Take that, little people: corporate profits the highest on record **UPDATE: so of course, business whines
Recessions are for chumps. Corporate America is doing just fine.
How fine?
From the New York Times:
American businesses earned profits at an annual rate of $1.66 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or non-inflation-adjusted terms.
Corporate profits have been going gangbusters for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as the fact that some of the profits of American companies come from abroad. Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly.
So how does that look in graphic terms?
Now, you might think that record corporate profits would translate into strong GDP growth, which should in turn mean more jobs, right? Well, let’s see:
Tuesday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter. Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent. The economy grew at 1.7 percent annual rate in the second quarter.
Still, most economists say the current growth rate is far too slow to recover the considerable ground lost during the recession.
“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,” Paul Dales, a United States economist for Capital Economics, wrote in a note to clients. “This is unlikely to change in 2011 or 2012.”
That would be a negative. Well at least higher corporate profits mean more corporate tax receipts for Uncle Sam, right, which should help begin to chip away at the national debt, and maybe fund some roads and bridges and … no? Really??? No, really. Federal revenue from corporate income taxes has been falling for decades, down from around 5-6 percent of GDP back in the 1950s to just over 2.5 percent by 2008, according to the Tax Policy Center, with rates having been slashed to the bone in the second round of Bush tax cuts in 2003. The U.S. has among the lowest corporate tax rates of any industrialized nation. And the Bush tax cuts on dividend income and capital gains means Wall Street — on track for its fourth best profit year ever in 2010 thanks to the American taxpayer (suckers) — won’t have to worry about shelling out too much lucre to the feds, either. Bonus time!
And yet, Republicans are pushing to get rid of corporate income taxes altogether — gone, zip, buh-bye!
Back to jobs for a moment, the chart below, also from the Times, shows the trajectory of job losses and recovery in previous and the current recession (the black line represents the Bush Recession and the slow recovery):
According to the Center on Budget and Policy Priorities (and per their chart below) there are now 5 people looking for every 1 available job.
But again, corporations aren’t adding those jobs, not because of “tax uncertainty” — gross corporate tax receipts have been falling for decades — but because it’s just much more profitable for the big boys the way things are now.
Now of course we’re going to hear from our CNBC and WSJ friends that these are the “productive classes,” who are getting rich because they’re better and smarter than you are. But what is it that Wall Street produces? What do the hedge funds produce? Except for more wealth, it’s getting harder to figure out just what it is that the ‘productive class’ does to earn all that dough? Mostly, it seems, they shuffle money around, invent instruments through which to launder client and government cash, and get richer and richer while the corporations they invest in lay your sorry ass off.
And so much for the argument that giving the gilded class low taxes “creates jobs” — we’re already in the lowest tax environment in my lifetime, thanks to George W. Bush, and corporations are — while right now enjoying their tax cuts — getting more profitable precisely by NOT creating jobs.
So Happy holidays, suckers. And be sure to stop by your local retailer on the way home. The shareholders are counting on you.
(Meanwhile, Peter Orszag floats a 34-vote solution to the Bush tax cuts dilemma…)
UPDATE: Read this only if you literally want your blood to boil. While those record corporate profits are simmering in the coffers of the fatcats, guess what they’re doing? Bitching and moaning that the president isn’t nice enough to them. Seriously ….
“There was no challenge to come work together for a common purpose,” one executive said. “There was never a call for weekly conference calls with the president and demands to go get stuff done. That’s the power he has as president. And instead they kept pushing people away.”
Boo freaking hoo. And they want more than just weekly calls from the POTUS. They want to bring their overseas profits back to the U.S. at low, low tax rates. They want special tax breaks for providing prescription drug coverage to their white collar employees. They want special “fixes” to healthcare reform so they can be sure they’re being heard, as opposed to “talking to their dog,” as apparently talking to the administration feels to little old them. But mostly they want deference. Lots and lots of deference. Peep the opening three paragraphs of the Politico story referenced above:
After business leaders sank millions into the midterms to defeat Democrats, a chastened Obama administration is seeking reconciliation with the corporate community.
But after two years of building frustration, the executives say they won’t be won over by another round of private lunches and photo opportunities at the White House.
If President Barack Obama has any hope for a truce with corporate America in time for his 2012 reelection campaign, he needs to drop the name-calling, try to see their point of view better and step up with some specific proposals.
Got that, Mr. President? Jesus, take the wheel. Read the whole thing — if you can stomach it — here.
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“The top 20% are prospering and spending money; the bottom 80% are not, but thanks to vast wealth disparity, the top slice of households can keep consumer spending aloft. This provides an illusion of “recovery” that masks the insecurity and decline of the bottom 80%.” ~ Charles Smith http://bit.ly/cAGBET
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Do people see through greed???
Oh wait, corporations are people too.
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