In the topsy-turvy world of the past few weeks, it’s comforting to know that some things haven’t changed. Economic inequality, for instance, continues to surge.
Recent data make clear what any sentient observer could have predicted a year ago: The benefits of the Trump tax cut have gone chiefly to major shareholders, with little to no impact on either corporate investment or workers' wages. “For the remainder of 2018,” S&P Global's Howard Silverblatt toldThe Washington Post’s Heather Long, “expectations are high for record corporate expenditures in both buybacks and dividends.”
Indeed, in the first quarter of 2018, stock buybacks were the highest ever recorded ($189 billion). By contrast, wage increases are just keeping pace with inflation, and Morgan Stanley reports that capital spending by American corporations is “past its peak.”
Of course, you can't invest or give your employees raises if you dole out all your money to your shareholders. Last week, after the Federal Reserve announced that all six U.S. mega-banks had passed their stress tests, the banks announced how much they planned to funnel to their shareholders over the coming year. The New York Times compared those numbers to the banks’ forecasts of how much they’d earn in the coming year, and the results tell us a good deal about the absurd state of the American economy. Bank of America planned to direct 95 percent of its anticipated profits to its shareholders in buybacks and dividends; JP Morgan Chase came in at 98 percent; Citigroup raised the ante to 128 percent; and not to be outdone, Wells Fargo won the bidding at 141 percent. (Morgan Stanley and Goldman Sachs came in at 80 percent and 69 percent, respectively, but these lowball numbers may be due to the fact that, as investment banks, they not only have to pay their shareholders but their many partners as well.)
How much, exactly, that leaves for loans is a good question.
