Posted by AzBlueMeanie:
We are told by supply-sider Republicans that we must give tax cuts and transfer the nation's wealth to corporations and the investor class, the "two percenters," because they are the "job creators" of our economy.
Uh-huh. So how did this Gilded Age revival work out over the past decade? Repost: The Bush Years Were a Lost Decade. Worst performance evah! (since Herbert Hoover anyway). If it hasn't worked for the past decade, what would make you believe it would work now? As Albert Einstein said, doing the same thing over and over again expecting a different result is the definition of insanity.
This week, the New York Times reported that "The nation’s workers may be struggling, but American companies just had their best quarter ever." U.S. Corporate Profits Hit Record in Third Quarter:
American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago[.]
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The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.
Corporate profits have been doing extremely well for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history. As a share of gross domestic product, corporate profits also have been increasing, and they now represent 11.2 percent of total output. That is the highest share since the fourth quarter of 2006, when they accounted for 11.7 percent of output.
This breakneck pace can be partly attributed to strong productivity growth — which means companies have been able to make more with less — as well as the fact that some of the profits of American companies come from abroad. Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly.
Tuesday’s Commerce Department report also showed that the nation’s output grew at a slightly faster pace than originally estimated last quarter. Its growth rate, of 2.5 percent a year in inflation-adjusted terms, is higher than the initial estimate of 2 percent. The economy grew at a 1.7 percent annual rate in the second quarter.
So where are all those private sector jobs being created by these record corporate profits? I have posted on this topic previously. The new corporate business model: increase profits, not jobs; UPDATE: The new corporate business model: increase profits, not jobs; and Update II: The new corporate business model: increase profits, not jobs; and Update III: The new corporate business model: increase profits, not jobs.
Since the "job creators" are not creating private sector jobs, just what are the "two percenters" doing with their record profits? You guessed it: conspicuous consumption and personal indulgence. Wall Street Dares to Indulge Itself Again:
Exuberance made a comeback this year at Josh Koplewicz’s annual Halloween party. More than 1,000 people packed into a 6,000-square-foot space at the Good Units night club in Manhattan, a substantially larger crowd than in the last several years.
The open bar was sponsored by Russian Standard vodka, and Mr. Koplewicz, an investment analyst at Goldman Sachs, was able to snag a big headliner: the hip-hop star Lil’ Kim, who performed dressed in a black cat costume.
The scene was more extravagant in September, at a 50th birthday party in Hong Kong for Brian Brille, the head of Bank of America Asia Pacific. Mr. Brille, who is well known on the New York social scene, wore a gray Hugh Hefner-esque jacket. Women dressed like Playmates, with feather boas and satin ears, danced behind a pink silk screen.
Two years after the onset of the financial crisis, the stock market is recovering and Wall Street’s moneyed elite are breathing easier again. And this means in some cases they are spending again — at times cautiously, but sometimes with a familiar swagger.
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[W]hen it comes to personal indulgences, there are signs that the wallets are beginning to open up. Traders and executives say that jobs seem much more secure. Businesses whose fortunes ebb and flow with the financial markets are thriving again.
“Wall Street is back spending as much if not more than before,” said the New York dermatologic surgeon Dr. Francesca J. Fusco, whose business is booming again after a difficult few years.
Christie’s auction house says investors from the financial world who fell out of the bidding market during the 2008 credit crisis are “pouring” back in.
Expensive restaurants report a pickup in bookings. At the Porter House restaurant in the Time Warner Center across from Central Park, the head chef, Michael Lomonaco, says business is up about 10 percent over a year ago and “people are starting to shake off what happened.” The restaurant is a favorite of A-list Wall Street executives, including Goldman Sachs’s chief executive, Lloyd C. Blankfein.
Real estate agents say Wall Street executives have already begun lining up rentals in the Hamptons for next summer. Dolly Lenz of Prudential Douglas Elliman said the bidding this year was “hotter and heavier” than previous years. “There is a passion now in the market I haven’t seen in a while,” she said.
Video Report: "Wall Street regains its swagger" http://link.brightcove.com/services/player/bcpid587214416001?bctid=678888864001
So what is responsible for job creation and preventing the nation's slide into the Second Great Depression that everyone feared at the end of 2008? The American Recovery and Reinvestment Act — federal stimulus spending — "widely panned by voters, injected life into the otherwise-sluggish economy between July and September, the nonpartisan Congressional Budget Office said on Wednesday." U.S. Stimulus Boosted Jobs, Output In Q3 – CBO:
The American Recovery and Reinvestment Act put between 1.4 million and 3.6 million to work in the third quarter of this year, a time when more than 15 million Americans were unemployed, CBO said.
It also boosted national output by between 1.4 percent and 4.1 percent during that time, the CBO said.
During the third quarter, the economy grew by an annual rate of 2.5 percent. Economists say a rate faster than 3 percent is needed to make any noticeable dent in unemployment.
The CBO's estimates have consistently shown that the $814 billion package of tax cuts, state aid, construction spending and enhanced safety-net provisions has blunted the impact of the worst U.S. recession since the 1930s.
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The unemployment rate, currently 9.6 percent, would have been between 10.4 percent and 11.6 percent without the Recovery Act, the CBO said.
The stimulus created the equivalent of 2 million to 5.8 million jobs during the third quarter as part-time workers shifted to full-time work, or employers offered more overtime work.
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Not all elements of the Recovery Act got the same bang for the buck, the CBO said.
Direct spending on highway construction, water-system upgrades and energy efficiency were among the most effective, the CBO said, while tax breaks for businesses and higher-income people cost more in lost revenues than they made up for in increased economic activity.
And yet — voters by wide margins believe the stimulus has been ineffective (the fault of an economics ignorant media and public), and they just handed a big victory to the Republicans who were responsible for the Bush Great Recession and who opposed the federal stimulus spending that actually worked, and who now demand the continuation of tax breaks for corporations and the "two percenter" investor class that did not and do not work to create jobs. This country is schizophrenic.