The Trump Economy

[TPS]

29 minutes ago, GG said:

 

Two separate concepts, especially since I asked about the Federal deficit

The federal government is usually the cause of public sector deficits since the states have to balance their budgets over time.  In addition, the federal government is the only entity that can spend without borrowing first, which is how it helps "create" the private sector surpluses.

[GG]

2 minutes ago, TPS said:

The federal government is usually the cause of public sector deficits since the states have to balance their budgets over time.  In addition, the federal government is the only entity that can spend without borrowing first, which is how it helps "create" the private sector surpluses.

 

Get your head out of the books.   Private sector can also spend quite well without borrowing first.

 

PS - that's beside the point, because that's not the deficit that the troll was talking about.

Edited September 11, 2018 by GG

[TPS]

30 minutes ago, KRC said:

 

If they are missing EPS targets or if they think that their stock price is too low, it is natural to do the stock repurchases. I would want to know why they are doing it. The data does not show that information. Also from the primary source material: "evidence of an increase in investment is less clear at this stage, as it is likely too early to detect given that the effects may take time to materialize." Of the $300 billion repatriated, there was only an increase in $32 billion in stock repurchases. What about the other $268 billion?

 

Also, from the article:

"There are several steps lawmakers should take to fix the new incentives that the TCJA creates to shift future profits and even real jobs offshore. Lawmakers should push legislation to equalize the tax rate on foreign and domestic income, crack down on inversions, and create transparency by requiring companies to report financial information on a country-by-country basis. Taken together such legislation could end offshore tax avoidance once and for all."

 

Equalizing Tax Rates: Doesn't create incentive to keep money in the U.S. It also doesn't incentivize companies to keep jobs here.

Inversions: It doesn't prevent companies from merging with another company for re-incorporation.

Transparency: Most of the 10k's I have seen report money by country. Asking (because I do not know): Are there no regulations that 10k's need to contain financial breakdowns by country/region?

 

To me, their prescription to solve the problem really doesn't solve the problem. What am I missing?

Good points, and I will take a closer look to respond.  

Since I'm getting old, is this THE KRC, the one responsible for creating PPP so many years ago?

[LSHMEAB]

Would not directly incentivizing corporations to hire in America been a more effective prescription than simply slashing rates? Unemployment HAS steadily decreased over the past decade, but I continue to observe the erosion of the middle class, so this is clearly not a standalone solution.

 

I suppose it comes down to whether or not one believes income disparity is actually a problem.

 

Advancing technology and the resulting diminished need for labor is really the elephant in the room. And I know, SOCIALISM!

Edited September 11, 2018 by LSHMEAB

[TPS]

3 minutes ago, GG said:

 

Get your head out of the books.   Private sector can also spend quite well without borrowing first.

 

PS - that's beside the point, because that's not the deficit that the troll was talking about.

Unless you're a bank, the private sector doesn't create new deposits when it spends; the government does when it spends in excess of tax revenues.

[GG]

Just now, TPS said:

Unless you're a bank, the private sector doesn't create new deposits when it spends; the government does when it spends in excess of tax revenues.

 

 Are you telling me that when a company spends its own cash, it's borrowing from someone else?

 

Is this a new take on "You don't really own your cash"

[TPS]

27 minutes ago, GG said:

 

 Are you telling me that when a company spends its own cash, it's borrowing from someone else?

 

Is this a new take on "You don't really own your cash"

No, not what I'm saying at all. 

[KRC]

32 minutes ago, TPS said:

Since I'm getting old, is this THE KRC, the one responsible for creating PPP so many years ago?

 

I didn't build that. ?

 

Same KRC.

[TPS]

1 minute ago, KRC said:

 

I didn't build that. ?

 

Same KRC.

This place has been around so long that GG and I have run a marathon worth of laps around some of these issues!

 

One quick response to your post, I think one of the important points they make is that the majority of the funds are already "invested" in US assets, so it's not like there has been some major shift from outside the US into corporate coffers.  Their point is that it has had a measurable impact on the value of share buybacks, but no other noticeable impact, specifically on real investments.  

[Buffalo_Gal]

While people are waiting for President Trump to do more about the national debt, they may want to consult their Congressman first. The House controls the purse. 

 

[Wacka]

9 hours ago, Tiberius said:

So Democrats are just bad and Republicans are just good, then? 

It took you this long to realize that?

[TPS]

3 hours ago, KRC said:

 

If they are missing EPS targets or if they think that their stock price is too low, it is natural to do the stock repurchases. I would want to know why they are doing it. The data does not show that information. Also from the primary source material: "evidence of an increase in investment is less clear at this stage, as it is likely too early to detect given that the effects may take time to materialize." Of the $300 billion repatriated, there was only an increase in $32 billion in stock repurchases. What about the other $268 billion?

 

Also, from the article:

"There are several steps lawmakers should take to fix the new incentives that the TCJA creates to shift future profits and even real jobs offshore. Lawmakers should push legislation to equalize the tax rate on foreign and domestic income, crack down on inversions, and create transparency by requiring companies to report financial information on a country-by-country basis. Taken together such legislation could end offshore tax avoidance once and for all."

 

Equalizing Tax Rates: Doesn't create incentive to keep money in the U.S. It also doesn't incentivize companies to keep jobs here.

Inversions: It doesn't prevent companies from merging with another company for re-incorporation.

Transparency: Most of the 10k's I have seen report money by country. Asking (because I do not know): Are there no regulations that 10k's need to contain financial breakdowns by country/region?

 

To me, their prescription to solve the problem really doesn't solve the problem. What am I missing?

Why are they doing it? I believe I posted an article in this thread awhile back suggesting it's because management is compensated via stock and options, so they have an incentive to artificially spur prices through buybacks; and there are no better alternative investment outlets.

What about the other $268 bil? It's right where it was before, invested in liquid assets.  As noted, the "repatriation" is simply an accounting transfer from the books of the foreign subsidiary to the books of the US parent.

As for your points related to their suggestions, equalizing rates does eliminate the incentive to keep money out of the US. Inversions are done for the tax savings, which is the point they focus on. I don't know the answer about the 10Ks and reporting by country. Maybe they mean the parent needs to do that on its consolidated statements?

 

The problem is how to eliminate the incentives of US MNEs to keep funds listed with foreign subsidiaries which means those funds can't be used in the US (though the example of Apple using their foreign funds as collateral for domestic borrowing shows an indirect use). I think some of their suggestions do help.

 

For me, the point in posting the article was in support of the arguments by the critics that the one-time tax  reduction would be used to support buybacks, not productive investment. So far, that's mostly been the case.  However, I can certainly see  a point relatively soon where some of those funds could support productive investments, as the accelerated growth from the Trump tax cuts and spending increases is pushing firms closer to capacity, which is what drives business investment.

[plenzmd1]

14 hours ago, Koko78 said:

 

I love how not taxing a company out of business is somehow considered "welfare" by the dipschiffs on the left.

i think the idea is that somehow we as a nation have to pay for all the things the federal government funds..the military, entitlements etc. To do that, the country needs to raise revenue somehow, plain and simple. For the last 100 years, that's been through income taxes...and there is no arguing that corporations and the rich saw the biggest reductions in tax burdens with the latest tax bill.

13 hours ago, Foxx said:

all i know is that it is better to teach a man to fish than it is to just hand him a fish. 

not quite sure what that has to do in a thread about the economy and in specific about deficits recently. I agree 100% with  your statment..but the reality is today we have entitlements that need to need to be funded somehow..and right now that is through tax revenues..and increasingly under this administration through deficits.

13 hours ago, KRC said:

 

If they are missing EPS targets or if they think that their stock price is too low, it is natural to do the stock repurchases. I would want to know why they are doing it.

 

Stock buybacks are real simple equation..most C level execs have bonus payouts and  LTIPs(long-term incentive programs) related to EPS. Buying back stock reduces float, therefore increasing EPS without really growing the business, or inflating growth...increasing comp to upper management, and especially C level.Problemis that growth is not sustainable.

11 hours ago, Buffalo_Gal said:

While people are waiting for President Trump to do more about the national debt, they may want to consult their Congressman first. The House controls the purse. 

 

Just so's we clear..Republicans control the House and Senate now correct?

 

This is concerning...https://www.washingtonpost.com/business/economy/government-borrowing-soars-despite-robust-economy/2018/09/11/09a85554-b5eb-11e8-a7b5-adaaa5b2a57f_story.html?utm_term=.e4d6a72600ca

 

Quote

The government spent $895 billion more than it brought in from taxes and other revenue sources during the past 11 months, the Congressional Budget Office said this week, a 33 percent increase from one year before.

Typically, the deficit shrinks during strong economic times, as the need for costly government support wanes and tax revenue rises. In 2000, the last time the unemployment rate was at its current level of 3.9 percent, the government ran a surplus, meaning tax revenue eclipsed all spending.

The dynamic is much different now.

Corporate tax receipts fell 30 percent in the past 11 months, the CBO said, precipitated by the large reduction in rates from the massive tax overhaul passed by Congress last year. Spending levels have risen sharply as a result of a bipartisan agreement to shed budget caps put in place to maintain fiscal discipline and pour more money into both military and domestic programs.

This money does need to be paid back at some point..and the money needs to come from somewhere...for all of you that pro-Trump and pro-Repunlican...pre Trump did you not think bigger government and large deficits were bad? When did conservatives and the Republicans move to the deficit loving party.

 

 

[KRC]

10 hours ago, TPS said:

 I don't know the answer about the 10Ks and reporting by country. Maybe they mean the parent needs to do that on its consolidated statements?

 

The point of the consolidated statements is to eliminate that type of granularity, no? That is why the 10k's will have consolidated statements, as well as detailed reporting (at least the ones I have seen for large multinationals). 

 

 

Quote

For me, the point in posting the article was in support of the arguments by the critics that the one-time tax  reduction would be used to support buybacks, not productive investment. So far, that's mostly been the case.  However, I can certainly see  a point relatively soon where some of those funds could support productive investments, as the accelerated growth from the Trump tax cuts and spending increases is pushing firms closer to capacity, which is what drives business investment.

 

It is way too early to see if large amounts of money is being used for major capital expenditures. Depending on the size of the investment, it could take years for the expenses to be realized. At a minimum, if you are only looking at Q1 data, you will only see small projects. Take someone like Amazon. If they were to invest in a new fulfillment center, that is a multi-year project. If they were just to add new equipment to an existing facility, it takes about a year. Those pieces of equipment are installed Q3/beginning of Q4. Equipment would ship Q2. Depending on payment terms (probably milestone, but could be net 60/net 90), the bulk of the payments would be seen Q2-Q4.

[KRC]

1 hour ago, plenzmd1 said:

Stock buybacks are real simple equation..most C level execs have bonus payouts and  LTIPs(long-term incentive programs) related to EPS. Buying back stock reduces float, therefore increasing EPS without really growing the business, or inflating growth...increasing comp to upper management, and especially C level.Problemis that growth is not sustainable.

 

That is one reason. C-suite execs also have a responsibility to shareholders to hit targets and to increase stock prices (that also applies to employees with stock options) without increasing their tax burden. Speaking of stock options, you can do repurchases to counter dilution from employees exercising their options. If a lot of employees are exercising their options, the company may need to counter this with repurchases.

 

Are the repurchased shares retired? Are they returned to treasury stock to be reissued? Is the company doing this to reduce cash on hand and increase stock price to stave off a takeover? Are they doing this to sell shares at a profit later to be used for investment?

 

My point is that they are not always done because execs are evil money-grubbing pigs. 

[plenzmd1]

2 minutes ago, KRC said:

 

That is one reason. C-suite execs also have a responsibility to shareholders to hit targets and to increase stock prices (that also applies to employees with stock options) without increasing their tax burden. Speaking of stock options, you can do repurchases to counter dilution from employees exercising their options. If a lot of employees are exercising their options, the company may need to counter this with repurchases.

 

Are the repurchased shares retired? Are they returned to treasury stock to be reissued? Is the company doing this to reduce cash on hand and increase stock price to stave off a takeover? Are they doing this to sell shares at a profit later to be used for investment?

 

My point is that they are not always done because execs are evil money-grubbing pigs. 

agreed..all good points. However, i do think that this particular round of stock buybacks and increased EPS are a direct reflection of the tax cuts, and are just not sustainable from of growth and rising EPS

[KRC]

2 minutes ago, plenzmd1 said:

agreed..all good points. However, i do think that this particular round of stock buybacks and increased EPS are a direct reflection of the tax cuts, and are just not sustainable from of growth and rising EPS

 

That is very possible. I also agree that it would not be sustainable. I am not sure there are many who would use this as a growth tactic. It is a temporary action.

[Foxx]

2 hours ago, plenzmd1 said:

... not quite sure what that has to do in a thread about the economy and in specific about deficits recently. I agree 100% with  your statment..but the reality is today we have entitlements that need to need to be funded somehow..and right now that is through tax revenues..and increasingly under this administration through deficits. ...

my response was in direct correlation the posts immediately above it.

 

the truth is that we have created the quagmire we currently find ourselves in and as such, have no one to blame but ourselves. we have created a society with a certain segment of dependance. this has not helped the people it was targeted for. instead it has only made them more dependant. it needs to be walked back so that the damage done by teaching them how to fish is minimal.

 

Quote

This money does need to be paid back at some point..and the money needs to come from somewhere...for all of you that pro-Trump and pro-Repunlican...pre Trump did you not think bigger government and large deficits were bad? When did conservatives and the Republicans move to the deficit loving party.

i used to think deficits mattered as well but then... Quantative Easing came along....

Edited September 12, 2018 by Foxx

[Koko78]

2 hours ago, plenzmd1 said:

i think the idea is that somehow we as a nation have to pay for all the things the federal government funds..the military, entitlements etc. To do that, the country needs to raise revenue somehow, plain and simple. For the last 100 years, that's been through income taxes...and there is no arguing that corporations and the rich saw the biggest reductions in tax burdens with the latest tax bill.

 

Yeah, interesting how tax cuts work: The people who pay the taxes get the benefit. Mind blowing, for sure.

 

Tax cuts are still not "welfare", unless you subscribe to the asinine (and completely unamerican) theory that the government owns all labor and money.

[Tiberius]

Imagine if the business cycle was on the downward slope now? 

 

Quote

President Trump’s numbers are sinking like a stone. From CNN’s Harry Enten: “President Donald Trump’s approval rating in the latest CNN poll stands at just 36%. That’s a 6-point drop from 42% last month. Normally, I’d dismiss such a decline as statistical noise and want to see other polls before declaring that the President’s standing among the public has diminished. Here’s the thing: CNN’s poll is only the latest in a series of high-quality, live-interview polling over the last two weeks to show that Trump’s approval rating is down. This dip could have a major impact on the midterms if it holds.”