Senate Democrats’ proposal to limit stock buybacks is their latest jab at the Republican tax cuts and part of an ongoing effort to paint themselves as the better party for the working class as the 2020 election cycle starts.
Senate Minority Leader Chuck Schumer, D-N.Y., and Sen. Bernie Sanders, I-Vt., have proposed a measure to stop corporations from repurchasing shares until they first invest in workers and communities through better pay and benefits. In a New York Times column published Sunday, the lawmakers argued the plan would help to boost wages and reduce income inequality
The senators’ proposal fits a Democratic Party intent on knocking the GOP as too cozy with corporations, rather than workers, during pivotal elections next year. With the op-ed, Schumer and Sanders try to discredit the 2017 Republican tax overhaul, the signature GOP economic achievement of President Donald Trump’s first term in office.
The Senate Democratic leader Schumer’s coordination with Sanders, a self-described Democratic socialist who caucuses with Democrats, also reflects the groundswell of discontent with corporations and the wealthy within the party base. The proposal is only the latest from Democrats since the new Congress started last month to try to create more equality between workers and their employers. For example, both Schumer and House Speaker Nancy Pelosi, D-Ca., endorsed a bill to raise the U.S. minimum wage to $15 per hour.
“So, in this Congress, the two of us will attempt to get a vote on legislation that demands that corporations commit to addressing the needs of their workers and communities before the interests of their wealthy stockholders,” Schumer and Sanders wrote of the proposal to limit share buybacks.
“The time is long overdue for us to create an economy that works for all Americans, not just the people on top. Our legislation will be an important step in that direction,” they conclude in the Times column.
Democrats control the House, but Republicans hold both the Senate and the White House. The plan proposed by Schumer and Sanders likely will not get through the GOP-controlled Senate or earn Trump’s support. McConnell’s office did not have an immediate response to the proposal.
Kevin Hassett, the chairman of Trump’s Council of Economic Advisors, told CNBC on Monday that he wishes “some economist would go and talk to these guys about how buybacks work.”
Despite the legislative hurdles for the plan, Democrats will use it to try to gain an advantage in the 2020 messaging battle. The party hopes to hold its House majority, defeat Trump and gain a Senate majority in next year’s elections. Trump, who has poor approval ratings, has at least one factor buoying his re-election bid: a solid economy.
With their plan targeting buybacks, Democrats take aim at Trump’s main economic achievement: the law that slashed tax rates for corporations and trimmed them for most individuals. The tax plan chopped the corporate rate to 21 percent from 35 percent. Republicans who designed the legislation argued it would boost capital investment, worker productivity, wages and economic growth. Trump called it a “middle class miracle.”
Democrats have cast the plan as a giveaway to corporations and wealthy Americans. They have consistently pointed to the record $1.1 trillion in stock buybacks in 2018, mechanisms to boost share prices unlocked in part by the corporate tax savings.
Schumer and Sanders say the share repurchases have not helped workers. They wrote Sunday: “First, stock buybacks don’t benefit the vast majority of Americans. That’s because large stockholders tend to be wealthier. Nearly 85 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households.”
Trump has frequently touted the economy as his greatest achievement in office. He will likely do so again Tuesday during his State of the Union address.
The dueling narratives will figure prominently in the 2020 election, in no small part because the tax law gave Democrats something to criticize within an otherwise strong economy. Democrats “have the stronger case at this point” in arguing the plan led to more stock buybacks and boosted the wealthy, said Bill Galston, a senior fellow in governance studies at the Brookings Institution.
Attacks on the tax plan and share buybacks will fit into Democrats’ broader contention that they will do a better job of looking out for the working-class Americans who Trump pledged to defend as a candidate.
“Both parties are going to try to make the argument that they are the real defenders of working class and middle class Americans,” he said. “And no doubt Democratic leaders including the presidential nominee will make the case that the Trump administration began by claiming the mantle of populism and ended by doing the bidding of the plutocrats.”
The share buyback proposal also reflects a shift in the Democratic Party’s center of gravity. The 2008 financial crisis and a perception that the wealthy people responsible for it avoided punishment fueled a more populist bent in both major political parties.
The change helped to propel Sanders, a vocal critic of banks and major corporations, to a surprisingly strong showing in the 2016 Democratic presidential primary. He could run again in a 2020 Democratic primary dominated in the early going by discussions about whether and how to tax the wealthy more.
Galston expects Trump’s eventual Democratic opponent to champion policies designed to boost the working class and rein in corporations.
“I would be very surprised if the Democratic presidential nominee, whether leaning left or leaning center, did not campaign on the transition to a $15 minimum wage and other issues that have become kind of common ground,” he said.
