Corporate Profits Up But National Well-Being Isn't

Wow, great news! The Commerce Department reported yesterday that in the third quarter of 2010, U.S. corporate profits surged to an all-time record high. They came in at an annual rate of $1.659 trillion. You can read all about it in the New York Times, or in this article from CNBC. Corporate profits have grown 11% this year. Sam Stovall, chief investment strategist for the Standard & Poor's 500 index says, "Profit margins for S & P firms are now above 9 percent - nosebleed territory."

This excellent news brings some questions to mind. First, aren't Obama and the Democrats supposed to be bad for business? The U.S. Chamber of Commerce just spent $200 million in the last election cycle to tell us so. Yet it certainly looks like the facts fail to support that assertion. The national economy grew at an annualized rate of 2.5% for the quarter while corporate profits were up 11%. A much higher percentage went into corporate coffers than into the rest of the economy.

Well, that must mean more jobs, right? No, it apparently doesn't. While the monthly losses of 700,000 jobs that greeted Obama's inauguration have been staunched, the turnaround that is cheering Wall Street hasn't fully translated to Main Street. According to the Bureau of Labor Statistics, 151,000 private-sector jobs were added in October, but unemployment remains stuck at 9.6%. Job creation is lagging because much of the profit has come from increases in "productivity," i.e. getting more work from fewer people. Much of the rest comes from the nature of where the increased profits are coming from. Three-fourths of all these profits are coming from the financial sector of the economy. Much of it therefore comes not from anyone producing anything, but from betting on where the stock, bonds and commodities markets are heading (futures) and related gimmickry such as derivatives. And these games do not require a lot of workers to make them happen.

Well then, that makes it all the more imperative to extend the Bush tax cuts for the rich to produce these extra jobs, doesn't it? No, it doesn't. If you have been paying attention you realize that these lower rates for the rich are currently in effect. They have been for years. And where are the jobs? They weren't being created in the Bush years, and with record profits now, they still aren't. What part of facts and results do people still not get?

The hard truth that many do not want to see is that corporations do not WANT to create jobs. They want to make profit, and if they can do that without hiring they will, for that will make profit higher yet. They do not WANT to provide health care or contribute to society. To a corporate entity these are costs. They did not, and still do not when they can avoid it, WANT
to pay workers a living wage, give them a forty hour week, vacations, lunch breaks, ventilation, safe working conditions or any other humane terms of employment until they were forced to do so by workers united together in strong unions and by labor and consumer legislation rammed down their throats by politicians more worried about losing the votes of an aroused populace than about losing corporate money.

Are they using this immense trove of cash, now estimated to be over $2.5 trillion, for the alleviation of national distress? Are they hiring? Are they offering to help pay down the national debt, contribute to the solvency of Medicare and Social Security, or make any other contribution to national life in return for the tax breaks and bailouts they have received? If society crumbles around them and people are unemployed they are not concerned. As long as profits are high and taxes are low they have what they want.

Why do you think they are always for this kind of "smaller government?" Think about it.