Making corporations great again makes America grow again. @JohnCochrane @HooverInst @Larry_Kudlow

Jan 03, 2018, 04:18 AM

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(Photo:"Jack and the Giant Joint-Stock", a cartoon in Town Talk (1858) satirizing the 'monster' joint-stock economy that came into being after the Joint Stock Companies Act 1844. )

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Making corporations great again makes America grow again. @JohnCochrane @HooverInst @Larry_Kudlow

The Buyback Fallacy Many commenters on the tax bill repeat the worry that companies will just use tax savings to pay dividends or buy back shares rather than make new investments.

Savannah Guthrie, interviewing Paul Ryan on the Today Show, thought she had a real gotcha with "What they [CEOS] are planning to do is stock buybacks, to line the pockets of shareholders." (She then moved on to a question most guaranteed to produce retweets of partisan admirers, and least likely to produce an interesting answer, "I'll ask you plainly, are you living in a fantasy world?" NBC then wonders that it is charged with partisan bias.)

Peggy Noonan, in an otherwise thoughtful column, echoed the same worry: "Big corporations can take the gift of the tax cut ... and do superficial, pleasing public relations sort of things, while really focusing on buying back stock and upping shareholder profits." (Just how taking less of your money is a "gift" is a question for another day.)

So, having established that this is a bipartisan worry, let's put the fallacy to bed. It is the fallacy of composition, that actions of one company mirror actions of the economy as a whole. It is the fallacy of "paper investments" vs. "real investments." That distinction can apply to a company, but not to the whole economy.