Great article. Warren Buffet is, in my opinion, a good example of a "bully capitalist" rather than an investor per se. He made his original capital accumulation by buying in early and heavily in Coca-Cola and has subsequently been able to increase his wealth by leveraging his capital to accumulate even more capital. Of course the stock buyback ploy makes sense to him because it generates wealth for stockholders, which is apparently his priority, while impoverishing and even endangering society as a whole.
Thankfully Biden seems to get the problem here. 1% to 4% would seem to be a modest beginning but possibly this could be expanded if these corporations decline to respond appropriately. The recent train derailments are a clear indication of the destructive consequences of greed.
Warren buffet pushes for living frugally and subscribes to large donations. If you've ever read Andrew Carnegie's The Gospel of Wealth, you will see that Buffet subscribes to this Philosphy. See what Carnegies opinion was on giving extra money to his employees.
"Much of this sum if distributed in small quantities among the people, would have been wasted in the indulgence of appetite, some of it in excess, and it may be doubted whether even the part put to the best use, that of adding to the comforts of the home"
Which basically states that we all are too stupid to deal with extra money if we had it. So Stock Buybacks which only benefit the Buffets and Carnegies of the world make perfect sense because only they can save us from ourselves and reducing their income reduces the "good" they can do in the world. Regardless of the fact that this policy goes down the tracks of vast income equality like Casey Jones driving a chemical train for Norfolk Southern.
I know Buffett more ways than one. I'm not an active investor, but he is the most publicized practitioner of "value" investing -- with a slight difference. Value investing is an investment philosophy that involves purchasing assets at a discount to their intrinsic value. This is also known as a security's "margin of safety". Benjamin Graham, known as the father of value investing, first established this term with his landmark book, The Intelligent Investor, in 1949. Graham, taught at Columbia, Buffett has a master's degree from Columbia University and was Graham's student.
When I first started to practice law, some of my clients were brokers and investors. I should have followed Buffett's advice, invested in his company, Berkshire Hathaway, rather than actively traded. In 1965 a share cost $19 is worth $473,256.13 this morning.
He is a major shareholder in BNSF, Burlington Northern Santa Fe, LLC, the parent company of the BNSF Railway (formerly the Burlington Northern and Santa Fe Railway). The company is an indirect, wholly owned subsidiary of Buffett's Berkshire Hathaway. Given that fact, I don't think he has a financial interest in Norfolk and Southern.
I heard a number of BNSF whistleblower cases under the Federal Railroad Safety Act.
I also held some hearings in Omaha, Buffett's home town.
Everyone in Omaha that I met, including cab drivers and hotel staff claim that Buffett has their back.
I don't agree that buybacks should be permitted. But please note that Buffett has been a democrat, despite the fac that his father was a Republican congressman. He does not believe in trickle down theory, and opposes the Fascist takeover of our country.
He advocates for noblisse oblige. His pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death.
I won’t throw the baby out with the bath water if he leaves me some hot water to bathe in... can’t wait for my share(?) until Mr. Buffett dies. And in what form does this philanthropy help poor working people “in the future”? We need it now in the form of actual investment in “US” today and then we can also buy stock! Ooooh can’t wait !
Thanks Jean, I was trying to think of a good response, but you did it. Buffett may be a Democrat, but to what end. I can see he might not like fascism or a Republican take-over, but he would still do just fine because of all he owns and all the pies he has a finger in. He doesn't have any real skin in the game as a cliche has it. I am trying to see the difference between Republicans with far far too much money for any human being to have and Democrats who have the same. They support different candidates, but the buying of candidates is what they do. If Buffett really were a Democrat, he would be putting his resources to getting the word out about what Republicans are doing to this nation ala Ron DeSantis, Greg Abbott, and their Klan and make sure his words are heard on every media platform. That is not happening, so, what am I missing?
If he aint investing in getting Citizens United reinstated and in the proper taxing of wealth (yeah stock buybacks another wealth transfer tp the wealthy mechanism). Then he isnt an ally and none of what he does will help us.
Actual investment in us, the other 330 million and not 26,000 wealthy families. I thought royalty died in the last century. As long as we stop, gross income and wealth inequality, or in the least make LARGE progress towards that goal I'll be happy.
That's like saying when I win the next billion dollar lottery I'll...blibity blab whatever, pal...and I'll toss in the Brooklyn and Verrazano bridges too, haha.
Dan, have ever read The Day They Shook the Plum Tree"? It's the biography of one Hetty Green, who in her day was the wealthiest woman known. It's recalling her absolute focus on the acquisition of wealth and her frugal way of life and solitude. I would say it is a cautionary book on the obsessive-compulsive preoccupation with wealth to the exclusion of the world around her. Just wondering if you had any thoughts.
I just think the baby should pay the same tax rate as the average non rich American. He would still be rich and virtuous and Americans would still get the use of his former philanthropy dollars.
He would still have plenty to fill his bathtub with gold coins, or whatever it is old dragons do when they sleep on their hoards.
It seems that the Ohio incident after Biden broke the RR strike, with its obvious endangerment of any community is indicative of corporate malfeasance at our expense. A flaming example and encouragement for wide spread unified strike activity across the country, with France's workers being an inspiration and this event the rallying cry.
And by putting these facts into words that “enrich” the understanding of the ordinary working American. Let them see in pictures and words what they “aren’t getting “ from this corporate Houdini game. “
It looks real, but wait, is it actually coming back to me in any way?”
Nicholas , keep explaining until four year olds without parents( both at work)understand that “hard work” doesn’t always benefit the workers.
yes! and let's not forget that other recent strike-breaking pres, raygun. so much damage to working people started with him. biden was just showing his corporate roots. let us not forget that he gave us clarence thomas
A one to four percent tax on buybacks is woefully too low. Dividends (the alternative to buybacks) are taxed as capital gains, which start at 15 percent for long-term capital gails.
I totally see why people love or hate Warren Buffett, the perfect capitalist, and his fabulous philanthropy, but if he PAID TAXES LIKE THE REST OF US, we wouldn’t need his noblesse oblige. Why should he get to sleep on his hoard like a dragon until he dies?
My friend suggested watching SUCCESSION on HBO Plus. The series captures the mindset of "noblesse oblige". Disgusting, enlightening and a huge motivation to act.
It’s sickening Robert. Disney cut 7,000 jobs in early February to reward shareholders it made me absolutely furious. I hope Biden is successful in imposing the 4% penalty against corporations instead of the 1% penalty but even that is not enough. Major corporations should not be allowed to buy back stocks at all at the expense of their workers. I used to respect Warren Buffet until I figured out that he is no better that any other billionaire. Just because he lives in a modest house doesn’t make him like the rest of us. He’s just as greedy as any other Wall Street tycoon. He just acts like he cares about the little guy. Stock buy backs hurt everyone but the ultra rich and regulations have to change.
Sixteen years ago, promised in a pledge letter to gift 99% of his wealth to philanthropy by the end of his life. He hit the halfway mark of that goal in 2021. Much of Buffett's remaining wealth, estimated at $117 billion in 2022, is already spoken for.https://www.gatesfoundation.org/about/leadership/warren-buffett
This is great but we wouldn’t need to rely on the kindness of strangers if wealth were distributed fairly. Corporations without cogs/workers/producers would have no profits. Those who control the capital do not distribute it equally because the workers have no voice. 11% belong to unions in US and those unions have no power ie: RLA where delay in negotiations benefits corporations who sit on profits for years and collect interest while negotiations go nowhere and a strike is meaningless when forced to accept sub par contracts and go back to work by the President because your job is part of the security of the nation. - god forbid all the plastic junk toys weren’t delivered for Christmas. Woah, end rant, I’m beginning to derail, but back to the point. Why should one old white guy get to decide who gets to benefit from his amassed wealth when instead individuals should be given authority to decide how to use the capital/profits/wealth they create? Oh but maybe not because we are just going to spend it on drugs and booze. (Sarcasm implied.)
All of this is very commendable, Dan, and you could easily defend WB in court but, back to the essential point of this article. Who benefits most greatly from stock buybacks? It's not John and Jane Q Public.
No, he is a world apart from billionaires like Elon Musk or Larry Ellison (a Trump supporter). Both of these guys have more wealth than Buffett or Gates.
The axiom that "Whatever is good for Business is good for America" was undoubtedly coined by a Business person. And the only way that it is potentially True is if it equates America = Wealthy people ONLY. As the #1 objective of Business is to maximize Profits any way it can, you can easily compose an entire litany of Business truisms (i.e. true from a Business POV):
Lowering Labor wages is good for Business
Eliminating employee benefits is good for Business
Eliminating safety equipment requirements is Good for Business
Reducing the number of shareholders with buybacks is good for Business (and to the remaining shareholders ONLY)
Requiring workers to work longer hours with fewer breaks is good for Business. (And if fatigue makes them have an accident, remember the 2nd rule)
The more one reflects on what is good for Business, the more it seems true that IF IT'S GOOD FOR BUSINESS, IT'S BAD FOR AMERICA.
But if you pay attention, you will notice that "Our" government keeps letting Business get away with this kind of BS. At most, a slap-on-the-wrist fine that puts a tiny ding in Business' Profits. (And the cost of which WILL eventually be passed on to the consumers.) Which should illuminate for you who "Our" government _actually_ works for.
In business school they teach that workers (salary and benefits) are a liability, a cost to be reduced or eliminated. Actually, workers are a company's greatest asset, responsible for the success or failure of the business. Want better employees? Pay more and increase benefits, and they will flock to your company!
And they will flock to neighborhoods without guns, and be able to feel accomplishment because they are part of the “Middle Class” that built a society where everyone shares in the contentment of having “just enough” to build a strong and happy family”.
America, say “no” to waiting for your share. Quit paying the rich’s bills!
You are correct up to a point. From an accounting standpoint, fixed assets such as buildings and equipment are assets while labor is an expense. However, you cannot operate without skilled and experienced employees and you will not retain them without good pay and even more importantly treating them as the valuable asset that they are. I once worked for a company that considered their employees as expendables and never figured out why they could not keep good people.
Depends on the industry. In some cases labor begets more profits. I had cases, for example where, e.g. driver salesmen made more than their management supervisors and developed their own markets.
Some businesses are actually labor pools, "renting" the inventory, human capital.
In certain situations, can capitalize the labor as a capital asset. This means that the labor gets depreciated over the life of its related asset, as long as the asset has a useful life of more than 12 months. A good example is professional athletes. The only way to pay huge salaries is to amortize them.
I don't know this as a fact but that's apparently what law firms do with associates and hospitals and insurance companies do with physicians.
Interesting Dan. I would never have expected to hear you refer to human being as commodities: Human Assets, Human Capitol. It sounds an awful lot like elitism to me. Do you really look down on those who produce the source of Profits that enable wealth to occur? Please help us to understand your reasoning in terms of the common good. I'm not angry, just confused by your postings this morning.
Those happen to be asset categories. I don't make the rules. I had cases involving whistleblowers who accused their employers of misrepresenting the value of their companies. .
I see. sopeople are a comodity to be evaluated just as one would value any other product. Some are value-added and some are nonvalue-added. and therefore, disposable commodities. Do you not yet see the danger of this view of human beings?
And I worked for a company that reaped the benefits of making us, the employee , absolutely famous in that we were educated, glamorous( the job) social, proud and fabulously trained to be the best. We shared in the beauty of it all. And we had the help of a union that learned that what is good for one is good for all. All corporations should be so proud!
Undervaluing people's skills, education and experience hardly attracts the Best employees. It also accounts for very poor employee retention, which can render a company's operations to be very volatile
Great insights. Offloading externalities to the wider population and the earth, thus socializing all the negative consequences of corporate actions, is the essence of what’s good for business. The Southern Norfolk accident is the epitome of this where the EPA was faced with the less bad choice of burning off the vinyl chloride so it wouldn’t explode with the consequence of the poisoning of East Palestine the result
"externalities...?" Do I sense an economist in the chat room?
No, the damage done by Norfolk Southern is not an externality because the company is liable for all of the damages it has caused in Ohio. Now if it were to go bankrupt and leave its creditors with the bill, that would be an externality. All limited liablilty entities benefit from that form of externality.
Captain Patch, you are right that what is good for business is bad for America, in particular, the American people, but we are not supposed to know that. I have noticed that every time a corporation announces that it has laid off a large number of workers, the Stock Market rises, usually significantly. Lately, whenever I see the Market rise, I am wondering who laid off and how many people. That is just plain wrong! I suspect Buffett and his crew would have no problem with that. They all know from the recent recessions that the American people will be forced to pay the price of bailing those greedy, inept corporations out, too big to fail, you know. When jobs return, the workers often start back to work at a lower wage and are told "that's all we can pay you, take it or leave it" and the workers have to take it because there are few jobs and unemployment is high at that point, often deliberately so. I suspect that is what Jerome Powell of the Fed and his compatriots are hoping will happen as they keep raising interest rates. Keep those workers poor and begging for work so corporations can make even more money by cutting wages and any pitiful benefits they offer. It's disgusting, but Mr. Buffett is right there with the rest, Democrat or not.
I have long felt that for Business, Management, and America's Wealthy, the rest of the population is comprised of interchangeable cogs for the machinery. ANYONE is eminently -- and easily -- replaceable. They may not show it (it being a cause for negative PR), but I'm sure that when they look at anyone who is not Them, what they see are the livestock at a slaughterhouse. Hard to feel any kind of empathy for Tomorrow's hamburgers.
Capt. Patch, excellent observation! I have noticed that when people become extraordinarily rich, the rest of the world for them no longer exists beyond what they can use his power to shape the way they want their comfortable little life to be. What the peons want is irrelevant which is why most corporate owners do not want unions. Unions would oppose those guys and their fragile egos. We need to make them take notice and be forced to pay attention
I'm not so sure that fragile ego has anything to do with it. I think they're just greedy and selfish. They want what they want and they don't want anyone or anything to get between them and what they want.
But will capitalism destroy itself if we don't criticise it? Certainly,
if their target market is overseas (Jeff), perhaps the target is in countries suffering from neo-colonialism (e.g. countries that trade raw materials in return for finished goods). But isn't much of the Global South getting canny and de-globalising, a bit like China seems to be doing?
That's what I wonder. At what point does the damage to a company or corporation become irreversible? If no one can afford the car, the computer, the phone except the very rich, where are we?
In the short term it probably doesn't matter. If they're providing an essential service or product it probably doesn't matter (no one is going to stop buying food). And if their target market is overseas it doesn't matter if they reduce the purchasing power of workers in the US.
Dear goodness that sounds like a true dog eat dog world ending, an Armageddon where people are hoarding, fighting for, and stealing food?? I see stories in the news on PBS NewsHour of people suffering and dying from famine in Ethiopia, Yemen, South Sudan, Somalia, and Afghanistan and I can’t believe that is still happening in our world today. War, poverty, and famine are government and policy choices. Those in control can be absolutely frightening and terrifying.
It depends on the product(s) being produced. Most companies produce products for _other_ companies' employees and managers. (And most definitely, REALLY EXPENSIVE auto manufactures are producing products for other Upper Management or independently wealthy customers.
Henry Ford was one of the earliest corporation owners to deliberately manufacture products his own employees could afford to buy for themselves. But it should be noted that what he sold them was a seriously cheaply-made vehicle that would cost them several month's wages to buy. He was also one of the early pioneers in issuing credit plans to employees so that they could pay for their purchases in monthly installments... for practically forever.
Robots & AI = eliminating employees. When this starts to hit the white-collar workers this will eliminate what’s left of the middle class, and we will have to have some kind of guaranteed income for the 99% to subsist off of.
And when it comes to Universal Basic Income programs -- "money for doing nothing" -- the amount allocated will be as about as low as possible, **just enough** to survive and no more. There will be an entire (automated) industry to make the least expensive to make products to be sold to people on UBI. [And the world's trash heaps will EXPLODE with the cheap products castoffs.]
[As Billy Joel sings, "Don't waste your money on a new set of speakers; you get more mileage out of cheap pair of sneakers."]
There is one political party who governments that does not make it a secret that it is PRO-BUSINESS, to the detriment of LABOR. Effective government is one that works to find a balance between business and labor, and caring for its citizens that are incapable of caring for themselves. Will we ever get an effective government?
I don't recall a time in my life when We had an "effective government" -- and I'm 70 years old. Of course, I really didn't start to pay attention until Watergate broke and We learned that Tricky Dick really was a crook. But for certain, ever since then the best word to describe Our government is "Dysfunctional". And symptomatic to that is that "Our" government really bends over backwards to give Business every break that either Party can conceive of, and leave crumbs for We The People.
Republicans always speak so highly of Ronald Reagan! I used to wonder why.
[Before 1982, it was illegal for corporations to purchase their own stock to artificially prop up share prices. Then Ronald Reagan’s SEC adopted a rule protecting corporations from being charged for this kind of stock manipulation.]
Yeah Keith, Saint Ronnie decided corporations were far more important than the American people while he smiled his grandfatherly smile and mouthed platitudes and whined about welfare queens. He was tremendously racist and misogynistic and just couldn't bring himself to make his rich white friends do the right thing for the people. He led a major recession in 1987 when the Savings and Loan industry collapsed under a huge weight of fraud and greed. Like all Republicans who cause massive damage to our country, Reagan was never held accountable (and couldn't be after he left office due to Alzheimer's). In fact, Reagan was even cited by President Obama as a worthy American. I get it that he was trying to court Republican voters (which of course, he didn't do), but it shows just how easily people forget what has been done to them and who did it. Because of Buffett's comments about wanting to pay more taxes as a mil/billionaire, people will think of him as some kind of business hero, not realizing he did very little to help anyone but himself and maybe a bit for his hometown where the people just love him. If he can project himself so well to the world, why can't he project his supposed Democratic/democratic views to the world and what he is going to do to help keep our country the greatest, most diverse democracy the world has seen? I would really like to see Warren Buffett do that, but I already know he won't because he's just like the rest of the white corporate owners and can't step out of the expected role no matter what his mouth says.
The other aspect to this was to give a break to long term capital gains, and encouraged wrote offs for expenses involved in breaking up US companies and selling off their domestic assets, and relocating to foreign countries.
Manufacturing companies dismantled their machinery and shipped them overseas. Foreign governments were permitted to engage in price wars with US companies.
Buffett was not involved in any of that. I think you re way off line.... For years, he was the conscience of US business.
Daniel, I am glad to hear Buffett was not involved with the offshoring, but did any of his businesses produce products that could have been offshored? I have heard he has been the conscience of business, but I am still not sure what that actually means for this nation and our economy. I am not expecting him to be a one-man-band for fixing capitalism, but what is coming from his talk? Has he turned anyone toward doing something to support workers or lower prices or the other things that American families and workers need? I truly don't know.
"Then it went off the rails, literally ..." - nice.
What you say state makes perfect sense, but so does what Buffet states - from his point of view. That's the crux, isn't it? Know your audience, it is said. When you communicate, think about your audience so that your message might actually reach them. In Warren Buffet's case, of course his annual letter is addressed to the intended audience, shareholders. And of course his point of view makes sense for him with his audience in mind, shareholders. He's been exceedingly good at what he does for seemingly a few hundred years by now. He's been around, he knows his stuff, it's all about wealth and increasing said wealth - and he does that well.
Holistically speaking, is he right? Of course not and I'd like to smack him for the stupidity of his statements. But then he's too old and I don't smack people. Corporations will continue to do whatever they can get away with to maximize profits - the whole "stakeholder capitalism" thing, as you highlighted in a recent post, was more of a marketing stunt, really. With corporations, when you take a look behind the curtain, nothing much has changed.
Government should govern, legislate - whatever's in his power, Biden should set the wheels in motion to pull corporations (and investment banks), back to the rules in places in the seventies, before deregulation and before Citizens United.
Buffett isn't running for anything. He's not a politician.
I don't agree with Buffett about share buy back -- small guys who happen to own stock will be bought out -- but he operates within the rules.
I think I know a something about the market because I heard whistleblower cases - Sarbanes Oxley -- Dodd Frank.
You can compare his policies at BNSF with other railroads. Geico with other insurance companies. See candies. All of his companies are controlled by Berkshire Hathaway. I don't think Buffett is a hands on manager -- A lot of the stuff you attribute to him has to be proved. I bet it's BS.
Sometimes these corporations buy back their shares using expensive debt.
And sometimes it’s done to obscure huge windfalls of bonuses to C-level executives who are often golf and hunting and sailing buddies with the very members of the board who are engineering and approving the bonuses, obscuring a raid of the company treasury all for themselves.
And we wonder why so many of these executives own private jets and yachts.
We don’t really wonder... we know. Now tell everyone in “red states “ what they don’t get to have. They get guns but a private plane, no way! They get guns, but a yacht? No way... Paulo, get the truth out....
We understand this Professor Reich, you've told us this before and it is quite logical. Why isn't this administration returning us to the pre-Reagan years when company stock buy backs were illegal. This sounds to me as though an Executive Order could rectify the matter. So, why is nothing being done. And we have have two other Democratic Presidencies, why did neither Clinton nor Obama fix this travesty before we got in the stew we're in now. I realize the general public (including me) didn't understand the whole buy-back scheme, but surely others in government must have known. WHY????
It's all about the benjamins, Fay. The DNC is as much funded by corporate money as the RNC. After all [because you mentioned them], Clinton repealed Glass-Steagall, and Obama caved to Big Insurance with the ACA. No modern President is going to do anything to seriously flout Big Corp.
I don't know enough to speak about all political parties. The Greens favor We the People, I would say, because as I understand it, they strive to protect the planet.
As for the Dems and the GOP---which I know are the ones you're asking about---no, I don't think either party is for the little guys, when you get down to it. I believe there are individual Dems who truly want to help their constituents, but look at the evidence. AOC and the Green New Deal, for instance, have largely disappeared. The Progressives as a whole went in strong, but Pelosi settled their hash pretty quickly and made them toe the Establishment Dem line. Bernie continues to rail against all the injustices, but the DNC has made damn sure he hasn't gotten nominated. In short, the DNC and DCCC control the party, and they're corporately owned, whatever the noises otherwise.
The GOP, well....they don’t make any attempt to hide the fact that Big Corp owns them.
I unforuntately believe this to be true. If corporate, rich donor issues have a 50% shot of passing and the needs of the voter are followed at a statistically irellevant level. Ie choices arent made on voter wishes. Then yes both parties are hosed. I see our movement here as something inside the DNC, not the DNC itself because IT DONT care about what we want or need.
Yes, but. All money bills have to arise in the House of Representatives, Ain't gonna happen Daniel with the nutcases in control. Kevin McNutnut isn't going to allow any bill protecting the people against anything is going to happen until at least 2024, So in the meantime that leaves it to Executive orders. 2022 showed us we have no reliable DCCC or DNC so we're going to need some grass roots movement to get a hussle and soon.
No authority for an executive order. Executive orders are issued by the President of the United States, acting in his capacity as head of the executive branch, directing a federal official or administrative agency to engage in a course of action or refrain from a course of action.
Southern Norfolk Railway now knows full well its profit making works. East Palestine proves to it- it’s cheaper to “clean up” than do the right thing in maintaining equipment. That railway runs its mile long cars 1/2 mile from my home. Two derailments in the past several years in this county- that I know about One a mile away. I’m sure there have been plenty of others elsewhere- it takes what happened in East Palestine to get noticed? You kind of wish this were a sci-fi story of a dystopian future. Emailed my do nothing county commissioner about the dangers this railroad poses to the county. This is Trump county, did I expect a response? And to end this rant- no such thing as “clean up” from chemical toxins. Saw news article on Texas residents upset by the water used to hose down East Palestine brought down there to some type of processing plant. The pitch of the article- residents upset when it should be toxic water shipped away from East Palestine in becoming someone else’s problem. The rampant and runaway Reagan capitalism has created the environmental catastrophe of which we are a part and you can’t fix it with the same mindset that created it.
I wonder how many citizens of East Palestine, Ohio, and the other Red State towns where train wrecks have occurred in the last 40 years cheered for deregulation, or voted for representatives that supported deregulation? Prof. Reich should throw a spot light on that!
They elect them every time. They are my neighbors- with their hand painted Trump signs in their yards or cars plastered by same stuff. They simply are bamboozled. Go back a few decades to my farmer neighbors who had a memorial portrait of JFK in their living room. Reagan wrecked this country for sure.
"[Y]ou can’t fix it with the same mindset that created it" applies to Buffet's own mindset. It was one of Einstein's greatest insights, and should be inculcated into all of us from infancy
Your wrong! Just kidding your right. Dzus fastners in my town and others nearby saturated the ground with plumes. Ground water STILL shows issues ie shouldnt really be drunk. This was pollution from the 40's. After 75 years the superfund cleanup is finally complete. It wont bring my mom or my neighbors mom back. They are both dead of cancer. Water here still has high levels of PRBs. So drink at your own risk. So yeah, those toxins gonna be around for a looooong time. I feel for the population there. No amount of money NS puts into the cleanup can fix what the people of Eas Palensitine are going to experience.
Clearly, we live in an economy with an investor class and a wage earning class. Enriching the former almost always occurs at the expense of the latter. And because the former votes en masse against progressive taxation and public investment, we merely hollow out our infrastructure and impoverish our workers.
Virtually anyone with an IRA or an equivalent has some investment, but that doesn't mean we clip bond coupons or actively trade.
Government employees receive annuities, including the Federal Retirement system and the Civil Service Retirement System annuity. I bought another private annuity thorough the Office of Personnel Management Thrift Savings Plan with an insurance company.
Same as a defined benefit.
Retired cops, teachers etc have similar plans. Many union members have defined benefit retirement plans but these days most don't.
And people who have to buy low and sell high to make a living may/may not be investors.
It should also be pointed out that investors are not venture capitalists. They don’t start new companies, and don’t typically invest in them, either. What they do do is move their money from one investment instrument to another. They sell shares of stock they own and use that money to buy stock in other companies — typically, old, settled companies. This doesn’t create wealth, and it doesn’t create a single job. It’s no different from buying a used DVD on Amazon: the money paid for it doesn’t go to the copyright holder, or the movie studio or the people who worked on the movie, it just goes to the person who’s selling the DVD. But selling that used DVD is more beneficial to society than selling a share of stock because a sales tax is paid on the former, but no significant tax is paid on a transaction involving the latter.
For more than the last century the mantra of the GQP has been "what's good for business is good for America", and they doubled down on that credo beginning in the Reagan era. Sadly, the opposite has been proven so often to be true, and in so many ways, from labor to the environment.
Reminds me of that Al Capp movie (Lil’ Abner) song about “What’s Good for General Bullmoose is Good for the U.S.A,”! I remember seeing it as a little kid and asking my dad what that song meant! He explained the same thing Robert just did! And that was in the ‘50s.
Wouldn't it be more lucrative for the government to abolish buybacks than tax them at 1% (or 4%)? Dividends are taxed in the year they are received. Stock buybacks are not taxed until the owner sells the shares, and then at the reduced capital gains tax rate. If the owner dies before selling the shares, the tax is ZERO due to the step-up in basis tax loophole. Just my thought...
As someone else said, because Congress would have to vote for it, and they individually benefit from it. They can't even agree that insider trading should be illegal for members of Congress...
Thank you for explaining what wall street buybacks are doing to we the people who have't enough money to benefit from buying stocks on wall street. It is heartbreaking to see what the people who had the misfortune to live by the traintracks in East Palestine, Ohio just so the rail CEOs make more money.
I would note that the purported benefit of stock buybacks to the country sounds like another one of Paul Krugman’s zombie ideas. Meantime, I didn’t know about the IRA’s 1% buyback tax, nor about Biden wanting to raise it to 4%, much less about the Brown/Wyden proposed legislation. Considering how often I portray the Inflation Reduction Act as a vastly edited down version of the reconciliation package (BBB), this bit of information is useful. Thank you, Professor.
Just to clarify, the ideas themselves aren't Krugman's. They're bogus concepts that float endlessly around the money-sphere, and Krugman has dubbed them, "zombies."
Making things to make money is the backbone of an economy. Making money WITHOUT making things is an ultimate drag on an economy. The FIRE sector (finance, insurance, real estate), while providing necessary capital, threatens the actual productive economy just like removal of more and more support pillars in a coal mine in search of more profits threatens collapse.
Great article. Warren Buffet is, in my opinion, a good example of a "bully capitalist" rather than an investor per se. He made his original capital accumulation by buying in early and heavily in Coca-Cola and has subsequently been able to increase his wealth by leveraging his capital to accumulate even more capital. Of course the stock buyback ploy makes sense to him because it generates wealth for stockholders, which is apparently his priority, while impoverishing and even endangering society as a whole.
Thankfully Biden seems to get the problem here. 1% to 4% would seem to be a modest beginning but possibly this could be expanded if these corporations decline to respond appropriately. The recent train derailments are a clear indication of the destructive consequences of greed.
Warren buffet pushes for living frugally and subscribes to large donations. If you've ever read Andrew Carnegie's The Gospel of Wealth, you will see that Buffet subscribes to this Philosphy. See what Carnegies opinion was on giving extra money to his employees.
"Much of this sum if distributed in small quantities among the people, would have been wasted in the indulgence of appetite, some of it in excess, and it may be doubted whether even the part put to the best use, that of adding to the comforts of the home"
Which basically states that we all are too stupid to deal with extra money if we had it. So Stock Buybacks which only benefit the Buffets and Carnegies of the world make perfect sense because only they can save us from ourselves and reducing their income reduces the "good" they can do in the world. Regardless of the fact that this policy goes down the tracks of vast income equality like Casey Jones driving a chemical train for Norfolk Southern.
"Bully capitalist."
I know Buffett more ways than one. I'm not an active investor, but he is the most publicized practitioner of "value" investing -- with a slight difference. Value investing is an investment philosophy that involves purchasing assets at a discount to their intrinsic value. This is also known as a security's "margin of safety". Benjamin Graham, known as the father of value investing, first established this term with his landmark book, The Intelligent Investor, in 1949. Graham, taught at Columbia, Buffett has a master's degree from Columbia University and was Graham's student.
When I first started to practice law, some of my clients were brokers and investors. I should have followed Buffett's advice, invested in his company, Berkshire Hathaway, rather than actively traded. In 1965 a share cost $19 is worth $473,256.13 this morning.
He is a major shareholder in BNSF, Burlington Northern Santa Fe, LLC, the parent company of the BNSF Railway (formerly the Burlington Northern and Santa Fe Railway). The company is an indirect, wholly owned subsidiary of Buffett's Berkshire Hathaway. Given that fact, I don't think he has a financial interest in Norfolk and Southern.
I heard a number of BNSF whistleblower cases under the Federal Railroad Safety Act.
I also held some hearings in Omaha, Buffett's home town.
Everyone in Omaha that I met, including cab drivers and hotel staff claim that Buffett has their back.
I don't agree that buybacks should be permitted. But please note that Buffett has been a democrat, despite the fac that his father was a Republican congressman. He does not believe in trickle down theory, and opposes the Fascist takeover of our country.
He advocates for noblisse oblige. His pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death.
Don't throw the baby out with the bathwater.
I won’t throw the baby out with the bath water if he leaves me some hot water to bathe in... can’t wait for my share(?) until Mr. Buffett dies. And in what form does this philanthropy help poor working people “in the future”? We need it now in the form of actual investment in “US” today and then we can also buy stock! Ooooh can’t wait !
Thanks Jean, I was trying to think of a good response, but you did it. Buffett may be a Democrat, but to what end. I can see he might not like fascism or a Republican take-over, but he would still do just fine because of all he owns and all the pies he has a finger in. He doesn't have any real skin in the game as a cliche has it. I am trying to see the difference between Republicans with far far too much money for any human being to have and Democrats who have the same. They support different candidates, but the buying of candidates is what they do. If Buffett really were a Democrat, he would be putting his resources to getting the word out about what Republicans are doing to this nation ala Ron DeSantis, Greg Abbott, and their Klan and make sure his words are heard on every media platform. That is not happening, so, what am I missing?
What am I missing?
He's actually one of the best spokesmen WE have. https://fortune.com/2023/02/28/warren-buffett-annual-letter-berkshire-generational-wealth-philanthropy/
If you shoot all of our allies, won't have anyone left.
If he aint investing in getting Citizens United reinstated and in the proper taxing of wealth (yeah stock buybacks another wealth transfer tp the wealthy mechanism). Then he isnt an ally and none of what he does will help us.
Actual investment in us, the other 330 million and not 26,000 wealthy families. I thought royalty died in the last century. As long as we stop, gross income and wealth inequality, or in the least make LARGE progress towards that goal I'll be happy.
He's been giving away ALL his money.
That's like saying when I win the next billion dollar lottery I'll...blibity blab whatever, pal...and I'll toss in the Brooklyn and Verrazano bridges too, haha.
Dan, have ever read The Day They Shook the Plum Tree"? It's the biography of one Hetty Green, who in her day was the wealthiest woman known. It's recalling her absolute focus on the acquisition of wealth and her frugal way of life and solitude. I would say it is a cautionary book on the obsessive-compulsive preoccupation with wealth to the exclusion of the world around her. Just wondering if you had any thoughts.
Yes, Sam Walton, the Saint of Retailism, was famous for driving around in a pickup truck. That fooled the dummies.
I just think the baby should pay the same tax rate as the average non rich American. He would still be rich and virtuous and Americans would still get the use of his former philanthropy dollars.
He would still have plenty to fill his bathtub with gold coins, or whatever it is old dragons do when they sleep on their hoards.
Buffett is someone who agrees. You're on the wrong track.
While value investment may have applications to the financial world,when you apply discount investing to humans the concept backfires.
Government can only regulate the extent of exploitation in an employer/employee relationship..
In psychology, interpersonal relationships.
,
Sounds like Andrew Carnegie. We don’t actually need captains of industry who are generous to the average person after their death.
Excellent!! Thank you Bill.
It seems that the Ohio incident after Biden broke the RR strike, with its obvious endangerment of any community is indicative of corporate malfeasance at our expense. A flaming example and encouragement for wide spread unified strike activity across the country, with France's workers being an inspiration and this event the rallying cry.
And by putting these facts into words that “enrich” the understanding of the ordinary working American. Let them see in pictures and words what they “aren’t getting “ from this corporate Houdini game. “
It looks real, but wait, is it actually coming back to me in any way?”
Nicholas , keep explaining until four year olds without parents( both at work)understand that “hard work” doesn’t always benefit the workers.
Thank you!
yes! and let's not forget that other recent strike-breaking pres, raygun. so much damage to working people started with him. biden was just showing his corporate roots. let us not forget that he gave us clarence thomas
No, he didn't give us Clarence Thomas. Biden voted against confirmation. Several conservative Democrats broke ranks and voted for confirmation.
sorry, i was misinformed. biden did not vote for clarence thomas
A nationwide rail strike would have paralyzed our economy. Be careful what you wish for.
Speaking of consequences, look at the SWA debacle of winter 2022 for failing to invest in infrastructure such as crew scheduling technology.
A one to four percent tax on buybacks is woefully too low. Dividends (the alternative to buybacks) are taxed as capital gains, which start at 15 percent for long-term capital gails.
I totally see why people love or hate Warren Buffett, the perfect capitalist, and his fabulous philanthropy, but if he PAID TAXES LIKE THE REST OF US, we wouldn’t need his noblesse oblige. Why should he get to sleep on his hoard like a dragon until he dies?
My friend suggested watching SUCCESSION on HBO Plus. The series captures the mindset of "noblesse oblige". Disgusting, enlightening and a huge motivation to act.
It’s sickening Robert. Disney cut 7,000 jobs in early February to reward shareholders it made me absolutely furious. I hope Biden is successful in imposing the 4% penalty against corporations instead of the 1% penalty but even that is not enough. Major corporations should not be allowed to buy back stocks at all at the expense of their workers. I used to respect Warren Buffet until I figured out that he is no better that any other billionaire. Just because he lives in a modest house doesn’t make him like the rest of us. He’s just as greedy as any other Wall Street tycoon. He just acts like he cares about the little guy. Stock buy backs hurt everyone but the ultra rich and regulations have to change.
He's giving away ALL his money.
😅I’ll believe it when I see it happen.
Sixteen years ago, promised in a pledge letter to gift 99% of his wealth to philanthropy by the end of his life. He hit the halfway mark of that goal in 2021. Much of Buffett's remaining wealth, estimated at $117 billion in 2022, is already spoken for.https://www.gatesfoundation.org/about/leadership/warren-buffett
This is great but we wouldn’t need to rely on the kindness of strangers if wealth were distributed fairly. Corporations without cogs/workers/producers would have no profits. Those who control the capital do not distribute it equally because the workers have no voice. 11% belong to unions in US and those unions have no power ie: RLA where delay in negotiations benefits corporations who sit on profits for years and collect interest while negotiations go nowhere and a strike is meaningless when forced to accept sub par contracts and go back to work by the President because your job is part of the security of the nation. - god forbid all the plastic junk toys weren’t delivered for Christmas. Woah, end rant, I’m beginning to derail, but back to the point. Why should one old white guy get to decide who gets to benefit from his amassed wealth when instead individuals should be given authority to decide how to use the capital/profits/wealth they create? Oh but maybe not because we are just going to spend it on drugs and booze. (Sarcasm implied.)
Resentment is such a hard thing to carry around.........
All of this is very commendable, Dan, and you could easily defend WB in court but, back to the essential point of this article. Who benefits most greatly from stock buybacks? It's not John and Jane Q Public.
After death, who needs money? I seem to remember that You Can’t Take it With You.
No, he is a world apart from billionaires like Elon Musk or Larry Ellison (a Trump supporter). Both of these guys have more wealth than Buffett or Gates.
The axiom that "Whatever is good for Business is good for America" was undoubtedly coined by a Business person. And the only way that it is potentially True is if it equates America = Wealthy people ONLY. As the #1 objective of Business is to maximize Profits any way it can, you can easily compose an entire litany of Business truisms (i.e. true from a Business POV):
Lowering Labor wages is good for Business
Eliminating employee benefits is good for Business
Eliminating safety equipment requirements is Good for Business
Reducing the number of shareholders with buybacks is good for Business (and to the remaining shareholders ONLY)
Requiring workers to work longer hours with fewer breaks is good for Business. (And if fatigue makes them have an accident, remember the 2nd rule)
The more one reflects on what is good for Business, the more it seems true that IF IT'S GOOD FOR BUSINESS, IT'S BAD FOR AMERICA.
But if you pay attention, you will notice that "Our" government keeps letting Business get away with this kind of BS. At most, a slap-on-the-wrist fine that puts a tiny ding in Business' Profits. (And the cost of which WILL eventually be passed on to the consumers.) Which should illuminate for you who "Our" government _actually_ works for.
In business school they teach that workers (salary and benefits) are a liability, a cost to be reduced or eliminated. Actually, workers are a company's greatest asset, responsible for the success or failure of the business. Want better employees? Pay more and increase benefits, and they will flock to your company!
And they will flock to neighborhoods without guns, and be able to feel accomplishment because they are part of the “Middle Class” that built a society where everyone shares in the contentment of having “just enough” to build a strong and happy family”.
America, say “no” to waiting for your share. Quit paying the rich’s bills!
You are correct up to a point. From an accounting standpoint, fixed assets such as buildings and equipment are assets while labor is an expense. However, you cannot operate without skilled and experienced employees and you will not retain them without good pay and even more importantly treating them as the valuable asset that they are. I once worked for a company that considered their employees as expendables and never figured out why they could not keep good people.
Depends on the industry. In some cases labor begets more profits. I had cases, for example where, e.g. driver salesmen made more than their management supervisors and developed their own markets.
Some businesses are actually labor pools, "renting" the inventory, human capital.
In certain situations, can capitalize the labor as a capital asset. This means that the labor gets depreciated over the life of its related asset, as long as the asset has a useful life of more than 12 months. A good example is professional athletes. The only way to pay huge salaries is to amortize them.
I don't know this as a fact but that's apparently what law firms do with associates and hospitals and insurance companies do with physicians.
Interesting Dan. I would never have expected to hear you refer to human being as commodities: Human Assets, Human Capitol. It sounds an awful lot like elitism to me. Do you really look down on those who produce the source of Profits that enable wealth to occur? Please help us to understand your reasoning in terms of the common good. I'm not angry, just confused by your postings this morning.
Those happen to be asset categories. I don't make the rules. I had cases involving whistleblowers who accused their employers of misrepresenting the value of their companies. .
E.G. Baseball team owners are permitted to amortize player contracts as if they are depreciating assets. https://sabr.org/journal/article/the-roster-depreciation-allowance-how-major-league-baseball-teams-turn-profits-into-losses/
Inside baseball.
I see. sopeople are a comodity to be evaluated just as one would value any other product. Some are value-added and some are nonvalue-added. and therefore, disposable commodities. Do you not yet see the danger of this view of human beings?
They knew why but it wasn’t cost-effective enough to do anything about it. It is always about the money, not the people.
And I worked for a company that reaped the benefits of making us, the employee , absolutely famous in that we were educated, glamorous( the job) social, proud and fabulously trained to be the best. We shared in the beauty of it all. And we had the help of a union that learned that what is good for one is good for all. All corporations should be so proud!
Once upon a time there were some enlightened employers that had profit sharing. I knew a few laborers who became millionaires due to profit sharing.
These companies were bought by corporate vultures that sold off the assets and sold customer accounts for the highest bidder.
Undervaluing people's skills, education and experience hardly attracts the Best employees. It also accounts for very poor employee retention, which can render a company's operations to be very volatile
That's bull. I never was taught that at the Stanford Graduate School of Business, arguably the top B-school in the country.
Great insights. Offloading externalities to the wider population and the earth, thus socializing all the negative consequences of corporate actions, is the essence of what’s good for business. The Southern Norfolk accident is the epitome of this where the EPA was faced with the less bad choice of burning off the vinyl chloride so it wouldn’t explode with the consequence of the poisoning of East Palestine the result
"externalities...?" Do I sense an economist in the chat room?
No, the damage done by Norfolk Southern is not an externality because the company is liable for all of the damages it has caused in Ohio. Now if it were to go bankrupt and leave its creditors with the bill, that would be an externality. All limited liablilty entities benefit from that form of externality.
If you die of cancer caused by the spill. Who cares about liability?
Captain Patch, you are right that what is good for business is bad for America, in particular, the American people, but we are not supposed to know that. I have noticed that every time a corporation announces that it has laid off a large number of workers, the Stock Market rises, usually significantly. Lately, whenever I see the Market rise, I am wondering who laid off and how many people. That is just plain wrong! I suspect Buffett and his crew would have no problem with that. They all know from the recent recessions that the American people will be forced to pay the price of bailing those greedy, inept corporations out, too big to fail, you know. When jobs return, the workers often start back to work at a lower wage and are told "that's all we can pay you, take it or leave it" and the workers have to take it because there are few jobs and unemployment is high at that point, often deliberately so. I suspect that is what Jerome Powell of the Fed and his compatriots are hoping will happen as they keep raising interest rates. Keep those workers poor and begging for work so corporations can make even more money by cutting wages and any pitiful benefits they offer. It's disgusting, but Mr. Buffett is right there with the rest, Democrat or not.
I have long felt that for Business, Management, and America's Wealthy, the rest of the population is comprised of interchangeable cogs for the machinery. ANYONE is eminently -- and easily -- replaceable. They may not show it (it being a cause for negative PR), but I'm sure that when they look at anyone who is not Them, what they see are the livestock at a slaughterhouse. Hard to feel any kind of empathy for Tomorrow's hamburgers.
Capt. Patch, excellent observation! I have noticed that when people become extraordinarily rich, the rest of the world for them no longer exists beyond what they can use his power to shape the way they want their comfortable little life to be. What the peons want is irrelevant which is why most corporate owners do not want unions. Unions would oppose those guys and their fragile egos. We need to make them take notice and be forced to pay attention
I'm not so sure that fragile ego has anything to do with it. I think they're just greedy and selfish. They want what they want and they don't want anyone or anything to get between them and what they want.
But is it good for business to reduce the purchasing power of workers? I'm still searching for a solution to this paradox
Ah, this is why we “leftists” are trying to save capitalism from itself.
But will capitalism destroy itself if we don't criticise it? Certainly,
if their target market is overseas (Jeff), perhaps the target is in countries suffering from neo-colonialism (e.g. countries that trade raw materials in return for finished goods). But isn't much of the Global South getting canny and de-globalising, a bit like China seems to be doing?
That's what I wonder. At what point does the damage to a company or corporation become irreversible? If no one can afford the car, the computer, the phone except the very rich, where are we?
And that dear Tony is the Houdini bull.. I spoke of.
In the short term it probably doesn't matter. If they're providing an essential service or product it probably doesn't matter (no one is going to stop buying food). And if their target market is overseas it doesn't matter if they reduce the purchasing power of workers in the US.
People will stop buying food if they don’t have money.
Dear goodness that sounds like a true dog eat dog world ending, an Armageddon where people are hoarding, fighting for, and stealing food?? I see stories in the news on PBS NewsHour of people suffering and dying from famine in Ethiopia, Yemen, South Sudan, Somalia, and Afghanistan and I can’t believe that is still happening in our world today. War, poverty, and famine are government and policy choices. Those in control can be absolutely frightening and terrifying.
Hear Hear!
IS?
Just guessing, Robert, but US works sensibly here, both grammatically and in context. If I were playing the stock market here, I’d buy in on “typo.”
Typo, meant US
I looked up the definition of doofus in my dictionary. The definition read "see Robert Bolstad".
It depends on the product(s) being produced. Most companies produce products for _other_ companies' employees and managers. (And most definitely, REALLY EXPENSIVE auto manufactures are producing products for other Upper Management or independently wealthy customers.
Henry Ford was one of the earliest corporation owners to deliberately manufacture products his own employees could afford to buy for themselves. But it should be noted that what he sold them was a seriously cheaply-made vehicle that would cost them several month's wages to buy. He was also one of the early pioneers in issuing credit plans to employees so that they could pay for their purchases in monthly installments... for practically forever.
Odious as he may have been in some respects, at least Henry Ford understood that the answer to that question is, "no," Tony.
Odious, indeed: an outspoken antisemite and supporter of the Nazi Industial complex in Germany in the 30's and 40's. It's in the history of his life.
Yep, I'm aware. He was right about paying his workers a decent wage, however, even if it was only out of self-interest
Amen
Robots & AI = eliminating employees. When this starts to hit the white-collar workers this will eliminate what’s left of the middle class, and we will have to have some kind of guaranteed income for the 99% to subsist off of.
And when it comes to Universal Basic Income programs -- "money for doing nothing" -- the amount allocated will be as about as low as possible, **just enough** to survive and no more. There will be an entire (automated) industry to make the least expensive to make products to be sold to people on UBI. [And the world's trash heaps will EXPLODE with the cheap products castoffs.]
[As Billy Joel sings, "Don't waste your money on a new set of speakers; you get more mileage out of cheap pair of sneakers."]
Hate to be the one to tell you but this has been happening as long as I have been working.
White collar/clericals have been the first to go.
There is one political party who governments that does not make it a secret that it is PRO-BUSINESS, to the detriment of LABOR. Effective government is one that works to find a balance between business and labor, and caring for its citizens that are incapable of caring for themselves. Will we ever get an effective government?
I don't recall a time in my life when We had an "effective government" -- and I'm 70 years old. Of course, I really didn't start to pay attention until Watergate broke and We learned that Tricky Dick really was a crook. But for certain, ever since then the best word to describe Our government is "Dysfunctional". And symptomatic to that is that "Our" government really bends over backwards to give Business every break that either Party can conceive of, and leave crumbs for We The People.
Republicans always speak so highly of Ronald Reagan! I used to wonder why.
[Before 1982, it was illegal for corporations to purchase their own stock to artificially prop up share prices. Then Ronald Reagan’s SEC adopted a rule protecting corporations from being charged for this kind of stock manipulation.]
Yeah Keith, Saint Ronnie decided corporations were far more important than the American people while he smiled his grandfatherly smile and mouthed platitudes and whined about welfare queens. He was tremendously racist and misogynistic and just couldn't bring himself to make his rich white friends do the right thing for the people. He led a major recession in 1987 when the Savings and Loan industry collapsed under a huge weight of fraud and greed. Like all Republicans who cause massive damage to our country, Reagan was never held accountable (and couldn't be after he left office due to Alzheimer's). In fact, Reagan was even cited by President Obama as a worthy American. I get it that he was trying to court Republican voters (which of course, he didn't do), but it shows just how easily people forget what has been done to them and who did it. Because of Buffett's comments about wanting to pay more taxes as a mil/billionaire, people will think of him as some kind of business hero, not realizing he did very little to help anyone but himself and maybe a bit for his hometown where the people just love him. If he can project himself so well to the world, why can't he project his supposed Democratic/democratic views to the world and what he is going to do to help keep our country the greatest, most diverse democracy the world has seen? I would really like to see Warren Buffett do that, but I already know he won't because he's just like the rest of the white corporate owners and can't step out of the expected role no matter what his mouth says.
The other aspect to this was to give a break to long term capital gains, and encouraged wrote offs for expenses involved in breaking up US companies and selling off their domestic assets, and relocating to foreign countries.
Manufacturing companies dismantled their machinery and shipped them overseas. Foreign governments were permitted to engage in price wars with US companies.
Buffett was not involved in any of that. I think you re way off line.... For years, he was the conscience of US business.
Daniel, I am glad to hear Buffett was not involved with the offshoring, but did any of his businesses produce products that could have been offshored? I have heard he has been the conscience of business, but I am still not sure what that actually means for this nation and our economy. I am not expecting him to be a one-man-band for fixing capitalism, but what is coming from his talk? Has he turned anyone toward doing something to support workers or lower prices or the other things that American families and workers need? I truly don't know.
Follow the Money.
"Then it went off the rails, literally ..." - nice.
What you say state makes perfect sense, but so does what Buffet states - from his point of view. That's the crux, isn't it? Know your audience, it is said. When you communicate, think about your audience so that your message might actually reach them. In Warren Buffet's case, of course his annual letter is addressed to the intended audience, shareholders. And of course his point of view makes sense for him with his audience in mind, shareholders. He's been exceedingly good at what he does for seemingly a few hundred years by now. He's been around, he knows his stuff, it's all about wealth and increasing said wealth - and he does that well.
Holistically speaking, is he right? Of course not and I'd like to smack him for the stupidity of his statements. But then he's too old and I don't smack people. Corporations will continue to do whatever they can get away with to maximize profits - the whole "stakeholder capitalism" thing, as you highlighted in a recent post, was more of a marketing stunt, really. With corporations, when you take a look behind the curtain, nothing much has changed.
Government should govern, legislate - whatever's in his power, Biden should set the wheels in motion to pull corporations (and investment banks), back to the rules in places in the seventies, before deregulation and before Citizens United.
Buffett isn't running for anything. He's not a politician.
I don't agree with Buffett about share buy back -- small guys who happen to own stock will be bought out -- but he operates within the rules.
I think I know a something about the market because I heard whistleblower cases - Sarbanes Oxley -- Dodd Frank.
You can compare his policies at BNSF with other railroads. Geico with other insurance companies. See candies. All of his companies are controlled by Berkshire Hathaway. I don't think Buffett is a hands on manager -- A lot of the stuff you attribute to him has to be proved. I bet it's BS.
So, he's an Enabler as opposed to an active participant. Isn't that called plausible deniability? Just trying to stir your soup a bit, Dan.
Sometimes these corporations buy back their shares using expensive debt.
And sometimes it’s done to obscure huge windfalls of bonuses to C-level executives who are often golf and hunting and sailing buddies with the very members of the board who are engineering and approving the bonuses, obscuring a raid of the company treasury all for themselves.
And we wonder why so many of these executives own private jets and yachts.
We don’t really wonder... we know. Now tell everyone in “red states “ what they don’t get to have. They get guns but a private plane, no way! They get guns, but a yacht? No way... Paulo, get the truth out....
I can't doubt it.
Its wealth transfer plane and simple. You bring up good points.
Yes, the executives of the richest companies find ways within the law to get even richer overnight.
We understand this Professor Reich, you've told us this before and it is quite logical. Why isn't this administration returning us to the pre-Reagan years when company stock buy backs were illegal. This sounds to me as though an Executive Order could rectify the matter. So, why is nothing being done. And we have have two other Democratic Presidencies, why did neither Clinton nor Obama fix this travesty before we got in the stew we're in now. I realize the general public (including me) didn't understand the whole buy-back scheme, but surely others in government must have known. WHY????
It's all about the benjamins, Fay. The DNC is as much funded by corporate money as the RNC. After all [because you mentioned them], Clinton repealed Glass-Steagall, and Obama caved to Big Insurance with the ACA. No modern President is going to do anything to seriously flout Big Corp.
So, in your opinion, Denise, no political party favors the majority?
I don't know enough to speak about all political parties. The Greens favor We the People, I would say, because as I understand it, they strive to protect the planet.
As for the Dems and the GOP---which I know are the ones you're asking about---no, I don't think either party is for the little guys, when you get down to it. I believe there are individual Dems who truly want to help their constituents, but look at the evidence. AOC and the Green New Deal, for instance, have largely disappeared. The Progressives as a whole went in strong, but Pelosi settled their hash pretty quickly and made them toe the Establishment Dem line. Bernie continues to rail against all the injustices, but the DNC has made damn sure he hasn't gotten nominated. In short, the DNC and DCCC control the party, and they're corporately owned, whatever the noises otherwise.
The GOP, well....they don’t make any attempt to hide the fact that Big Corp owns them.
I unforuntately believe this to be true. If corporate, rich donor issues have a 50% shot of passing and the needs of the voter are followed at a statistically irellevant level. Ie choices arent made on voter wishes. Then yes both parties are hosed. I see our movement here as something inside the DNC, not the DNC itself because IT DONT care about what we want or need.
Need Congress.
Yes, but. All money bills have to arise in the House of Representatives, Ain't gonna happen Daniel with the nutcases in control. Kevin McNutnut isn't going to allow any bill protecting the people against anything is going to happen until at least 2024, So in the meantime that leaves it to Executive orders. 2022 showed us we have no reliable DCCC or DNC so we're going to need some grass roots movement to get a hussle and soon.
Fay, as "Ya Buts" go this is one of the best I've seen lately. Kudos for a little levity on such a depressing subject.
Before or after all the bickering?
No authority for an executive order. Executive orders are issued by the President of the United States, acting in his capacity as head of the executive branch, directing a federal official or administrative agency to engage in a course of action or refrain from a course of action.
Southern Norfolk Railway now knows full well its profit making works. East Palestine proves to it- it’s cheaper to “clean up” than do the right thing in maintaining equipment. That railway runs its mile long cars 1/2 mile from my home. Two derailments in the past several years in this county- that I know about One a mile away. I’m sure there have been plenty of others elsewhere- it takes what happened in East Palestine to get noticed? You kind of wish this were a sci-fi story of a dystopian future. Emailed my do nothing county commissioner about the dangers this railroad poses to the county. This is Trump county, did I expect a response? And to end this rant- no such thing as “clean up” from chemical toxins. Saw news article on Texas residents upset by the water used to hose down East Palestine brought down there to some type of processing plant. The pitch of the article- residents upset when it should be toxic water shipped away from East Palestine in becoming someone else’s problem. The rampant and runaway Reagan capitalism has created the environmental catastrophe of which we are a part and you can’t fix it with the same mindset that created it.
I wonder how many citizens of East Palestine, Ohio, and the other Red State towns where train wrecks have occurred in the last 40 years cheered for deregulation, or voted for representatives that supported deregulation? Prof. Reich should throw a spot light on that!
They elect them every time. They are my neighbors- with their hand painted Trump signs in their yards or cars plastered by same stuff. They simply are bamboozled. Go back a few decades to my farmer neighbors who had a memorial portrait of JFK in their living room. Reagan wrecked this country for sure.
how'd they move from JFK to Trump and Bush ?
"[Y]ou can’t fix it with the same mindset that created it" applies to Buffet's own mindset. It was one of Einstein's greatest insights, and should be inculcated into all of us from infancy
Your wrong! Just kidding your right. Dzus fastners in my town and others nearby saturated the ground with plumes. Ground water STILL shows issues ie shouldnt really be drunk. This was pollution from the 40's. After 75 years the superfund cleanup is finally complete. It wont bring my mom or my neighbors mom back. They are both dead of cancer. Water here still has high levels of PRBs. So drink at your own risk. So yeah, those toxins gonna be around for a looooong time. I feel for the population there. No amount of money NS puts into the cleanup can fix what the people of Eas Palensitine are going to experience.
Clearly, we live in an economy with an investor class and a wage earning class. Enriching the former almost always occurs at the expense of the latter. And because the former votes en masse against progressive taxation and public investment, we merely hollow out our infrastructure and impoverish our workers.
As a retired professional, I don't fit into either category. Neither do most people these days as we live in a "gig" economy.
In my case, I don't own any common stock anymore but I am locked into retirement funds that invest.
I come from a long line of petit bourgeois small business people. So does Robert.
If you are on the receiving end of investment funds, you are indeed in the investment class.
Virtually anyone with an IRA or an equivalent has some investment, but that doesn't mean we clip bond coupons or actively trade.
Government employees receive annuities, including the Federal Retirement system and the Civil Service Retirement System annuity. I bought another private annuity thorough the Office of Personnel Management Thrift Savings Plan with an insurance company.
Same as a defined benefit.
Retired cops, teachers etc have similar plans. Many union members have defined benefit retirement plans but these days most don't.
And people who have to buy low and sell high to make a living may/may not be investors.
It should also be pointed out that investors are not venture capitalists. They don’t start new companies, and don’t typically invest in them, either. What they do do is move their money from one investment instrument to another. They sell shares of stock they own and use that money to buy stock in other companies — typically, old, settled companies. This doesn’t create wealth, and it doesn’t create a single job. It’s no different from buying a used DVD on Amazon: the money paid for it doesn’t go to the copyright holder, or the movie studio or the people who worked on the movie, it just goes to the person who’s selling the DVD. But selling that used DVD is more beneficial to society than selling a share of stock because a sales tax is paid on the former, but no significant tax is paid on a transaction involving the latter.
For more than the last century the mantra of the GQP has been "what's good for business is good for America", and they doubled down on that credo beginning in the Reagan era. Sadly, the opposite has been proven so often to be true, and in so many ways, from labor to the environment.
Reminds me of that Al Capp movie (Lil’ Abner) song about “What’s Good for General Bullmoose is Good for the U.S.A,”! I remember seeing it as a little kid and asking my dad what that song meant! He explained the same thing Robert just did! And that was in the ‘50s.
Once again I agree with Mr. Reich. Congress should forbid them.
Why would they forbid something that so many congressmen and women benefit from? They have a vested interest in keeping them in play.
Oh what web we weave.
Lynn -Taxing them is more lucrative for the government.
Wouldn't it be more lucrative for the government to abolish buybacks than tax them at 1% (or 4%)? Dividends are taxed in the year they are received. Stock buybacks are not taxed until the owner sells the shares, and then at the reduced capital gains tax rate. If the owner dies before selling the shares, the tax is ZERO due to the step-up in basis tax loophole. Just my thought...
Why not make stock buybacks illegal again?
As someone else said, because Congress would have to vote for it, and they individually benefit from it. They can't even agree that insider trading should be illegal for members of Congress...
Why would they solve a problem from which they so incredibly benefit?
Are you gonna make hats? MSBIA
Dear Robert Reich,
Thank you for explaining what wall street buybacks are doing to we the people who have't enough money to benefit from buying stocks on wall street. It is heartbreaking to see what the people who had the misfortune to live by the traintracks in East Palestine, Ohio just so the rail CEOs make more money.
I would note that the purported benefit of stock buybacks to the country sounds like another one of Paul Krugman’s zombie ideas. Meantime, I didn’t know about the IRA’s 1% buyback tax, nor about Biden wanting to raise it to 4%, much less about the Brown/Wyden proposed legislation. Considering how often I portray the Inflation Reduction Act as a vastly edited down version of the reconciliation package (BBB), this bit of information is useful. Thank you, Professor.
Just to clarify, the ideas themselves aren't Krugman's. They're bogus concepts that float endlessly around the money-sphere, and Krugman has dubbed them, "zombies."
Denise, Thank you for your comment, which clarified that I had not expressed myself clearly.
What can I say? I'm a word nazi. And a fan of Krugman!
Making things to make money is the backbone of an economy. Making money WITHOUT making things is an ultimate drag on an economy. The FIRE sector (finance, insurance, real estate), while providing necessary capital, threatens the actual productive economy just like removal of more and more support pillars in a coal mine in search of more profits threatens collapse.
Don't forget the 20-30% overhead for administering health care.