Two data points:
1.) Corporate profits — corporate after-tax profits — reached $1.75 trillion in the third quarter of 2012, an increase of 18.6 percent over a year ago. In fact, corporate after-tax profits now account for a bigger share of the national economy than at any point since World War II ended.
2.) Workers’ wages, on the other hand, now account for just 43.5 percent of our national economy. That is the lowest share of the national economy going into workers’ paychecks that has been recorded since World War II.
In fact, when you combine those two statistics into a single chart, you have created a snapshot of the single most important, consequential long-term issue facing both the U.S. economy and the U.S. political system. It looks like this:
In the chart, the share of the national economy, or GDP, going to workers’ paychecks is in blue. The share of the economy that is going to corporate profits is in red. (Note that in this combined chart, the two statistics have separate scales.)
Again, those are after-tax profits. While corporate chieftains complain that taxes and regulation and unions have made it difficult to do business here — Bernie Marcus of Home Depot is fond of complaining that he and Arthur Blank could never have created that company in today’s business climate — in reality times have never been better in terms of corporate profitability.
There is every indication that this isn’t the end of it, and that both trends will continue over the long term. They are being driven by factors such as technology and globalization, which empower and enrich capital while undercutting the ability of workers to demand anything close to their previous share of the economic pie.
These trends also create the backdrop for the battles being fought in Washington. Should government attempt to compensate in any way for the massive shift in income distribution away from employees, such as by providing health-care and education assistance? Or must government serve only as a disinterested bystander during this historic transfer of economic wealth and power?
The 2012 election was in some ways a referendum on that question, but its verdict was far from definitive. To the contrary, this conflict will continue to provide the subtext of American politics for at least a generation. The fiscal cliff, entitlements, Obamacare, the 47 percent, the 1 percent, corporate taxes, CEO pay, Wall Street, Medicare — the entire spectrum of economic issues confronting our political system is being driven by the forces portrayed in this chart.
– Jay Bookman