We hear it from Republicans all the time; “if a company has more money then they will hire”. It’s the basic premise they use to sell their plans for tax cuts. But the problem is that Republicans are dead wrong, and that is shown in this article:
For months, companies have been sitting on the sidelines with record piles of cash, too nervous to spend. Now they’re starting to deploy some of that money – not to hire workers or build factories, but to prop up their share prices.
Sitting on these unprecedented levels of cash, U.S. companies are buying back their own stock in droves. So far this year, firms have announced they will purchase $273 billion of their own shares, more than five times as much compared with this time last year, according to Birinyi Associates, a stock market research firm. But the rise in buybacks signals that many companies are still hesitant to spend their cash on the job-generating activities that could produce economic growth.
And for some very basic economics; the kind you learn in high school:
Some companies are buying back shares partly because they don’t want to invest in developing new products or services while consumer demand remains weak, analysts said.
Again – it’s supply and demand. Companies hire to increase supply, but when consumers aren’t demanding (buying) the products/services, there is no need for supply. If you want to really stimulate this economy, then put more money into the hands of the middle class. We are the ones who buy the items that really increase demands. It isn’t rocket science, it’s simple (very simple) economics.