Hollowing out the Middle Class, chunk by chunk! I believe its vital to our democracy for average Americans to be a little bit better informed, not experts mind you, just better informed, on how the wealthy and well-connected and corporate America more often than not take but fail to give back. An editorial in the NY Times this past Saturday describes how Carl Icahn, whose investment firm owns 53 million shares of Apple, pressured Apple chief, Tim Cook, to buy back $150 billion of its own stock so that Apples share price would double as a consequence. Buybacks usually cause a companys share price to go up because less shares are in circulation making the shares left in the market more valuable. Mr. Icahn would have made out like a bandit without creating one additional job, without increasing anyones salary, or improving their benefits! Apple did eventually buy back $90 billion, but it did so without using any of its more than $100 billion in cash reserves in overseas accounts - in overseas accounts in order to avoid US taxes. (Did you rush to buy iPhone 6?) How did Apple pay for the $90 billion buyback? Apple borrowed the money at low interest rates, lower than your mortgage rate or your son or daughters college loan rate. The case above is not an isolated one. Economist William Lazonick, in his article published in Harvard Business Review states, Between 2003 and 2012, the 449 companies that were publicly listed in the S&P 500 index throughout that time spent 54 percent of their earnings buying back their own stock. That cost an astounding $2.4 trillion - money that could have been spent hiring workers or making capital investments. Translation: money that could have been used to create jobs! His articles conclusion according to the Times editorial is: ...buybacks hurt not only the company that is buying back the stock, but also the country itself. Lazonick asserts that the motivation for the buybacks is not, as is routinely purported, to display the companys confidence in its health and future potential but rather enriching the key executives, who are paid primarily in stock. Lazonick writes: The very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies profits to uses that will increase their own prosperity. In 1980 corporate CEO pay averaged 44 times average worker pay. According to an article in the June 2014 issue of Business Insider, it was 331 times average worker pay and rising! Over the same time period US productivity doubled yet the wages of American workers have remained essentially the same since 1980 adjusted for inflation. Does any of this make sense to you? Are you willing to share this information within your family, or with friends, relatives, neighbors, and co-workers? What ideas do you have that might address this? And while youre at it please sign and share the End Tax Loopholes petition in the next post....... thanks!
Posted on: Tue, 28 Oct 2014 13:47:31 +0000