, and instead corporations would use most of their windfall for things like stock buybacks, which increase share prices and benefit the wealthy people who own the vast majority of stocks.

Well, it has been only two months since President Trump signed the bill into law, and we’re already learning what anyone with any sense knew at the time: Everything Democrats predicted is turning out to be right. Let’s look at this report in the New York Times, which describes how stock buybacks are reaching record levels:

Almost 100 American corporations have trumpeted such plans in the past month. American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.

Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.

Cisco said this month that in response to the tax package, it would bring back to the United States $67 billion of overseas cash, using $25 billion to finance additional share repurchases. Alphabet, the parent company of Google, authorized up to $8.6 billion in stock purchases. PepsiCo announced a fresh $15 billion in planned buybacks. Chip gear maker Applied Materials disclosed plans for a $6 billion program to buy shares. Late last month, home improvement retailer Lowe’s unveiled plans for $5 billion in purchases.

Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.

But the purchases can come at the expense of investments in things like hiring, research and development and building new plants — the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.

This is exactly what Democrats warned would happen. How could Democrats have been so clairvoyant? Do they own a time machine?

Well, no. They applied logic, looked at data and understood history. Republicans, on the other hand, were spinning out a ludicrous fantasy with no basis whatsoever.

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6 Responses to Essentially a I Told You So Post

  1. Erik says:

    With Democrats “predicting the future” why didn’t they tell everyone to start buying stocks so everyone would benefit?

    • Wifather2000 says:

      Tell everyone? Why share the news with Tea BaKKKers, it is better to keep the profits with the democrats!

  2. John Hansen says:

    So the stock but backs increase the value of each share of a companies stock and that is bad for EVERYONE’S 401k account how?

    • Jake formerly of the LP says:

      John- It does nothing for the 50% of Americans who don’t own stick, and it’s bad for the 90%+ of Americans who will lose jobs and/or see their wages stagnate because the money goes to stockholders and CHRis instead of to the workers that make the business run.

      Have you,been sleeping the last 40 years to not see how this works in the Real America?

  3. John Hansen says:

    “buy” not “but”

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