This, no shareholder controlled board would ever authorize taking out debt to pay dividends, unless there's some special circumstances for which this makes sense (i can't think of any atm).
The difference with buybacks using debt is that buybacks changes the capital structure. I suppose if the debt is artificially cheap (say, the gov't is forcing interest rates down to lower than what the market rate _would_ be), then it makes sense from a financial perspective, to borrow money, and pay (to the shareholders) the difference between the "real" market rate and the artificial rate. But this predicates that the real rate is much higher (transactional costs, and other overheads might easily dwarf this difference in rate).
Energy (oil & gas) companies certainly did last year. Those stocks are a little different than the broader market, in that investors in them generally aren't looking for appreciation in share price, they want consistently high dividends. Exxon is a good example of this.
Sorry, but this is nonsense. Increasing debt and giving the proceeds away to shareholders definitely alters the debt ratio of a company ... basic financial accounting concept.
you can try to convince people that buybacks are evil, and if enough concensus is reached, it will be outlawed.
The problem is that there's no good evidence that it's evil in the general case, and it's hard to convince large portions of shareholders that it is.
why not? What's wrong with altering a company's capital structure to be more efficient?
Stocks have a cost (aka, cost of equity), just like debt. Sometimes, cost of equity is higher than cost of debt (aka, the interest rate). Sometimes, the cost of debt is higher than cost of equity. This is determined by the general market conditions and economic environment.
A company may find itself in a situation where the cost of equity is very high, and cost of debt is very low. In this case, it makes a lot of sense for the company to borrow to reduce the amount of outstanding equity on the market. There is an equalizing point, where the total cost of capital is lowest, and that is where the company's money source is most efficient.
There is absolutely nothing wrong with company buying back stocks, if this is the case. The only problem, really, is that buybacks gives capital gains for stockholders, and this is taxed lower than normal income. This is a question of taxation policy, not stock buybacks. Is it fair that capital gains are taxed less than earned income?