Monday, February 04, 2019

Dueling op-eds in the NYT

On the surface, it may seem as if two op-ed's in the New York Times today, one by David Leonhardt and the other by Charles Schumer and Bernie Sanders, are both on the same track of creating a more fair economic system.  However, there are differences.  For starters, one is intelligently written and one is not.

Leonhardt discusses the tax system in his piece "It's Radical Not to Tax The Rich More."  A few of his arguments are questionable, but most are fact based.  He focuses on variables like education, healthcare, technological change, property tax, and the issue of minimally taxed generational wealth.  He addresses the societal implications of disparities that have become increasingly apparent.

Meanwhile, Schumer and Sanders begin their comment, "Workers Before Buybacks" by promoting the fantasy of the beneficence of the mid-20th century when enlightened CEO's and better regulation created a prosperous America for working people.  That is a preposterously broad based statement that ignores many facts about that time period. Starting the discussion of buybacks in that way undercuts what might have been a better discussion.  Stock buybacks can be beneficial but they can also be destructive.  Buybacks in the place of overpriced acquisitions are a great check on management hubris while buybacks instead of needed investment to grow a company can be harmful.

Companies that squander capital to aid a CEO's manifest destiny to be bigger and bigger often end up in the hands of hostile acquirers, who then come in and lay off workers, cut paychecks, reduce benefits, and streamline operations in a way that disrupts communities.  Just ask Wilbur Ross how to do that.  Buybacks would have been better in those situations so the Wilburs' don't attack.

The point is that the Schumer and Sanders piece is a massive oversimplification that panders to the public rather than informs.  Schumer is a career politician and Sanders admits his preference for a socialist approach that is not affordable without major disruption.  The facts that they point out about income and wealth disparities are correct, but their argument is not credible.

So step aside guys, you've done enough.  Let others have more exposure, and put your feet up.  It's cold outside, time for a toddy.


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