Weekend Economists Salute Our Favorite Bunnies March 29-31, 2013

[xchrom]

27. Profit Share Hits Post-War High and the Post Doesn't Notice by Dean Baker

http://www.commondreams.org/view/2013/03/30-0



The revised GDP data for the fourth quarter released yesterday showed the profit share of corporate income hitting 25.6 percent. This is the highest since it stood at 25.8 percent in 1951. However if we look at the after-tax share of 19.2 percent, we would have to go back to 20.8 percent share in 1930 to find a higher number, excepting of course the 19.3 percent number hit last year.


To put this in context, the after-tax profit share was just 14.5 percent in Reagan's Morning in America days. The difference would have come to roughly $330 billion last year. To put this in the 10-year budgetary window that is the standard framework in Washington these days, the rise in after-tax corporate profits since the Reagan era can be seen as equivalent to a $5.0 trillion tax on the nation's workers.

This surge in profits in a weak economy (profits tend to move with the cycle) is striking but readers of the Washington Post version of AP piece on the data wouldn't know anything about it. This piece includes no mention of the jump in corporate profits in 2012.

There are a few other issues that the piece could have better presented to readers. It noted that:

"The fourth quarter was hurt by the sharpest fall in defense spending in 40 years."