A recent New York Times article revealed the fact that many large corporations are experiencing record profits that they are not willing to reinvest in ways that benefit the nation. Instead, they are sitting on huge piles of cash or are buying back more company stocks. The rationale is they don’t think the market is optimal for expanding their business. Pfizer, for example just laid off 1100 workers to save money while,
“In fact, the drug maker had so much cash left over, it decided to buy back an additional $5 billion worth of stock on top of the $4 billion already earmarked for repurchases in 2011 and beyond”. (NY Times, Nov. 21,2011*)
Hewlett Packard’s decision to reinvest $10 billion coincided with the elimination of 770 jobs. Campbell Soup recently announced the reinvestment of $1 billion and then laid off 700 workers. In other words, these corporations are bankrolling outrageous profits created in part by eliminating jobs rather than creating new ones. The money they save by eliminating jobs is used to reduce the number of stocks in circulation, thus artificially driving up their value and raking in more profits for investors. Most economists agree that this short-term profit taking is short-sighted and is deleterious to a company’s future sustainability.
“The result is that at a time when the nation is looking for ways to battle unemployment, big companies are creating fewer jobs, and critics say they are neglecting to lay the foundation for future growth by expanding into new businesses or building new plants.” (NY Times, Nov. 21,2011*)
Hey Pfizer, if you don’t think there’s a market to maintain your current production capacity let alone expand it, instead of sitting on the cash how about investing some of your excess profits into advanced research to find vaccines, medications, and cures for disease, thereby improving your potential for future business?
Hey Hewlett-Packard and Campbell’s, why not invest in better, modern infrastructure to ensure future competitiveness? Doing so will not only improve your production efficiency and productivity, it will stimulate many other manufacturing and construction jobs. In light of the current economic crisis and record high unemployment, where are your “excess” employees going to find work?
I think most reasonable people understand that if a company is going under it must tighten its belt and oftentimes that unfortunately means reductions in the work force… But to do so just to generate billions in cash you don’t know what to do with is, well…obscene.
Why do we sit back and allow corporations to dictate economic policy that is not in the country’s or the people’s best interest? Why not create legislation that prevents or strongly discourages this kind of greedy corporate behavior? The Tea Party/Republican rallying cry against increased corporate taxes or even increased taxes on the wealthiest 1% is that they “need” these funds to create jobs. The recent choices made at Pfizer, HP and Campbell’s are just one more reminder of how baseless this argument really is.
If corporations are not willing to invest excess profits in improving their business and create new jobs why do they continue to receive preferential tax benefits in the name of “job creation”?
We may not be ready to dictate how corporations spend their money, but as a nation we can certainly provide incentives for real job creation (not just tax cuts for the wealthy) and dis-incentivize them from firing workers to use those savings for pure corporate greed. There is plenty of precedent for windfall profit taxes to try to keep corporate greed in check. If nothing else, it will help defray the cost of supporting unemployed workers. Let’s push Congress and President Obama to create incentives for corporations to behave responsibly. It’ about time.