10 October 2011

Wall Street: Where Profits = Layoffs

Reposted from Jobsanger

The Republicans in Congress have been preaching incessantly that the giant corporations would just love to hire new workers, but can't afford to do so because the the abnormally high income taxes they must pay. They say that all we need to do to open the floodgates to massive job creation is to lower taxes on these corporations (and on all of the rich). In fact, some of the congressional Republicans (probably most of them) don't think corporations should have to pay any taxes at all.

The truth is that the share of tax revenues paid by corporations is at the lowest level since the 1950s, and corporations have more cash on hand (trillions of dollars) than the U.S. government does. Even in the midst of this recession that is still hurting countless millions of Americans, corporations (and rich people) are doing very well. But let's put that aside and just look at one American corporation doing pretty well -- Goldman Sachs. Are they turning massive profits and lower taxes into new jobs?

During the second quarter of 2011, Goldman Sachs recorded a profit of $1.05 billion (a $1.85 payout of each of their millions of shares of stock). Understand, that is not sales or income -- that is pure profit, after all expenses have been accounted for. And it is for only one quarter of this year, meaning the yearly profits would fall in the range of $4 billion or more. When compared to their quarterly profit of this same period in 2010, this year's profit looks even better. The 2010 second quarter profit was a mere $453 million -- less than half of this year's quarterly profit.

And to reward their executives for this very nice profit, the company has set aside $8.44 billion which will be paid out in bonuses at the end of the year (and taken out of expenses, not profits). Now that sounds like a company in pretty good shape, doesn't it? That sounds like a company that could help the economy by hiring a few workers. Well, that's not the way corporate America works.

The company was disappointed in their $1.85 a share payout. They wanted the payout to be more in the range of $2.27 a share. Now this could have been easily accomplished. All they had to do was take a couple of billion out of the executive bonus fund and declare it as profit. After all, should the executive bonuses be more than double the company profits? That would have put the share payout above the desired range.

But that would have made sense, and common sense isn't nearly as important to a corporate executive as plain old-fashioned greed. So instead of dipping into the executive bonus fund they have come up with another way to increase profits. They are going to fire at least 1,000 workers (and make other "noncompensation" cuts like buying smaller drinking cups and getting rid of potted plants). Why cut executive bonuses when you can just send another 1,000 workers to the unemployment office?

Now this is just one anecdotal bit of evidence about one company, but it does highlight a very big flaw in the Republican argument (which says companies will hire more workers when they have more money). While the Republican "trickle down" theory may sound good in the abstract, it doesn't take into account one important factor -- GREED. Why would a corporation hire a worker (which they don't think they need) when they can just put that extra money in the bank, or pay out bigger executive bonuses?

That's the way corporate America works. They are not in business to help their community or their country, but only to maximize profits. Depending on corporate America to save this country by creating jobs through lower taxes will just further increase the country's deficit and debt while fattening the bank accounts of the corporations (and the rich).

There are ways to create new jobs in America, and President Obama listed some of those in his jobs bill. But giving rich people and corporations more money is not one of them.

No comments:

Post a Comment

All comments are welcome!
Please use the Name/URL option (you don't have to register, just enter a screen-name) or sign your anonymous post at the bottom.