The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Shorter New York Times

Posted on | July 6, 2010 | 14 Comments

PROFITS BAD!

Making matters worse, businesses are already plowing fewer profits back into their own enterprises.
Over the past decade and a half, corporations have been saving more and investing less in their own businesses. . . .
The reason for all this saving in the United States is that public companies have become obsessed with quarterly earnings. To show short-term profits, they avoid investing in future growth. . . .

Can you guess where this argument is leading?

[C]orporate executives are being rewarded for myopia and speculation, undermining the very operation of capitalism. We need tax and regulatory policies to counter this destructive development, along with wider recognition that government deficits, when they counteract corporate savings, are necessary and salutary.

Much easier solution: If you don’t like how a corporation operates, don’t buy the stock.

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Comments

  • http://www.littlegreenfootballs.com Charles Johnson

    gg, good job being the resident troll here at TOM. I will not forget your loyalty.

  • http://www.littlegreenfootballs.com Charles Johnson

    gg, good job being the resident troll here at TOM. I will not forget your loyalty.

  • http://ak4mc.us/cms/ ak4mc

    Shorter New York Times: PROFITS BAD!

    That explains their stock price.

  • http://ak4mc.us/cms/ ak4mc

    Shorter New York Times: PROFITS BAD!

    That explains their stock price.

  • http://www.coldfury.com Randy Rager

    I’ve said it before, I’ll say it again: “Progressives” don’t even rise to the level of being wrong on economics, they are simply incoherent, a shrieking white noise in the body politic.

  • http://www.coldfury.com Randy Rager

    I’ve said it before, I’ll say it again: “Progressives” don’t even rise to the level of being wrong on economics, they are simply incoherent, a shrieking white noise in the body politic.

  • Adobe Walls

    @ Randy, excellent analysis. IMHO espousing Keynesian economics should be defined as a mental illness. If one uses Einstein’s definition that diagnosis is correct.

  • Adobe Walls

    @ Randy, excellent analysis. IMHO espousing Keynesian economics should be defined as a mental illness. If one uses Einstein’s definition that diagnosis is correct.

  • Estragon

    “To show short-term profits, they avoid investing in future growth. . . .”

    This single sentence betrays the NYT writer’s utter ignorance of business accounting. A profit is still a profit whether it is paid out to shareholders as a dividend, invested as capital in an expansion, or retained by the company. One wonders why someone who doesn’t understand even the basics is writing on finance and economics – although at NYT, ignorance of your subject seems almost a prerequisite.

    Companies aren’t investing their profits because of uncertainty of the future. With the huge tax hike coming January 1, and another likely to be recommended by the deficit commission this fall, and a maniacal Marxist micromanager in the White House, a company would be crazy to take the risk of expanding under these conditions. Better to be prudent and wait until Democrats have been safely hounded from office in 2013, and take part in the rebuilding process for the country then.

  • Estragon

    “To show short-term profits, they avoid investing in future growth. . . .”

    This single sentence betrays the NYT writer’s utter ignorance of business accounting. A profit is still a profit whether it is paid out to shareholders as a dividend, invested as capital in an expansion, or retained by the company. One wonders why someone who doesn’t understand even the basics is writing on finance and economics – although at NYT, ignorance of your subject seems almost a prerequisite.

    Companies aren’t investing their profits because of uncertainty of the future. With the huge tax hike coming January 1, and another likely to be recommended by the deficit commission this fall, and a maniacal Marxist micromanager in the White House, a company would be crazy to take the risk of expanding under these conditions. Better to be prudent and wait until Democrats have been safely hounded from office in 2013, and take part in the rebuilding process for the country then.

  • http://www.thehayride.com MacAoidh

    Corporations merely respond to market forces, and those market forces are affected by the very government policies the New York Times touts as a panacea.

    Specifically, the federal government taxes dividends, which reduces their value to stockholders. That reduces the owning of stock to something akin to gambling – when stock ownership in its fundamental sense is BASED on the expectation of dividends.

    Not to mention that the money invested by stockholders in pursuit of dividends is after-tax money in most cases and the money paid by corporations to stockholders in dividends is also after-tax money.

    Of course, to left-wing dunces such as those who populate the staff at the New York Times, unintended consequences like these are too difficult to grasp.

  • http://www.thehayride.com MacAoidh

    Corporations merely respond to market forces, and those market forces are affected by the very government policies the New York Times touts as a panacea.

    Specifically, the federal government taxes dividends, which reduces their value to stockholders. That reduces the owning of stock to something akin to gambling – when stock ownership in its fundamental sense is BASED on the expectation of dividends.

    Not to mention that the money invested by stockholders in pursuit of dividends is after-tax money in most cases and the money paid by corporations to stockholders in dividends is also after-tax money.

    Of course, to left-wing dunces such as those who populate the staff at the New York Times, unintended consequences like these are too difficult to grasp.

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