Corporate profits climb as politicians wrangle

Brian Brown, Reporter

Amid all the hubbub and last-minute dealmaking in Washington D.C., current gross domestic product numbers were released by the U.S. Department of Commerce on Friday: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm.

The GDP increased 1.3 percent in the second quarter to roughly $15 trillion after a .4 percent increase in the first quarter.

This hardly seems like much good news, but considering a recession is defined by two consecutive quarters of negative economic growth as measured by the GDP, at least we can say that we’re not sliding backward.

On a positive note for business owners and executives, corporate profits remain strong.

Elliot Eisenberg, senior economist for the National Association of Home Builders, noted in an e-letter following the release that corporate profits now account for the largest share of the GDP since 1950: 12.6 percent. Salaries, on the other hand, are shrinking. Wages and salaries only account for 54.9 percent of the GDP – it’s workers’ smallest share of the pie since 1955.

This is interesting to me considering the debates we’ve seen in Washington over federal spending and tax increases.

Democrats have called for loopholes to be closed for corporate America and top earners. Republicans want to see government spending cut and fiscal responsibility on Capitol Hill. I’m no economist, but it seems that with those two locked in battle, what we’ve earned as a nation are less taxes for the wealthy and no cuts in spending to huge social programs such as Medicaid and Social Security – a situation that many experts agree is no longer sustainable.

Interestingly, in Missouri, our Democratic governor, Jay Nixon, has not been shy about touting the state’s economic incentives offered through the Department of Economic Development. In a story I wrote in the July 12 edition, “Companies apply tax breaks for new hires,” supporters of a fair tax, the Show-Me Institute, were critical of state tax credits that aren’t broad or all-inclusive.

Wherever you fall philosophically with regard to taxes and spending, I think all of us were glad to see cooler heads prevail over the weekend, as our leaders came together to avoid a real debt crisis – assuming the deal is finalized today. Hopefully, the lesson here is that we all have to remember to work together if we want to see our bottom lines increase in the third quarter.

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