The Rich Are Hoarding All The $$$. Quick, Send TLC (And Liz Warren!) To Help!
Wallis Simpson was famous for two things: that the King of England abdicated his throne to get with her, and that she was the first person to say "You can never be too rich or too thin," a turn of phrase beloved by ignorant assholes the world over.
Wait. Three things. She was also super racist, like even for the day. And, allegedly, a Nazi sympathizer.
As anyone with half a brain knows, it is indeed possible to be too thin. Because if you are too thin, you can die, or at the very least have some pretty serious health problems. And while it may not literally kill you or prevent you from having a normal menstrual cycle, I would certainly say it is possible to be too rich.
In fact, I happen to have a favorite saying about that, myself.
"You may call me an anarchist, a socialist, or a communist, I care not, but I hold to the theory that if one man has not enough to eat three times a day and another man has $25,000,000, that last man has something that belongs to the first." -- Mary Lease
But now it's not just me and my radical politics saying that, it's the cold hard facts. According to a report from Axios (right?), America's rich people and rich corporations now literally have so much cash that, by golly, they just don't know what to do with it anymore! They are holding record levels of unused cash, sitting around for decorative purposes only, like so many Fabergé eggs.
Sure—they could dive into mountains of coins, Scrooge McDuck-styles, but as a result of the Trump tax cuts and various other factors, many of the richest have now hit a threshold where they have so much money they're not even bothering to reinvest in their own businesses.
The big picture: U.S. companies raked in a record $2.3 trillion in corporate profits last year, while the country's total wealth increased by $6 trillion to $98.2 trillion (40% of which went to those with wealth over $100,000).
So, where is all the money going? The IMF notes large companies around the world are overwhelmingly and uniformly choosing not to reinvest much of it into their businesses. They're hoarding it in cash and buying back stock.
Now, you, a normal human person and not a monster might think "Oh! I know exactly what they can do with that money! They could pay their workers more!"
"There are only 2 things that money can do — sit on a balance sheet unused, where it's just earned income earning an interest rate of zero," ICI chief economist Sean Collins points out. "Or it makes sense to release it to share buybacks or dividends."
- Companies could pay their workers more, but "that would be terrible for the stock market," says Neil Shearing, chief economist at Capital Economics — half-jokingly.
- Companies made a record $1.1 trillion in stock buybacks in 2018 and are on track to surpass that number this year. But they still have record cash holdings of close to $3 trillion.
Did you know that is an actual thing? It is an actual thing. When wages go up, jerks start selling their stocks in anticipation of "inflation." So much for that trickle down theory, huh? Wages stay low because rich people are greedy in multiple ways, not just the one way.
Anyway, they're really trying super hard to spend all that money they have, but to no avail. There are, apparently, just not enough Birkin bags, private islands and monocles in the world.
Wealthy households and individuals are pouring money into asset managers, betting on companies that lose $1 billion a year, bonds from little-known Middle Eastern republics, and giving hot Silicon Valley start-ups more venture capital than they can handle.
And private equity has seen so much cashflow that firms have $2 trillion of unused capital.
But even that hasn't been enough to account for all the new money. The top 1% of U.S. households are holding a record $303.9 billion of cash, a quantum leap from the under $15 billion they held just before the financial crisis.
Oh, the poor dears. And at the same time that income inequality is at an all time high? That's ... nice. And why do they have all this money you ask?
How we got here:
The Fed's quantitative easing program pushed the cost of borrowing money to next to nothing for nearly a decade, allowing companies to splurge on debt for mergers and acquisitions and to boost revenue.
At the same time, globalization allowed them to reduce labor costs, meaning that gains effectively were returned as profit and used by public companies to boost stock prices.
Between the lines: These factors, combined with legislative policies that have consistently favored business owners over workers, eroded unions and reduced employees ability to demand higher wages.
The Tax Cut and Jobs Act — i.e., the Trump tax cut —exacerbated these issues, slashing the share of U.S. taxes that companies paid to its lowest level in at least half a century and provided companies even more capital for buybacks, dividends and executive compensation.
"Perhaps the fallacy of the tax plan to begin with was companies were not starved for capital coming into this," Mark Hackett, chief of investment research at Nationwide, tells Axios. "They were starved for growth opportunities."
I would just like to take a moment and acknowledge the 85,000 times I have desperately screamed into the void, "FOR THE LOVE OF GOD, WHEN THESE COMPANIES USE CHILD LABOR THEY'RE NOT EVEN PASSING THE SAVINGS ONTO YOU!" It's really hard being right about everything all of the time.
But there is a solution! Elizabeth Warren, for one, has a plan (Yep! She has a plan!) to help all these rich people out with their problems: a two percent tax on wealth over the $50 million threshold, and and a three percent tax on wealth over a billion dollars. Now sure, it's probably not enough to help them rid themselves of this burden, but at least it's something. And as we've all learned from our occasional multi-hour TLC binges, hoarding is just not good for one's mental health. Just as no one should live surrounded by piles of old magazines and newspapers and creepy dolls, much less dead rodents and plastic bags of human waste, no one should live with billions more dollars than they or their heirs could spend in their lifetimes. It's just not right. Something has to be done.
And rather than just dumping all their money into stupid shit for no reason, they can help fund child care and health care and help the rest of us out with our stupid student loans that will otherwise plague us for the rest of our lives. Won't that be nice? It sure sounds nice! Then they can actually feel good about themselves, and perhaps even be less fearful that we will all go Les Mis on their asses eventually. It works out well for everyone!
[Axios -- we know!]
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Robyn Pennacchia is a brilliant, fabulously talented and visually stunning angel of a human being, who shrugged off what she is pretty sure would have been a Tony Award-winning career in musical theater in order to write about stuff on the internet. Follow her on Twitter at @RobynElyse