As share of GDP, profits soar and paychecks plummet
NARRATIVE #1:
Barack Obama is a socialist, secular Marxist who hates business and wants to steal from the producers and give to the “takers.” Through overregulation, high taxes and “uncertainty,” he has made it all but impossible for American business to make a profit.
————————
NARRATIVE #2 (in graphic form) :
Source: New York Times, U.S. Bureau of Economic Analysis
As Floyd Norris notes in the New York Times:
“In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent.
During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent.
For companies, these are boom times. For workers, the opposite is true.”
Now, which competing narrative should you accept? I suppose it’s like shopping for a new car or television set — it depends on what you want in a narrative. If you are less concerned with attributes such as accuracy and hard data, but more in emotional satisfaction and confirmation of pre-existing bias, if you like to believe that government taxation and regulation are killing the economy and you don’t require data to sustain that notion, you’d go with Narrative #1.
On the other hand, if you like your narratives to be data-driven and fact-based, you might find Narrative #2 more to your liking. In addition to the charts above, Narrative #2 is supported by the fact that total corporate taxes as a percentage of corporate profit are considerably lower than at any time in the past 50 years, and that personal taxes as a percentage of personal income are also much lower than the 50-year average.
Some words of warning, however:
Should you subscribe to Narrative #2, you have to confront the fact that the long-term trends documented in the charts above show no signs of abating. To the contrary, there is every reason to believe that wages and salaries will continue to fall as a proportion of economic output, and that corporate after-tax profits will continue to increase.
And should you subscribe to Narrative #1, there is again every reason to believe that wages and salaries will continue to fall as a proportion of economic output, and that corporate after-tax profits will continue to increase. But you will be blissfully unaware of such things.
– Jay Bookman
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252 comments Add your comment
Occupy Congress (aka The Tea Party)
November 28th, 2011
12:01 pm
Obama is a corrupt shill for corporations. Fire him.
Good data jay.
Also, buy stocks. They’re good for your future.
Peadawg
November 28th, 2011
12:07 pm
What’s the point of this article? I don’t see anything about possible solutions to anything…just pointing out a fact.
Occupy Congress (aka The Tea Party)
November 28th, 2011
12:07 pm
Jay. Btw. Ever heard of a venn diagram?
Narrative 1 and 2 are not mutually exclusive.
barking frog
November 28th, 2011
12:11 pm
the reality of President Obama is not the delusion of the
right or the left. He is left centrist and has followed the
course mapped out by his predecessors and his promises.
His personal habits and family values could not be better
for a candidate. I would describe him as a brilliant pragmatic
politician and a fearless one.
Jay
November 28th, 2011
12:11 pm
Peadawg, defining the problem is the first and essential step in correcting it. And so far we have been unable to accomplish that feat.
If Narrative #1 is correct, a series of steps then flows from that fact.
If Narrative #2 is correct, a whole different set of steps then flows from that fact.
Mick
November 28th, 2011
12:11 pm
It’s pretty obvious that the haters need a theme to cover up their irrational prejudices…
all opinion, no solutions
November 28th, 2011
12:13 pm
Asking a serious question Jay, what is the solution? So corporations have cut costs and expenditures and still find a way to make a profit. What’s your solution, raise the corporation tax to 50, 60, 70, 80 percent? Raise taxes on Billionaires? All you are doing is giving gov’t and politicians more money to play with and buy votes with. There will still be income disparancies.
Filter
November 28th, 2011
12:13 pm
Check this out….
AJC HEADLINE ***Gas prices dropping; may stay down through 2011***
http://www.ajc.com/business/gas-prices-dropping-may-1243328.html
Now since the Right screamed their blame of the President when Gas Prices were high, does he now get to take the credit since they are falling?
getalife
November 28th, 2011
12:14 pm
Their goal is cheap labor and low taxes to compete in the global market.
I remember a meeting in my only corporate job when we were discussing off-shoring all jobs to China.
I asked how this would help the American worker?
They laughed and said buy stocks.
Soothsayer
November 28th, 2011
12:15 pm
Jay, you’re wrong. Wages are going up. Take a look at this chart.
Redneck Convert (R--and proud of it)
November 28th, 2011
12:15 pm
Well, I vote for this Narrative 1. This Obama is a Commie and hates business. What we need is a good Republican President that will put God back in the White House and get the Gays on the run again. Oh sure, the banks and Wall Street will go back to stealing from us again when that happens, but you expect a little loss in the harvest. And we need to get rid of this EPA. I want to go back to the good old days when I could pour my used motor oil in the creek and throw my old tires on somebody’s land without having the cops all over me.
Besides, all of us want Kayaker to go back to work and quit griping. That ain’t going to happen till we can get another housing bubble going and he can start cheating builders again.
Anyhow, seeing as how it’s beanie weenie time, that’s all I got to say. I hope everybody is working hard and not stealing from your boss by using his PC to check the online sales.
Don't Forget
November 28th, 2011
12:15 pm
The way I see it, there is a world wide labor market glut. This is increasing profits but reducing the purchasing power of consumers. The meager increase in the wealth of the Chinese worker is not enough to drive the world economy especially with their barriers to trade. Tax policy can’t fix this and we are just wasting time pretending that it can. We are on an unsustainable path.
Occupy Congress (aka The Tea Party)
November 28th, 2011
12:16 pm
The “solution” of course is to raise tax rates to 90% like the good ole liberal days…..
getalife
November 28th, 2011
12:17 pm
pea,
Baby steps.
Be patient.
They BOTH suck
November 28th, 2011
12:18 pm
But but but
what about trickle down?
barking frog
November 28th, 2011
12:18 pm
Soothsayer, compare GDP in china to GDP in the US…
Occupy Congress (aka The Tea Party)
November 28th, 2011
12:20 pm
Getalife 12:14
Nice make believe story. You would have more cred if u stopped with those BS stories
Butch Cassidy
November 28th, 2011
12:20 pm
Anyone else notice that whenever Jay puts up a chart, there are two things that are consistent:
1. Things begin to gradually diverge around 1980
2.Things seem to rapidily diverge around 2000.
The only time that the two graphs are even remotely in sync is around 2008 -2009 when everyone got slammmed across the board. However, since then, the trajectories seem to continue the upward/downward track, and it’s NEVER in favor on the wages side. Not pointing fingers, just curious as to how the party faithful account for this under 30 years of “trickle down” economic policy.
getalife
November 28th, 2011
12:20 pm
frog,
Do you know the percentage of our gdp made by our too big to fail banks?
Peadawg
November 28th, 2011
12:21 pm
“what about trickle down?” – Like this?
http://www.youtube.com/watch?v=TTpKOFte6JE – American Pie Stiffler Getting Pissed On
They BOTH suck
November 28th, 2011
12:21 pm
Occupy Congress
People and business actually paid 90%? Really
That was the effective rate?
Really
Soothsayer
November 28th, 2011
12:22 pm
frog, the Central Government sets the GDP in China since it is a command economy.
getalife
November 28th, 2011
12:23 pm
jm,
True story.
Butch Cassidy
November 28th, 2011
12:23 pm
getalife – “Do you know the percentage of our gdp made by our too big to fail banks?”
I believe that it’s somewhere around 77%.
carlosgvv
November 28th, 2011
12:24 pm
This story has been going on since the dawn of History. The rich get richer and the poor get poorer. At some point, the poor won’t take it any more and revolt. This will happen is American eventually. What form it will take is anybody’s guess.
barking frog
November 28th, 2011
12:25 pm
getalife, i think 7-8% but I don’t remember where that came from
and i’m too lazy to look it up..
USinUK
November 28th, 2011
12:27 pm
carlos – 12:24 – you say that … the 1% hear this
http://www.youtube.com/watch?v=TYpYs9GBXwY
barking frog
November 28th, 2011
12:27 pm
soothsayer, so no china figures can be relied on?
JamVet
November 28th, 2011
12:27 pm
On the other hand, if you like your narratives to be data-driven and fact-based, you most definitely are not a Reagan/Gingrich/Bush Republican.
End corporate welfare. Now. End the handouts, giveaways, subsidies, “shelters” and other legalized tax dodges, sweetheart deals involving OUR assets and let them for the first time ever learn how to survive using capitalism.
No more Uncle Sugar propping up the banksters and Titans of Industry and picking the winners and losers. None of them.
Step up prosecutions for criminal negligence and malfeasance. Send CEOs and other executives to prison if convicted.
Expand shareholder rights.
END CORPORATE PERSONHOOD.
Publicly fund elections.
Tax derivative trades and other speculations heavily.
No more socialism for BIG business and capitalism for the rest of us.
Occupy Congress (aka The Tea Party)
November 28th, 2011
12:27 pm
Tbs
Marginal
getalife
November 28th, 2011
12:29 pm
6 banks control 66 % of our gdp.
666.
Evil doers.
Jm
November 28th, 2011
12:30 pm
Butch Cassidy 12:23
Oh dear. Lots of ignorance displayed in your post
Butch Cassidy
November 28th, 2011
12:30 pm
getalife – “6 banks control 66 % of our gdp”
Hey, I was close.
Jm
November 28th, 2011
12:31 pm
“6 banks control 66 % of our gdp.”
More ignorance
Butch Cassidy
November 28th, 2011
12:31 pm
Jm – “Oh dear. Lots of ignorance displayed in your post”
Wow, I was off by 10%. So that equates to “Lots” in your world? No wonder you think your getting ass raped by taxes.
nelsonh
November 28th, 2011
12:31 pm
The issue is are the every day worker in the U<S. living in a substandard way and the answer is an emphatic no. H/she does not. The every day worker has flat screen tv, late model car, plentiful food and good schools for his children. The Captains of industry are getting richer, they are smarter for one thing. They invest in the market where the workers invest only in their creature comforts.
It is time to get off the dime and give credit where it is due. There are no sweat shops, child labor or unheALTHY working conditions, the workers of the country haVE NOTHING TO COmplain about
I have said it all, times could not be better.
Stevie Ray
November 28th, 2011
12:31 pm
JAY,
This is predictable given the uncertainty surrounding government relationship with business combined with techological strides and the need to compete globally (see Jeffrey Immelt). I’m not sure what the point is here, if this is a real problem as opposed to a rally cry (aka Big ED) for more costly union labor. Perhaps many are finding the pay and benefits are much better with our state and federal governments. Do you have any data on the changes in salary and benefits of government employees?
That my be fun information to peruse…don’t you think?
Jm
November 28th, 2011
12:32 pm
Comparing assets to income production (GDP) is apples to oranges
Fact #1: liberals don’t know what they’re talking about
TaxPayer
November 28th, 2011
12:33 pm
Oh dear. Lots of ignorance displayed in your post
Do the words form a picture of jm.
getalife
November 28th, 2011
12:34 pm
jm,
Just use one name because Jay busted you again.
Do you have mental problems?
Jm
November 28th, 2011
12:34 pm
Butch you’re erring by 50%
Butch Cassidy
November 28th, 2011
12:34 pm
Here ya go Jm
When we contacted Sanders’ office, a spokesman provided testimony to a congressional oversight panel by Simon Johnson, a professor of entrepreneurship at the MIT Sloan School of
Management. “Our six largest bank holding companies currently have assets valued at just over 63 percent of GDP,” Johnson testified, citing figures for the fourth quarter of 2010. “This is up from around 55 percent of GDP before the crisis (e.g., 2006) and no more than 17 percent of GDP in 1995.”
Granny Godzilla
November 28th, 2011
12:34 pm
I feel sorry for the folks who don’t understand how
horrible conservative economic policy is.
They are doomed to keep suffering.
Soothsayer
November 28th, 2011
12:36 pm
“soothsayer, so no china figures can be relied on?”
Not that. The GDP numbers are real. It’s just that the Chinese government determines what the GDP will be. If they say 8%, then 8% it is.
The easiest way to reach these GDP numbers is by building apartments. That’s why China has over 65,000,000 vacant apartment high rises.
They are vacant because the workers shown in my previous chart cannot afford them.
I post a short video on this subject in a minute.
USinUK
November 28th, 2011
12:37 pm
“They are doomed to keep suffering.”
but, like most martyrs, they actually think their suffering will have a big payoff at the end
Jm
November 28th, 2011
12:37 pm
Butch
That is an irrelevant metric
That’s like saying if you have a million dollars in assets and you make $50,000, then you’re a menace because of you’re wealth
It’s nonsensical
Stevie Ray
November 28th, 2011
12:38 pm
Interesting dialogue on assets held by banks. Two questions I haven’t researched. First, how much of these assets are home loans not qualified to be surrendered to FM/FM or HUD (commercial)? Of that amount, what was the comparative value of these assets 5 years ago? Also, what is the comparative quality of these assets?
Also, do these asset numbers include our deposits or simply non-cash assets?
Jm
November 28th, 2011
12:39 pm
Botch. I mean butch.
Compare bank assets to national wealth. Or financial services income to GDP.
Don’t mix the ratios.
Recon 0311 2533
November 28th, 2011
12:40 pm
Of course GDP has been hovering around 2% or less and real unemployment around 16%. Those are the real conditions in serious need of repair. Jay, charts don’t provide repair solutions only political diversions intended to spin a failed presidency.
Butch Cassidy
November 28th, 2011
12:41 pm
I merely responded to the question asked by getalife.
“Sanders’ math is correct — in fact, the percentage he offers is actually a little low. And he’s careful to say only that the banks’ assets are only “equivalent” to 60 percent of the United States’ GDP, not that the banks own 60 percent of the United States. Sanders doesn’t note that big banks in other countries are far bigger, compared to their nations’ GDP, than the U.S. banks are. Still, on balance, we rate his statement True.
But hey, as long as the banks are growing and not lending, you should be happy as a clam.