Since 1990, Corporate Profits Up 200%, Household Income Up 2% - BCA

[Wiseacre]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

 

[Toro]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

The Bank of America Merrill Lynch study I referenced earlier broke down the increase in profit margins. They conclude that about 3/4s is due to an increase in profitability within the tech industry. Some of that is due to the rise in software companies, which are inherently more profitable than hardware companies. Some of that is due to an increase in profits made abroad. But some of that is due to aggressive tax avoidance strategies. And some of those strategies are egregious. For example, tech companies will transfer their intellectual property offshore through perfectly legal but highly questionable inter-company transfers, whereby the technology - created in America - is "sold" from the American company to an offshore subsidiary. The company sets the price at which the technology is "sold" even though there is no market for the technology. For example, Microsoft isn't going to sell its core technology to Oracle. But it sells its core technology to a Microsoft sub in Ireland or Bermuda. The offshore sub then charges the parent for use of the technology and those charges accrue to the company offshore tax-free. This is perfectly legal but can be stopped by changes in the tax laws. However, the tech industry has a heavy lobbying presence to stop that, and has done so successfully.

I do agree that the goal of a corporation is to maximize profits, and it can pay its executives whatever they want. However, corporate governance is very poor in this country, and shareholders rights are weak compared to the powers of management. There is a difference between managements' interests and shareholders' interests. That is known as the "agency problem." It is very difficult and expensive to remove board members, for example, and shareholders rarely sit on corporate boards. Shareholders are rarely successful in proxy fights, for example. Nomination to boards are heavily influenced by management, which gives them significant influence over boards, and thus their own compensation. Thus, given the structure of American corporate laws, management has more say over how it pays themselves. Compare this to many countries in Europe, where shareholders have more say and have much more influence and power over boards. It is much more common for shareholders to remove executives in much of Europe. Even though executive pay has exploded in America, it has not in Europe, even though corporate performance in Europe hasn't been much different than in America. Oh, and there have been several pay studies which have shown within America that there is little relation between pay and performance. IOW, higher pay does not lead to better performance. So, yes, when we say that companies are private entities, they operate within the laws of the state in which they are incorporated, and according to the rules of exchanges if they are publicly listed. Corporate managements thus often resist changes that are shareholder friendly by lobbying politicians and bureaucrats to not change anything that affects their compensation and influence, even if it is better for shareholders. For example, the Chamber of Commerce fiercely resisted "Say On Pay" rules, which attempt to give shareholders more say on how executives are paid. That's because managements' interests diverge from shareholders.

 

[Wiseacre]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

The Bank of America Merrill Lynch study I referenced earlier broke down the increase in profit margins. They conclude that about 3/4s is due to an increase in profitability within the tech industry. Some of that is due to the rise in software companies, which are inherently more profitable than hardware companies. Some of that is due to an increase in profits made abroad. But some of that is due to aggressive tax avoidance strategies. And some of those strategies are egregious. For example, tech companies will transfer their intellectual property offshore through perfectly legal but highly questionable inter-company transfers, whereby the technology - created in America - is "sold" from the American company to an offshore subsidiary. The company sets the price at which the technology is "sold" even though there is no market for the technology. For example, Microsoft isn't going to sell its core technology to Oracle. But it sells its core technology to a Microsoft sub in Ireland or Bermuda. The offshore sub then charges the parent for use of the technology and those charges accrue to the company offshore tax-free. This is perfectly legal but can be stopped by changes in the tax laws. However, the tech industry has a heavy lobbying presence to stop that, and has done so successfully.

I got no problem with changing the tax code for corps, eliminating loopholes and tax breaks and so on. Seems to me we'd be better off if we significantly lowered or even eliminated corp business taxes in an effort to spur more investment here and reduce the need for chicanery. Or else get a lot tougher on enforcement and resultant penalties for those who cheat. But you're talking about tax avoidance rather than profitability, which is a different issue.

I do agree that the goal of a corporation is to maximize profits, and it can pay its executives whatever they want. However, corporate governance is very poor in this country, and shareholders rights are weak compared to the powers of management. There is a difference between managements' interests and shareholders' interests. That is known as the "agency problem." It is very difficult and expensive to remove board members, for example, and shareholders rarely sit on corporate boards. Shareholders are rarely successful in proxy fights, for example. Nomination to boards are heavily influenced by management, which gives them significant influence over boards, and thus their own compensation. Thus, given the structure of American corporate laws, management has more say over how it pays themselves. Compare this to many countries in Europe, where shareholders have more say and have much more influence and power over boards. It is much more common for shareholders to remove executives in much of Europe. Even though executive pay has exploded in America, it has not in Europe, even though corporate performance in Europe hasn't been much different than in America. Oh, and there have been several pay studies which have shown within America that there is little relation between pay and performance. IOW, higher pay does not lead to better performance. So, yes, when we say that companies are private entities, they operate within the laws of the state in which they are incorporated, and according to the rules of exchanges if they are publicly listed. Corporate managements thus often resist changes that are shareholder friendly by lobbying politicians and bureaucrats to not change anything that affects their compensation and influence, even if it is better for shareholders. For example, the Chamber of Commerce fiercely resisted "Say On Pay" rules, which attempt to give shareholders more say on how executives are paid. That's because managements' interests diverge from shareholders.

In this instance we oughta be more like Europe in terms of shareholder rights and governance. Seems to me the compensation for top execs should be tied to the company's profitabilty, with full transparency required. If a CEO's proposed compensation for a given year exceeds the company's profitability year over year by say 5%, then it oughta be required to approve that by shareholder vote, "Say on Pay" as you said. Which means we gotta do something about lobbyists and campaign finance so that such changes are not killed in Congress. But you're still not talking about a corps' profitability, you're looking at compensation. Which is fine but isn't the subject of the thread.

 

[Flopper]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

I agree with much of your post however, I believe there is as there should be ethics in business, not just doing whatever is legal to make a profit. If you have good legal talent on board you can get away just about anything. I believe that companies that try to deliver the best product, treating their customers, shareholders, and employees fairly do better in long run.

 

[Wiseacre]

It's a bogus measure due to the demographic changes of households. We have a higher mix of single person households now.

According to America's Families and Living Arrangements: 2010, the average household size declined to 2.59 in 2010, from 2.62 people in 2000. This is partly because of the increase in one-person households, which rose from 25 percent in 2000 to 27 percent in 2010, more than double the percentage in 1960 (13 percent).

Newsroom: Families & Households: U.S. Census Bureau Reports Men and Women Wait Longer to Marry

We also have a greater number of people entering the workforce at the bottom levels. And we have less upward mobility in wages due to increased productivity, automation, outsourcing, and a host of other factors. It would therefore be unreasonable to expect the median household to rise by any measure over the past 20 years.

Where as total corp profits over the past 20 years would be expected to be quite high, you gotta turn a prfit or you're gone. Comparing these two statistics is meaningless, neither has anything to do with the other.

wise
there IS A DIFFERENCE between 'turning a profit' and 'making RECORD profits'

it seems you are interchanging them.....

of course any business needs to make a profit to continue with the business....but the business does not have to make huge profit increases, to where they set some of their all time profit percentage record highs imo!

In the free enterprise market system like ours, profitability is the goal, the more the better. If you limit the amount of profitability that is acceptable, then to some extent you disincentivize entrepeneurs and business people to create new businesses and more jobs. In today's global economy the disincentives that we have here in the US in one reason why our economy isn't doing better.

I think you are suggesting that a business should pay it's employees more than they are worth and be less profitable as a result. So now a competitor or even a foreign company starts making the same product for a cheaper price, you're kinda fucked. What then, you gotta layoff some people and cut wages to compete.

In fact some might aso be suggesting that a highly profitable company should be penalized with higher taxes than a less profitable one, so that the two companies come out more equal. Do you really think a less efficient company should make the same profit as the more efficient one? In the long run, what kind of society do you think you end up with if you do that?

 

[Wiseacre]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

I agree with much of your post however, I believe there is as there should be ethics in business, not just doing whatever is legal to make a profit. If you have good legal talent on board you can get away just about anything. I believe that companies that try to deliver the best product, treating their customers, shareholders, and employees fairly do better in long run.

Oh absolutely, profitability shouldn't be the sole driver in a company's decision making. Makes me think of BP and Enron. No doubt there are many cases where a company's emphasis on the bottom line was too much relative to the other concerns you mentioned. But - you can't tell if a specific company's profit margin is due to that or the fact that they are more effectively managed. Unfortunately in today's world it's all about the bottom line and share price. Ethics in business is not what it used to be, and I don't think you can legislate that.

 

[whitehall]

It has been the best of times for corporate profits, but rather less so for consumer incomes. Corporate earnings have soared 200% since 1990 while real median family incomes have increased by only 2%.

These data come from a recent article entitled, "High Profit Margins and Stagnant Real Incomes: Is Capitalism Working Properly?"

It didn't appear in The Nation but rather in The Bank Credit Analyst, the highly respected, long-time financial and economic research service that would never be thought of as some hotbed of populist fervor. And the author is not Michael Moore but Martin Barnes, the Bank Credit Analyst's long-time managing editor and self-described "dour Scot."

Moreover, rather than calling for a storming of the ramparts, Barnes poses questions of concern for the most self-interested of capitalists. Can the current high level of profit margins be maintained? Even more basically, can the corporate sector continue to prosper while the average consumer struggles?

What's stunning about the current cycle is that, despite a weak economic recovery, profit margins are near historic highs, albeit short of their historic peak in 2005. A major driver has been earnings from abroad, which have increased to 35% of total U.S. company profits from 20% since 1999. …

Bottom line, the main factors that have propelled corporate profits—cost-cutting, financial profits and overseas earnings—are waning. Even so, companies have done a far sight better than workers, as noted earlier. Since 2000, they've fallen even further behind; profits are up 70% while real median family incomes are down 2%.

Part of that has been because consumer prices have risen faster than corporate selling prices, which reflect costs of capital goods which have been held down by technology, Barnes notes. "However, it seems clear that labor has not received its fair share in recent years, even when using corporate prices," he adds, falling 4% short of what would be expected based on productivity gains.

"Ultimately, the health of the corporate sector depends on the financial health of its customers. Thus, the divergence between rising profits and weak growth in real consumer incomes will have to change," Barnes asserts.

Corporate Profit Gains at Labor's Expense May be Hitting Limit - Barrons.com

Corporate profits ..R..us you left wing jerks. Every American pension plan is invested in the dreaded "corporate profits". Thank God for corporate profits or Barry Hussein would have us eating rice and riding on skate boards.

 

[waltky]

Uncle Ferd says...

... dat's why ever'thing cost twice as much now.

 

[LilOlLady]

Exucse me, Democrats have not had our money because Bush spent it all and now we have to borrow. Thanks master Bush. Two wars not funded almost ruined us financially and then there is illegal aliens who are costing us more then the state deficits are.

 

[Flopper]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

I agree with much of your post however, I believe there is as there should be ethics in business, not just doing whatever is legal to make a profit. If you have good legal talent on board you can get away just about anything. I believe that companies that try to deliver the best product, treating their customers, shareholders, and employees fairly do better in long run.

Oh absolutely, profitability shouldn't be the sole driver in a company's decision making. Makes me think of BP and Enron. No doubt there are many cases where a company's emphasis on the bottom line was too much relative to the other concerns you mentioned. But - you can't tell if a specific company's profit margin is due to that or the fact that they are more effectively managed. Unfortunately in today's world it's all about the bottom line and share price. Ethics in business is not what it used to be, and I don't think you can legislate that.

I worked for a guy some years ago who use to tell everyone who worked for him to stick with him and he would make us rich. The business did very well for a while and every one made good money but eventually things started falling apart. He was pulling some shady deals all nice and legal but dishonest. His best employees didn't want be part of it and left. The business finality folded. He did the same thing over again a couple times. He's now retired and pretty well off.

While he was screwing his customers and his employees, he was really screwing himself because he had real talent. Had he just realized that honesty really is the best policy he could have really made it big.

 

[Sallow]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

Well they kinda are..

What do you honestly think this "Too big to fail" stuff is all about? Most of the financial firms that were "too big to fail" were that way because they were flush with government cash in the form of government worker 401k accounts and other investments. Same with AIG which insures a good deal of government interests. And with most of these huge corporations, behind it are some very big government contracts. The money to pay for those government contracts comes from tax payers. And quite honestly, many of the high fliers in terms of income with many of these firms weren't around them for "30 years".

 

[editec]

What can we expect?

Over the last 40+ years we have systematically increased the political, legal and tax advantages of CAPITAL over LABOR.

Add to that, the changing TRADE policies (also giving enormous advantage to CAPTIAL at the expense of American labor) as well as the very real social and financial improvements happening in formerly third world nations, and OF COURSE the formerly affluent American middle classes are mostly going to take it on the neck.

Finally, there is the very real outcome of techologically and scientifically driven improvements in manufacturing and farming that result in the redundancy of more and more workers.

SOME of the above we can POLITICALLY change if we can find the political will to do so.

IMPROVEMENTS in efficiency, however, are the result of the organic effect of mankinds advancing technology and frankly, there is damned all that can be done about THAT without ALSO so radically changing the social contract.

It's not just the American middle class that is facing this problem, it's the middle classes of the industrialized world, and inevitably also, the emerging industrialized world to follow soon thereafter.

Here's what I know....CAPITAL is not willingly ever going to share the wealth, folks.

It never has, and it never will.

It has taken and it will always take radicaly philosophical changes in the social contract to really deal with these developments.

But those kinds of changes in social contract DO happen from time to time.

The change from Monarchist governance to representational governments worldwide was one example of that KIND of change.

The end of slavery in most of the world, since say about the 19th century, was still ANOTHER example of a radical change in the SOCIAL CONTRACT.

So, while I have very little hope that changes in the way mankind works generally are going to happen in my lifetime, I have some hope that eventually, that social contract IS going to change.

 

[Bfgrn]

What can we expect?

Over the last 40+ years we have systematically increased the political, legal and tax advantages of CAPITAL over LABOR.

Add to that, the changing TRADE policies (also giving enormous advantage to CAPTIAL at the expense of American labor) as well as the very real social and financial improvements happening in formerly third world nations, and OF COURSE the formerly affluent American middle classes are mostly going to take it on the neck.

Finally, there is the very real outcome of techologically and scientifically driven improvements in manufacturing and farming that result in the redundancy of more and more workers.

SOME of the above we can POLITICALLY change if we can find the political will to do so.

IMPROVEMENTS in efficiency, however, are the result of the organic effect of mankinds advancing technology and frankly, there is damned all that can be done about THAT without ALSO so radically changing the social contract.

It's not just the American middle class that is facing this problem, it's the middle classes of the industrialized world, and inevitably also, the emerging industrialized world to follow soon thereafter.

Here's what I know....CAPITAL is not willingly ever going to share the wealth, folks.

It never has, and it never will.

It has taken and it will always take radicaly philosophical changes in the social contract to really deal with these developments.

But those kinds of changes in social contract DO happen from time to time.

The change from Monarchist governance to representational governments worldwide was one example of that KIND of change.

The end of slavery in most of the world, since say about the 19th century, was still ANOTHER example of a radical change in the SOCIAL CONTRACT.

So, while I have very little hope that changes in the way mankind works generally are going to happen in my lifetime, I have some hope that eventually, that social contract IS going to change.

And the New Deal was a good deal for the middle class and working man.

 

[expat_panama]

Lovely graphic, it would be nice to know where it came from though it's hard to take seriously a rant that says the 'Great Depression was from 1922 to 1932...

 

[Bfgrn]

Lovely graphic, it would be nice to know where it came from though it's hard to take seriously a rant that says the 'Great Depression was from 1922 to 1932...

It is not so lovely. Maybe you misread the chart. The label is where the Great Depression began in 1929. There is no correlation to the size of the label and the timeline.

Here is another chart that shows the same metrics with different labels.

Here is that website:

Wealth And Inequality In America

 

[Flopper]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

Well they kinda are..

What do you honestly think this "Too big to fail" stuff is all about? Most of the financial firms that were "too big to fail" were that way because they were flush with government cash in the form of government worker 401k accounts and other investments. Same with AIG which insures a good deal of government interests. And with most of these huge corporations, behind it are some very big government contracts. The money to pay for those government contracts comes from tax payers. And quite honestly, many of the high fliers in terms of income with many of these firms weren't around them for "30 years".

We have had a rather liberal interpretation of anti-trust laws for years. Government has actually encouraged the growth of these financial giants. Much of their growth is by gobbling up competitors. Today, many are too big too fail. If the crash of 08 happened tomorrow, the government would have to do the same thing or see the entire financial system of the country and world collapse.

 

[Wiseacre]

I assume we're still talking about corp profits now, rather than personal income. On the business side, we've got public and private right? On the public side, a corp owes it's stockholders the best possible return on their investment. To do otherwise is dishonest IMHO. As long as they are within the law, there's no such thing as too much profit. Now if they want to pay their CEOs and top execs multi-millions, then they have to answer to the stockholders. But the rest of us should be out of it.

On the private side, it's a little different cuz the responsibility to stockholders isn't there. How much profit is too much for these guys? Question: who gets to decide that? Suppose a guy works for 30 years building up his company, is he/she not entitled to reap the rewards when success arrives? These guys put up the money, put in the time and effort, and took the associated risks. I'm not sure someone else should be authorized to say what the limit should be for anybody.

It's not like the rich guys are taking money away from the rest of us you know. It's not zero sum, I'd like to know who first lied about that. You take a rich guy with a couple hundred grand and he/she builds a business and in the process creates wealth. Say he bulds it up to a 5 million dollar business with say $500,000 of profit. So he made a pile of money, didn't he earn it? Didn't he risk ios own cash, create some jobs, pay taxes, spend more of his money than he would have?

This guy does something that a guy who only makes $50,000/yr can't do, unless he gets rich guys to invest their money in his business. Who has the right to decide how much profit is too much, I think it comes from class warfare arguments by the democrats who want to take more money from them in taxes so they (the dems) can spend it to get themselves re-elected.

Well they kinda are..

What do you honestly think this "Too big to fail" stuff is all about? Most of the financial firms that were "too big to fail" were that way because they were flush with government cash in the form of government worker 401k accounts and other investments. Same with AIG which insures a good deal of government interests. And with most of these huge corporations, behind it are some very big government contracts. The money to pay for those government contracts comes from tax payers. And quite honestly, many of the high fliers in terms of income with many of these firms weren't around them for "30 years".

We have had a rather liberal interpretation of anti-trust laws for years. Government has actually encouraged the growth of these financial giants. Much of their growth is by gobbling up competitors. Today, many are too big too fail. If the crash of 08 happened tomorrow, the government would have to do the same thing or see the entire financial system of the country and world collapse.

WHAT? I thought the Dems fixed all that with the Dodd/Frank bill.

 

[Wiseacre]

Okay, now we've left the discussion about corp profits and moved into personal tax rates, which is fine. I saw the graphs for the concentration of income, marginal tax rates, and the 1929 depression and the latest recession, but it's a stretch to say the former causes the latter. We've had a bunch of times ince 1950 where the GDP growth rate dropped below 0%, but the income disparity wasn't so great then. So that theory is not exactly true every time. There are a myriad of factors involved in a severe economic downturn, I see no logic yet that convinces me the marginal tax rates is one of them.

Look at the latest recession that started in 2007, does anyone here think that if we had raised the marginal tax rate in 2006 then the recession would have been avoided? I'm not going to get into the causes for the recession, but income inequality is sure as hell not one of them. To make such a ridiculous claim is to play the class warfare game invented by the liberals soley to win votes.

 

[expat_panama]

...Lovely graphic, it would be nice to know where it came from though it's hard to take seriously a rant that says the 'Great Depression was from 1922 to 1932...

It is not so lovely. Maybe you misread the chart. The label is where the Great Depression began in 1929. There is no correlation to the size of the label and the timeline....

We agree that it's not lovely, that there's no correlation of labels and time-line, and that I misread the '1929' label at the 1928 Wealth Gap peak. No matter, the graph's purport is that the Great Depression and the Reagan/Bush tax-cut era had a big 'Wealth Gap' in common.

...Here is that website...

--and now the emphasis is corrected to show today's wealth gap "hasn't been this bad since the Roaring Twenties". Much better, and in spite of the graph's wording it shows how years of booming economic growth ended when the 'Wealth Gap' stopped and Great Depression began. That's bears on current 'Wealth Gap' concerns.

 

[Toro]

Here's a good speech from four years ago by our esteemed Fed chair. It would carry much more weight if he weren't one of the crowd that got us into this mess in the first place.

WASHINGTON -- Federal Reserve Chairman Ben Bernanke cautioned that widening economic inequality may make Americans "less willing to accept the dynamism ... so essential to economic progress." But he warned politicians to avoid responses that would make labor markets less flexible or create barriers to international trade and investment.

In an unusual speech for a central banker, Mr. Bernanke said a wiser approach to the problem would be to improve education and training and to cushion dislocations caused by technology and globalization. He cited such steps as making health and pension benefits more portable and offering retraining and job-search assistance to displaced workers. ...

Wandering beyond the boundaries of monetary policy, his area of responsibility, Mr. Bernanke said: "Although average economic well-being has increased considerably over time, the degree of inequality in economic outcomes has increased as well ... for at least three decades." A text of his speech was released by the Fed in Washington.

In his 15-page lecture, complete with 48 academic references, Mr. Bernanke documented the inequality evident in data on wages, household incomes and even baseball players' contracts. He also examined economic forces behind the trend, from changes in technology that have increased employers' appetite for more-educated workers, to the decline of unions, to the surge in chief executives' salaries, to the impact of globalization. He said the effect of the latter has been "moderate and almost surely less important than the effects of ... technological change." ...

[Bernanke] offered three principles that he said are "broadly accepted in our society" -- economic opportunity should be as widely distributed and equal as possible, economic outcomes needn't be equal but should be linked to a person's contributions, and people should get some insurance against very painful outcomes.

"We ... believe," he said, referring to Americans generally, "that no one should be allowed to slip too far down the economic ladder, especially for reasons beyond his or her control."

Mr. Bernanke, who served briefly as an economic adviser to Mr. Bush before becoming Fed chief a year ago, avoided any mention of tax policy, a favorite tool of Democrats interested in reducing the inequality produced by market forces. He noted that eliminating inequality altogether would be unwise.

"Our market-based economy, which encourages productive activity primarily through the promise of financial reward, would function less effectively," he argued. The dynamism that has propelled the U.S. economy for decades brings with it "painful dislocations" for some workers, he added. But he said, "If we did not place some limits on the downside risks to individuals ... the public at large might become less willing to accept the dynamism that is so essential to economic progress."

Fed Chief Warns of Widening Inequality - WSJ.com