Friday, November 18, 2016
Penny wise and pound foolish
This just in: Facebook has announced that early in 2017 it would begin repurchasing $6 Billion of its own stock. The report went on to say that Facebook has amassed a sizeable stockpile of cash in recent years, currently $26 Billion in cash and other short term investments. FYI, Apple currently has an estimated $200 Billion in cash reserves, mostly overseas, and Google has roughly $83 Billion cash on hand.
Other notable corporations with large cash stashes include Chevron with $43 Billion, Conoco Phillips with $45 Billion, Ford with $51 Billion, Exxon Mobil with $52 Billion, Cisco with $56 Billion, Microsoft with $73 Billion, GE with $122 Billion, and Berkshire Hathaway with $162 Billion, give or take a few coins.
Most of this isn't literally green cash sitting in a bank vault somewhere, but money placed in "short term investments". These investments offer a very modest return, but with so little investment opportunities out there today, this is the best they can do. Oh, and they're buying back their own stock with some of their moolah, too.
My purpose here isn't to scold them for being so profitable. I'm actually quite happy for them. I bring this up because the new Trump administration will soon begin implementing some of their campaign promises, including major tax cuts. Some, of course, will go to the middle class, but as most taxes are paid by the rich, they will get the lions share of the new tax cuts.
The justification given for these tax cuts is that the rich, lets call them the "investor class", will use this money to fund new start up companies (hoping some will turn out to be the next Apple or Google), and to help existing companies modernize and expand. In theory all this investment will create NEW JOBS!
Except....the investor class doesn't need any new windfall tax cuts to fund these new businesses. They can't even find a good place to invest what they have parked around the world right now!
WE ARE ABSOLUTELY SWIMMING IN LIQUIDITY! All a tax cut now will do is put more money in the hands of those who don't need it, widening the income inequality that already exists, and increasing resentment and hostility between the super wealthy (the 1%) and the masses. This is called "killing the golden goose", or a short sighted action that destroys the profitability of an asset. And can you imagine the shortfall (deficit) this will mean to the Treasury? It's greed, pure and simple!
Instead lets spend that money on fixing our crumbling infrastructure (highways, bridges, ports, etc), or investing in a better educated work force. The wealthy will definitely benefit from that, too, as they....as we ALL should.
No, I'm not trying to spread some sort of socialist message here. I'm not suggesting we take away what the wealthy already have. I'm just trying to head off a revolution that may be coming sooner than we think if we don't wise up. Just level the playing field so the masses can afford to buy what the wealthy are selling.
As my daddy used to say, "A little piece of a BIG pie is better than a big piece of NO pie."