Wednesday, February 09, 2005

All Carrot, No Stick

Forgot to post this AP article from yesteray. Keeping on the theme of "what is wrong with economic models," we read that the incentives given to corporations aren't flowing back into the community at large. And people are surprised?

Lawmakers backing the "homeland reinvestment" provision last year touted the idea of lower tax rates as a way to encourage companies to repatriate their earnings, and by putting extra money into corporate coffers, the thought was that companies would increase operating and investment activity and add jobs to payrolls.

Yet the devil in all this comes in the details. When it comes to the specifics in how the repatriated funds should be used, it turns out that what is considered permissible probably won't drive too many upswings in employment at all, and in some cases, could even spur layoffs.

In fact, a Morgan Stanley survey that was released late last year found that none of the investment firm's analysts believed that any of the companies they followed would use the repatriated earnings for hiring.

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