A ‘Buyback’ for Our Future?

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

People who are trying to do good — with a Green New Deal, for instance, or Medicare for All — regularly find themselves confronting a simple and sometimes sneering gotcha question: So where’s the money coming from?

How about we start putting this same simple question to the top executives of Corporate America?

These execs are currently spending incredibly vast sums buying back their own companies’ shares of stock off the open market. In 2018, researchers at Dow Jones report, 444 of America’s top 500 firms spent dollars on stock buybacks. Lots of dollars: $806.4 billion in all, up 55 percent over the year before and up 37 percent over the previous all-time buyback annual record high.

These stock buybacks have no redeeming social value. Buybacks don’t make corporations more efficient or effective. They just make the rich richer. Buybacks reduce the volume of shares that trade, in the process upping earnings per share and share value. Who benefits from these upticks? Top corporate execs see an immediate boost. Over 80 percent of their pay comes from stock-based compensation.

The wealthy overall benefit, too. America’s top 1 percent, researchers at Goldman Sachs observed earlier this year, now own half of all the nation’s shares of stocks, with nearly 85 percent in the pockets of America’s wealthiest 10 percent.

The dollars corporate execs put in buybacks could, if invested elsewhere, help significantly share the wealth the modern American economy creates. Imagine how much brighter our future would be now if the over $5 trillion that S&P 500 corporations have spent on buybacks since 2007 had gone instead to paying higher wages or training workers in new skills or making corporate operations more eco-friendly.

And that brings us back to our original question: Where’s all the money for these buybacks coming from? Corporate America “earned” a good share of that cash the old-fashioned way — by exploiting workers, squeezing consumers, and shunting the cost of cleaning up corporate messes onto the rest of us. Corporate execs also raise multiple millions for buybacks by taking on new debt. But these execs have a plush new source of buyback cash as well: the Trump corporate tax-rate cut enacted in December 2017.

The White House promised that corporations would use their savings from this corporate tax cut to create jobs and promote prosperity. Corporations did create prosperity — via buybacks — for the people who run corporations. The rest of the economy, the latest stats seem to indicate, is sinking into a new recession.

What could we do about all this? A good starting place would be undoing the Trump corporate tax cut or keeping it in place only for corporations truly helping create prosperity for all. That would be rather simple to pull off. We could, as one example, deny corporations tax-cut dollars if they pay any of their top execs over 25 times what they pay their most typical workers.

Back in the middle of the 20th century the pay gap within most all U.S. corporate enterprises never exceeded that 25-to1 ratio. CEOs at major corporations today now average over 350 times their worker pay. In 2017, Bloomberg reports, some 32 major companies paid their top execs over 1,000 times the pay that went to their most typical workers.

Will lawmakers in the United States ever show the spine necessary to make a serious move against corporate buybacks? Earlier this year, Senators Bernie Sanders and Chuck Schumer announced plans to introduce legislation that would let corporations buy back their own shares only if they were already investing in shared prosperity, as evidenced by “things like paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits.”

Senator Tammy Baldwin has an even better idea. She’s just reintroduced her landmark legislation that completely bans open-market stock buybacks.

“Corporate profits should be shared with the workers who actually create them,” the Wisconsin lawmaker notes. “It’s just wrong for big corporations to pocket massive, permanent tax breaks and reward the wealth of top executives with more stock buybacks, while closing facilities and laying off workers. We need to start rewarding hard work, and not just wealth.”

In other words, let’s buy back our future.

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Reposted from Our Future

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches, From Campaign for America's Future

Union Matters

Steel for Wind Power

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities. 

Siemens Gamesa last month laid off 130 workers at its turbine blade manufacturing plant in Iowa, just months after GE Renewable Energy decided to close an Arkansas factory and eliminate 470 jobs.

The companies reported shrinking demand for their products, even though U.S. consumption of wind energy increases every year.

America’s prosperity depends not only on harnessing this crucial energy source but also ensuring that highly skilled U.S. workers build the components with the cleanest technology available.

Right now, the nation relies on imported steel and turbine components from foreign manufacturers like China while America’s own steel industry—well equipped for this production—struggles because of dumping and other unfair trade practices.

Steel makes up the bulk of turbine hubs and the wind towers themselves. It’s also used to make the cranes and platforms necessary for installing the towers.

Yet the potential boon to America’s steel industry is just one reason to ramp up domestic production of wind energy infrastructure.

American steel production ranks among the cleanest in the world, while China has the highest carbon emissions of any steelmaking nation and flouts environmental regulations.

The nation’s highly-skilled steelmaking workforce must play an essential role in the deeply-needed revitalization and modernization of the nation’s failing infrastructure. Producing the components for harnessing wind energy domestically and cleanly is an important step that will put Americans to work and position the United States to be world leaders in this growing industry.

 

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There is Dignity in All Work

There is Dignity in All Work