Last Wednesday’s “Wall Street Journal” had a thought provoking op-ed piece by John Chambers, chairman and CEO of Cisco, and Safra Catz, president of Oracle, entitled: “The Overseas Profits Elephant in the Room.” Mr. Chambers and Catz argued that the Obama administration should lower the 35% tax rate on foreign earnings to 5%, so corporations could more affordably repatriate these earnings and use this offshore cash to create jobs and invest in research, plant and equipment, all of which would help stimulate the U.S. economy.

The problem with their argument is that while it is true that companies could use repatriated earnings to increase hiring and investment, they would only do so if they see a strong return on investment  potential.  And if that profit potential exists, since companies such as Cisco and Oracle currently have access to some extremely low interest rate credit, the 35% tax rate on foreign earnings should not serve as a deterrent, as they can borrow the money they need right here in the U.S.  Consider for instance that John Chambers announced back in June of this year that Cisco would hire 3,000 workers over the balance of 2010.

Further, on October 4th,  Graham Bowley of  the “New York Times” reported that “companies such as Microsoft are raising billions of dollars by issuing bonds at ultra-low interest rates, but few are spending the money on new factories, equipment or jobs. Instead, they are stockpiling the cash.”   According to analyst Richard Lane, Microsoft decided that borrowing new money was more affordable than repatriating earnings from overseas.

And how is Microsoft using some of the money from its recent 0.875% interest rate bond offering?  Microsoft is using the funds to buy back shares of its own stock, and to raise its dividend by $.03/share, all of which is good for Microsoft shareholders, but pretty much a non-event for unemployed Americans.