News What is wrong with the US economy?

[GENIERE]

Nothing!

From the pen of First Trust Advisors Chief Economist, Brian Wesbury re: the 2006 economy:

“…Many are also in denial about the underlying strength of the US economy. While some economic data has been weaker than expected, underneath the headlines, the economy remains robust. The housing market has fallen precipitously, but in reality has only returned to the trend that was in place for a decade before the Fed cut interest rates to absurdly low levels between 2002 and 2004. Housing is normalizing, not collapsing. Moreover, initial claims remain low and "core" durable goods orders are still rising at double-digit rates…”

“…This week's economic data is going to be hard for the pessimists to explain. Second quarter real GDP growth will be revised upwardly, consumption data will reflect 3.5% to 4.0% real growth in the third quarter, purchasing managers survey's will reflect continued expansion, and the August employment report is highly likely to accelerate from recent months. In the face of this data, denying a continued recovery will be harder than ever…”

"…Productivity bounces around from quarter to quarter, but nonfinancial corporate-sector productivity is up 4% at an annual rate in the past five years. This is why the economy is so resilient…."

A little more from the same source:

- Corporate profits are at an all-time high share of GDP

- Commercial and industrial loans are up at an annual rate of 15.3% so far this year, a level of growth not seen since the go-go Nineties.

- Excluding transportation, new orders for durable goods are up 9.6% at an annual rate in the first five months of 2006 while unfilled orders are up 12.8%.

- Private nonresidential construction is up 12.7% in the past year, and lodging construction (hotels) has surged 51%. All of this is offsetting the slowdown in housing starts.

-Industrial production jumped 0.8% in June: The U.S. manufacturing sector has never produced more "stuff."

Chris Edwards writing for the Cato Insitute:

“The nation's strong economic growth is creating a tax-revenue boom for the states. State tax revenues jumped 8.7 percent in 2004 and about 8 percent in 2005. About three-quarters of state governments had tax-revenue growth of 6 percent or more in 2005.”

Pamela M. Prah, Stateline.org Staff Writer

“…State tax collections rebounded from a slight downturn in late 2005 and saw solid growth in the first three months of 2006, according to a new report that shows 16 states with double-digit revenue growth...”

Edmond Andrews, New York Times, July 9, 2006

“… An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year …”

The NYT and liberals may think the tax revenue increases were unexpected but we ‘pubs’ remember and learn from history. Three presidents have delivered tax cuts since WW2, Johnson, Reagan, and Bush. Economic booms and increased tax revenues followed all cuts


...

 

[Skyhunter]

If you live in California, (like me) this is what is wrong.

Profits soar, wages lag

Corporate income jumped from 2001 to 2004 in California, while wages,
personal income and employment barely budged.

Net corporate income - 368.9%
Median hourly wage - 13.3%
Personal income - 10.7%
Employment - 1.2%
.
Source: California Budget Project

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/09/03/BUG45KT0JB1.DTL&type=printable

The super majority of the wealth from the economic growth is going to corporations.

Then of course there is the big picture.

 

[russ_watters]

'I'm not getting richer fast enough!'

Do you hear yourself?

And SFGate does it again - mismatching statistics to give a prettier appearance of a disparity, even better they cited a study by a special interest group and they picked timeframes specifically to show the worst possible picture.

Good post though, Geniere - I'm surprised I missed it before, but then good news tends to get ignored around here...

 

[Gokul43201]

Good post though, Geniere - I'm surprised I missed it before, but then good news tends to get ignored around here...

...also posts without any links to source material.

 

[russ_watters]

Maybe not the link, but the sources are all there. Google finds the links quickly enough if you want the whole articles: http://www.realclearpolitics.com/articles/2006/08/policy_and_economic_denial.html

http://www.cato.org/pub_display.php?pub_id=5437

http://www.govpro.com/SiteMap_500/strArticleId/107829/ViewArticle.asp

http://www.nytimes.com/2006/07/09/w...97600&partner=rssnyt&emc=rss&pagewanted=print

 

[Gokul43201]

Thanks Russ.

I'm not inclined to have to Google up the sources that someone else has posted from (especially, when all they have to do is highlight, CTRL+C, CTRL+V or similar ). And I'm not inclined to going simply by choice soundbites selected from a bigger passage.

 

[Astronuc]

'I'm not getting richer fast enough!'

Do you hear yourself?

And SFGate does it again - mismatching statistics to give a prettier appearance of a disparity, even better they cited a study by a special interest group and they picked timeframes specifically to show the worst possible picture.

Good post though, Geniere - I'm surprised I missed it before, but then good news tends to get ignored around here...

Skyhunter simply pointed out that the 'good news' is not the whole story. The downside was omitted - and thus the conclusion that 'nothing' is wrong is a fallacy.

What's wrong - for one, the US economy is highly leveraged. The aggregate debt is increasing. What happens when even the interest can't be paid?

 

[Evo]

Geniere, you MUST provide links to your sources.

 

[Evo]

I agree with Astronuc, you cannot only look at one side of the coin. You have to weigh the negatives against the positives.

 

[McGyver]

Financial Markets Cause too much Volitility in U.S. Economy

My primary concern with the U.S. economy is with the powerful influence today that the financial markets have on consumer pricing, supply, and demand for goods.

Historically, the financial markets have driven growth and new business startups with capital. But more recently, the enormous size of the markets and pressure within to generate robust growth, has created a leverage effect and a "hijacking" of U.S. industry segments. Case in point is the comodities market and the run up of oil and gasoline prices over the last year. The run up in pricing was NOT supported by high demand vs. short supply. Rather, underperforming equities markets and real estate prices led institutional investors to place huge amounts of money in oil - which unilaterally inflated the price of oil products by 30-50 percent.

A similar run up occurred in real estate prices, as investors poured money into real estate in the face of flat equities markets and artificially low interest rates on mortgage loans (including 120% loans). Now, real estate prices are trying to FIND their true values, and tough times likely lie ahead for many who simply own a home to live in, rather than use to generate income.

The longer term negative impact of today's huge financial markets on pricing and the economy should be viewed in terms of "opportunity costs." i.e. Did the big run up in oil prices help/hurt the economy? Did the big run up in real estate prices help/hurt the economy?

 

[russ_watters]

Skyhunter simply pointed out that the 'good news' is not the whole story. The downside was omitted - and thus the conclusion that 'nothing' is wrong is a fallacy.

The downside is manufactured and the conclusion that something is wrong is flawed.

What's wrong - for one, the US economy is highly leveraged. The aggregate debt is increasing. What happens when even the interest can't be paid?

None of the above discusses the debt issue, but the debt issue is a complicated one. There are several good reasons for concluding that the US does not have a debt problem though:

-Aggregate debt is not what determines if you can afford to make payments: debt [payments] to income ratio is. And banks have put a lot of effort into calculating the debt-to-income ratio their debtors can afford. Yes, the ratio has gone up in recent years, and no it can't go up forever, but that alone doesn't make it a problem.
-The same principle applies to the US national debt: "highly leveraged" is not clearly defined. The US is much less in debt than, say, France, based on debt ratio. And more to the point - while I agree that reducing the national debt will allow the economy to grow faster, the economy is, in fact, growing at a decent rate and the increase in debt over the last 20 years hasn't stopped it.

The bottom line is that no, of course the economy isn't perfect (yeah, that was an exaggeration, but hey - this is a politics forum!), but the economic data is pretty overwealmingly positive right now. And intentionally miselading analysis (the SFGate article) doesn't change that. The OP is likely in response to the liberal politicians, pundits, and posters that are trying to pound the idea into the American consciousness that the economy is doing poorly. We have several active threads about it, and SFGate articles have popped up before (there was a recent one about how people can't afford housing because it is too expensive - how do you think it got expensive? ). And it just plain isn't true.

 

[Gokul43201]

And SFGate does it again - mismatching statistics to give a prettier appearance ...

As does Wesbury:

"-Excluding transportation, new orders for durable goods are up 9.6% at an annual rate in the first five months of 2006"

Incidentally, the source for this statement (not among Russ' links) is here: http://www.ftportfolios.com/Retail/research/viewresearcharticle.aspx?id=113

However, including transportation, new orders for durable goods are down 7.2% at an annual rate in the first five months of 2006.

Source: http://www.census.gov/briefrm/esbr/www/esbr021.html

 

[russ_watters]

No, Gokul. Transportation is virtually always left out of that statistic (or shown both ways as a caveat) precisely because it is so volatile month-to-month. We have that discussion just about every month (at least every month they decrease - when they increase, it doesn't get discussed)...

[edit: oh, and I'm not sure what you have there, but your statistics don't match your link...]

 

[Bystander]

"Wall Street indices predicted nine out of the last five recessions!"
Paul Samuelson

"Economics has never been a science - and it is even less now than a few years ago."
Paul Samuelson

 

[selfAdjoint]

"Wall Street indices predicted nine out of the last five recessions!"
Paul Samuelson

"Economics has never been a science - and it is even less now than a few years ago."
Paul Samuelson

So is your point that, selon Samuelson, neither the practical investors nor the ivory-tower scholars has a clue? I think many of us would agree, but where does that leave us? With a bunch of interested parties cherry picking statistics, like this thread?

 

[Gokul43201]

No, Gokul. Transportation is virtually always left out of that statistic (or shown both ways as a caveat) precisely because it is so volatile month-to-month.

Okay, that's true. But then, if you want a good indicator of business spending, shouldn't you speak of non-defense spending on durable goods (less transportation)?

[edit: oh, and I'm not sure what you have there, but your statistics don't match your link...]

Checked the link. It's the one I calculated from. Maybe I calculated wrong?

Here's my formula:
Annualized change in first 5 months of 2006 = (12/5)*(value at end of may, 2006 - value at end of dec,2005)/(value at end of dec, 2005)

 

[selfAdjoint]

BTW has anyone seen http://www.businessweek.com/magazine/content/06_39/b4002001.htm?chan=top+news_top+news+index_businessweek+exclusives" ? Absent health care, the economy would be more lackluster than it is.

Of course as several people have said, if you chop off the upper tail of any distribution the remainder looks lower. But it sure does look like the weird US health care system, well-known for having the highest dollar-per-benefit cost in the advanced world, is what is making the job numbers look bearable.

 

[McGyver]

BTW has anyone seen http://www.businessweek.com/magazine/content/06_39/b4002001.htm?chan=top+news_top+news+index_businessweek+exclusives" ? Absent health care, the economy would be more lackluster than it is.

Of course as several people have said, if you chop off the upper tail of any distribution the remainder looks lower. But it sure does look like the weird US health care system, well-known for having the highest dollar-per-benefit cost in the advanced world, is what is making the job numbers look bearable.

The labor data is a bit striking! If the health care sector, which is in trouble in of itself, is driving most of the job growth, then what does that say about the U.S. economy and job creation when (HC) takes the setback that is 20 years overdue?

HC has been funded by double-digit price increases, unabated for 30 years. I attended a biotech breakfast last week that touted the new consumer in HC, but it errupted into heated debate when "free market" issues were asked. A few months ago, I had lunch with former Secretary HHS Tommy Thompson. His talk was about how Medicare is headed for collapse by 2014, and likely radical changes in private payor care sooner.

Can you say, Opportunity Cost!

 

[Bystander]

So is your point that, selon Samuelson, neither the practical investors nor the ivory-tower scholars has a clue? I think many of us would agree, but where does that leave us? With a bunch of interested parties cherry picking statistics, like this thread?

Pretty much --- Jimmy Carter caught hell for "double digit inflation" during his administration --- tract housing was ten bucks a square foot then, and it's around a hundred-fifty now --- motor vehicles cost five or six times what they did then --- food's five to ten times --- inflation rate didn't drop, the definition changed. Same thing can be seen in other "economic indicators," meaning that we're all clueless as far as knowing, or even being able to find out what's happening.

 

[edward]

BTW has anyone seen http://www.businessweek.com/magazine/content/06_39/b4002001.htm?chan=top+news_top+news+index_businessweek+exclusives" ? Absent health care, the economy would be more lackluster than it is.

Health care has become our new corporate dynasty. It is something that eveyone needs and they can charge whatever the traffic (consumer) will bear.
Some of the CEO's now in health care were formerly in other areas of the economy that downsized or disappeared.

There are many reasons for the increase in cost. One of them is the $20 billion per year spent on pharmaceutical advertising. Someone has to pay for all of those erectile dysfunction commercials on TV. And that someone is the general public.

As for the GDP, even the cost of that nasty little toe nail fungus commercial goes on the positive side. Government spending also goes on the positive side. For that matter the cost of fighting all of this summers wildfires bumps up the GDP.

 

[Astronuc]

How about this -

NINE YEARS OF NEGLECT:
Federal Minimum Wage Remains Unchanged for Ninth Straight Year, Falls to Lowest Level in More than Half a Century
http://www.cbpp.org/8-31-06mw.htm

Overall inflation - 26%
Food - 23%
Housing - 29%
Medical care - 43%
Child care and nursery school - 52%
Educational books and supplies - 61%
Gasoline, unleaded regular - 134%

Minimum wage - 0%
Household Median Income - $37,005 (1997) - $46,326 (2005) (25.2% increase 1997-2005, compared to overall inflation of 26%). HMI was $42,151 in 2000 ,thus HMI increase by $5146 (13.9% increase) from 1997-2000, and from $42,151 to $46,326, or an increase of $4,175 (9.9% increase) from 2000-2005.

Real median
Income (all households) - 1997 $37,005
http://www.census.gov/hhes/www/income/income97/in97sum.html
Income (all households) - 1998 $38,885
http://www.census.gov/hhes/www/income/income98/in98sum.html
Income (all households) - 1999 $40,816
http://www.census.gov/hhes/www/income/income99/99tablea.html
Income (all households) - 2000 $42,151
http://www.census.gov/hhes/www/income/income00/inctab1.html
Income (all households) - 2001 $42,228
http://www.census.gov/hhes/www/income/income01/inctab1.html
http://www.massbudget.org/article.php?id=177 (US median household 2001 - $42,900, dollar figures cited in this summary are in constant 2002 dollars.)
Income - 2002 $42,409
http://www.census.gov/Press-Release/www/2003/cb03-153.html
http://factfinder.census.gov/jsp/saff/SAFFInfo.jsp?_pageId=tp6_income_employment
Slightly different results from - State Science & Technology Institute (State Median Household Income, 2002-2003 - *Income in 2003 inflation-adjusted dollars.)
Income (2002) - 43,057, Income (2003) - 43,564

Income - 2003 $43,318
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/002484.html
Income - 2004 $44,389
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/005647.html
Income - 2005 $46,326
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/007419.html

Iowa (US Incomes - Median Household Income)
http://www.iowaworkforce.org/trends/medianus.html
1997 - $37,005
1998 - $38,885
1999 - $40,816
2000 - $42,148
2001 - $42,467 (2001 Inflation Adjusted Dollars)
2002 - $43,057 (2002 Inflation Adjusted Dollars)

http://www.fiscalpolicy.org/SOWNY2005Chapter2Figures.pdf


WHOSE RECOVERY?
Labor Day 2006 Finds Many Americans Not Sharing in the Growing Economy
http://www.cbpp.org/press-points.htm

POVERTY REMAINS HIGHER, AND MEDIAN INCOME FOR NON-ELDERLY IS LOWER, THAN WHEN RECESSION HIT BOTTOM:
Poor Performance Unprecedented for Four-Year Recovery Period
http://www.cbpp.org/8-29-06pov.htm

Overall median household income rose modestly in 2005 — but significantly less than normal for a year during an economic recovery — while the poverty rate remained unchanged, also an unusual development for a recovery year. For the first time on record, poverty was higher in the fourth year of an economic recovery, and median income no better, than when the last recession hit bottom and the recovery began.

http://www.cbpp.org/8-29-06pov-f1.jpg - Commerce Department

Number of Uninsured Sets Record

Health insurance also deteriorated. The number of uninsured people climbed by 1.3 million in 2005 to 46.6 million, a record high. The percentage of people without insurance rose from 15.6 percent of the population to 15.9 percent. Both figures were substantially above the figures for the 2001 recession year, when 41.2 million people — 14.6 percent of Americans — were uninsured.


IN FIRST HALF OF 2006, WAGES AND SALARIES CAPTURED SMALLEST SHARE OF INCOME ON RECORD
Share of Income Going to Corporate Profits at
Highest Level Since 1950
http://www.cbpp.org/8-31-06inc.htm

Commerce Department data released on August 30 show that in the first half of 2006, the share of national income that went to wages and salaries was at the lowest level on record, with data going back to 1929.[1] The share of national income captured by corporate profits, in contrast, was at its highest level since 1950.

These findings reflect weak overall growth in wages and salaries — and rapid growth in corporate profits — since the current economic recovery began in November 2001. Growth in total wage and salary income was exceptionally weak during the first stage of the recovery but has picked up in the last few years and has been strong so far in 2006.[2] Even with this recent improvement, however, wages and salaries have grown more slowly during the current recovery than in all but one other recovery since the end of World War II.


HOUSE PROPOSAL TO REFORM EARMARKS EMPLOYS DOUBLE STANDARD, LARGELY EXEMPTING EARMARKS PACKAGED AS SPECIAL INTEREST TAX BREAKS
http://www.cbpp.org/9-14-06bud.htm


THE ILLUSION OF CHOICE:
Vulnerable Medicaid Beneficiaries Being Placed in
Scaled-Back “Benchmark” Benefit Packages
http://www.cbpp.org/9-14-06health.htm


EVEN WITH NEW BUDGET PROJECTIONS, BUDGET DETERIORATION FROM 2000-2006 WILL BE THE LARGEST 6-YEAR DETERIORATION IN HALF A CENTURY
http://www.cbpp.org/7-20-06bud.htm


DON’T POP THE CORKS
CBO Outlook for the Federal Budget Is Still Bleak
http://www.cbpp.org/8-17-06bud.htm


http://www.washingtonmonthly.com/archives/individual/2006_09/009459.php


Income Climbs, Poverty Stabilizes, Uninsured Rate Increases
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/007419.html
Real median household income in the United States rose by 1.1 percent (compared to an average inflation rate of 3%) between 2004 and 2005, reaching $46,326, according to a report released today by the U.S. Census Bureau. Meanwhile, the nation’s official poverty rate remained statistically unchanged at 12.6 percent. The percentage of people without health insurance coverage rose from 15.6 percent to 15.9 percent (46.6 million people).
http://www.census.gov/hhes/www/income/income.html
http://inflationdata.com/inflation/Inflation_Rate/AnnualInflation.asp
http://inflationdata.com/inflation/images/charts/Annual_Inflation/annual_inflation_chart.htm
http://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx


I have also noticed that the economic statistics have become more obfuscated since 2002 (or maybe since 2001). The formats have been changed and the comparisons are not so easily made.

The bottom line is that the bottom 50% are NOT doing very well, and have actually lost ground since 1997.

The upside is for those in the top two quintiles - http://www.census.gov/hhes/www/income/histinc/h01ar.html

 

[Futobingoro]

Talk about an obfuscation of data.

I bet that when Poland joined the EU, cynics spun statistics to "show" how the average quality of life in the EU was decreasing.

And now we have cynics waving their arms in the air and shouting from the highest mountaintops about how the average quality of life in the US is decreasing.

At the very least, a sizable portion of these observed trends are symptomatic of nothing other than an infusion of Mexico.

 

[edward]

Talk about an obfuscation of data.

I bet that when Poland joined the EU, cynics spun statistics to "show" how the average quality of life in the EU was decreasing.

And now we have cynics waving their arms in the air and shouting from the highest mountaintops about how the average quality of life in the US is decreasing.

At the very least, a sizable portion of these observed trends are symptomatic of nothing other than an infusion of Mexico.

The Ford and Chrysler workers who are about to lose their jobs may not agree with this.

And have we been told numerous times by so called financial experts that the illegals are necessary to our economy. They take the jobs Americans used to have or something like that.

 

[Skyhunter]

'I'm not getting richer fast enough!'

Do you hear yourself?

This smacks of ad hominem.

Those are your words not mine.

I was simply pointing out that after 4 years of strong economic growth that the only ones better off are corporations.

And SFGate does it again - mismatching statistics to give a prettier appearance of a disparity, even better they cited a study by a special interest group and they picked timeframes specifically to show the worst possible picture.

Really?

What special interest group? You mean those interested in helping low to moderate income workers.

California Budget Project (CBP)
A nonpartisan, nonprofit organization seeking fiscal reforms to benefit low and moderate income Californians.

What mismatched statistics?

Wages in California showed scant gains from 2001 to 2005. Hourly wages by
percentile are in 2005 dollars.

Year 20th Median 80th
2001 $9.65 $16.55 $28.68

2003 10.09 16.99 29.73
2005 10.00 17.00 30.00


Year 20th Median 80th
2001-03 4.5% 2.6%
2.6%
2003-05 -0.9 0.1 0.9

Would you care to explain why they are mismatched?

And perhaps provide the properly matched statistics.

 

[Futobingoro]

What special interest group? You mean those interested in helping low to moderate income workers.

It matters little if it is nonprofit and nonpartisan. It still is a special interest group.

Imagine a nonprofit, nonpartisan group which advocates an "equal" flat tax rate. Wouldn't you call that a special interest group?

Labor groups can, and do, hide behind the facade of "helping low to moderate income workers." Corporate groups likewise mask their actions by putting up their "tax equality" banner.

 

[russ_watters]

Checked the link. It's the one I calculated from. Maybe I calculated wrong?

Here's my formula:
Annualized change in first 5 months of 2006 = (12/5)*(value at end of may, 2006 - value at end of dec,2005)/(value at end of dec, 2005)

Ok, I checked the link and didn't see the stat - I didn't realize you calculated it yourself.

Okay, that's true. But then, if you want a good indicator of business spending, shouldn't you speak of non-defense spending on durable goods (less transportation)?

Sure - I'm just pointing out that you need to be very careful not to misunderstand a highly volatile statistic. It just so happens that Boeing had two particularly strong months at the end of 2005, followed by one particularly weak one in the beginning of 2006. The stats are chopped to start at 2006, so when you calculate that out into an annualized rate, it implies a downturn where none exists.

In this case, the misuse of the data was accidental due to calendar issues - in the case of the earlier info in the SFGate article, the timeframe was specifically chosen to make the data seem as negative as possible.

 

[russ_watters]

This smacks of ad hominem.

Those are your words not mine.

It's a paraphrase or a charicature. You are complaining that the poor aren't getting richer fast enough. Or at least you were...

I was simply pointing out that after 4 years of strong economic growth that the only ones better off are corporations.

"Only"? No, not "only". At the very least, in the post I quoted, you did acknowledge that the poor have seen improvements.

Really?

What special interest group? You mean those interested in helping low to moderate income workers.

Yes.

What mismatched statistics?

Would you care to explain why they are mismatched?

Corporate income and personal income are not calculated the same way. Putting them next to each other like that implies that they are the same. The term "corporate income" is a misnomer that is only ever really used with the word "tax" at the end: it isn't income that is being taxed (and shown in that stat), it is profit.

 

[McGyver]

U.S. Corporations Reneg on Reinvesting in America per Tax Breaks

If you live in California, (like me) this is what is wrong.


http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/09/03/BUG45KT0JB1.DTL&type=printable

The super majority of the wealth from the economic growth is going to corporations.

Then of course there is the big picture.

No doubt the BIGGEST issue of FACT on the U.S. economy, and complaint with the Bush White House policy, is how big U.S. corporations have FAILED to REINVEST record earnings back into the business infrastructure. Those record earnings were made possible in large part by tax breaks on corporations, done so with the historical belief [they] would reinvest back in America. But U.S. corporations instead mostly sat on the CASH, rewarded executives, and invested in finacial markets and commodoties like oil, that caused a surge in pricing and inflation.

It typically takes 2-5 years for capital investment and related job creation to make a meaningful contribution to an industry infrastucture. The big three U.S. automakers all exemplify these failures. Whereas, Toyota and Nissan didn't make the same mistake!

Given the above perspective, the tax breaks were misappropriated.

 

[Astronuc]

No doubt the BIGGEST issue of FACT on the U.S. economy, and complaint with the Bush White House policy, is how big U.S. corporations have FAILED to REINVEST record earnings back into the business infrastructure. Those record earnings were made possible in large part by tax breaks on corporations, done so with the historical belief [they] would reinvest back in America. But U.S. corporations instead mostly sat on the CASH, rewarded executives, and invested in finacial markets and commodoties like oil, that caused a surge in pricing and inflation.

It typically takes 2-5 years for capital investment and related job creation to make a meaningful contribution to an industry infrastucture. The big three U.S. automakers all exemplify these failures. Whereas, Toyota and Nissan didn't make the same mistake!

Given the above perspective, the tax breaks were misappropriated.

And that is exactly what critics of the tax cuts said would happen, and what the supporters of tax cuts denied would happen.

In fact, going back to the Reagen administration, the reinvestment in the economy has not happened as projected. Instead the economy has been financed on borrowing by the government, borrowing by industry, and borrowing by consumers (credit cards and home equity loans). Simultaneously, we've incurred a huge trade imbalance.

 

[turbo]

And that is exactly what critics of the tax cuts said would happen, and what the supporters of tax cuts denied would happen.

In fact, going back to the Reagen administration, the reinvestment in the economy has not happened as projected. Instead the economy has been financed on borrowing by the government, borrowing by industry, and borrowing by consumers (credit cards and home equity loans). Simultaneously, we've incurred a huge trade imbalance.

The tax cuts have been very short-sighted, designed to disproportionately benefit people who are already wealthy and powerful. If the Administration actually wanted to jump-start the economy, they would kept the tax rates exactly where they were for the people with the highest wages, salaries, and capital gains, and cut the taxes for the poorest and for the middle-class, who spend a far larger percentage of their disposable income than do the wealthy. The concept that giving the weathiest Americans tax cuts will help the economy is a fiction and past and current Administration officials know it. They just keep repeating the lie and the voters follow like sheep. If you give a tax break to someone who is earning low to moderate wages, they will likely spend the money as soon as they get it, putting money right back into the economy immediately. The rising economy would help the wealthy by increasing their earnings - a healthy economy benefits the many, not just the few. George Bush I said that Reagan's trickle-down scheme was "voodoo economics" and he was right.

 

[edward]

snip

No doubt the BIGGEST issue of FACT on the U.S. economy, and complaint with the Bush White House policy, is how big U.S. corporations have FAILED to REINVEST record earnings back into the business infrastructure. Those record earnings were made possible in large part by tax breaks on corporations, done so with the historical belief [they] would reinvest back in America. But U.S. corporations instead mostly sat on the CASH, rewarded executives, and invested in finacial markets and commodoties like oil, that caused a surge in pricing and inflation.

U.S. corporations have built dozens of new factrories. Unfortunately those factories are in other countries.

 

[Futobingoro]

The observed oil profits are not excessive. Profit margins are in line with the historical neighborhood of 10%. But repeat a big number (say, $36 billion) across the airwaves and people tend to forget that ExxonMobil had to spend more than $334 billion in taxes and expenses to earn that $36 billion.

Bewailing the $36 billion as "excessive" is akin to calling China "fat" for having the world's largest food consumption. Both of these statements are made without any regard to proportionality - a fatal mistake when examining statistics such as these.

I do not claim to be omnipotent in matters of economics, but much as a movie critic can recognize a bad movie without being able to do better himself, I can recognize incomplete economic analysis when I see it.

With that in mind, I take issue with the claims that the government and corporate greed are to blame for any failure to reinvest.

It seems that the issue is more complicated than some might believe:

But the biggest problem with costly oil is that it makes it tougher to line up new supplies. Countries that sit on lots of oil -- such as Iran, Kuwait, Libya, Russia, Venezuela, and Nigeria -- drive harder bargains with the supermajors like ExxonMobil when oil prices are high. Oil-rich nations are reluctant to part with irreplaceable natural resources at prices below where they stand now. The Western oil companies want to cut deals on the assumption that oil will drop back to $25 or $30 a barrel. But that's hard to argue when the oil for delivery in December, 2012, is trading at $64.

When the supermajors can't negotiate access to new fields, their production drops. This isn't just hypothetical: The most important fact in ExxonMobil's quarterly earnings report was that oil and natural gas production fell 3.6% in 2005 from 2004, continuing a five-year downtrend. (Excluding onetime factors such as hurricanes, it fell 1%.) If the company can't ramp up output by getting access to new fields, it will be a cash cow slowly going dry. Not a good prospect.

http://www.businessweek.com/magazine/content/06_07/b3971064.htm

It looks like the oil companies actually want to reinvest to be able to maintain, or increase, oil production. This process, however, is being hindered by our good friend - high oil prices.

But for this to be true we would have to ignore the "fact" that oil companies only stand to benefit from their "price manipulation," and that they are failing to reinvest only because of their greed.

In the end we will probably be told that the greedy oil executives wanted to increase oil prices for a short-term windfall to buy their mansions with gold-plated toilets and diamond-encrusted silverware, leaving the long-term problem to their successors and to America in general.

 

[McGyver]

U.S. Corporations Instead Acting as Financial Institutions

Short of reinvesting in America, and now with large CASH COFFERS, thousands of U.S. corporations operate today more like unregulated FINANCIAL INSTITUTIONS, where there CORE product and service transactions comprise an ever-shinking part of their total business.

There are physical limits to the number of mergers and acquisitions a company can undertake. Eventually, you run out of companies, and are forced to innovate within your own four walls. At this juncture, if you haven't undertaken solid R&D and planned for new product introduction, your product or service will SUFFER, and your business will be "eaten away" by those who have, i.e. better cheaper Japanese products and emerging innovation out of China.

As for U.S. investment in plants oversees, many of these do not reach a reasonable "lifecycle," and are abandoned for (perceived) more lucrative investment elsewhere. This leads to ever more shrinking useful lifecycles on plant and equipment, and deters long term investment in quality plants and equipment, R&D, and infrastructure needed for long term sustainability. Finanally, states and localities feel the brunt and fiscally begin to collapse, then must raise taxes, which further drives business out!

Can you say, Opportunity Costs!"

 

[McGyver]

The observed oil profits are not excessive. Profit margins are in line with the historical neighborhood of 10%. But repeat a big number (say, $36 billion) across the airwaves and people tend to forget that ExxonMobil had to spend more than $334 billion in taxes and expenses to earn that $36 billion.

With that in mind, I take issue with the claims that the government and corporate greed are to blame for any failure to reinvest.

It seems that the issue is more complicated than some might believe:http://www.businessweek.com/magazine/content/06_07/b3971064.htm

It looks like the oil companies actually want to reinvest to be able to maintain, or increase, oil production. This process, however, is being hindered by our good friend - high oil prices.

But for this to be true we would have to ignore the "fact" that oil companies only stand to benefit from their "price manipulation," and that they are failing to reinvest only because of their greed.

Oil companies reap more earnings when the price of oil rises. When the tech, real estate, and equity markets are flat, more investment dollars will flow into commodoties like oil, pushing up prices. HIGHER oil prices should spur oil companies to reinvest, unless it is their imperitive to keep field exploration and supplies low in the hopes of further driving up prices.

But, there will be opportunity costs, down the road, to those decisions. A free market and free society will remedy any wrongs!

 

[Skyhunter]

Corporate income and personal income are not calculated the same way. Putting them next to each other like that implies that they are the same. The term "corporate income" is a misnomer that is only ever really used with the word "tax" at the end: it isn't income that is being taxed (and shown in that stat), it is profit.

So you agree that corporate profits are up 368.9% from 2001 - 2004 and personal income rose 10.7%. Yet this is misleading?

How is the comparison misleading.

Could you demonstrate what you mean?

As I see it;

Net income equals ((gross income minus expenses) minus taxes).

Or net income = after tax profit.

How is that calculated differently between corporations and persons in such a way as to make the two so disparate that they are beyond comparison?


As for the poor, or the lowest 20% of income, their actual income declined from 2001 - 2005.

It is not the fault of the CBP that the statistics that look so bad coincide with the Bush reign. I don't know why they left out 2005 from the first chart, but I don't believe that it would significantly impact the trend.

 

[Astronuc]

Not some much wrong as just a correction/adjustment, but could be an indicator or a sign of trouble ahead.

Existing-home prices fall for 1st time in 11 years
Sales drop 0.5% in August to lowest pace since January 2004

WASHINGTON (MarketWatch) -- The collapsing U.S. housing market crossed another milestone in August, as the median sales price of existing homes fell for the first time in 11 years and for just the sixth time in the past 38 years, the National Association of Realtors said Monday

The median sales price fell 1.7% year-over-year to $225,000 in August.
Sales of existing homes fell 0.5% in August to a seasonally adjusted annual rate of 6.3 million, the industry group said. It was the lowest sales pace since January 2004. Sales have fallen five months in a row. Sales are down 12.6% in the past year.
. . . .
Meanwhile, inventories of unsold homes rose to a 13-year high.

If people wait to buy homes, then there will be more downward pressure on prices. How far will the correction go?

 

[Skyhunter]

Not some much wrong as just a correction/adjustment, but could be an indicator or a sign of trouble ahead.

Existing-home prices fall for 1st time in 11 years
Sales drop 0.5% in August to lowest pace since January 2004
If people wait to buy homes, then there will be more downward pressure on prices. How far will the correction go?

Low interest rates have fueled the home construction market, now that they are on the rise, home construction is slowing. Commercial construction has increased recently, so the effects of slowing residential construction has not significantly impacted the construction industry as a whole.

 

[selfAdjoint]

Low interest rates have fueled the home construction market, now that they are on the rise, home construction is slowing. Commercial construction has increased recently, so the effects of slowing residential construction has not significantly impacted the construction industry as a whole.

The latest data shows that not only are fewer new houses being built, but the prices of existing houses are coming down. A bubble is when people only buy something in the hopes of making a profit by selling it later for more than they paid. I think it's unquestionable that at least some of the housing boom was a bubble. And the bubble has burst.

 

[edward]

There was a lot of speculation buying done. For instance my brother in law bought a home ,to live in, located in an upper middle class subdivision.
Now when I drive through his neighborhood there are at least two "for sale" signs on every block.

A lot of this speculative buying was done using some really questionable methods. Negative amortization loans are a prime example.

The concerns of home builders appear to be well founded. The Federal Deposit Insurance Corporation (FDIC) recently identified 55 metro areas where price appreciation had reached “boom” proportions by the end of 2004, and mortgage loan data files (from LoanPerformance) show not only an upswing in investor activity nationally but also relatively high shares of investor purchases in many of the “boom” markets identified by the FDIC.

Furthermore, it seems clear that investors often use “exotic” forms of adjustable-rate mortgages, financing vehicles that Federal Reserve Chairman Alan Greenspan recently called “developments of particular concern” in testimony before the Joint Economic Committee of the Congress. Greenspan also told Congress that “speculative activity may have had a greater role in generating the recent price increases than it has customarily had in the past,” and he cited a quickened pace of turnover of existing homes as symptomatic of speculative activity.

http://www.nahb.org/news_details.aspx?newsID=1527

 

[Astronuc]

http://today.reuters.com/news/articlenews.aspx?type=newsOne&storyID=2006-09-30T014439Z_01_N29420601_RTRUKOC_0_US-FINANCIAL-AMARANTH.xml&WTmodLoc=Home-C2-TopNews-newsOne-2

Well if you haven't been reading the business/economic news, you might have missed another collosal failure in the US economy.

NEW YORK (Reuters) - Amaranth Advisors LLC, the hedge fund manager which lost billions of dollars in energy trades, will suspend redemptions and liquidate its remaining positions, the company said in a letter made available to Reuters on Friday.

Amaranth will continue to pursue strategic alliances, the letter said, after its net asset value declined by 65 percent to 70 percent during September. Its funds are down 55 percent to 60 percent year-to-date, it estimated.

Amaranth said it was in investors' best interests to temporarily suspend redemptions for September 30 and October 31.

"This temporary suspension of redemptions will enable the Amaranth funds to generate liquidity for investors in an orderly fashion, with the goal of maximizing the proceeds of asset dispositions, while seeking to treat all investors equitably through pro rata distributions," the letter by founder Nicholas Maounis said.

The Greenwich, Connecticut-based firm, a "multi-strategy" fund manager that in August reported assets of more than $9 billion, met with investors earlier this week to discuss future plans.

Amaranth suffered a $6 billion loss this month in wrong-way bets on natural gas derivatives, including $560 million in one day alone, which led to demands by investors for a return of capital.

The letter is the latest evidence of the unraveling of Amaranth, a once prominent hedge fund manager whose trading prowess generated more than $3 billion in profit from January 2005 to August 2006, largely on commodity trades.

Those gains should have been a "warning sign" to investors, said Magnus Olssen, portfolio manager at London & Capital Group, a fund-of-funds based in the United Kingdom.

Oops!

 

[Astronuc]

Gosh, it gets even better!

Inflation's up, consumer spending down
http://marketplace.publicradio.org/shows/2006/09/29/PM200609291.html

The government released some worrisome economic data. August's core inflation, which excludes food and energy prices, posted the biggest year-over-year increase in more than a decade. And consumer spending was down. Janet Babin reports.

JANET BABIN: The nation's annual inflation rate posted its biggest increase since 1995. The jump comes despite a two-year long effort by the Federal Reserve to keep a lid on inflation.

The Commerce Department's report also found that consumer spending dropped slightly in August and incomes rose only 0.3 percent. That's the weakest income performance in nine months.

Economist Richard DeKaser with National City Corporation says weak spending and income numbers indicate an economic slowdown. And that might be a good thing: . . .

Layoffs might be a good thing too (to keep downward pressure on wages), unless you're the one getting layed off.

=====================================

But still even better -

Taking a (tax) break in Puerto Rico
http://marketplace.publicradio.org/shows/2006/09/29/PM200609297.html

A great example of how companies are getting even more creative looking for tax breaks? The pharmaceutical industry's presence in Puerto Rico. Kai Ryssdal talks about it with Jill Barshay of Congressional Quarterly.

KAI RYSSDAL: You know what Congress has managed to get done the past month it's been in session. Antiterror legislation. And a couple of spending bills. What it hasn't gotten done is almost anything else, including corporate tax reform. Which was on the agenda for a while. Until it wasn't.

Tax breaks for businesses are nothing new. But companies are getting ever more creative in taking advantage of them. One great example is the pharmaceutical industry and its larger than usual presence in Puerto Rico.

. . . How did it become the manufacturing center of the pharmaceutical industry in this country?

BARSHAY: It became the center of the pharmaceutical industry in the 1960s. They were lured there by the U.S. Congress that had a very generous tax break for American companies that wanted to manufacture down there. And it was so generous by the late '80s that they were getting $78,000 from U.S. taxpayers for every job they created down on the island.

. . .

We looked at what happened 10 years after Congress took this action. Congress thought it would raise $10 billion in the last 10 years. And it appears that the pharmaceutical industry found some clever accountants and tax attorneys, and they realized they could re-register as foreign companies in Puerto Rico and pay no taxes at all down there.

Why do business in the US, when you can start your own company in Puerto Rico and not pay US taxes. Just put the profits off-shore and quietly transfer them wherever needed.

So if you buy products from yourself, that's a deductible expense, and most money goes off-shore - to yourself, of course.

Can you say capital flight?!

 

[Yonoz]

Stagflation, here we come. :(

 

[Astronuc]

Gas prices: down. Deficit: shrinking. All the good news! So what could be wrong?! Economist Austan Goolsbee agreed that the news sounded good — until he delved into the government's accounting magic.

http://marketplace.publicradio.org/shows/2006/10/12/PM200610124.html

KAI RYSSDAL:

The federal government's about 12 days into fiscal year 2007. The president took the opportunity yesterday to have a look at the books. He announced the budget deficit for the last fiscal year came in just shy of $250 billion. That's a big number. But it's still less red than there had been. And it had commentator and economist Austan Goolsbee feeling pretty good. Until he remembered the way the government does math.

--------------------------------------------------------------------------------

AUSTAN GOOLSBEE:

Turns out years ago the government decided that it didn't like showing its spending habits. So regular ledger-keeping was dumped in favor of a more Washington-friendly way of bean counting.

In normal life, if you charge $5,000 on your credit card, you subtract it as an expense. But not in D.C. No, in D.C., if it's not due today, it's not a cost.

Take the Social Security system. It's running a surplus this year because it is building up money it needs to pay for Baby Boom retirements.

The government counts that surplus as income. Presto! That income cut the deficit in half.

But anybody can see that's nuts. You can't call that income anymore than a cash advance on your credit card is income. If you have to pay it back, it ain't income.

There is no difference between what the government is doing and what Enron and Worldcom did to land themselves in jail. It's overstating earnings and hiding true costs. In fact, if you add up costs the way standard business accounting rules do, the deficit for this year alone would be more like $700 billion. Add in Social Security and Medicare promises and it would be over $3 trillion!

Now, that just couldn't be right, could it?

So just to make myself feel better I contacted Larry Kotlikoff at Boston University, one of our leading budget experts, and I asked him.

Well, he told me that by the standards of business, the U.S. is actually bankrupt. The promises we're on the hook for will cost $70 trillion more than the revenue we're going to bring in. He figures to pay it off would take something like an 80 percent hike in all income taxes.

Whoah! Now, I really don't feel any better. When all this goes down, you know somebody is going to be left holding the bag. Take a wild guess who.

RYSSDAL: Austan Goolsbee is a professor of economics at the University of Chicago Graduate School of Business.

Well, let's see in 10, 20, . . . years time. If all is as it seems, there will be insufficient funds to cover all obligations - and that means some will go without. Perhaps we'll observe the 100th anniversary of the Great Depression of the 20th Century with a Great Depression of the 21st Century. But then again, Washington may get religion and become fiscally responsible.


Also - Record trade deficit not all bad news

http://marketplace.publicradio.org/shows/2006/10/12/PM200610121.html

Soaring oil prices sent the U.S. trade deficit to a record of almost $70 billion in August. But the government says record imports of oil sank a healthy gain in U.S. exports.

KAI RYSSDAL: The trade gap numbers came out today, too. Another month, another record deficit in how much Americans bought from overseas. Marketplace's Scott Tong looks at Uncle Sam's shopping list from the month of August.

SCOTT TONG: The trade gap hit $69.9 billion, largely because Americans paid sky-high prices for oil in August.

But Daiwa Securities' Michael Moran reminds us that the sky has fallen — crude is off 25 percent since the summer. [maybe this is the good news? ]

MICHAEL MORAN: Over the next several months, we will be seeing lower prices of imported oil, which will be helping to either bring down or limit the increase in the trade deficit.

Also in August, retailers bought a whole lot of presents from overseas, or at least what they hope will be presents. Here's Anirvan Banerji of the Economic Cycle Research Institute.

. . . .

America's trade gap with China hit a monthly record of $22 billion. Think of it this way: for every U.S. boat that carries stuff to China, five boats come the other way.

. . . .

Oh, well.

 

[Astronuc]

Loose Credit Standards Boost Real Estate Woes
http://www.npr.org/templates/story/story.php?storyId=6326038
by Chris Arnold

Morning Edition, October 19, 2006 · Many investors loaded up on condos and other properties during the real-estate boom, hoping to sell them quickly at big profits. Now, with prices falling, some of them are in real trouble. One 24-year-old investor has started the Web site: iamfacingforeclosure.com.

Speed of Housing Downturn Surprises Homeowners
http://www.npr.org/templates/story/story.php?storyId=6123037

Morning Edition, September 22, 2006 · The real estate market has made a surprisingly quick downturn in some parts of the country. The change in direction has left many homeowners holding property they can't sell at the price they would like, or need, to get.

Buyer's market it appears, but one might wait to buy as prices may come down considerably, especially if the economy slows.

I know some who got good deals on properties through foreclosures.

 

[russ_watters]

This thread died and came back and I never answered this:

So you agree that corporate profits are up 368.9% from 2001 - 2004 and personal income rose 10.7%. Yet this is misleading?

Yes.

How is the comparison misleading.

It is misleading because it is meant to show two numbers that are describing the same thing (income for business vs income for people) which are in actuality not describing the same thing.

Could you demonstrate what you mean?

Well, let's see how you did...

As I see it;

Net income equals ((gross income minus expenses) minus taxes).

Or net income = after tax profit.

How is that calculated differently between corporations and persons in such a way as to make the two so disparate that they are beyond comparison?

It's pretty simple: people don't have profits. It's just personal gross income that is being compared against corporate profit (your definition of corporate profit is correct).

Lets say, for example, that I earned $50,000 last year and spent all but $49,000 on taxes and expenses. $1,000, I saved. This year, I got a raise and earned $55,000, spending $49,000 again. The way personal income is calculated I gained 10% and the way corporate income is calculated, I gained 500%.

And, needless to say, if I didn't save anything last year, but did save $1 this year, then my "profit" would be up by an infinite amount. Clearly, an absurdity, yet that is how the statistics are being presented wrt corporations. It's actually a problem when working with P/E ratios to figure out when to buy/sell stock - sometimes the P/E ratio is undefined/infinite.

As for the poor, or the lowest 20% of income, their actual income declined from 2001 - 2005.

That's commonly cited, but it is misleading to the point of being a purposeful deception. Saying "declined from 2001-2005" implies yearly decreases, when in fact it decreased each year from 2001-2004, then went up in 2005. Yes, it is still lower than in 2001, but either that's sloppy wording or an intentional deception. And I don't accept that people are that sloppy in their wording.

It is not the fault of the CBP that the statistics that look so bad coincide with the Bush reign. I don't know why they left out 2005 from the first chart, but I don't believe that it would significantly impact the trend.

Regardless, it is wrong to be intentionally deceptive when presenting statistics.

 

[russ_watters]

That's commonly cited, but it is misleading to the point of being a purposeful deception. Saying "declined from 2001-2005" implies yearly decreases, when in fact it decreased each year from 2001-2004, then went up in 2005. Yes, it is still lower than in 2001, but either that's sloppy wording or an intentional deception. And I don't accept that people are that sloppy in their wording. Regardless, it is wrong to be intentionally deceptive when presenting statistics.

And btw, were the poor the only ones negatively affected by Clinton's recession and the "jobless recovery" that followed it under Bush? How were those at the top 20% doing in 2005 compared with 2001...?

Again, like the above deceptions, Democrats like to cherry-pick economic data showing negatives, implying that those negatives only apply to those on the low end, when in fact, they apply to everyone. It's more of the 'the rich get richer while the poor get poorer' thing they like to play-up. But the reality is that when things are good, they are good for all and when they are bad they are bad for all. They may not be equally good or bad, but the trends affect everyone: Currently, no one in any 5th (or the top 5%) are back up to their peak incomes from just before the recession. But all are rising again. http://www.census.gov/hhes/www/income/histinc/h03ar.html

The one-two punch of the 'us vs them' and attempts to argue their way out of the economic cycle are the two big rediculous deceptions the Democratic party play's-up. They are both easily shown to be wrong, but in campaigns they often work well because you can argue them so easily with a misleading soundbyte in a 30 second commercial.

 

[edward]

Since this thread seems to be back up and running. I would add that statistics can vary depending on the source. A company that is paid to find information that leads to a desireable result, will probably find it.

That said I don't think anyone has covered several other topics. I hope

One is job growth compared to population growth. The link below doesn't paint a rosy picture.

http://www.jobwatch.org/20040820_state_job_growth_pop_growth.pdf

The other has been on my mind for some time. Just how many jobs were created because of the Bush tax cuts? The link below indicates that without the massive increases in defense and discretional spending by the government, there would have been few or no jobs created by the tax cuts.
http://www.epi.org/content.cfm/webfeatures_snapshots_20060126

 

[russ_watters]

One is job growth compared to population growth. The link below doesn't paint a rosy picture.

http://www.jobwatch.org/20040820_state_job_growth_pop_growth.pdf

Once again, cherry-picking one year isn't very useful for telling us where the country is really going. Its nice they picked a year that there actually was job growth, but by the very nature of a cycle, the first year of increase after a decline is pretty much always going to have thin gains.

The other has been on my mind for some time. Just how many jobs were created because of the Bush tax cuts? The link below indicates that without the massive increases in defense and discretional spending by the government, there would have been few no jobs created by the tax cuts.
http://www.epi.org/content.cfm/webfeatures_snapshots_20060126

Again, they're analyzing the bottom of the curve for something that takes a while to manifest. It is the great thing about being a liberal economist: most conservative ideas are long-range and you can easily discount them by being short-sighted.

That said, Bush's first tax cut was actually a psuedo-rebate, which was intended as a quick shot-in-the-arm and probably helped soften the recession that was underway when he took office. That was an unusual thing, though.

Regardless of all that, taxes are very difficult to positively correlate to changes in the economy. They certainly have an effect, but the normal cyclical fluctuations drown them out over the short-term.

 

[edward]

Once again, cherry-picking one year isn't very useful for telling us where the country is really going.

Actually there was no cherry picking Russ, that was the only link I could find without a subscription. I would take it then that you presume that no connection between employment and population growth can be shown unitil X nuber of years have passed.

russ_wattersThat said, Bush's first tax cut was actually a psuedo-rebate, which was intended as a quick shot-in-the-arm and probably helped soften the recession that was underway when he took office. That was an unusual thing, though.

Regardless of all that, taxes are very difficult to positively correlate to changes in the economy. They certainly have an effect, but the normal cyclical fluctuations drown them out over the short-term.

Odd then that the White House uses the jobs supposedly provided by the tax cuts as a bragging point. And you would then discount any chance that the massive spending by the Bush administration had anything to do with satisfactory employment figures??

The Strength And Continued Growth Of Our Economy Is A Tribute To The American Worker And The President's Tax Cuts.

http://www.whitehouse.gov/infocus/economy/

I say that without the record government spending bills, employment would have tanked in 04-05, just when it mysteriously started holding it's own.

 

[Skyhunter]

This thread died and came back and I never answered this: Yes. It is misleading because it is meant to show two numbers that are describing the same thing (income for business vs income for people) which are in actuality not describing the same thing. Well, let's see how you did... It's pretty simple: people don't have profits. It's just personal gross income that is being compared against corporate profit (your definition of corporate profit is correct).

Lets say, for example, that I earned $50,000 last year and spent all but $49,000 on taxes and expenses. $1,000, I saved. This year, I got a raise and earned $55,000, spending $49,000 again. The way personal income is calculated I gained 10% and the way corporate income is calculated, I gained 500%.

And, needless to say, if I didn't save anything last year, but did save $1 this year, then my "profit" would be up by an infinite amount. Clearly, an absurdity, yet that is how the statistics are being presented wrt corporations. It's actually a problem when working with P/E ratios to figure out when to buy/sell stock - sometimes the P/E ratio is undefined/infinite. That's commonly cited, but it is misleading to the point of being a purposeful deception. Saying "declined from 2001-2005" implies yearly decreases, when in fact it decreased each year from 2001-2004, then went up in 2005. Yes, it is still lower than in 2001, but either that's sloppy wording or an intentional deception. And I don't accept that people are that sloppy in their wording. Regardless, it is wrong to be intentionally deceptive when presenting statistics.

Thanks for the clarification. I agree, that one should not be intentionally misleading when presenting statistics.

Still if corporations are realizing a 300% increase in profit, they are not spreading it around, otherwise personal income would be higher, not 300% perhaps, since as you pointed out the two are not the same, but certanly there is not an equitable distribution.

Since much of the personal income in this country is derived from government employees, high level management executives, and investments, the real growth in personal income is not from corporate profits to workers. It is the workers BTW that produce the goods and services, that are responsible for the wealth that becomes corporate profit.

Since corporate and personal earning data are calculated differently, what would you suggest as a less confusing comparison?