Sunday, June 24, 2018

Sunday Morning Links

This and that for your Sunday reading.

- Simon Enoch challenges Scott Moe's misleading rhetoric on equalization by pointing out that Saskatchewan could easily afford child care and other programs which Moe criticizes other provinces for funding - if only the Saskatchewan Party hadn't blown the proceeds of a boom on tax slashing and vanity projects.

- Christian Weller examines the results of the U.S.' latest tests of supply-side dogma, and finds that it continues to fail miserably:
On June 7, the Federal Reserve released its latest data on corporate finances, providing the first look at what happened after the passage of the tax cuts.* The supply-side arguments do not hold up; corporations have gotten a lot more money, but that additional cash has not translated into increased domestic investments.
(I)nvestments took a back seat in the first quarter of 2018. Capital expenditures equaled 178.6 percent of after-tax profits in that period, meaning that companies borrowed money to invest. This was down from 191.2 percent at the end of 2007. If, in the first quarter of 2018, corporations had invested the same amount relative to after-tax profits as they did at the end of 2017, they would have had an additional $58 billion to spend on manufacturing plants, office buildings, and equipment such as computers, heavy machinery, and trucks.

Yet, rather than investing the money in this way, corporations used it to keep shareholders happy. In the first quarter of 2018, the share of after-tax profits that went to net equity issues—share repurchases above and beyond new share issuances—equaled 37.5 percent, up from 32.7 percent at the end of 2017. This acceleration indicates that corporations spent an additional $12 billion in the first quarter of 2018, for a total of $257 billion, in order to buy back their own stocks. Such a buyback raises the prices of a company’s shares and boosts the wealth of its shareholders.
Corporations continue to be awash in money; the 2017 tax cuts just made it a lot easier for them to get that money. Yet the cash is not benefiting the economy in the form of increased investments. It is therefore unlikely that the gains promised by supporters of supply-side economics will trickle down to workers.
- Meanwhile, Jason Joseph offers a theory that nominal economic strength is failing to boost wages in part because workers are afraid to leave their jobs for potentially higher-paying alternatives.

- Susan Lund examines the corporate debt bubble which has been inflating since the 2008 financial crisis. And John Quiggin discusses the false promises - and harmful realities - of the privatization of public services.

- Finally, Jesse Norman offers a reminder that the real Adam Smith - rather than the caricature so often presented by laissez-faire zealots - was fully aware of the need for markets to be genuinely trustworthy, rather than granted blind faith. And Aditya Chakrabortty writes about a course designed to connect the public with the basics of economic theory - and the inability of what's generally taken as a given among corporatist economists to stand up to the lived experience of citizens.

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