A Bird's Eye View of the Enronomy

[TahitiNut]

I dabble in some cursory macro-analysis of various economic and employment data in order to better inform myself. (Some of you have seen my occasional posting of the graphs I irregularly update.) In an attempt to get some improved understanding of how one person (a typical Busholini reichbot) can extol the virtues of today's enronomy and another (me, for example) can decry the increased economic disenfranchisement of working people, I went to the BEA's National Income figures to "follow the money."

The best I can show it is in this graph:




What we see is the greatest share of income in recent history (the last half-century) going to corporations in after-tax profits. We also see the least share of income in recent history going to employees.

The "ownership class" is in hog heaven.

The "working class" is being impoverished.

"Supply side" enronomics just doesn't fucking work except to enrich the rich!

It should be noted that I show Employee Compensation less payroll taxes only. It should also be noted that Employee Compensation includes the obscene compensation for CEO's and COO's - and thus doesn't adequately show how much more damage has actually been done to ordinary workers. Remember, labor is the sole source of wealth.

This abject failure in just and equitable distribution of national income is systemic - part of the rape of our nation by the Busholinis. Much has been noted regarding the "tax cuts" that benefit almost solely the wealthy. What hasn't been as often noted is the historically low taxation of corporations - yet another 'entitlement' for the ownership class that accelerates the rate at which the wealthy become wealthier.




I really don't know of a more succinct way to depict the enormous systemic damage to the economy that the Busholini Regime has wrought in just a few years. It's appalling. This is the Corporatism (ownership class fascism) that Eisenhower and others warned us of.

[LittleApple81]

1. Wow. Thanks Tahiti. It is a great visual image of what is going on.nt

[TahitiNut]

18. I'm pleased some find it revealing.

Perhaps one point deserves a little emphasis: generally speaking, and particularly in the manufacturing sector, employment costs precede the resultant revenues. (Corollary: only in very few instances do compensation costs follow revenues; sales commissions are an example.)

Let's think about it. A person assembles widgets for subsequent sale. Thus, the costs of assembly precede the revenues of the sale. A person designs a more cost-efficient business process. The costs of analysis, design, and implementation of the business process all precede the increased operational revenues and decreased operational costs associated with the new process. Indeed, if the operational analyst is then laid off, even his/her compensation is saved even though the benefits of his/her work continue to accrue to the business.

In the retail service sector, of course, the revenues occur simultaneous to the compensation costs. A burger-flipper is actually paid after the sale of burgers flipped. But that's not true for the entire service sector. Architects, doctors, and lawyers all work mostly in the services sector. To the degree that the value of their services are realized subsequent to the performance of their service (and compensation), we still have the rule satisfied.

Why do I bring this up? Because some might think that the simultaneity of reduced employee compensation with increased after-tax corporate profits actually rationalizes lower employment. This is deceiving. To the degree this is true at all, it's only in the shortest possible term. In all instances, cut backs in employment are followed by reductions in corporate income. There's a very real limit to the degree to which continued layoffs and workforce reductions serve short-term after-tax profits without threatening the very viability of the enterprise itself.

Corporations make money in any longer term solely due to the efforts of their employees - even in brokering or derivative-trading enterprises. Labor creates wealth. Without labor there is no wealth. Without labor there is no value to 'the means of production.'

Make sense?


What we're seeing in the macro sense is the diminished value-added (i.e. 'productivity') of the "management class." This is a picture of an overall economy motivated not by baking bigger pies but by making sure that the wealthy get an ever-increasing share of a smaller pie - motivated by relative wealth rather than growth of wealth. There is really only one productive purpose of management: deployment of labor in the creation of wealth. As more labor is available and more wealth is not being created, the management class is a failure. As the management class increasingly regards their role as the relative enrichment of the wealthy (owners) and themselves irregardless of the equitable compensation of labor, the economy (and each enterprise within that economy) is harmed. (This is management according to Drucker.)

In effect then, we're seeing owners selecting (hiring) worse and worse managers - managers like DimSon and Dickie-Doodoo.

[On the Road]

2. I Wouldn't Mind Lower Corporate Tax Rates

if personal income taxes were made more progressive. Or even the reverse. The combination of the two is unquestionably making the rich richer, while everyone else's after-tax income is stagnating or worse.

[JHB]

3. Corporate & Personal Income taxes should be syched up...

...otherwise people at the high income end will just shift assets to whichever is more favorable to them.

[AP]

13. Corp and Peronal taxes should both be progressive, and, even more import-

antly, we should NOT tax earned income at a higher rate than unearned income (interest income, dividends, and cap gains).

All wealth created in America comes from work. Even unearned income comes from wealth created by work, and if it doesn't, it isn't real wealth -- it's a bubble that will pop unless it's filled with something real.

[TahitiNut]

4. When we tax unearned income at less than half the rate of earned income ..

... we make it virtually impossible for workers to accumulate wealth at anywhere near the rate at which the wealthy accumulate wealth.

Labor and labor alone creates wealth. Productive property has no value without labor. (Unless there are people who will work the cotton fields, those fields have no productive value.) The fundamental question is how that wealth is distributed between workers and owners. (This is indirectly measured by the GINI Index which is over 42 and going up in the US.) Then, after it's systemically allocated, how do we equitably fund the very system of governance that makes ownership itself possible? Government's increasingly predominant role is in enforcing ownership entitlements. So, who should pay for it? Why are those compensated least and receiving the least benefit bearing the greatest burden?

[AP]

14. I should have read this before I posted...

...I totally agree. And what you described is what Clinton warns about on p78 of My Life.

[TahitiNut]

15. GMTA

It's amazing how few really understand and appreciate this.

[Beetwasher]

5. Kick

Thanks TN!

[TahitiNut]

6. {grin} I wonder what it is about the dismal science ...

... (or maybe the graphs?) that allows me to hear the crickets chirping. :silly:

[Jim Warren]

7. Appreciate the work

Thanks for the graphs, worth many words and if it's okay I'd like to save them for future reference and use.

[TahitiNut]

12. Sure ...

The data are all available from BEA ...
http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Popular=Y
http://www.bea.gov/bea/dn/nipaweb/TableView.asp#Mid


For these, I use "Table 1.1.5. Gross Domestic Product" and "Table 1.12. National Income by Type of Income," both quarterly.

[unkachuck]

8. I like the way....

....the top chart was working around 1970. What were we doing right?....can we do it again?....

[TahitiNut]

10. In the70s, the politicians were finally under the scrutiny of activists ..

... from coast to coast. It wasn't just about the Viet Nam War. Their feet were being held to the fire on a wide range of issues. Politics was "trendy."

Then we got indolent. Our indolence was exacerbated, in no small part, by the discontinuation of the draft. We got "bread and circuses."

[porkrind]

9. Thanks, Nut.

I always love reading your posts. Thanks for keeping us informed.

---

Read about the Right-Wing "Master Plan": http://www.zmag.org/chomsky/sam/sam-contents.html

Have you read "War is a Racket"?: http://lexrex.com/enlightened/articles/warisaracket.htm

[charlie]

11. A timely corollary in Salon today

in light of the Fed's expected rate increase:

Squeezing Workers

...

If Greenspan raises rates, what does he expect the move will actually accomplish? Most who comment on this topic treat rising interest rates as a necessary, inevitable, irresistible reaction to rising prices. The motivation and the mechanism are beyond the scope of an intelligent question. And so the press does not ever ask what the exact link from rising interest rates to inflation control might be.

For members of the Federal Reserve, which meets in private, there is no similar excuse. They know. They know that the only reason to raise interest rates is to slow down the economic growth rate and so to increase unemployment. Their theory -- the only theory they've got -- holds that rising inflation is a consequence of labor markets that are too tight, of unemployment rates that are too low, of wages rising faster than prices and rising real wages squeezing real profits.

But wait. We know this is not the case. We are still short well over 1 million jobs compared with where we were four years back. We are still at least 5 million jobs short of what we should have. And while productivity is rising, real wages are falling. Whatever is pushing up prices, in other words, it isn't wages. The only thing in full boom right now is corporate profits -- up a stunning 40 percent over the past year.

The inflation the United States is experiencing isn't demand-driven. It's a product of the war, oil price uncertainty and monopolistic manipulations in sectors like healthcare.

http://www.salon.com/opinion/feature/2004/06/28/inflation/

Remember Greenspan's flummoxed handwringing over the inordinately low unemployment, low inflation, and rising wages during the nineties? I wonder if he's taken a lesson from that experience?

[Ripley]

16. Americans expectations have been severely lowered.

If I were to show those charts to most people round here...they'd say, "Well I never got hired by a poor guy," or "If you don't let the Corporations make money, how can they hire people?" blah blah blah.

I used to think the fatalism I see in the dirt poor people here in the Deep South was just a local phenomenon. Evidently it is widespread in Murika.

Be thankful to the Lord that at least You Know You're Free! bleh.

[TahitiNut]

17. It's an epidemic of low self-esteem, I think.

It's the same reason there's such a "kill 'em and let God sort 'em out" attitude and, in concert with the Busholinis, an obsession with lowering standards to rock bottom.

DimSon actually tries to compare himself with Saddam Hussein and feels the simultaneous need to paint Saddam as even more dastardly than he was ... as a former ally, no less. If we listen carefully, it's like DimSon is competing with Saddam in an election. It's disgusting. He doesn't look good even in that low of a comparison.

Also listening carefully to their ads and talking points, we can hear the madministration use August of 2003 as the "benchmark" for job creation. Interestingly, August 2003 is the lowest point so far in this employment disaster of an enronomy - a point which marked the loss of 3.434 million jobs since December 2000. They look for the LOWEST standards (ones which they themselves dig) -- and even then fail to look good in comparison!!

[TahitiNut]

19. last kick

:eyes: