TAX CUTS WON'T DO A DAMNED THING TO IMPROVE THIS ECONOMY

From the Washington Post courtesy of Eschaton:

U.S. companies buy back stock in droves as they hold record levels of cash

Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates, a stock market research firm. But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth.

Some companies are buying back shares partly because they don't want to invest in developing new products or services while consumer demand remains weak, analysts said.

"They don't know what they want to do with all the cash they're sitting on," said Zachary Karabell, president of RiverTwice Research.

And

But critics say buybacks are a shortsighted way for companies to offload cash when they would be better off investing for the future.

"It's totally wasted money," said William Lazonick, a professor at the University of Massachusetts at Lowell and director of its Center for Industrial Competitiveness. "It does not do anything long-term for companies."

Lazonick added that executives like buybacks because they boost their own stock options.

More here.

This really is a case study in just how fucking retarded the right-wing cure-all for economic woes, tax cuts, really is. Just think this through. Conservatives aggressively assert that businesses are scared shitless to invest in an economy where there is so much "uncertainty" what with stimulus spending and whatnot, or something to that effect: what we need, they say, are tax cuts for business and the rich, which will then be invested in the economy, which will then expand because of all the new tax-cut spawned investment, which will create new jobs, and give everybody chocolate bunnies and edible baby Jesuses.

But businesses already have butt-loads of cash that they're either not using at all or spending in order to buy back stock so as to fatten already fat CEOs. Needless to say, giving them more money will simply result in more of the same, more idle cash in the bank, or more executive fattening. Tax cuts will do nothing to improve the economy, but they will deprive the federal government of much needed revenue, which is down simply because tax revenue goes down when there is less economic activity. So, not only are business tax cuts in this economy totally useless in terms of economic expansion, they're just fucking stupid in terms of deficit reduction.

The bottom line here, as economist Paul Krugman relentlessly observes in his New York Times column, is that business avoidance of spending isn't because of "uncertainty," a concocted and bogus narrative created by right-wingers for the sole purpose of justifying their radical tax-cuts-for-the-wealthy agenda: rather, businesses aren't spending because demand is so low. That is, consumers don't have enough money to buy the stuff businesses produce and sell. So there's just no use in business expansion when businesses are experiencing a great deal of overcapacity.

The obvious answer, then, is to improve demand. And that means more stimulus. Lots more stimulus, not that half-hearted attempt that Obama called a stimulus last year. We need to spend on the scale of WWII, like drunken sailors, doling out a much bigger percentage of the GDP than conventional wisdom is comfortable contemplating.

What's particularly disturbing is the disconnect between the reported facts and the wonky political conversation about economics. The entire corporate mainstream press knows it's a demand problem, but they continue to funnel this conservative bullshit about "uncertainty" and tax cuts without questioning it. If news organizations were doing their damned jobs, everytime some fuck-ass Republican spews his lying manure about tax cuts, reporters would throw rhetorical pies in his face until he shuts the fuck up.

Unfortunately, that's not the world we live in.

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