BASEHOR, Kan. - The Wall Street Journal editorial in the August 6-7 edition, titled Repatriation Games, extolls the economic miracles that would abound if U.S. multi-national corporations were allowed to "repatriate" their foreign-earned capital to the United States at atrociously low tax rates. New York Democratic Senator Chuck Schumer, in spite of his everyman-champion image, is a shill for Wall Street and has proposed a one-year, 5.25% repatriation rate. Economist Allen Sinai, in the same editorial, is reported to have estimated that there is more than $1 trillion abroad waiting to be repatriated -- if only the rates go down.
Unfortunately, the editorial leaves out one inconvenient fact when it comes to the argument that repatriation of foreign capital will produce jobs: lack of customer demand.
The Journal's own pages regularly report that U.S. corporations are already awash in cash that they are loath to spend on job creation because lack of demand for goods and services is the single biggest factor holding back new hiring.
Small business owners (and I am one) are reluctant to take out loans to expand their businesses and hire new people because lack of customer demand makes such loans extremely risky when it comes to repayment.
I see this as nothing more than a naked attempt to add cheap money to Wall Street coffers in its attempt to take ever more risks with it--masked as "innovative financial products" of course. And, as former Fed Chairman Paul Volcker once quipped, "I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth--one shred of evidence."