Defenders of buybacks contend that they do no harm because the funds are reallocated through financial markets and used elsewhere in the economy. A company’s profits are, however, the financial foundation for investments in productive capabilities, first and foremost in employees. Investment in training and retaining employees is the key to productivity growth and innovation, for individual companies and for the economy. According to our research, when trillions of dollars of corporate cash are extracted from companies through buybacks, on top of dividends, the result is a dramatic concentration of income among the richest American households and the destruction of middle-class employment opportunities.

In 2003, the S.E.C. revealed that it was aware of the use of buybacks to manipulate the stock market. The agency acknowledged, in amending Rule 10b-18 to include block trades, that “during the late 1990s, it was reported that many companies were spending more than half their net income on massive buyback programs that were intended to boost share prices — often supporting their share price at levels far above where they would otherwise trade.” But its 2003 amendment was hardly a solution.

From 2003 to 2007, the value of buybacks by companies in the S.&P. 500 Index quadrupled, reaching almost $600 billion in 2007. With their cash reserves depleted by this orgy of buyback activity, these companies were more vulnerable when the downturn came. Having wasted billions on buybacks, many of them incurred huge losses and required mass layoffs to avoid bankruptcy.

After plummeting in 2008 and 2009, buybacks have again soared: A record $800 billion in buybacks by S.&P. 500 companies is predicted for this year.

Democrats have argued that the Republican tax cuts have funded increased buybacks. While this is true, the damage done by corporate stock buybacks over the past decades has been systemic.

Short of a Congressional ban on buybacks, as Ms. Baldwin proposes, the S.E.C. should immediately rescind Rule 10b-18, and confront the reality of stock market manipulation that open market repurchases entail. If Congress and regulators do not take action to rein in buybacks, the rampant economic inequality that already afflicts the United States will only get worse.