Very interesting article ont he trickle down effect. Definitly have their facts correct; "
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BY Nick Hanauer March 10, 2015 at 2:48 PM EDT A GMC vehicle is seen parked in front of a trader standing outside of the New York Stock Exchange on Nov. 18, 2010. On Monday, GM announced a $5 billion stock buyback, part of bigger trend in corporate America, argues entrepreneur Nick Hanauer, that's threatening the American economy. Photo by REUTERS/Shannon Stapleton.
A GMC vehicle is seen parked in front of a trader standing outside of the New York Stock Exchange on Nov. 18, 2010. On Monday, GM announced a $5 billion stock buyback, part of a bigger trend in corporate America, argues entrepreneur Nick Hanauer, that’s killing economic growth. Photo by REUTERS/Shannon Stapleton.
Editor’s Note: On Monday, General Motors announced a $5 billion stock buyback. The beleaguered car-maker is appeasing grumbling shareholders by making their shares worth more.
Buying back stock limits its supply and therefore artificially drives up its value. To make those purchases, GM is reducing its cash reserves from $25 billion to $20 billion. (Recall that you, the taxpayer, helped prop up GM’s cash reserves with a $49.5 billion bailout in 2009.)
The stock buyback, combined with higher dividends, is expected to result in $10 billion for shareholders through 2016. It’s a grand time to be holding GM stock. And a bad time to have been behind the wheel of one of the thousands of defective vehicles for which GM is currently under investigation by the Department of Justice.
But GM’s not the only corporation throwing taxpayers under the bus. Almost all public companies do stock buybacks, writes plutocrat progressive Nick Hanauer in the following Making Sen$e column. He should know. The entrepreneur and original Amazon investor has done them too.
Hanauer authored the most popular post ever on this page last fall: on corporations not paying overtime and how doing so would address the crisis of growing economic inequality. He was also featured in a story of ours on the minimum wage and in Robert Reich’s film, “Inequality for All.”
The billionaire investor has used his high-profile platform to address his peers, most famously in the 2014 TED talk, “Beware, fellow plutocrats, the pitchforks are coming.” Today, he returns to Making Sen$e with another example of, to him, extravagant corporate overreach: stock buybacks.
— Simone Pathe, Making Sen$e Editor
Everybody is talking about income inequality these days. But even as politicians from both parties jockey to position themselves as champions of the American middle class, leaders from both sides seem terrified of acknowledging the trillion dollar elephant in the room: unsustainably high corporate profits.
Our crisis of income inequality wasn’t principally caused by the rich not paying enough tax, even though we don’t. Rather, it is largely the product of the $1 trillion a year that once went to wages, but now goes to corporate profits. And this demand and investment-killing trillion-dollar-a-year transfer of wealth from the bottom 80 percent of households to the top 1 percent is the direct result of the economic and regulatory policies both Republicans and Democrats have imposed since the dawn of the trickle down era."