The Biden Administration’s 2023 budget proposal includes a Billionaire Minimum Income Tax and a rewrite of stock buyback practices. Will these changes actually take effect? If so, will they do enough to curb runaway corporate power? Niko Lusiani from the Roosevelt Institute breaks down what’s inside Biden’s budget.
Niko Lusiani is the Director of Corporate Power at the Roosevelt Institute.
Twitter: @NikoLusiani
Budget of the U.S. Government https://www.whitehouse.gov/wp-content/uploads/2022/03/budget_fy2023.pdf
Roosevelt Institute Responds to Billionaire Minimum Income Tax Proposal in Biden Administration FY 2023 Budget https://rooseveltinstitute.org/2022/03/28/statement-roosevelt-institute-responds-to-billionaire-minimum-income-tax-proposal/
Starbucks Halts Stock Buybacks as Schultz Returns
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
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Nick’s twitter: @NickHanauer
Goldy:
We’re going to be talking about the Biden Administration’s proposed 2023 budget. A lot of the proposals in there affect corporate power indirectly and in a very intentional way.
Nick Hanauer:
Yeah. Power is the dark matter of economics.
Niko Lusiani :
There’s a few thousand unelected, corporate executives and shareholders and big institutions and small ones that are making the decisions, really critical decisions that affect the way trillions of dollars move through our economy.
Speaker 4:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why.
Nick Hanauer:
Goldy, today on the podcast, we get to talk to Niko Lusiani who has this fantastic title, which is the director of corporate power at the Roosevelt Institute. And I’m just, I’m mesmerized by that title. I don’t think it implies that he’s in charge of all power at the Roosevelt Institute
Goldy:
Or an electrical utility because when I see that I think of like Seattle City Light.
Nick Hanauer:
Exactly. But all joking aside, I think that it’s really exciting to get to talk to somebody who is focused on the real work of economics, which is dealing with power, unequal amounts of power. I think as we said in the podcast before, power is the dark matter of economics. It makes up close to 85% of what matters but it’s really hard to see or characterize or quantify.
Goldy:
And that’s why Orthodox economists ignore it because it gets in the way of their bullshit theories. If we actually talk about power, then all of this supply demand curve stuff, its physics doesn’t work anymore. And it’s particularly telling Nick, because what we’re going to be talking about, the Biden administration’s proposed 2023 budget. And there’s very little in that document that speaks directly to power. A lot of the proposals in there affect corporate power indirectly and in a very intentional way.
Nick Hanauer:
Yeah. And it’ll be interesting to see what his perspective is on the budget. And with that, let’s talk to Niko.
Niko Lusiani :
I’m Niko Lusiani. I direct the corporate power program at the Roosevelt Institute. We’re a think tank, a student network and the nonprofit arm of the Roosevelt Library. And we’re really trying to advance a new common sense around economic policy and then push forward accompanying policy ideas for a more democratic and equitable economy.
Nick Hanauer:
Well, let’s start with an obvious question. What incarnation is director of corporate power? And why is it necessary?
Niko Lusiani :
Well, as you all know well and your listeners will know well, today in 2022, there’s a few thousand unelected corporate executives and shareholders in big institutions and small ones that are making the decisions, really critical decisions that affect the way trillions of dollars move through our economy, both directly in their decision making on issues like pricing, on how much tax they want to pay and to whom, issues of pay and hiring, capital allocation. These are all decisions that affect all of us in one way or another. But these few people in very high places in the business world also indirectly affect our lives through their influence over public policy and the rules of the game.
We’re set up as part of the think tank to research corporate behavior, the structures which enable harms stemming from that. We try to also dig a little bit deeper and challenge some of the axioms and origin stories of today’s economy, based around shareholder first business models. And then we try to promote alternative economic thinking, similar to what I think you all are doing to rewrite the rules, to make them more democratic within firms, between firms and then over firms. And essentially get back to a place where supersized firms are rule takers, not the rule makers.
Nick Hanauer:
Speaking of rules, the Biden administration released their 2023 budget proposal a couple of weeks ago and it did seem to send a loud message that Biden wants to curb corporate power. What’s in it? And what do you think is significant?
Niko Lusiani :
Just to start, to be honest, there are lots of goods. There are also some bads and some maybe a few ugly in the President’s budget. But to start out on really just focus on the goods and what it could do to curb excessive corporate power. I’d say there’s three main areas and we can dig in a little bit more if you’d like. The first one I think that the President and his team made a real important decision to call out support for work that’s being done in the Congress and SEC to tackle the pernicious use of share buybacks. We can go into detail on that. That I think was very important. It was not talked about so much but I think an important part of the budget document.
Then there in terms of the funding side, there’s further and really historic increases in funding for the antitrust law mechanisms, both the antitrust division of the DOJ and the FTC, I think will make a difference. Those agencies are incredibly understaffed and we need to build them up as well as so many other federal agencies to be able to take on corporate power.
And then third area where there was a lot of heat and a lot of discussion and a lot of good movement was on the tax code. And the President said from the beginning that he wants to reward work, not wealth. And so a lot of the existing tax proposals we’d heard in his campaign were there, including increasing the corporate income tax rate, the personal income tax rate, et cetera, eliminating fossil fuel tax preferences. I think that was an important part of it. And then there’s a couple of new tax proposals, one on ensuring a minimum tax for centi-millionaires and another to make sure that US and foreign multinationals pay 15% per country everywhere and that would effectively end the abuse of tax havens.
Nick Hanauer:
Well, why don’t we start with stock buybacks, which we have talked about so often on this show because they’re just, it’s both such an egregious practice and simultaneously proof positive that as a country, we could afford to do almost anything we chose if we wanted to. It’s a waste of money and it also proves that if we wanted to fund anything, there’s tons of money there to do it.
Goldy:
Well, an extra trillion dollars to invest in the economy.
Niko Lusiani :
Per year.
Nick Hanauer:
Yeah. Per year.
Goldy:
Per year.
Nick Hanauer:
It’s not nothing. Tell us what the budget reflects.
Niko Lusiani :
Yeah. I think what the budget is getting to is really recognizing a growing consensus of what you just said, that open market stock buybacks are used principally to manipulate stock prices and earnings per share to benefit in the short term, C-suite executives who get paid based on earnings per share and other metrics related to stock price, but also, actually shape the way the stock market is working, I think in important ways. There was a study recently that showed that something like 40% of the gains of the equity rally over the past eight or nine years, comes from companies buying back their own shares. That’s proof positive of very, very unhealthy capital market. There’s those bigger macro issues. And then as you said, also the opportunity cost of all this wasted money.
What the budget does is it shows support for essentially disconnecting the ability of corporate executives to juice the stock right at the moment they’re selling shares, which has been the preferred way of many corporate executives to get a little pay bump, incidentally while they’re using corporate funds. That’s essentially what the budget says it does. I think it’s really important because now we have both the Security Exchange Commission, which is engaged in a new rule making around stock buybacks, which would increase the transparency ideally at a daily level. You could see on every day what a company has bought back in shares and track that against insider selling from executives. That’s moving forward, hopefully in a positive way. And we’ve put in some submissions on that.
You’ve got Congress moving accordingly. And you’ve also got maybe surprisingly, a lot of, if you want to say sustainable or just common sense investors, which are saying, “This has got to end.” And so we may be at a place where this particular provision in the budget sort of symbolizes peak buybacks because we are now at a peak. This is a record year, as you know. Maybe this will signal that the time has come.
Goldy:
I just want to be clear about the policy and the budget. What you were referring to is that there’s a lot of studies that show that a company will announce stock buybacks, that will drive the price up immediately and then executive sell at that moment. And as I understand it, this would put a three year freeze on executives selling their shares after announcing a share repurchase.
Niko Lusiani :
Yeah. Something around three to four. This is, it’s a proposal so it’s not written into legislative language but that’s sort of the idea is to have a cooling off period to prevent executives from selling their shares at the time of or just after a share purchase. And to the extent that you believe that a lot of these share purchases are done to a boost personal income and there’s some private interests in mind, which I think is the case, this would essentially eliminate that.
Nick Hanauer:
Just playing it back to you, I hadn’t thought it quite through, if you were the CEO of a company that does a stock buyback, you will not be able to sell any of your shares for three years after that action takes place.
Niko Lusiani :
Yeah.
Nick Hanauer:
Okay. Well that will put a kibosh on it.
Niko Lusiani :
Well, exactly it would. Exactly. It would limit the interest of the buybacks to begin with.
Nick Hanauer:
Yeah, there wouldn’t be a lot of enthusiasm in the C-suite for stock buybacks anymore because that effectively ends the executive’s ability to buy and sell stock.
Niko Lusiani :
Or it would end their ability to do engage in buybacks.
Nick Hanauer:
To do stock buybacks.
Goldy:
They don’t do buybacks and they instead invest in their own company and increase sales and the stock price goes up.
Nick Hanauer:
Then they get a sale.
Goldy:
The earnings have gone up, then they can sell and make a profit.
Nick Hanauer:
Okay. I’m seeing this clearly now and the power of that change is more apparent. To me, I would’ve just taxed them at 10%. I would’ve just said, “Look, go for it but we get 10% of everything you do.”
Niko Lusiani :
Yeah. Well, there’s a proposal on that, Nick, as part of the Build Back Better, RIP, agenda. There was an excise tax of 1%. We could get up to 10%, 20%. I personally think that we should move back to a pre-1982 standard where these open market repurchases were seen as manipulative and just ban it.
Nick Hanauer:
Yeah. A 100%. Except in extraordinary circumstances, right?
Niko Lusiani :
Correct. And if you want to distribute, you can use the dividend channel, which is more recognized as adding value.
Goldy:
Speaking of taxes, how would this centimillionaire tax affect people like Nick?
Niko Lusiani :
Well, I can’t say I know the ins and outs of your tax returns, Nick, but essentially this would prevent many centimillionaires from being able to pay less than 20% essentially, to get around and avoid the income tax code in really important ways.
Nick Hanauer:
To be clear, I pay more than 20%, Goldy, already.
Niko Lusiani :
It wouldn’t affect you at all. There you go.
Goldy:
I said people like Nick.
Niko Lusiani :
Exactly. What this is really focused on is to deal with this really outstanding and pernicious gap between what ordinary people pay in income tax, on average, something like 14 to 20% at the federal level and what centimillionaires and billionaires pay, which is anywhere between zero and maybe 8%, I think on average was the one of the latest studies and say, “Hey, no matter how rich you are, you can’t get beyond the law and you pay 20%, including importantly on realized gains.” If you’re a Zuckerberg and Facebook stock jumps 20%, you’re going to pay on an annual level, the existing capital gains tax on that unrealized gain, even if you didn’t sell the stock.
Goldy:
Is that the main part of how this works? Or do they have specifics in terms of this, I guess it’s like the alternative minimum billionaire tax?
Niko Lusiani :
Yeah, exactly. It would set a floor for those worth more than a $100 million and apply also, as I mentioned, just to those unrealized capital gains, which is important because this is happening within a context of a growing consensus, at least in many parts of the Democratic party that we need to tax the ultra wealthy more effectively. And there are different ways to do that. The wealth tax was very much discussed during the campaign and a little bit after that. That would tax dynastic wealth, that would tax the stock of wealth at a 2% level or an 8% level. Whereas this proposal, which is really sort of an iteration of Senator Wyden’s mark to market proposal, would tax the growth of wealth. And it’s really in that sense, more of an income tax than a wealth tax.
Nick Hanauer:
Okay. What else is in the budget?
Niko Lusiani :
Well, those are really the big ticket items from the corporate power side. I mentioned this fossil fuel tax preferences, eliminating those. That’s pretty significant when you think about climate change. It’s not a silver bullet by any means but we give away so much money to oil and gas companies, every single year.
Nick Hanauer:
How much?
Niko Lusiani :
Oh, in the hundreds of millions a year. These proposals, if you eliminate these fossil fuel tax preferences, would be in the range of $45 billion saved over 10 years. We’re talking $5 billion a year, just in giveaways and tax preferences to oil companies and gas companies. I think that’s another angle here, which is important to mention. It wasn’t necessarily new. It’s something that’s been discussed quite a bit but if we were to get there, that would automatically then create a disincentive essentially for those companies and maybe more of an incentive for the clean energy companies to come online.
Goldy:
Let me ask you something, Niko, in your opinion, how much of these tax proposals are about raising additional revenue in a more equitable fashion? And how much of it is about counter veiling power?
Niko Lusiani :
Yeah, that’s a very good question. I think they’re both. Most of the conversation around these tax proposals over the past year has really been about raising revenue, pay floors, oh and by the way, if we can create some more equity, that’s great too. But I think it’s important that there’s more roles of a tax code in our economy than just revenue and redistribution. There’s also repricing and regulatory effects that can restructure opportunity and power in our economy. And so these particular proposals, I think, are also, even if they’re not talked about as such, they’re also about restructuring the economy in ways where people that are working for a living don’t have as much burden and those that are passively enjoying their wealth, pay a little bit more than they are now. And that would change incentives.
If you’re incentivized to make a lot of money because the tax code wouldn’t tax it, maybe if it’s taxed away, your incentives are a little bit less and you may look for more promising things to do with your life and change the way you make decisions in a company. To your point, Nick, if buybacks were taxed, companies may then reinvest in workers, in R and D, in productive investments, et cetera. Taxes really do shape incentives but we can do that in a positive way, I think, for a more progressive economy. And that’s what part of what this is moving towards. But I think there’s other tax proposals which are also very important.
The excess profit tax is one of those, which I think needs to be considered as a complement, especially when we think of the runaway profits over the past few years, since the pandemic began. And that’s an old style World War II tax that would disincentivize companies from profiting but wouldn’t affect companies that aren’t profiting whatsoever. And then, I think in complement to the minimum income tax for centi-millionaires, we have to think about a wealth tax to go along with it because they tax different types of activity and create different types of complimentary incentives.
Goldy:
I’m wondering how much, obviously this is a budget proposal. We all know that the Democrats, they don’t really control the Senate. It’s hard to get things through the Senate. And some of these I can just see are not up Manchin’s line here. But I’m wondering how much just proposing these things and talking about it changes the narrative and starts to change behavior. I know Starbucks recently announced that it was going to halt stock buybacks and put money back into the company instead. Remains to be seen how much they live up to that but are we beginning to see a shift in the way CEOs are thinking about how they run their companies, even in the face of the record buybacks, we’re seeing right now?
Niko Lusiani :
As I mentioned before, I think it’s potential that this is just sort of one of the straws that breaks the camel’s back. You would think back all the way back to the CARES Act, under the Trump administration. There was a ban on companies using bailout money to engage in share buybacks. The airline industry, for example, stopped buying back shares as a result of the CARES Act. And that was something that was supported by senators from Sanders to Rubio. And then you’ve had much discussion since then, Biden’s budget supporting these curbs is the latest but I think it’s a growing consensus that something’s wrong. Something’s very wrong in corporate America. There’s no retain and reinvest model anymore. It’s just it’s downsize and distribute.
And in the Starbucks example, it was really pretty stark. You all over there in Seattle probably know more than I do but this company spent nearly $12 billion in fiscal 19 and 20 in buying back shares. And just in October, they said they would spend an additional 20 billion over three years on repurchases and dividends. I think it was around half on repurchases. And then Schultz comes back in as CEO and says, “Oh, that’s enough. We’re going to pause. We need to quote unquote invest more profit into our people.” Depending on your views, you may see that cynically or optimistically but I think it’s a sign. The CEO of Intel did the same thing similarly. Both of them got dinged in terms of their stock prices. That’s an important structural matter that investors are expecting share of purchases once there’s an announcement been made. And that’s why, sorry, go ahead.
Nick Hanauer:
Yeah. If I could interject, just to be clear, I think eliminating the ability of executives to buy and sell stock if the company has done a stock buyback, will have a cooling effect on stock buybacks. But be super clear, the principal driver of stock buybacks is not the greed of executives, although that is a part of it. The principal driver is the greed of Wall Street, of institutional investors who put relentless pressure on those executive teams, who in many cases would far prefer to invest back in the businesses. Who would infinitely, would prefer to retain all of the earnings, pay their people more, invest in new technologies but effectively cannot because they’re being blackmailed every day by their institutional investors.
Goldy:
It does show you Nick, though, the power of charismatic CEOs who have the ability to buck the board and buck Wall Street.
Nick Hanauer:
That’s right and just tell them to go pound sand. It’s not the board, it’s the institutional investors.
Goldy:
Because Howard Schultz felt like he could come in, come back in make that decision. And famously, Steve Jobs hated stock buybacks and even dividends. They paid almost no dividend and he resisted that until he died. And since his death, Apple was profitable before and the stock price was going up before but since then, they’ve become, are they the largest stock repurchaser in the world?
Niko Lusiani :
Absolutely. $85 billion last year. That’s about 90% of their net income was paid out in buybacks.
Goldy:
And that is, Steve Jobs dies and new CEO comes in and he says, “Sure, let’s do stock buybacks.” Something which Steve Jobs might never have done because as far as he was concerned, screw you.
Nick Hanauer:
Yeah, it was corrupt.
Goldy:
He wasn’t going to take.
Nick Hanauer:
He knew it was a corrupt practice. This is of course why regulations matter because most people are weak, only a few are strong and so regulations make the decision for the weak.
Niko Lusiani :
And that’s why also we’ve been saying, when we get a chance to talk to any senior executives in companies or the regulators and rule makers, this is exactly why you need enforced public rules. You want to look it cynically, it provides cover for CEOs to do the right thing.
Goldy:
Did they ever secretly tell you, “Please, keep me from doing this.”
Niko Lusiani :
No comment.
Nick Hanauer:
No, I’m sure a ton of people would do that. A ton of people would do that. Not everybody who runs a big company in America is a shortsighted sociopath. I would say that solid majority want to do the right thing for their customers, for their workers and for the business long term but they are trapped in an incredibly stupid, pernicious feedback loop that does not reward that behavior. It rewards short-termism and stupidity. And in most cases, these CEOs didn’t create this circumstance. They didn’t change the rule. They are a prisoner of these circumstances in the way that the rest of the country is. I think the people on Wall Street will fucking hate it because all they care about is that’s the enemy here, are the institutional investors who only care, don’t care at all about the businesses themselves or the people or the products or anything else. All they care about is the stock price. And that will be the enemy here. Not so much the CEOs who in again, in most cases want to build a good business.
Goldy:
Okay. You mentioned there were good and bad things in this budget. We know that we talk about this. Nick has said it frequently, a budget is a moral document. How moral is this budget proposal?
Niko Lusiani :
I think on the economics side, it’s really not bad. I think where it gets a little bit dicey and ugly is first of all, it falls along with a bit of a change in the narrative to the so called unity agenda, which never really existed and never will exist with the Republican party as it is. There’s fig leaves to issues of, police spending and fig leaves to increasing the military budget, which is way too big, in my opinion, does not need further increases. And then just kind of one of the ugly things here in my opinion is that they want to spend $1.5 billion of a $2.5 billion budget to not invest in anyone except to bring down the deficit.
Goldy:
Trillion.
Niko Lusiani :
Trillion, excuse me. Excuse me. They want to spend $1.5 trillion of a $2.5 trillion budget to decrease the deficit, which is not what the priorities I believe Biden was elected on. And it’s a little bit bizarre to me that you would increase taxes on wealthy people to pay back the deficit. The politics there don’t line up but also the economic sense, it does not line up, especially with interest rates maybe increasing but still very, very low and the needs and the returns on investments so high.
Goldy:
Democrats never learn. They always think, hey, this time voters are going to believe we’re the ones who are responsible with the economy because we’re paying down the deficit and then Republicans come in and they push up the deficit and reap all the rewards of the tax cuts and the hot economy. And then Democrats have to come back in and pay down the deficit. We’re always the bad guys.
Niko Lusiani :
Yep. But we know very well that the best way to drive the decreases in the deficit is to have an equitable, thriving economy. And you can’t have that today without productive investments, without climate change, zero carbon and low carbon and high care economy.
Goldy:
What do you think, Nick? Final question.
Nick Hanauer:
Why do you do this work?
Niko Lusiani :
Part of it is the family I grew up in. I was taught to treat everyone equally with dignity and respect. And so by extension, I wanted to do things that would make policies and our government and one another and our economy treat each other with dignity and respect and curb structural inequities. But maybe even more deeply, I do this work because of my commitment to hope. I used to work internationally. I work with Syrian democracy activists in Syria and they always used to tell me, this was years ago, that we are condemned to hope. And this was before the war. I never quite understood what that meant until the war started and what I think they meant there is that when you see the world caving in in front of you, despair is just not an option because it leads to paralysis and gives away to power, gives everything away to injustice and the only kind of renewable resource and absolute necessity in the darkest times that you have is hope and retaining hope because without hope you don’t really have options for a better future.
And when I say hope, it’s not the kind of flighty, airy optimism that often demotivates, this kind of false certainty that everything’s going to be all right. I’m talking about a deep commitment that when there’s a fire all around you, you’re going to find an ax and break through the door and pull yourself out to safety. That’s the driving hope that I’m talking about. And so my work is more than anything else, trying to get wins that show there’s a reason for hope but also to move in a direction so that there’s an economy which allows everyone to have and live up to their hopes and dreams.
Nick Hanauer:
That’s awesome. Well Niko, thank you so much for being with us. Great work.
Niko Lusiani :
Goldy, Nick, it was a pleasure to talk to you. I really enjoy the podcast. Hope to do it again soon.
Nick Hanauer:
Thank you.
Goldy:
Thanks for joining us.
Well, my big takeaway from this conversation of course has to do with one of our favorite topics, Nick, stock buybacks. We had hoped there could have been a little more on stock buybacks. With that three year ban on selling stocks, CEOs selling their stocks after announcing a buyback, man, that really puts a crimp into the behavior of the past decade and a half or so.
Nick Hanauer:
Yeah, I would think so. I have to think about it more but definitely I hope it’s not just the CEO but the entire C-suite of executives, anybody who gets in fact, a stock as comp, that will put a lot of downward pressure on stock buybacks. But again, the real pressure, I just think it’s just being dishonest to say that all of this behavior is being driven by greedy CEOs who are trying to jack the share price in the short term for themselves. There is some of that behavior but the real pressure comes from institutional investors, Wall Street.
Goldy:
But it puts pressure on CEOs resisted. And I want to go into why this is so important. And we’ve talked about this before. Essentially, and this is intentional in paying CEOs with stock and stock options. What you’re doing is rewarding them for driving up share prices. That’s how they’re getting most of their compensation and share prices are largely determined by earnings per share, future earnings per share.
Nick Hanauer:
The growth of earnings per share.
Goldy:
Right. Wall Street doesn’t reward you for what you’ve done in the past. That’s already worked into the price. When the price is going up, they’re looking at earnings per share into the future. And there’s two ways to increase earnings per share. Traditionally, the main way to do it was you take your profits and you reinvest it in the company to grow the company, grow your sales.
Nick Hanauer:
You make better products and sell them to more people.
Goldy:
Grow your market and increase your earnings. You’re investing in increasing earnings, your earnings go up, the shares remain steady. You do the math, you have an increased earnings per share. There’s another way though, to increase earnings per share and it’s a lot simpler and that is reduce the number of shares. Same amount of earnings, maybe even fewer earnings, doesn’t matter but if you buy back stock and you reduce the number of shares, the EPS, the earnings per share goes up. Now, given a choice between these two, the first one, investing in your company, that may be the responsible thing to do but it’s risky. And it’s very long term because you don’t make these investments and all of a sudden your earnings go up.
Nick Hanauer:
No, and it’s hard.
Goldy:
It’s hard.
Nick Hanauer:
It’s hard.
Goldy:
It’s hard, it’s risky.
Nick Hanauer:
It’s hard to it’s make better products and sell them to more people.
Goldy:
Right. And it doesn’t always work. And it’s way out in the future. It takes years to recoup these investments. The other one, stock buybacks is a sure thing.
Nick Hanauer:
Super easy.
Goldy:
And it is immediate.
Nick Hanauer:
Super easy.
Goldy:
Absolutely immediate. You buy back a number of shares and your earnings per share goes up. And so there is this huge incentive to go the short term route, if in fact the pressures to increase EPS. What this does is it tells executives, C-suite executives that, well okay, you can choose this route and this may be what Wall Street wants but you’re not going to profit from it. And this is important for a larger reason because we have to understand what buybacks have done over the past couple decades is that it has decreased investment in the economy. People have this idea that somehow most investment comes from stock offerings, comes from Wall Street, comes from banks, bank loans.
It does not. Most investments in our economy, in R and D and in building new equipment and factories, comes from retained earnings. These are the profits that are coming in, you’re retaining it and you’re reinvesting in the company. Historically that is where most economic investment has come from. The vast majority of it, not from the markets, from retained earnings. And if instead of using these retained earnings to reinvest in your company, you’re just creating this paper wealth by buying back stock and jacking up the price, well the economy’s not going to grow as fast, productivity’s not going to grow as fast, wages are not going to grow it as fast. It’s bad for the economy. If you’re a capitalist, it’s bad for capitalism.
Nick Hanauer:
Yeah. Not if you’re an institutional investor though. And again, that’s where the pressure comes from. That’s who is going to hate. Warren Buffett is going to hate this. Because what matters to those guys is the stock price going up. And I don’t doubt that study that says that close to half of the increase in the stock market over the last number of years is a consequence of stock buybacks. I just don’t doubt it. I’m not sure how you do that analysis but it just, it feels right to me.
Goldy:
We’ll see. I’m not confident in Biden’s ability to get a moral budget through this Congress but give him credit for trying.
Nick Hanauer:
Yep. Absolutely.
Speaker 4:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on Medium @civicskunkworks and peek behind the podcast scenes on Instagram, @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.