Originally Published: 1/6/2018
The Problem: The Harvard Business Review put much of the blame for corporations reaping all the income gains after the Great Republican Recession of 2008 on stock buybacks: “Corporate profitability is not translating into widespread economic prosperity.” (NOTE: If you want to know more about this issue and it’s effect on income inequality, this is a great piece.) A study by William Lazonick pointed out that buybacks are a huge drain on corporate cash. He looked at buybacks from 2003 to 2012 and found that roughly 54% of all the money earned by companies was spent to repurchase shares. Another 37% of earnings was distributed in dividends. That left only 9% of earnings to reinvest in the business. Not much for expansion or increased wages. Another study by S&P and Bloomberg found that companies spent 95% of their earnings on repurchases and dividends in 2014, including $553 billion on buybacks in 2014. There’s nothing to suggest that things will be any different now that companies will have even more money due to the GOP tax cuts. Business Insider reported in 2016 that U.S. businesses had spent $2.1 trillion on buybacks in the prior 5 years and pointed out that buybacks make things look better than they are: earnings per share appear to be rising but that’s not because earnings are growing. More importantly, stock buybacks used to be illegal because they were considered insider trading. But this changed (once again, thanks to Ronald Reagan) in 1982 “when the Securities and Exchange Commission passed rule 10b-18, which, despite a few mechanical restrictions, opened the gates for companies to begin to repurchase shares en masse.”
The Tax Cut: David Dayen at The Intercept pointed out that corporate CEOs aren’t waiting for the GOP tax cut to kick in, they’ve been buying back their stocks since the Senate passed its bill. (TWW, CBO on Tax Cut Bill, 12/2/17) They immediately announced $70.2 billion in stock buybacks, “which uses company cash to buy its own shares,” which then drives up the price of those shares, “rewarding major investors and executives whose compensation is directly tied to the company’s stock price.” (TWW, Stock Buybacks, 5/30/15) But, according to a new report by Senate Democrats, stock buybacks had been declining in 2017, which is probably why they were so desperate to get the tax cuts. They need the money for more buybacks. As part of the tax cut bill, corporations will be able to bring back trillions of dollars from overseas accounts at a much lower tax rate, giving them even more money for buybacks. Recently White House National Economic Council Director Gary Cohn asked CEOs whether the tax cuts “would cause them to spend more on growth. Only a few responded. ‘Why aren’t the other hands up?’” (CNBC) So far many corporations have announced buybacks and Dayen published the list. Now look at Axios’ list of the S&P 500 companies with the most cash overseas. There are trillions of dollars overseas and everyone expects that much will be brought back at the lower tax rate and then spent on buybacks. This is where our tax dollars will be going - a major transfer of wealth.
Fire and Fury: Michael Wolff has written a book called Fire and Fury about the Trump White House. For the book he had open access to White House employees, including former chief strategist Steve Bannon. Purportedly Bannon told Wolff that Don Jr.’s meeting with Russians (TWW, Junior’s Russian Meeting, 7/22/17) during the campaign was “treasonous” and “unpatriotic” and predicted: “They’re going to crack Don Junior like an egg on national TV.” (Guardian) CNBC published some excerpts from the book. Trump, of course, retorted: “Steve Bannon has nothing to do with me or my Presidency. When he was fired, he not only lost his job, he lost his mind.” The statement goes on. You can read it at U.S. News. Trump’s lawyers are threatening legal action against Bannon (Guardian) (now that could backfire brilliantly) and sent a letter to the book’s publisher demanding that they halt the publication of the book, due out next week. (Washington Post) It went on sale yesterday morning after the publisher moved up the date. (NY Times)
Fusion GPS: Glenn Simpson and Peter Fritsch, founders of Fusions GPS, the company hired to provide background information on Trump - the so-called Steele dossier - (TWW, Opposition Research, 10/28/17), wrote an op-ed piece for the NY Times. They accuse congressional Republicans of “chasing rabbits” by throwing aspersions on them, rather than truly investigating. “Republicans have refused to release full transcripts of our firm’s testimony, even as they selectively leak details to media outlets on the far right.” So they decided to write this piece “to share what our company told investigators.” They noted that “credible” allegations of collusion between the Trump camp and Russia “were pouring in from independent sources during the campaign.” They go on to list all the documentation they had beyond what is in the Steele dossier, but wrote that congressional investigators weren’t interested. They pointed out that Christopher Steele was not informed of whom they were working for “and gave him no specific marching orders beyond the basic question: Why did Mr. Trump repeatedly seek to do deals in a notoriously corrupt police state that most serious investors shun?” And, as we now know, Steele was able to confirm the “effort by the Kremlin to help elect Mr. Trump president. Mr. Steele saw this as a crime in progress and decided he needed to report it to the FBI.” As the authors predicted, the Senate Judiciary Committee, chaired by Chuck Grassley (R, IA), “has told the Justice Department (DOJ) they had reason to believe” that Steele “lied to federal authorities about his contacts with reporters regarding information in the dossier.” They are urging DOJ to investigate. (NY Times)
Jeff Sessions: Just days after Attorney General Jeff Session officially recused himself from the Russian investigation, he tried to discredit then-FBI director James Comey. An aide to Sessions asked a Capitol Hill staffer whether he had dirt on Comey, explaining that Sessions wanted “one negative article a day in the new media” about him. (NY Times)
Paul Manafort: He’s suing special counsel Robert Mueller, asking the judge to narrow the Russian investigation. (NY Times) I wonder if this strategy has ever worked before.
Marie Royce: Trump has nominated Royce as Assistant Secretary of State for Educational and Cultural Affairs. Royce has built a 30-year career “in the hospitality and telecommunications industries.” She is also the wife of the top Republican on the House Foreign Affairs Committee, Ed Royce. (Washington Post)
Thomas Brunell: He’s Trump’s pick for deputy director of the U.S. Census Bureau. According to Mother Jones, he has defended racial gerrymandering and voter suppression laws. (See the Justice Department’s push for changes to the census questionnaire below.)
Albert Kelly: Environmental Protection Agency (EPA) administrator Scott Pruitt has named Kelly to “streamline” the Superfund program. Who is Kelly? Last May the Federal Deposit Insurance Corporation (FDIC) fined him $125,000 because they had “reason to believe that [Kelly] violated a law or regulation by entering into an agreement pertaining to a loan by the Bank without FDIC approval.” The FDIC went further. They banned Kelly from banking for life. “The ‘order of prohibition from further participation’ explained that the FDIC had determined Kelly’s ‘unfitness to serve as a director, officer, person participating in the conduct of the affairs or as an institution-affiliated part of the Bank, any other insured depository institution.’” The Intercept noted that Kelly is a longtime friend of Pruitt’s and that Pruitt had received loans from Kelly’s bank. But Kelly has no experience with environmental issues but now he’ll oversee a lot of money.
Iceland: It has become the first country in the world to make it illegal to pay men more than women. Companies and government agencies with more than 25 employees will be required to obtain government certification for their equal-pay policies. (Independent)
Israel: “Facebook has been on a censorship rampage against Palestinian activists who protest the decades-long, illegal Israeli occupation, all directed and determined by Israeli officials. Indeed, Israeli officials have been publicly boasting about how obedient Facebook is when it comes to Israeli censorship orders.” (The Intercept)
Iran: Protesters took to the streets last weekend “over economic grievances” and with “unprecedented calls for the supreme leader, Ayatollah Ali Khamenei, to step down.” Hassan Rouhani, Iran’s president, acknowledged that they have the right to “criticize” but said that “authorities would not tolerate antisocial behavior.” He said criticism was “different from violence and destroying public properties.” (Guardian) Trump, of course, tweeted during the protests. But Senator Lindsey Graham (R, SC) said: “President Trump is tweeting very sympathetically to the Iranian people, but you just can’t tweet here. You have to lay out a plan.” (Washington Post) According to Trita Parsi at The Nation, the protests are happening because of Trump’s threats to kill the nuclear deal have inhibited investment, leading to economic distress. But it was the government’s proposed 2018 budget that enraged the people.
North Korea: Kim Jong-Un boasted in a New Year’s Day speech that “he had a nuclear button on his desk and that the entire United States was within range of his weapons - but he also vowed not to attack unless threatened.” (Chicago Tribune) Naturally, Trump had to respond. In a Tweet he said: “North Korean Leader Kim Jong-Un just stated that the ‘Nuclear Button is on his desk at all times. Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!” (NY Times) OMG. My button is bigger than your button. The NY Times pointed out that there is no button. Watch what Stephen Colbert said about it. (You Tube)
Pakistan: Early on January 1st Trump “rang in the new year” by attacking Pakistan on Twitter. “The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No More!” Pakistani officials struck back saying Trump’s statement was “completely incomprehensible” and “contradicted the facts” (Washington Post) and summoned the U.S. ambassador “in a rare public rebuke.” (Guardian) Trump naturally reacted to this by suspending at least $900 million in security aid to Pakistan “until it takes action against the Afghan Taliban and the Haqqani network militant groups.” (Reuters)
South Korea: North Korea reopened a border hotline with South Korea “restoring a channel of direct dialogue and signaling a possible thaw in relations between the 2 Koreas after years of hair-trigger tensions.” (NY Times)
California: State senate leader Kevin de León said, “There should be no doubt that President Trump has officially declared war on California.” He was referring to Jeff Sessions’ approach to state marijuana laws (see below). Sam Levin, writing at the Guardian, noted that marijuana isn’t the only problem. “The federal government’s war on the Golden State - which overwhelmingly rejected the president in 2016 and has become a liberal leader in the anti-Trump resistance - has intensified in recent days with the administration threatening California’s immigrants, world-famous coastal shores, taxpayers, and weed smokers.”
Virginia: David Yancey (R) won the lottery for the House of Delegates seat. (TWW, Virginia, 12/23/17) An election official “reached into an artsy stoneware bowl, pulled out a name,” and declared Yancey the winner. (Washington Post) Of course he did.
Border Wall: Negotiations are beginning again for this year’s budget since the Continuing Resolution (CR) expires January 20th. Trump told lawmakers that he wants $18 billion over the next decade to extend and reinforce the Mexican border wall. This would fund 316 miles of new barriers and “bolster” 407 miles of existing barriers. (Guardian)
Wildfire Preparedness: The Interior Department admitted it “made a mistake” by trying to use Wildfire Preparedness funds “to pay for helicopter rides taken by Interior Secretary Ryan Zinke that had nothing to do with wildfires.” Supposedly the $39,295 charge will be moved to a “more appropriate” account. (Think Progress)
Tax Cut Bill: In response to a request from Senator Ron Wyden (D, OR), the Congressional Budget Office (CBO) sent him a letter regarding the estimated deficits and debt under the new bill. CBO estimated that, with the additional debt service on the deficits, the 10-year increase in deficits will be $1.8 trillion, not the $1.5 trillion as previously reported.
Marijuana: As expected, Attorney General Jeff Sessions is moving to stop legal marijuana. Obama’s Justice Department “discouraged federal prosecutors from bringing charges of marijuana-related crimes in states that had legalized sales of the drug.” But Trump’s Justice Department “will free federal prosecutors to more aggressively enforce marijuana laws.” The NY Times noted that it’s not clear if they intend to begin raids on marijuana dispensaries, or they’re merely rattling their saber.
Voting Commission: Trump dissolved Kris Kobach’s Voting Integrity Commission (TWW, Voting Commission, 12/30/17), “attributing the step to various states’ refusal to participate in the board.” (CNN)
Census: ProPublica obtained an unreported letter from Arthur Gary at the Justice Department (DOJ) to the Census Bureau at the Commerce Department. “The letter argues that the DOJ needs better citizenship data to better enforce the Voting Rights Act ‘and its important protections against racial discrimination in voting.’” So, DOJ wants a citizenship question on the questionnaire. Many are saying that this will depress participation by immigrants “who fear that the government could use the information against them.” Lower participation would lead to changes in how congressional seats are distributed around the country and to where federal money is spent. I think they’re going after the blue states again.
Police Shootings: Nationwide police shot and killed almost 1,000 people in 2017. (Washington Post) If you remember, in 2016 the Guardian tracked police shootings and reported that there were 1,091 in 2016. That was down from 1,146 in 2015. (TWW, The Counted, 1/7/17) Maybe the outrage is having an effect.
Cost of Health Care: According to multiple studies, the U.S. spends almost twice as much on health care as other nations primarily due to the prices. That’s it. We don’t use more health care. We just charge more for it. (NY Times) This is what happens when health care is for profit.
Ocean Dead Zones: These are areas with zero oxygen. (TWW, Climate Change, 11/15/14) Scientists say that the oceans are suffocating and estimate that dead zones have quadrupled in size since 1950, “while the number of very low oxygen sites near coasts have multiplied tenfold.” The Guardian noted: “Climate change caused by fossil fuel burning is the cause of the large-scale deoxygenation, as warmer waters hold less oxygen. The coastal dead zones result from fertilizer and sewage running off the land and into the seas.”
Drilling: Trump unveiled “a controversial plan” to permit drilling in all U.S. waters, including protected areas of the Arctic and the Atlantic, “where oil and gas exploration is opposed by governors from New Jersey to Florida, nearly a dozen attorneys general, more than 100 U.S. lawmakers, and the Defense Department.” (Washington Post) They’re going after all of it but McClatchy wrote that this may “shake up 2018 elections.”
Fracking: The Interior Department’s Bureau of Land Management repealed Obama’s 2015 rule setting standards for fracking on federal land. The rule has been in limbo as a federal judge ruled that the agency didn’t have legal authority to enforce it, but an appeals court disagreed. The rule mandated that companies disclose the chemicals they use to frack, required them to cover surface ponds that house fracking fluids, and set standards for the construction of the wells. Due to the court fight, the rule has never taken effect. (The Hill)
Bomb Cyclone: The powerful winter storm hitting the east coast is being called a Bomb Cyclone “for its sudden drop in atmospheric pressure.” (NY Times) It’s due to a polar vortex and scientists say the evidence is clear “that the Arctic has been warming faster than the rest of the planet. That warming is reducing the amount of Arctic sea ice, allowing more heat to escape from the ocean.” The scientists think “that the ocean energy that is being released is causing a weakening of the polar vortex winds over the Arctic, which normally keep cold air centered over the polar region. That weakening is then allowing cold polar air to slip southward more often.” (Inside Climate News)
Transportation: Cars, trucks, planes, trains, and shipping are the new king of climate-warming pollution “at a time when the Trump administration is reviewing or tearing up regulations that would set tougher emissions standards for car and truck companies. Republicans in Congress are also pushing new fuel economy rules they say will lower costs for American drivers but could also weaken emissions standards.” (Guardian)
Unemployment: U.S. job growth slowed in December with only 148,000 jobs being added. Data for October and November were revised to show 9,000 fewer jobs created than previously reported. But average hourly earnings rose 9¢. The unemployment rate remained unchanged at 4.1%. (Reuters)
AT&T: Last week I told you about AT&T’s announcement about them giving bonuses to its employees thanks to the tax cuts. (TWW, Other Salespeople, 12/30/17) They are now planning on laying off thousands across the U.S. (Indy Star)