Why Are Corporations Hoarding Trillions? • Hacker News Board

Re: Why Are Corporations Hoarding Trillions?

#111

Post by digikata » Thu, Jan 21, 2016, 9:03 PM UTC

npalli wrote: post #104

Animats wrote: post #88

The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…

> The US is out of demand How is the US out of demand? Peak consumption years of population are between twenties and fifties and the biggest cohort of US demographics - the millennials - is just getting started. They crossed over the Boomers last year and now are the largest group. Behind them the younger (Gen Z) equally large in size is ready to backfill in another 15 years. It is true that demand from Boomers is do…

The US is out of demand because wages for Gen X and millennials have been minimized by decades of shift in the power balance between employers & labor, on top of that, many millennials have been saddled with much higher education costs compared to Gen X and especially the Boomer generation. So even as careers progress and wages rise due to experience, some of that margin of money isn't going to disposable consumer spending, it's going to go to loan repayment. That money then spends more time circulating in the financial service sector vs other sectors where there is a greater amount of real value creation and real growth.

Re: Why Are Corporations Hoarding Trillions?

#112

Post by [deleted] » Thu, Jan 21, 2016, 9:06 PM UTC

jandrese wrote: post #94

Animats wrote: post #88

The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…

This is the ultimate problem with "trickle down" economics. Capital doesn't drive growth. Lack of capital limits growth, but excess capital doesn't generate additional growth. Demand drives growth and 35 years of stagnant wages (wages are basically where they were in 1981) have put a chokehold on growth. This is why you have the seemingly incongruous effect of high taxes encouraging growth and low taxes stifling it.…

[deleted]

Re: Why Are Corporations Hoarding Trillions?

#113

Post by jerf » Thu, Jan 21, 2016, 9:06 PM UTC

ju-st wrote: post #109

vellum wrote: post #98

According to this Bloomberg article, companies have $2.1 trillion sitting offshore for tax reasons [1]. They're probably waiting for Congress to let them bring home the cash, tax-free. However, the last time that happened (2004), it was done to encourage companies to create jobs. Instead, they spent it buying company stock. [2] 1 - http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan... 2 - http://www.theguar…

As far as I know the US taxes the income of its citizens even when they live outside the US. So why can't the US just tax the offshore income of the companies?

"So why can't the US just tax the offshore income of the companies?"

There's 2.1 trillion reasons....

Re: Why Are Corporations Hoarding Trillions?

#114

Post by AnthonyMouse » Thu, Jan 21, 2016, 9:07 PM UTC

bradleyjg wrote: post #90

AnthonyMouse wrote: post #80

Earlier quoted context omitted.

> In particular, I'd expect there will be another one-time-only-we-really-mean-it-this-time repatriation holiday in 2017 or 18. Nobody even really takes advantage of those because it isn't about repatriation. It's about the interest. If you have a pile of cash (really investment securities) held by MegaCorp in some low tax jurisdiction, it pays the low tax rate on the interest the money generates. If you repatriate t…

Qualified dividends are taxed at the long term capital gain rate. One time, special dividends aren't, but that's just a reason to use a regular dividend instead. Investors could just sell shares if they wanted to raise money, but then they lose out on future growth in the company's value. Sending out profits to shareholders in the form of a regular dividend allows owners to have a concentrated investment in the busin…

> Qualified dividends are taxed at the long term capital gain rate. One time, special dividends aren't, but that's just a reason to use a regular dividend instead.

That's not what I mean by preferred tax treatment.

If you get $120 as a dividend then you have $120 worth of taxable income. If you sell $120 worth of shares which you bought at $100 then you have $20 worth of taxable income. Even if the rate is the same, you're still paying significantly less in taxes because less of it is considered income.

> Investors could just sell shares if they wanted to raise money, but then they lose out on future growth in the company's value. Sending out profits to shareholders in the form of a regular dividend allows owners to have a concentrated investment in the business the company is in rather than it being diluted with some low risk / low return pile of investments.

Yes, that is the problem we would like to prevent.

But investors prefer that bad thing to happen over paying more taxes, so it does.

> The 2004 holiday saw about $312B repatriated. That may not be a huge number compared to the $1.9T discussed in the article but it hardly supports the claim that "nobody even really takes advantage".

I obviously didn't mean that literally zero people take advantage of it. That is not a large percentage of the total. And how much of that "repatriated" money is actually still in the country and not just an instance of people taking advantage of the tax holiday by moving money into the country during the holiday to reset their tax basis in it and then moving it back out to a tax haven again?

Re: Why Are Corporations Hoarding Trillions?

#115

Post by partiallypro » Thu, Jan 21, 2016, 9:07 PM UTC

jandrese wrote: post #94

Animats wrote: post #88

The US is out of demand. Workers are spent out. Thus, there's no need to increase output, because nobody has the money to buy it. The US has huge excess manufacturing capacity, thousands of malls which could handle more traffic ("there's always parking at Sears", a rather pathetic ad), and services which could handle more business. There's a glut of capital, plenty of available unemployed or underemployed workers, no…

This is the ultimate problem with "trickle down" economics. Capital doesn't drive growth. Lack of capital limits growth, but excess capital doesn't generate additional growth. Demand drives growth and 35 years of stagnant wages (wages are basically where they were in 1981) have put a chokehold on growth. This is why you have the seemingly incongruous effect of high taxes encouraging growth and low taxes stifling it.…

That's not "trickle down" economics, which is not actually a real thing at all. That's a nonsensical political term that the Democrats seized upon during Reagan's "supply side" economic policy; which has beginnings much earlier than Reagan, and likely older than Jean-Baptiste Say's formulation.

There isn't an idea that alone "capital drives growth," that's an idea that Keynes came up with by misreading Jean-Baptiste Say. Paraphrasing him to say that "supply creates its own demand," which we all know is nonsensical, but that's not what Jean-Baptiste Say was saying. The idea is far more complicated than your simple explanation offers, though I sympathize with your view (though, at least the second paragraph is almost entirely wrong), it is narrow in its scope to the study of economics.

Re: Why Are Corporations Hoarding Trillions?

#116

Post by digikata » Thu, Jan 21, 2016, 9:09 PM UTC

JustSomeNobody wrote: post #108

rodgerd wrote: post #106

Earlier quoted context omitted.

> The CEO of WarMart has mentioned this So a business model of screwing every penny out of your staff and suppliers can result in customers too poor to buy your merchandise? Who could have forseen this?

How much do you want to pay for goods in order for that cashier to make 40K?

I would argue that the overall economy is more productive when the lowest wages meet some minimal living line (higher than we have now). This causes businesses to search to meet a higher efficiency of value creation in order to stay in business. The evolutionary culling of poor efficiency businesses drives a virtuous cycle for our civilization and economy in the long term.

If the companies are searching for a way to leverage lower wages for employees - that isn't real value creation. Driving wages too low, we get our current economic stagnation.

Re: Why Are Corporations Hoarding Trillions?

#117

Post by frogpelt » Thu, Jan 21, 2016, 9:11 PM UTC

My theory is that when the QE rounds started and trillions of dollars were pumped into the economy (major inflationary red flag), the velocity of money dropped like a rock (major deflationary red flag) as a natural reaction.

EDIT: The reason is likely tied to the fact that interest rates sat on the bottom for the last 5-8 years and holding money was just as valuable as investing it. See the article[1] on the St. Louis Fed's website.

1. https://www.stlouisfed.org/On-The-Economy/2014/September/Wha...

Re: Why Are Corporations Hoarding Trillions?

#118

Post by ryanlol » Thu, Jan 21, 2016, 9:12 PM UTC

ju-st wrote: post #109

vellum wrote: post #98

According to this Bloomberg article, companies have $2.1 trillion sitting offshore for tax reasons [1]. They're probably waiting for Congress to let them bring home the cash, tax-free. However, the last time that happened (2004), it was done to encourage companies to create jobs. Instead, they spent it buying company stock. [2] 1 - http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan... 2 - http://www.theguar…

As far as I know the US taxes the income of its citizens even when they live outside the US. So why can't the US just tax the offshore income of the companies?

Because the US needs the businesses, not the other way around.

Re: Why Are Corporations Hoarding Trillions?

#119

Post by frogpelt » Thu, Jan 21, 2016, 9:12 PM UTC

ju-st wrote: post #109

vellum wrote: post #98

According to this Bloomberg article, companies have $2.1 trillion sitting offshore for tax reasons [1]. They're probably waiting for Congress to let them bring home the cash, tax-free. However, the last time that happened (2004), it was done to encourage companies to create jobs. Instead, they spent it buying company stock. [2] 1 - http://www.bloomberg.com/news/articles/2015-03-04/u-s-compan... 2 - http://www.theguar…

As far as I know the US taxes the income of its citizens even when they live outside the US. So why can't the US just tax the offshore income of the companies?

They would have to change the tax code.

Re: Why Are Corporations Hoarding Trillions?

#120

Post by seiji » Thu, Jan 21, 2016, 9:13 PM UTC

markdown wrote: post #110

npalli wrote: post #104

Earlier quoted context omitted.

> The US is out of demand How is the US out of demand? Peak consumption years of population are between twenties and fifties and the biggest cohort of US demographics - the millennials - is just getting started. They crossed over the Boomers last year and now are the largest group. Behind them the younger (Gen Z) equally large in size is ready to backfill in another 15 years. It is true that demand from Boomers is do…

And what good is a large population of people in their peak consumption years if they have no money with which to consume? So long as you have a low-paid workforce who have to save their money (either themselves or via insurance companies) in case they get an infected tooth or need to see a doctor for an antibiotic prescription, you'll have low consumption spending and low growth.

even medium to highly paid workforce members aren't entirely capable of spending en masse these days.

I'd love to stop paying $3500/month in rent, but any property to buy around here has a median price of $1.2 million. Unless we all move to rural Indiana, housing + healthcare is designed to eat 100% of your after-tax income with no room for further growth.

(of course, that's assuming you're just a putz serial employee like myself and not a wise investor who can share the success of 1,000 companies at once without having to do any real work yourself.)