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Why Are Corporations Hoarding Trillions?

nytimes.com

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Re: Why Are Corporations Hoarding Trillions?

#401

Post by maxwell »

ryandrake wrote: post #19

Looks like the TL;DR of this article is: "Corporate leadership, being so much smarter than the rest of us dummies, sees something big on the horizon coming. They're saving all their cash so they can later invest because "the next transformative innovation could be just around the corner". Apparently they're smart enough to hoard all this cash, but not smart enough to know exactly what that transformative innovation i…

The only companies named in the article are Google, Apple, and GM. What's "big on the horizon" for tech and auto companies? Autonomous transportation.

After "horse-and-sun-powered agrarian economy" and "electricity-and-motor-powered industrial economy" and "silicon-based information economy", it seems we're going to "automation-based service economy".

Re: Why Are Corporations Hoarding Trillions?

#402

Post by kevin_thibedeau »

gozur88 wrote: post #203
slg wrote: post #76

Earlier quoted context omitted.

>I doubt even a Republican would be willing to lower corporate income taxes. I think a lot of people expect some type of future repatriation period that would allow these companies to bring their cash stateside at a reduced tax rate during a short temporary window. It is something the government has done in the past and it probably makes sense to do again sometime soon. I wouldn't want to be the CEO who overpays taxe…

These tax repatriation deals are getting to be like "immigration reform". Once you start doing it, no matter how much you say "This is the last time! Honest!" people factor the next amnesty into their calculations. In both cases the fact that people believe it will happen increases the likelihood they are correct. I would love to see the US corporate income tax eliminated, but this kind of one-time tax amnesty thing…

> In both cases the fact that people believe it will happen increases the likelihood they are correct.

More like the people that want it to happen have enough collective influence to buy off Congress to make it happen so long as there isn't a pesky POTUS with an itchy veto pen finger.

Re: Why Are Corporations Hoarding Trillions?

#403

Post by gozur88 »

kevin_thibedeau wrote: post #402
gozur88 wrote: post #203

Earlier quoted context omitted.

These tax repatriation deals are getting to be like "immigration reform". Once you start doing it, no matter how much you say "This is the last time! Honest!" people factor the next amnesty into their calculations. In both cases the fact that people believe it will happen increases the likelihood they are correct. I would love to see the US corporate income tax eliminated, but this kind of one-time tax amnesty thing…

> In both cases the fact that people believe it will happen increases the likelihood they are correct. More like the people that want it to happen have enough collective influence to buy off Congress to make it happen so long as there isn't a pesky POTUS with an itchy veto pen finger.

Doesn't matter. If companies can afford to wait (and they can), Congress will eventually be seduced by the prospect of billions in free tax money. When Congress finally does it they can pay off all their interest groups without raising taxes. Nobody has to be paid off.

As time goes on, that pot of money gets bigger and bigger. The more people expect a tax amnesty, the more companies will just leave the money where it is instead of repatriating and paying taxes at the current rate, which just sweetens the pot even more.

Also, the president isn't any less beholden to donors. Do you think Obama would stand in the way of something Goldman Sachs (#3 donor) wanted? I don't.

Re: Why Are Corporations Hoarding Trillions?

#404

Post by Houshalter »

freehunter wrote: post #391
Houshalter wrote: post #375

Earlier quoted context omitted.

Large corporations are not stupid. They have decades of sales data. They can definitely predict demand a year in advance, and they do. I don't actually think they are overproducing. They make a huge markup on new cars, so having to discount a few that don't sell isn't a loss. Also factories are pretty much large fixed costs. Overproducing actually doesn't cost that much. The car might only cost $500 worth of raw mate…

Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The th…

>Look at the Cash for Clunkers program a few years back.

Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down.

>But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7 instead of shutting them down.

But if we can produce so many cars, why are cars still expensive? Shouldn't the ability to create massive supply drive the price down a lot?

There are plenty of people that want new cars. And are willing to pay for them. It's not like we have more cars than people actually want. It just costs a lot to make a car. And that cost includes fixed costs like the factory itself. But factories wouldn't be closing down if other costs weren't also very large.

Yes in theory we could make millions more cars than we do. But not for free. It would require buying more materials, hiring more workers, building new production lines, etc. Those costs must be greater than the expected return for selling another car. Otherwise they would already be doing it.

Re: Why Are Corporations Hoarding Trillions?

#405

Post by jaycroft »

Scarblac wrote: post #367
jaycroft wrote: post #353

Earlier quoted context omitted.

To say this is merely a problem with distribution is absurd. There are hundreds of thousands of vacant homes in San Bernardino, there are many thousands of homeless that could easily be transported there. If those homeless were to move into those homes they would soon be evicted or arrested and imprisoned. This is an issue with ownership, not distribution. Much food from local restaurants, cafes, and grocery stores i…

That's the exact same thing. If we say wealth is not distributed evenly, that's the same thing as saying that only a few people own most things and many people own hardly anything. Redistributing wealth means spreading out ownership more.

I misunderstood. To say it is a "distribution problem" read to me as if distribution was a verb: that is to say "everyone could have what they want if only the means to move people and things around were available".

Re: Why Are Corporations Hoarding Trillions?

#406

Post by iofj »

icebraining wrote: post #399
guyzero wrote: post #103

Earlier quoted context omitted.

Tech companies specifically have seen their historical predecessors disappear very quickly - Sun and SGI nearly evaporated, IBM has had 16 quarters of shrinking earnings. So tech company execs hoard cash in the hope that if they get blindsided they'll have time to recover. I'm pretty sure this is Eric Schmidt's explicit strategy. Also, as someone else noted, a lot of this cash is "trapped" overseas as it would cost 3…

"Nearly Half of So-Called “Offshore” Funds Already in the United States" "Corporations are able to invest their foreign earnings in U.S. assets without treating them as “repatriated” and subject to taxation, because the federal tax code, specifically Section 956(c)(2), already allows U.S. corporations to use foreign funds to make a wide range of U.S. investments without incurring tax liability." https://www.hsgac.sen…

That doesn't change anything. Cash on hand, even outside of the US lowers cost of capital, potentially almost to zero.

Paying the money to shareholders would imply double or triple taxation before the money is with the shareholders. (once, returning the money (corporate tax), once capital gains tax, then income tax or corporate tax again in the case of corporate shareholder). Just so we're clear, that means 35% and then another 35% or 50% tax, or 57% up to 67% tax.

So I think the original argument stands. The company has a choice. Either spend 3x the money on something that will make the stock price go up (like creating an offshore entity buying your own stock if you want to do this rather directly), or give 60% to the US government, 40% to the shareholders. That's why buybacks, which have been proven inefficient to say the least, still happen. They'd have to be 3x as inefficient to break even.

And from the perspective of the management itself : that's either a trillion dollars under their direct control (not quite property, but ...) or 400 billion payout to shareholders, none of it under their control. As long as they can get away with it, they'll keep it. Just look at what Amazon does to it's shareholders.

Re: Why Are Corporations Hoarding Trillions?

#407

Post by mjevans »

Animats wrote: post #128
partiallypro wrote: post #115

Earlier quoted context omitted.

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…

There is a school of economics, sometimes called the "freshwater school" (from the Chicago School and Milton Friedman) which claims you can't run out of demand. This is a classic position. But productivity is now so good that we can run out of demand. Classically, countries ran out of land, labor, capital, or management before they ran out of demand. There were occasional recessions, but that wasn't a permanent condi…

That's simple. You tax sitting on money not earmarked for a recognized task (EG: Saving up for big investment X (named) such as college, a new home/building, etc.) or for rainy day funds; but you also limit the maximum that can be stashed for such tasks.

Then with that tax you re-invest in infrastructure, exploration of new resources, and even missions to space. (I'd rather we have a (robotic) mission to the asteroid belt than mars...).

Re: Why Are Corporations Hoarding Trillions?

#408

Post by freehunter »

Houshalter wrote: post #404
freehunter wrote: post #391

Earlier quoted context omitted.

Look at the Cash for Clunkers program a few years back. People were paid to bring in their old, but still functioning cars, and buy new ones. Many of those old cars were still fully functioning, and not that old. We have the production capacity for so much more than we actually make. You're right, they can predict sales so they're not making 1,000,000 units more than they can sell, but they CAN make that many. The th…

>Look at the Cash for Clunkers program a few years back. Which was done just after a recession. That's not evidence of overproduction in general, just one year when demand unexpectedly went down. >But just because we don't overproduce right now doesn't mean we couldn't if we wanted to. I'm still not seeing where production is the problem. If production was the limiting factor, they would be running the factories 24/7…

Just because I can't make a product cheaper doesn't mean I can't produce more of it. Why don't we make cheaper and cheaper cars? Because people who can afford new cars would rather spend more money to get nice features and safer cars. People who can't afford new cars would rather buy a used car with nice features and a good safety rating. We've had several sub-$10k on the market. They don't sell well. No one wants to buy a brand new Geo Metro or the original Kia Rio or a Chevy Tracker when they can buy a five year old Ford Taurus that is better equipped for cheaper. The used car market is the reason we don't have cheaper brand new cars, not production. And luckily we have so many used cars because we produce so many new cars every year.

But again, we're talking economics right now. The subject is production. Once again I ask: you said we're limited by our ability to produce, do you have anything to back that up? And no, saying "it costs a lot of money" is not proof of a production bottleneck, it's proof that companies hire accountants.

So at this point I'm going to step away from this conversation because I don't think it's going anywhere. You've made me think a bit about economics, so thanks. Good conversation.

Re: Why Are Corporations Hoarding Trillions?

#409

Post by mjevans »

nrb wrote: post #354
greggman wrote: post #343

Earlier quoted context omitted.

> As standard of living decreases on average, people start to have less children That seems counter to all actual evidence doesn't it? The places with the poorest standards of living have the most children and visa verse.

I think he's talking about people who are at a decent standard of living that becomes reduced, thus the potential parents not "wanting to bring a child into this troubled world."

I believe I fit squarely in to that category. I'm just old enough to have seen the fall of 'corporations who hire for life' in to 'everyone for themselves' employment. It is a disheartening drop in live stability.

Re: Why Are Corporations Hoarding Trillions?

#410

Post by mjevans »

cobaltblue wrote: post #292
reddytowns wrote: post #263

Earlier quoted context omitted.

One thing I don't understand about basic income is how to deal with children. If the parents get the basic income of a child, then that will incentivize some people to have more kids simply to get more money. If you don't give basic income for kids, then people with a lot of kids won't be able to live. Of course, you can adjust the amount between the too extremes of full basic income and no basic income for kids, but…

There already are tax and welfare benefits to having children, and indeed it does incentivize having them when you really can't afford them. It doesn't seem sustainable long term, but we'll see. I don't think it's a problem with basic income any more than the current system. The bigger issue I find with basic income is that proposals typically don't include any mention of price control on the seller side and purchase…

The best way of fixing this is to make sure that there is an over-supply of housing (located NEAR the jobs) and to make it as easy as possible to move.

Economic incentives should encourage local, suitable (even for apartments) housing in an area to be approximately equal to the number of jobs in that area (then pad up slightly for BIG if that's also an 'employer').

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