Society & Culture

Selling Them the Rope

The United States recently came under an attack by an activity so insidious that Democratic leader Chuck Schumer and his Wisconsin colleague Tammy Baldwin joined forces in an effort to demand it be “reined in.”  Massachusetts’ Elizabeth Warren, the Senate’s modern-day firebrand who never tires in her perpetual imitation of the maniacal abolitionist John Brown, ramped up the rhetoric even more as she went on the warpath to call for an outright ban.  Aside from every word coming from President Trump’s mouth, what could have ignited this leftist nursery-school rebellion?  Child pornography?  Another school shooting?  “Immigrant” family separation?  Wrong on all counts.  The senators have gotten exercised over corporate America’s predilection for stock buybacks.  And for once, these three stooges might actually be onto something.

Between 2007 and 2016 cash balances at the firms that make up the S&P 500 rose 50 percent to a mind-boggling four trillion dollars.  Corporations have several options for disposing of this cash that is generated by their operations.  First, they can pay it out as dividends to shareholders.  Unfortunately, our genius leadership class in Washington decided long ago to penalize this strategy via the tax code.  So management will often present the tax penalty as sufficient reason to avoid paying dividends. ...

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