Quoting at length just so you know I\’m not manipulating her words:
About $1.7tn of US corporate dollars are sitting overseas, and those companies say they would love to bring it back to the United States. But what they would do with it?
They say they would invest it in the American economy. A New America Foundation study (pdf), co-written by Laura D\’Andrea Tyson,
maintained that companies could use the money for two purposes:
\”They can distribute them to their shareholders in the form of dividend payments and share repurchases; and they can use them directly to fund their domestic economic activities or to reduce their debt.\”
The paper estimated that $581bn in repatriated cash would go to to US shareholders, of which $192bn will go to US households. With the struggling US consumer and 12 million people unemployed, that sounds like a nice boost for the economy. Appealing, right? Companies could spread the wealth, either giving it to stockholders or pumping it into the economy – wouldn\’t that be a nice change from what we hear about the unevenness of the economy, and companies hoarding cash while households struggle?
Unfortunately, it\’s more like wealth redistribution for corporate dummies. History shows us that these promises are not to be trusted.
Companies had a tax holiday once before, in 2004, when a set of major corporations were allowed to bring back their overseas profits at a tax rate of only 5.25%. You might imagine that it resulted in an enormous economic boost, but here\’s what happened instead, in the words of Treasury official Michael Mundaca:
\”There is no evidence that it increased US investment or jobs, and it cost taxpayers billions … the nonpartisan Congressional Research Service reports that most of the largest beneficiaries of the holiday actually cut jobs in 2005-06 – despite overall economy-wide job growth in those years – and many used the repatriated funds simply to repurchase stock or pay dividends.\”
So we tried a tax holiday before, it accomplished nothing except lining some corporate coffers, and it hurt the economy.
No, run through that again.
So, Laura Tyson, real live economist, says that bringing the corporate cash piles home could be a good idea because the money will flow out to shareholders and households in dividends and stock buybacks. Ms. Moore thinks this is a good idea.
The evidence from last time is that the money brought back from the corporate cash piles flowed out to households and shareholders in dividends and stock buybacks.
Ms. Moore takes this as evidence that it all didn\’t work because it worked exactly as advertised, exactly as she herself agrees would be a good idea: the money flowed out to shareholders and households.
Is there some kind of special lobotomy it\’s necessary to get to write about economics for The Guardian?