Corporations Will Use Their Windfalls To Create Jobs. NOT.

Part of the mantra obediently recited by advocates of the mis-named “tax reform” bill is their touching (or feigned) belief that corporations will use the funds being repatriated and/or saved from the tax collector to create jobs.

Brings to mind the old adage about the triumph of hope over experience.

Ed Brayton relays the recent, eye-opening response by corporate CEOs to a speech by Gary Cohn, Trump’s chief economic advisor.

Trump’s chief economic adviser, Gary Cohn, took part in an event hosted by the Wall Street Journal that featured an audience full of CEOs, and when a Journal editor asked for a show of hands by those leaders who would invest in new capacity if their taxes were cut, very few hands went up. Cohn seemed shocked.

Cohn really shouldn’t have been shocked. We’ve been here before, and there is no reason to believe that the fundamentals–or the economic incentives– have changed. As Brayton notes, corporate profits are already at record highs, and credit is very cheap and readily available.

If those businesses believed that investing in new factories or equipment that might create more jobs would result in higher profits for them, they would already be doing it. But they’re not. Indeed, while this poll was an informal one, formal surveys of CEOs find the same result.

This summer, Bank of America Merrill Lynch asked 300 companies what they would do if Congress passed a “tax holiday” that allowed them to bring back massive amounts of money being held overseas at a lower tax rate. 65% said they would pay down their debt. Second most popular option? Stock buyback. Neither of those things creates new jobs. Indeed, when George W. Bush did the same thing in 2004, about $300 billion in cash kept in overseas subsidiaries was brought back at a ridiculous 5.25% tax rate. 80% of it was used to buy back stock. Why? Because it makes the shares of CEOs, which are a huge part of their compensation package, much more valuable. So the rich people benefit but no one else does.

I don’t know whether the lawmakers who continue to push this theory have convinced themselves of its credibility through constant repetition, or whether they are knowingly putting the best possible spin on an economic policy that repeated experience tells us is bogus. It probably doesn’t matter whether they are venal or stupid (not that the two categories are mutually exclusive); the outcome is the same: the rich get richer, and their political donations reward the lawmakers who’ve carried their water. Economic inequality and popular resentments continue to grow, along with political cynicism and social distrust.

It’s a prescription for upheaval, for further splintering of our already strained social fabric–and plenty of wealthy people understand that social unrest shrinks, rather than grows, the economy. As the contours of the tax “reform” bill  have become known, more than 400 American millionaires and billionaires have signed a letter to Congress demanding that Republican lawmakers not cut their taxes.

These wealthy Americans argue that reducing taxes on the richest families at a time when the the nation’s debt is high and inequality is at the worst level since the 1920s would be a colossal mistake.

The letter calls on Congress to not to pass any tax bill that adds to the debt and that “further exacerbates inequality.” Instead of cutting taxes of the wealthy, the letter tells Congress to raises taxes on rich people like them.

If money talks, theirs is the money Congress should listen to.

 

21 thoughts on “Corporations Will Use Their Windfalls To Create Jobs. NOT.

  1. “If money talks, theirs is the money Congress should listen to.”

    Have any of you watched, even briefly, one of the hoarder TV programs? These people (corporations and members of Congress and the current Trump administration) hoard money in vast amounts; it is not crammed and piled in their homes, it is crammed and piled in their bank accounts and in their brains. They cannot think beyond or wade their way through the massive numbers which continue to increase in their bank account here and in offshore accounts thanks to tax loopholes. They certainly do not need that amount of wealth to survive, it is essentially useless to them in the reality of day-to-day living but, like hoarders of junk they refuse to let go of any of it and seek more and more to hoard. I wish I could remember the name of the wealthy American who said, “A bed can only be so comfortable and a steak can only taste so good.”

    Trump has repeatedly announced the low job level thanks to HIS endeavors to encourage corporations to create those jobs and thanks to HIS endeavors corporations have returned their outsourced business and jobs to this country. Which corporations, what jobs…especially which corporations owned by all of the Trumps and Kushners have been returned to the United States and provided jobs for Americans? The terms “tax cuts” and “tax reform” are NOT interchangeable anymore than the terms “Climate Change” and “Global Warming” are interchangeable. We have seen what the just passed House tax budget will save Trump alone.

    The much needed tax credits by the majority of Americans are dwindling away; lowering wages and leaving little income to put back into the economy. The “economy” is comprised of those corporations who are seeking more tax cuts because Americans do not have the money to pay for the corporation’s goods and services. “Cutting off their noses to spite their faces.”

    “I don’t know whether the lawmakers who continue to push this theory have convinced themselves of its credibility through constant repetition, or whether they are knowingly putting the best possible spin on an economic policy that repeated experience tells us is bogus.”

    Here is where I am going to insert the definition of stupidity regarding the above copied and pasted statement from the blog…but I am applying it to the VOTERS WHO CONTINUE TO REELECT THE SAME REPUBLICANS. “Stupidity; repeatedly making the same mistake and expecting a different outcome.” Like those millions of “good Germans” under Hitler; they are committing genocide, seemingly unaware they are among the victims.

  2. The entire goal for cutting taxes on corporations and the wealthy while increasing the debt is to be able to cut or eliminate social safety nets. Once the revenue pipeline dries up Congress can claim that they are forced to cut programs because there is not enough revenue to pay for them and they certainly don’t want to ‘add to the national debt’ in order to continue funding these programs.

    It has taken the Kochs and their cohorts decades to finally realize their goal. It looks like they just might accomplish it now. But the reward for reaching their goal will be social unrest in this country that will bring about violent upheaval and revolution.

    It certainly appears that we will have to completely hit rock bottom for the Rs who continue to vote for uber conservative legislators to finally recognize that they brought this severe punishment onto themselves and they will be very very angry when they realize what happened. We are headed for some extreme social upheaval.

  3. What Nancy said.
    But, I want to add this:
    I’m not an economist, but I AM AWARE that corporations only create jobs when they cannot meet the demand for their products so they can produce more of them with which to make more money.
    I’m also AWARE that this makes me smarter than the Republicans in Congress and the White House.
    Be scared, because as I said, I’m NOT an economist. I’m just a history teacher.

  4. “Revolution is nothing more than the kicking in of a rotten door.” I don’t know who wrote this, but I do agree and will add that the door isn’t the only thing rotting in our country… the whole house is rotting from the foundation to the roof, and the inhabitants are angry and armed to the teeth.

  5. If the traditional Dems are sick of the Bernie-bot democratic socialists now, just wait till this bill (or some minor variation of it) is signed into law.

  6. It seems to me that there is an inherent FRAGILITY in the Corporate model, a genetic, capitalist flaw that just organically evolves into short-term strategies. Smart corporate leaders realize that long-term thinking exposes their companies to that frailty (whatever it is) over the short term.

    Corporate leaders not only have to keep their companies alive over the short-term, they have to keep the profits high. Boards and investors will tolerate nothing less. Call that selfishness or call it something else, but speaking of the insanity of doing the same thing repeatedly and expecting different results, preachers have been condemning selfishness since before Biblical times, yet selfishness is here to stay.

    Perhaps, we’d be more successful creating solutions to that weakness (whatever it is) in the Corporate model than condemning capitalist selfishness.

  7. Some of those who try to convince us that tax cuts will stimulate the economy may be stupid, but it is more likely that they think that we are stupid, or have very short memories, or both. The fact that people continue to vote for these guys makes me wonder about our intelligence.

  8. The anger and logic from these early postings reflect the real tragedy about to enfold us all. The utter blindness to profits over citizenship is stupefying in its scope and irresponsibility. As our history teacher suggests, we are fools for repeating the same folly that created massive hardship. This time, however, there are more than twice of us who will suffer than in 1930.

    The irony of corporate “masters” and Republicans is that while they scream and rant against socialism, they ignore the prophecy of Karl Marx, their ideological opposite: Unregulated capitalism will destroy itself from within. He wasn’t making personal remarks, necessarily, it’s just that capitalism is, by its definition, compelled to exploit everything and everyone for profit. Without sanity and some intellectual hands on the tiller, we will indeed destroy our economy for the few hundred that are so pig-headed as to not see what they are doing.

    The Koch brothers are in their late 70s. Maybe it won’t come to revolution.

  9. The count of hands that went up when asked how many of those 300 CEOs would add to their capacity, was 5. That’s fewer than 2% of the assembled CEOs. What I find interesting is that corporations still get to take most of the deductions that individuals will no longer be able to take. It appears the goal of this “tax reform” is to allow even more multi-national corporations to pay $0. in federal income tax to the good old US of A.

  10. Theresa, “armed to the teeth”? Who are these people with multiple arms? Not the progressives I know. Facts are a small number of citizens own lots of guns. Perps of mass shootings aren’t killing elected officials. Their anger may come from the greed of the 1%, but the 1% aren’t being killed. The dregs of society are killing fellow dregs. I see no possibility the poor will repeat the atrocities of the French Revolution. Our revolution didn’t murder the wealthy of the 18th century. The wealthy and privileged led our revolution. By the way, our revolutionary leaders were not evangelical christians, and many were likely misogynistic. The 1% or 0.01% have no reason to fear for their lives. Those “armed to the teeth” will continue to kill children, church-attendees, fellow sufferers, druggies, gang enemies. Academics who educate us of the follies of the right wing elected officials are not in danger. We readers of this blog don’t live in fear of those who own guns. The true revolutionaries of our time, Wm. Barber, Bill McKibben, leaders of the Sierra Club, WWF, NRDC, Ocean Conservancy, Whales and Dolphins, etc. do not advocate violence and are not armed. Also unarmed are the vast majority who do nothing, not even vote. Congress, Kochs, DeVos family, Trumps, and their ilk are not shaking in their boots. So children will continue to fall ill, be ill-educated, suffer hunger, be gunned down in their school, church, mosque. “Armed to the teeth”: have you observed our police forces recently; tanks, armored vehicles, helmets, vests, water cannon, automatic weapons. The elite have nothing to fear. Cut Medicare, Medicaid, Social Security, education. Abandon the Paris Accords. Let Florida, New Orleans, Hampton Roads be flooded. Let the Earth burn.

  11. Once they’re done enriching the rich, then our GOP/DNC puppets will go after Medicare and Social Security.

    It takes lots of propaganda to convince Americans to vote and support policies which go against their own best interests.

  12. Business has one rule. Make more money regardless of the impact on others. Why people have fallen for that as a powerful source of common good is completely beyond me. Business is made tolerable in society only if is well regulated and if among the regulations are strong measures to create real competition for its competition that is the powerful source of common good.

    This GOP wealth redistribution bill will allow corporations to make more money so they will take advantage of it it to store more money some of which will be stored overseas. Probably a good strategy as the sailing federal deficit will make America a suspect place in which to invest in growth.

    The temporary tax cuts for the creators of wealth, the workers, is hush money. Let your Congress do this and here’s a few thou to keep your mouth shut.

    The real winners are the oligarchs who invested in congressmen. They are emptying the treasury on the way out of town to Monaco or Hong Kong or Switzerland or Singapore.

    All this from exchanging really pitiful entertainment for the opportunity to live in every purse, pocket and living room in order to buy relatively empty minds.

    It is without doubt the great heist.

  13. What will the already wealthy do with more money in their pockets : Go to Africa and kill elephants. Animal-protection advocates were outraged on Thursday over the Trump administration’s decision to reverse a ban on imported elephant trophies from Zambia and Zimbabwe. The Elephant Project called the move “reprehensible” and declared, “One hundred elephants a day are already killed. This will lead to more poaching.”
    ============================================================================

    I know for a certainty if there was a strong push to increase the minimum wage to a living wage, the Republicans would be frothing at the mouth to defeat it. The Corporatist view is sunny when the already wealthy can scam the system to increase their wealth.

    Pete you are right: > Business has one rule. Make more money regardless of the impact on others. I have always thought that the Golden Rule for Capitalism is: Anything that impedes profit must be by definition bad: Financial regulations, clean air or clean water rules and regulations, unions are targets.

    The Democrats if they can standup have a plethora of targets to shoot at, concerning the rigged economic system we have.

  14. Ms. Kennedy, as most of us who are over 50 and have observed the trend and know ‘some’ history of the world and its former empires… it is SNAFU!…

  15. Oh one other piece of the Tax Reform for the Pence Wing of the GOP –

    The GOP tax plan before Congress has billions in gimmicks and giveaways for corporate interests. But none may be as far-reaching, from a social policy perspective, as language declaring human fetuses are legal persons for federal tax purposes. http://www.smirkingchimp.com/thread/steven-rosenfeld/76283/gop-sneaks-creation-of-fetal-personhood-into-tax-bill-in-giant-giveaway-to-anti-choice-religious-r

  16. Chained CPI works its evil magic and Democrats support it — so it may slide through. So, we get the Grand Bargain one deal at a time

    From the Center for Economic Policy and Research…

    (Snip)
    Reductions in Social Security benefits are extremely unpopular across the political spectrum. The program enjoys enormous support among both Democrats and Republicans and people are far more likely to say that benefits should be raised than cut. For this reason, the public should be paying attention to a little noticed provision in the tax bill passed by the House today and which also appears in the bills under consideration in the Senate.

    In both cases, the basis for indexing tax brackets would be shifted from Consumer Price Index (CPI) to the Chained Consumer Price Index (CCPI). The difference is that the CCPI takes account of when people change their consumption patterns in response to changes in relative prices.

    (snip)
    However if Congress is in a budget cutting mood, they are unlikely to be interested in such fine distinctions. Switching Social Security benefits to the same index as is used for tax brackets is likely to be seized as a quick out that can save lots of money — at the expense of retirees’ Social Security benefits.

    http://cepr.net/blogs/beat-the-press/the-republican-tax-bill-and-cuts-to-social-security

  17. Sheila’s lead-in piece and the commentaries so far today are excellent and I fear such atrocities as the one just passed by the House (along with others not of a fiscal nature) are tearing at the fabric of our social cohesion (as I often blog). I have written elsewhere that the predicted shortfall of 1.5 to 1.7 trillion dollars admittedly added to our long term debt by this terrible piece of legislation is a debt our descendants will have to pay in order to reward present day plutocrats, and I have suggested that such a debt-enhancing addition to our already historically high debt does not consider the interest to be paid on such shortfall.
    I learn today that the increase in debt with interest over the projected period of ten years will bring the total shortfall to 2.3 trillion dollars. Further, we will likely be borrowing money to finance such shortfall from China and Saudi Arabia (and the 2.3 figure assumes that interest rates will not for one reason or another increase within such period). One of the problems we had with this rushed legislation by the Ayn Randers is that the CBO did not have time to adequately project independent cost assessment of the bill now passed by the House. We will not ultimately know the costs of this giveaway bill until ten years from the date of its enactment and are buying a pig in a poke, though I hope the CBO will illuminate us on costs while the Senate is coming up with its version of the bill.
    The foregoing does not consider the Senate’s ill-advised addition of a health care provision to this so-called “tax bill,” a repeal of which will do great damage to our healthcare system (such as it is) and some 13 million Americans over the course of the next ten years. My fervent hope is that a few thoughtful Republicans will join the Democrats in the Senate in a rejection of the entire measure passed by the House, incidentally including the addition of a health care provision in an ostensibly (but misnamed) tax bill the Senate has crafted, a provision not in the House bill.
    Trickle down is trickle up, and one of the many negative results from such a “system” is that those of us in the ninety five percent majority will be paying on principal and interest to Chinese and Saudi investors for years to come without any discernible benefits accruing to any of us other than those in the rich and investment class. This is public policy designed for the common good? Not in my book.

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