Big business has traditionally spent the bulk of its free cash on buying its own stock.
Iowa Sen. Chuck Grassley (R) on Monday defended a failed Republican stimulus package that Democrats blocked over the weekend, due to concerns that the bill unfairly skewed in favor of corporations.
From the March 23 edition of "The Hugh Hewitt Show":
SEN. CHUCK GRASSLEY (R-IA): And the other thing is, he [Senate Minority Leader Chuck Schumer] says it's a bailout for corporations. What are corporations? They're a lot of people. Ninety percent of them are probably employees.
And in this tax bill, we have a lot of liquidity for these businesses to keep people on the payroll and we have a big help for small business. Just think of 750,000 restaurant workers going to — probably laid off already. And small business task force has loan programs that are forgivable loans if the, if the restaurants keep their people on the payroll.
In the recent past, corporations have used money from government interventions on stock buybacks to benefit shareholders and wealthy executives.
After the 2017 GOP tax bill, many wealthy corporations saved billions in taxes, with many reducing their federal tax bill to zero. But rather than spending those savings on wage increases and investments in workers, many put profits into buying back stock, which mainly benefits shareholders.
Stock buybacks occur when a company uses profits to purchase shares of its own stock. As a result, there are fewer shares on the market and the value of stocks increases. Stock buybacks predominantly "help enrich corporate executives, whose compensation is often linked to their share price," CNN notes.
The airline industry, which is looking for a federal bailout, has spent an average of 96% of its free cash on stock buybacks over the past 10 years. Airlines are willing to stop stock buybacks for the life of government loans in light of the coronavirus pandemic, according to Vox.
There are a few exceptions to the trend. During the 2008 and 2009 auto industry bailout, the federal government forced General Motors to make changes as a result of receiving billions in bailout funds, including making more fuel-efficient cars to compete against foreign vehicles.
Grassley has made controversial comments about assisting average Americans before.
Back in 2017, while defending the GOP tax bill, which benefited corporations and the super wealthy, Grassley claimed that assisting investors was more important that helping those who did not put their money into the market.
He claimed those who did not invest their money were instead "spending every darn penny they have, whether it’s on booze or women or movies."
Published with permission of The American Independent Foundation.