Sanders and Schumer's buyback plan is treating the wrong problem, says economist - Recent News from USA
Senate Minority Leader Chuck Schumer (D-NY) (R) and Sen. Bernie Sanders (D-VT).

Sanders and Schumer's buyback plan is treating the wrong problem, says economist

Last year, more than $1 trillion in buybacks were announced by large companies, who had a lot of extra cash to spend after the late-2017 corporate tax cut. The senators argued those buybacks were made instead of investing in employee pay and equipment, and said some even laid off workers while still buying back billions of dollars of shares.

Companies are repurchasing their stock because they aren’t able to do anything else with their money — and that’s the fundamental issue, Swonk said.

“Why are companies not investing? One of the reasons they aren’t is because the political dysfunction of Washington,” she said. “They are very uncertain and walking on eggshells in what should be a very good economy.”

Brian Brenberg, chair of the program in business and finance at The King’s College in New York, is wholeheartedly against Sanders and Schumer’s plan. He called it “completely ridiculous” and a “destructive idea” Monday on “Closing Bell.”

He’s believes share buybacks are ultimately good for the economy.

“If companies don’t have good ideas about where to spend their money than they should give it back to investors and that money gets channeled to companies that have growth ideas,” Brenberg argued.

Representatives for Sanders and Schumer did not immediately respond to requests for comment.

— CNBC’s
Liz Moyer
contributed to this report.

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