The United States recently came under an attack by an activity so insidious that Democratic leader Chuck Schumer and his Wisconsin colleague Tammy Baldwin joined forces in an effort to demand it be “reined in.”  Massachusetts’ Elizabeth Warren, the Senate’s modern-day firebrand who never tires in her perpetual imitation of the maniacal abolitionist John Brown, ramped up the rhetoric even more as she went on the warpath to call for an outright ban.  Aside from every word coming from President Trump’s mouth, what could have ignited this leftist nursery-school rebellion?  Child pornography?  Another school shooting?  “Immigrant” family separation?  Wrong on all counts.  The senators have gotten exercised over corporate America’s predilection for stock buybacks.  And for once, these three stooges might actually be onto something.

Between 2007 and 2016 cash balances at the firms that make up the S&P 500 rose 50 percent to a mind-boggling four trillion dollars.  Corporations have several options for disposing of this cash that is generated by their operations.  First, they can pay it out as dividends to shareholders.  Unfortunately, our genius leadership class in Washington decided long ago to penalize this strategy via the tax code.  So management will often present the tax penalty as sufficient reason to avoid paying dividends.  Second, corporations can invest their excess capital in new facilities, products, or research and development.  This is ostensibly why they hire their executives from the so-called top schools and then brag of their provenance.  Smart executives should make the right investment decisions to help their companies grow, or so the theory goes.  Lastly, instead of paying tax-disadvantaged dividends or investing in the current business, corporations can use their excess capital to repurchase their own shares on the market.  The repurchased shares are then cancelled, reducing the number of shares outstanding and increasing earnings per share and every other “per share” measurement.  This cash-deployment option also drives up the share price through the increased demand for the shares in the stock marketplace.  Technically speaking, managements would only do this when they think the market has fundamentally undervalued their company’s stock.  And since no one else’s view of their enterprise’s business prospects exceeds their own, they should have an edge relative to the overall market in regard to their prospects.  But managements don’t speak, or even think, technically.  Today, the C-suite swindlers only think in a self-interested manner, corporate welfare and societal good be damned.  Share buybacks do little more than transfer wealth from shareholders to corporate executives.  This is the kind of stuff that gets the likes of Schumer, Baldwin, and Warren rightfully irate.  If you own stock in American corporations, you should be angry as well.

The Wall Street Journal recently reported that U.S. corporations will likely repurchase in excess of $800 billion of their own stock this year.  That’s a lot of foregone dividends, which a shareholder could use to pay down his mortgage, take a long-delayed trip, or buy a new refrigerator, all of which would help keep the economy buzzing.  In this year’s first quarter, American corporations bought back $189 billion of their own stock while at the same time investing only $166 billion in their own operations.  Historically speaking, this year’s mammoth buyback number will even exceed 2007’s $589.1 billion share-buyback mania and subsequent crash, a gut-wrenching experience no one over 30 has forgotten.

American shareholders have demanded more and more accountability from their top executives over the last few decades.  As a result, executives now receive much of their compensation in company stock.  Restrictions imposed by shareholders usually prevent the executives from disposing of their shares until after their departure from the company.  While the original intention behind these limitations—uniting the interests of corporate management and the shareholder base—seemed to obviate the agency problem and align both parties’ interests, executives now have incentives to game the management of corporate results since company stock now accounts for most of their net worth and the lion’s share of their annual compensation.  Corporate managements lack Disneyesque creativity for new products or markets, but they have become Einsteinian in their systematic theft of value from their shareholders via stock buybacks.  How better to improve every corporate performance metric, especially earnings per share and return on equity, than by rigging the calculation by reducing the denominator—the number of shares outstanding?  Share buybacks reduce share count.  But what happens when companies find the cash till empty after they have skimped on investment in organic growth for over a decade?  Think “Crash of 2008” as the horizon we are approaching.  Financial engineering does not sustain corporate or economic growth.

Worst of all, the coming backlash from corporate management’s financial chicanery will empower leftist demagogues like Warren and Schumer to demand all-encompassing government control of American enterprise.  Corporate executives have proven the truth of the old adage, “The problem with socialism is socialism.  The problem with capitalism is capitalists.”  Human nature inclines us toward greed.  The typical American C-suite has armed its adversaries with enough data through its dizzying greed and harmful, inordinate self-interest to convince even Adam Smith tie-wearing Republicans of its avaricious intentions.  With manufacturing jobs being exported and CEO pay as a stratospheric multiple of a company’s lowest paid worker, corporate America has announced whom it cares about most.  (Hint: not the guy with the lunch bucket.)  At this point many Americans don’t need much more convincing.

In their noteworthy new book The Great Revolt: Inside the Populist Coalition Reshaping American Politics, Salena Zito and Brad Todd cite their own August 2016 survey of 2,000 likely Rustbelt Trump voters that showed “72 percent agreed that large corporations don’t care when their decisions hurt working people.”  They also don’t care when they hurt small shareholders, who are often the same group.  Bernie Sanders sparked the democratic socialist buzz in the last presidential election cycle.  New York’s very own self-avowed democratic socialist (sorry, I don’t mean Schumer, Nadler, Cuomo, DeBlasio . . . ) Alexandria Ocasio-Cortez just defeated long-time incumbent Joe Crowley, a possible successor to Nancy Pelosi, in a recent Democratic primary.  Millennials remain open to the idea that some sort of collectivist economic system might work better than capitalism.  Corporate management’s selfish actions will not help those who try to argue against such insanity.

By the time the collectivists impose their insane policies on us, today’s CEOs and CFOs will be lounging on their Hamptons beaches or golfing in Palm Springs while the rest of us wonder why our meager 401(k)s don’t suffice to fund our retirements as we stand in line at the unemployment office.  In his 1948 classic Communism and the Conscience of the West Fulton J. Sheen described the dual nature of economics as focused not just on the individual, but even more so on the individual as a member of a broader society.  Sheen wrote,

Communism emphasizes social use to the exclusion of personal rights, and capitalism emphasizes personal rights to the exclusion of social use.  The Church says both are wrong, for though the right to property is personal, the use is social.

There is nothing socially beneficial to corporate executives rigging the system in their own favor.  Then again, there’s nothing socially beneficial to democratic socialism, unless your experiences at the DMV have convinced you that government just does everything better.  Well, maybe not better.  But at least, in the minds of the democratic socialist neophytes who never heard the word gulag, no one will be getting richer in our collectivist paradise.  Brace yourself.  Corporate America is doing its darnedest to breed many more Alexandria Ocasio-Cortezes as it abjures its duties to grow and sustain its own operations and, by virtue of their success, keep fringe political thinkers like her on the fringe.