Goldman Sachs just weighed in with their predictions for next year’s economy. They expect “only a modest growth in business investment”… but a whopping increase in the amount of money corporations will spend buying back their own stock.
(Corporations buy back their own stock to increase per-share prices. Many CEOs get paid more, if the price of their company’s stock rises. And most CEOs receive at least some of their compensation as stock or stock options. Either way, increasing the stock price increases how much $$$ the CEO takes home.)
Next year, Goldman Sachs analysts expect corporations to spend a total of $707 billion buying back their own stock.
What else could Corporate America do with that money?
- Companies could create about nine million $50,000 jobs – with benefits! (Wait… isn’t “nine million” the number of people who are unemployed in America, right now?)
- Companies could “afford” to increase the wages of the 3.3 million minimum-wage workers in America. (Most minimum wage employees work 34 hours or less at their primary job… calculating that as 5.8 billion minimum-wage work-hours a year… would mean that all those workers could get a $122/hour increase! Yeah, that was “one hundred twenty-two dollars an hour”… do the math yourself.)
- It could pay for the Food Stamp program — for almost an entire decade. (Which only seems fair, since nearly three-quarters of families receiving public assistance are working families who don’t get paid enough to make ends meet. And it doesn’t matter how profitable the industry is: almost one-third of all bank tellers are on public assistance; more than half of all fast-food workers; thousands upon thousands of workers in other industries.)
But apparently Corporate America isn’t going to be doing anything like that, with that $707 billion. Not creating jobs. Not increasing wages. Not giving up the taxpayer subsidies for their low-wage jobs.
No, Goldman Sachs expects Corporate America to spend that money just… buying back shares of stock.
Which doesn’t really create value. It’s not a new factory, or a new product, or even a new market. All stock buybacks do is concentrate corporate ownership. Like ultra-concentrated dish soap: it’s the same stuff, just in a smaller bottle.
And yes, this does have advantages if you’re looking at things from the CEO’s perspective.
All too often stock buybacks are deceptive things, which create a sugar high in the share price, a nice little windfall for management, and pretty much nothing in the way of actual value creation.
But looking at that $707 billion from the perspective of the 99%…?
- In a stack of $100 bills… that same money would be about 480 miles high.
- You could buy enough ultra-concentrated dish soap to fill about 75,000 Olympic-sized swimming pools.
… and from the perspective of the 99%, either of those options would probably be just as good as spending all that $$$ on stock buybacks.
Have a better idea about how to spend $707 billion? Use our comments section to share it.
Read “Nightmare on Wall Street? Are Stock Buybacks Creating Another ‘Financial Bubble?’” here.
Read “Why the Economy Doesn’t Work for the 99%: Massive Payouts to Corporate Stockholders” here.