By Kevin Judge | February 5, 2019
In a NY Times op-ed today, Senators Charles Schumer and Bernie Sanders came out with a brilliant idea. They propose that we should limit, by law, stock buy backs to socially responsible companies that meet government specified wage and benefit requirements!
Stock buy backs are when a public company uses its profits to purchase its own stock from its stock holders. There are generally three reasons to do this:
1) Because they think their stock is undervalued and a better investment than reinvesting it in other business opportunities.
2) They want to reward shareholders without raising dividends.
3) To boost the stock price of the remaining outstanding shares.
The good Senators think they know how to spend those profits better than the company that made them. They are afraid that making profits in the Trump economy will just make the rich that much richer. That wouldn’t be fair because, well its just not and besides… some of the increase profitability is due to those awful business tax cuts that Donald Trump and those nasty Republicans gave them.
Those cuts could not, in fact, cause greater economic growth and wealth creation said liberals and Democrats. Except they did.
So our US Senators feel it is now their obligation to dictate where those profits should go.
Giving the money back to stockholders, who are fat and rich of course, is not as productive as using to benefit employees or reinvest in the company, regardless of the industry and product opportunities at the moment.
Plus, to prevent companies getting around this we need to also limit dividends.
I guess Senator Schumer knows what he is talking about since he is often called the “Senator from Wall Street”, a locale in his home state,
I got a better idea. Just assign every corporation to a different Senator and the Senator can run the company.
What could possibly go wrong?