The article is really long so I didn't post the entire thing. WSJ U.S. Economic Growth Accelerates The U.S. saw its strongest growth of the year in the third quarter, as Americans stepped up spending, businesses boosted investment and exports grew. Separately, new claims for unemployment benefits fell slightly last week yet remained elevated, showing that the labor market is still struggling to find its footing. Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 2.5% from July through September, the strongest performance in a year. Economists surveyed by Dow Jones Newswires expected GDP to rise 2.7%. The economy grew a paltry 0.4% in the first quarter and 1.3% in the second quarter of the year, sparking concerns of a new downturn. But in the third quarter, consumer spent more on durables -- goods like cars and refrigerators -- and services, while business investment surged. The first estimate of the economy's benchmark indicator showed third-quarter personal consumption expenditures up 2.4%, compared with only 0.7% in the preceding period. "Despite negative economic headlines, we're not seeing evidence of a slowdown in demand," JetBlue Airways Corp. interim Chief Financial Officer Mark Powers said Wednesday after the company reported third-quarter earnings. Businesses also are investing, especially in equipment and software. Nonresidential fixed investment jumped 16.3% after a 10.3% rise in the second quarter. Federal government spending and rising exports also helped the economy, while inventory investment and falling state and local government spending dragged on growth. Real final sales -- GDP less changes in private inventories -- increased 3.6%, compared with a 1.6% rise in the second quarter. The pace of growth rose as businesses rebounded from natural disasters in Japan and despite uncertainty over the United States' fiscal outlook and a rolling financial crisis in Europe. The outlook for Europe brightened Thursday -- leaders there said they secured a deal to reduce Greece's debt after they labored overnight to find agreement on what they had billed as a blockbuster package to stem the Continent's debt problems.
Gallup's daily polling suggests a notable drop in unemployment, so hopefully that translates into job numbers next week. If so, that would be really impressive, given that the August through October has been a period of extreme uncertainty with Europe and general slowdowns.
You are correct Carl. We don't need a debt funded stimulus. Repatriating cash from overseas would be a much better form of stimulus, especially if it is tied to businesses investing that money.
How would you propose they make that requirement work? It seems like if Company A has $10B onshore and $10B offshore and is going to spend $3B, they could just say they are using the offshore money and hold onto what's already here. The logistics of whatever rule you put in place there would be interesting.
Other than that this has been cited as a reason to do this before, tried, and failed, are you really gonna go with "this time, it's different!"
If this economic growth continues The Once is going to become The Twice. No word yet on three times a Lady... Hills.
So don't even try is your line of thought....excellent! Anyhow, after reading the bulk of that link it made me think that maybe if you tied the repatriation to forcing the companies to payout special dividends with the money repatriated that you might have a more direct stimulus on the economy. During the last repatriation companies were not allowed to buy back stock even though they did anyway, but stock buy back are worthless and stupid. Anyhow, I guess the alternate unintended consequence of paying out special dividends would be stock prices potentially moving too high, but I guess maybe you could circumvent that by forcing companies to make the date of record the same day as they make the filing for the special dividend. I dunno if that is allowed, but it sounds good to me . Maybe it's absolutely stupid, but I think with companies having so much excess cash that you need to figure out ways to stimulate them to use their cash to get the economy going rather than just building more and more debt to try to stimulate the economy.
That sounds seriously close to a re-distribution. Because if there were any way for them to make more profit they would be doing it. That is their mandate. (over pay, extend benefits, to build a consumer middle class, to sell more products to, at better prices, profit?) They should start some unions and a buy American campaign.
Yeah it is a redistribution and it will likely end up in the hands of higher income/older people. Also, tying it to a qualified dividend would also ensure that taxes are paid on that money too. Yes, corps wouldn't pay tax on it, but it would be like pass thru income to the investors. Probably a terrible idea but whatever I'm full of terrible ideas. And I disagree that companies always maximize their profits. Lots of public companies avoid tying up cash in business activities that could be termed low margin. Right now they don't see any great returns for reinvesting their profits so they are just sitting on them which is terrible for the economy. There is too much corporate cash being tied up not out of greed, but out of fear due to the prior crash.
The problem is that that the effect of a special dividend is going to get super diluted since the vast majority of it is going to flow to insitutitional investors & ohter big boys who have about the same incentives to sit on the cash; by the time it filters down to the unwashed masses via retail investors, most likely, the income effect (and thus any consumption bump) is going to be pretty weak. I'm not saying it's hopeless, but using legalese to try to get around what amounts to a collective action problem where actors have trillion dollar incentives to evade it is very difficult and can end up making you worse off - I think there's probably more creative paths to go down that don't offer the destructive consequences of a tax cut. If you were really going for a short-term income boost, I'd say you offer them semi-amnesty the chance to bring it home at a *reduced* rate now, but with the stricture that the rates are going to *escalate*, (coupled with elimination of the Irish Dodge, the Swiss tax fraud haven, and other ethically, if not legally, dubious structures) at the expiration of the semi-amnesty period.
The economy is still very weak and to stay that no more stimulus is required can't be made off of one quarter. State and local gov'ts have been slashing like crazy as a major drag and investing in infrastructure as well as school/teachers is still a good choice for both short term and long term growth. Also the tax code needs to be fixed and the handouts to the rich must end to balance the budget in the long term.
