Chart of the Day
A nice chart summarizing the recent economic expansion in comparison with past booms. Two key results stand out. First, this boom was particularly lousy in the historical context. Second, the only aggregate to outperform the post-war average was corporate profits. Note especially the weak growth in wages and salaries and in employment.
Does Catholic social teaching have anything to say about this? Well, yes. In Quadragesimo Anno, Pope Pius XI wrote: “riches that economic-social developments constantly increase ought to be so distributed among individual persons and classes that the common advantage of all…. one class is forbidden to exclude the other from sharing in the benefits.” Pope John XXIII in Mater Et Magistra argued that “the economic prosperity of a nation is not so much its total assets in terms of wealth and property, as the equitable division and distribution of this wealth.”
Nobody is pinning the blame entirely on Bush and his party for this particularly weak and lopsided expansion. But it should at least be evident that his expensive tax cuts not only had little aggregate effect, but actually had adverse distributional consequences. McCain’s tax proposals would do the same. Another key imperative, harking all the way back to Pope Leo XIII, is to bolster the power of unions, so that workers can negotiate their fair share. This recent mushrooming in corporate profits at the expense of wages and salaries would probably not have occurred had the power of unions not been squashed over the past quarter century or so.
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In the interest of full disclosure, the chart is from the Center on Budget and Policy Priorities. From Wikipedia:
According to New York Times reporter Matt Bai, CBPP is one of three left wing think tanks funded by the Democracy Alliance. The other two are the Center for American Progress and the Economic Policy Institute. According to Bai’s account, representatives of CBPP and the other two Democracy Alliance-sponsored think tanks attended the May 2006 meeting of the Democracy Alliance at the Barton Creek Resort near Austin, Texas. Their role was to “talk about the agendas they were busy crafting that would catapult Democratic politics into the economic future.”
Great Post, MM – I think those charts and numbers are a factor in popular disillusionment with GOP policies and governance. We’ll have some sense of the depth of that disillusionment come November, I expect.
Phillip,
What if it were “right wing”? Would that warrant our dismissal or skepticism without actually considering the data, results, and conclusions? Would you be posting bits from the all-authoritative Wikipedia in that case?
No it wouldn’t merit automatic dismissal nor have I said so in this case. Such full disclosure is standard in scientific/medical publications. People typically then read the study with more attention to ensure there was no bias (intended or otherwise.) They can then critique the study if such bias appears present in the analysis of the data.
The problem here is we only have a chart. Based upon this chart with no link to the original study, we cannot determine for ourselves if the data, results and conclusions are valid. It is even more reasonable to want the data if there was funding that might make the study more prone to bias. But based upon a chart from a study we don’t have that may be biased, we are then asked to accept at face value the second premise that the Bush tax cuts contributed to this and then vote in a certain direction because this is contrary to Quadragesimo Anno. That doesn’t work. And that’s healthy statistical skepticism whether right or left.
Following on Philip’s point, Poli, one of the first things I would want to know as an analyist is to what extent the report cherry-picks what it calls an “expansion” in the 45-01 period in order to make the desired contrast — and where exactly it defines the 01-07 expansion as starting and stopping.
On the post more generally — MM’s point would perhaps be more interesting if “corporate profits” were taken away by big fat men and hidden in coffers where they were never shared. In reality, “profits” are either distributed to investors (which include the 50+ percent of the population who have some sort of retirement savings) or used to fund additional investments in research, staff, infrastructure, etc. The fact that they represent the difference between expenses and income in a given year does not mean that they somehow leave the system and thereafter are only on access to “the rich”.
I think it would also be reasonable to consider that this is looking at percentage increases. So we’d do well to ask if employment was particularly low in 2000 or if wages were particularly low in 2000. If they were in fact at relatively high levels already (and MM is relatively fond of telling us that the Clinton years were just great for the economy) then we can hardly be surprised if they didn’t increase by as great a percentage on in 01-07 “boom” as they did during booms which followed a period of increased unemployment or depressed wages.
Finally, I’d be curious to see to what extent what you’re seeing in regards to corporate profits is simply a reflection of positive changes in the business culture. In 2000, we were pretty much at the end of the “high tech” bubble, during which a lot of companies didn’t worry much about profits and instead made round after round of investments (and sometimes just plain spendthrift waste) at the expense of profits. During the 01-07 period, we’ve certainly seen a much greater swing back to an emphasis on the “bottom line”. So I’d want to see what the actual corporate profit percentages were during this “boom” versus the other “booms” in question. Were profits actually much higher, or is it just that their percentage increase was greater because they had been dangerously low at the entry point in 2000?
Well, I’ll pull an MM and say:
Despite what the Church says, we don’t need a legal option to address the issue of the lousy economic expansion and corporate profits.
There you go MM, you don’t need to vote for Obama…
This recent mushrooming in corporate profits at the expense of wages and salaries would probably not have occurred had the power of unions not been squashed over the past quarter century or so.
Absolutely right, MM. The decline of Unions has been catastrophic for American workers.
Excuse my ignorance, but what squashed the power of unions?
Zach – it began about the time that the Democratic Party threw out the New Deal coalition in favor of the granola and macrame set. Thomas Frank wrote several books describing the process. A good one to start with is “What’s the Matter With Kansas?”
Always skeptical of MM’s claims, I ran the numbers myself. Indeed, the last period of economic expansion was very weak by historical standards and all related numbers are also weak.
I couldn’t find what numbers they were using for net worth. I looked at disposal household income and even though it grew faster relative to GDP thanks to the tax cuts, it was still slower than previous boom eras.
The employment figure in the graph is pretty useless. I looked unemployment rates and it’s the one bright spot. The 2001-2007 expansion saw lower than average unemployment. The lowest since the 61-69 expansion when the draft provided “employment.” And before that the lowest since the Korean War.
While, I wasn’t willing to spend my time adjust corporate profits for inflation, I did find that the corporate tax has been reduced drastically so I don’t doubt the graph.
The lesson? Corporations saved us from a worse fate in the 21st century. Now go give a CEO a big fat kiss.
BTW, I am worried about income inequality and I do believe that Bush’s tax cuts contributed to it which is one reason why I opposed it but the notion that corporate profits came “at the expense of wages and salaries” is pure nonsense.
My mistake. I thought MM was attributing the “mushrooming in corporate profits at the expense of wages and salaries” to Bush which would indeed be pure nonsense. The deterioration of unions can be blamed. It also explains the low unemployment. Choose your poison.
False choice, RR: From 1945 to 1970 unions were strong and unemployment was low.
Again, given that MM treats as optional the definite Catholic teaching that legislators must seek to restrict abortion via the law, he has no standing to claim that Catholic teaching requires a particular type of tax policy or union regulation.
Union membership has been on the decline since the late 1950s, and it declined much more in the periods that make up the “average expansion” than from 2001-2007, so I don’t think that’ll do as an explanation.
MM,
How do you have time to look all this crap up and post on it?
Matt, I explained that in my post as well. Unemployment was low during the Korean and Vietnam Wars but personally I don’t like that jobs program. But you’re right, there are three poisons to choose from: Stronger unions, lower unemployment, or a massive war.
RR: there is a reason why people focus more on the employment rate rather than the umemployment rate. The employment rate is the inverse of the unemployment rate times the participation rate (the latter means the labor force as a proportion of the working gae popultion), During the last expansion, we did indeed see stable unemployment rates (employment over labor force), but low participation (labor force over participation). This tells us that people simply withdrew from the labor force. So looking at unemployment can be misleading.
SB: I’m going to say this once, and once only. I have never claimed that it is optional that “legislators seek to restrict abortion via the law”– my focus is on Catholics who deal with legislators who don’t do such a thing. I know your pattern– repeating this lie at every conceivable opportunity. Let me tell you now that I’m not going to tolerate it. You’ll be out of here on your ear– permanently– if you pull this crap again.
MM — you said in an email to me that it is a “legitimate” position in “Catholic debate” for Gerald Campbell to argue affirmatively on behalf of being prochoice as a legal matter. I apologize if I somehow misunderstood that statement, and if you meant to refer to something far more limited (i.e., the legitimacy of voting for Obama DESPITE his prochoice position, rather than saying that Campbell’s affirmative pro-choice stance is itself legitimate as a Catholic position). Thus, I take your clarification with its implicit and necessary condemnation of Campbell’s affirmative prochoice stance. Thanks.
On the main post here, one might wonder why the wages/salaries are depicted as having risen only by about 2% in the 2001-07 time period. If one takes benefits into account (as would seem to be a honest way to calculate such things), wages and benefits have in fact risen by 6.7 percent in that time period, a faster rate of growth than during the 1990s. http://www.willwilkinson.net/flybottle/wp-content/uploads/2008/07/blscompensation.png