We’ve been reading and hearing that corporations are raking it in.  Yet, we also know that jobs growth- real jobs (not just part-time or temporary or low paying)- are not keeping pace.  Oh sure, the top 0.1% are seeing income gains.  And, the top 1 or 2%, those that have enough cash to invest in corporations, have been participating in the stock market boom.

But, a great deal of that stock market boom is coming from stock repurchases.  Instead of using profits to fuel corporate expansion and hire new employees, companies have been buying back their stock.  Why?  Because executive pay is tied to stock price- and if there are fewer shares, one would expect the price of the stock to go up- and, therefore, benefit the executives (you know, the 1%ers)- even if they’ve done nothing to advance their firms goals and stability.

After all, the normal practice of corporations (up until the last 2 decades or so) has been to invest those profits in employees, new products, new processes, rebuilding their infrastructure (when was the last time an oil refinery was refurbished?)- but these executives are by and large matching the (idiotic) logic of our political representatives, who refuse to invest in new roads, bridges, or schools that our country so desperately needs.

You think I’m making this up?  (Come on, this is not XXX news.)  Check the facts out.  Over the past decade (2003-2012), the Standard and Poor’s 500 (S&P 500, the stock index of the largest companies in America) have spent more than ½ their earnings on stock buybacks.  (Actual data:  449 of the 500, and 54% of their earnings [$2.4 trillion].  Oh, and don’t forget, they proffered and additional 37%  of their earnings as dividends.  Meaning – if they paid ANY taxes (57 of them paid zero taxes), less than 9% remained with the company for growth, infrastructure, etc.)

This “mentality” is no different than that of the LBO (leveraged buyout firms) that strip out everything worthwhile in a company and then resell it (or let it go bankrupt). Companies (at least the public ones) are no longer in the ‘value creating business’, but solely focused on ‘value extraction’.  It should not surprise anyone that the decimation of the middle class began about the same time that this value extraction mentality took hold.

So, we see that labor is not sharing in this recovery from the recession. One so bad that Ben Bernanke, the former head of the Federal Reserve, admitted that (the 2008 fiscal crisis) “was the worst financial crisis in global history, including the Great Depression.”   This wasn’t an idle statement- he wrote that in a document filed with the US Court of Federal Claims on my daughter’s birthday (22 August 2014).

Given the facts that the poor and middle class provide the bulk of the funds to the US Treasury (the graph makes it clearer), this means that the richest 1% and the corporations were bailed out by the poor and middle class.  Yet, those same groups are not sharing in the recovery- and plenty of companies are still playing Shell Monte (a.k.a.  the 3 shell game) with their profits and paying their taxes.

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