Sanders-Schumer Want To Muck Up Stock Market Efficiency

Bernie Sanders and Chuck Schumer

Senators Chuck Schumer, D-N.Y. and Bernie Sanders, I-Vt. have proposed a measure to stop corporations from repurchasing shares until they first invest in workers and communities through better pay and benefits.

The two central planners recently wrote in The New York Times:

So focused on shareholder value, companies, rather than investing in ways to make their businesses more resilient or their workers more productive, have been dedicating ever larger shares of their profits to dividends and corporate share repurchases. When a company purchases its own stock back, it reduces the number of publicly traded shares, boosting the value of the stock to the benefit of shareholders and corporate leadership...This has become an enormous problem for workers and for the long-term strength of the economy for two main reasons.

These two clowns think buybacks are a negative but it is just the shallow thinking you regularly see from central planners. They simply have an inability to think more than one step out. Buybacks do increase shareholder value, which provides more incentive for people to invest in the stock market, more investing means an increase in capital, more capital investment means more goods are produced. This benefits all, including the workers that Schumer and Sanders are so concerned about.

But they don't understand this and claim there is a "crisis":

[W]e are planning to introduce bold legislation to address this crisis. Our bill will prohibit a corporation from buying back its own stock unless it invests in workers and communities first, including things like paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits.

Of course, a higher minimum wage does not help workers. Increasing paid sick leave also creates a disincentive to hire, and the pensions they are demanding hold the very stocks that they want to make more difficult to appreciate by restricting buybacks.

As Jordan Peterson would put it: Low resolution thinking.

-RW