Senator Marco Rubio has recently published a major public policy statement that is both bold and controversial. Despite criticisms from the right that the report draws too much from the left, it is clear to me that, by stirring the pot and calling attention to some disturbing economic trends, the Senator has done a great service to the nation.
Let’s get to the fundamental thesis of Rubio’s report. American companies were raking in billions of dollars by having their companies benefit from tax havens outside the U.S. With the new all-time low corporate tax rate, all the money now could be repatriated to the U.S. and invested in the economy. The question Rubio raises and decisively—with evidence—answers is whether that money has been really invested in the U.S. economy.
What Senator Rubio has noted, correctly in my view, is that the money indeed has come back to the U.S.—so far so good. But instead of spending that wealth on the U.S. economy, in real capital investment—buildings, technology, machinery, new industries, and human capital (through professional development of workers that would yield new and greater skills)—these companies have chosen to invest on paper, not real investment, by “buying back” their own shares and inflate the companies—and their stockholders—pockets!
It is calculated that the stock market value has been inflated by about 20% because of these buy-backs. This is not Senator Rubio saying that. This means that the real value of the stock market (now at around 25,000) should be 20,000. Talk about inflated wealth! This is the inflation of the worst kind and of the kind we certainly do not need. Words like voodoo economics and smoke and mirrors come readily to mind.
Even criticisms of the Senator’s report, such as the one in the National Review—which attacks the report as misguided and under the influence of left-wing thinkers—do not disagree that the data—that is the buy-backs—the Senator is invoking is correct. Let me repeat, the data the Senator’s report appeals to is accepted as factual. It is his interpretation of the data critics are having problems with.
Well, I for one think the Senator’s reading of the data is absolutely spot on. As the Senator goes on to point, we are outsourcing real economic investment to other nations, and China in particular. I recommend that the reader read my other piece on China. It is China that is reaping the benefits of our blindness to long term consequences of going for the short-term profits; and for the benefit of the few, not of the nation.
It is the Chinese who are investing in real economic development—in our technology and other capital investments—that is making China the economic giant with whom we will have to contend and possibly bow down to if we do not heed the Senator’s words.
To the misguided critics on the right that might think the Senator is an economic “leftist,” all I have to say is that if the Senator is anything, he is a real economic nationalist. All that he is pleading for is our great capitalist economy to be put work for the benefit our people and the nation, not through centralized economic planning or by coercion (as China does), but through our own and well tested American free enterprise capitalism, whose awesome power to generate wealth has been unleashed since the advent of the conservative Republican administration of president Trump.
If conservatives have an issue with economic nationalism, please take it up with the president, not with Senator Rubio.