Corporate Surplus: Cash Available for Growth Investment
Why is there so much money tied up in corporate surplus, and what should citizens do about it?
Surplus is the cash left over at the end of the year compared to profits that are an accounting number that includes such non-cash items as depreciation. There is over $2 trillion in corporate cash at home and another $ 2 trillion abroad. Much of this is the result of sacrificing long-term growth for the price of the stock and value of options.
Surplus can be used in four ways: investment in growth and jobs, dividends recycled into the economy, stock buy backs, a favorite Wall Street trick to hype the stock and value of options, and deals that rain money on all of the deal makers. The first two benefit democratic capitalism, the second two benefit finance capitalism.
Tax policy should reward investment in growth and dividends and penalize stock buy backs and deals.