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Corporate profit bonanza Judd Legum

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In the last three months of 2023, after-tax corporate profits reached an all-time high of $2.8 trillion. This is part of a long-term growth in corporate profits that began in the 1980s, picked up steam at the turn of the millennium, and exploded since 2020. 

Notably, the surge in corporate profits since 2020 has been fueled, in part, by expanding corporate profit margins. Last year, corporate profit margins (excluding the financial sector) were over 15%, a level not seen since the 1950s. This is because the increases in prices for goods and services have outpaced the increase in costs — both labor and non-labor — for corporations. 

According to an analysis from the Groundwork Collaborative, “corporate

profits drove 53 percent of inflation during the second and third quarters of 2023 and

more than one-third since the start of the pandemic.” In the four decades prior to the pandemic, corporate profits contributed to just 11% of price increases. 

Theoretically, this should not happen. Corporations should not be able to dramatically increase their profit margins by increasing prices because competitors should step in with lower prices and steal market share. So what’s going on?

Greg Ip, who writes about economics for the Wall Street Journal, suggests that corporations are collectively taking advantage of consumer psychology. Supply shocks related to the pandemic created widespread cost increases that consumers accepted. Although those supply shocks have dissipated, many businesses have maintained higher prices anyway. “If people are paying $3 for a dozen eggs last week, they’ll pay $3 this week. And firms take advantage of that,” Yale University economist Mike Sinkinson explained

This kind of informal collusion works best in concentrated industries. The Groundwork Collective highlights the diaper industry, where “Procter & Gamble Co. (P&G) and Kimberly-Clark Corp. control 70 percent of the domestic market.” Since the onset of the pandemic, “[d]iaper prices have increased by more than 30 percent” — from $16.50 per package to nearly $21. This was initially driven by an increase in the price of wood pulp, a key input for diapers but also paper towels and toilet paper. But since January 2023, prices for wood pulp have declined by 25%. 

But P&G and Kimberly-Clark are not reducing diaper prices. Instead, they are bragging to investors about their massive profits. In July 2023, P&G “predicted $800 million in windfall profits because of declining input costs.” In October 2023, Kimberly-Clark acknowledged that its input costs were coming down, but said that its products were still “priced appropriately.” 

Similar dynamics are playing out in many other industries, including “new and used cars, groceries, and housing.” 

How corporations are using their windfall

It’s possible for corporate profits to be used productively to fuel innovation and growth. But that doesn’t appear to be happening. Economist Christian Weller notes that corporations are using their record profits “mainly to pay dividends to their shareholders and building up their stockpiles of cash.”

Between December 2019 and December 2023, non-financial corporations used almost half of their pre-tax profits (48.9%) to pay dividends to investors. That is the highest share of corporate profits devoted to dividends since the 1950s. The same group of corporations now has $7.2 trillion in cash, up from $6.1 trillion in 2019, adjusted for inflation. Meanwhile, capital expenditures — which is a key way corporations invest in the future — are at historic lows relative to profits. 

The path forward

In light of these record corporate profits, the government has a few choices. It could choose to raise corporate tax rates and use the funds to help people in need, such as children in poverty. In March, President Biden released a proposal that would raise the corporate tax rate from 21% to 28%. Biden’s proposal also includes raising the minimum tax for corporations with $1 billion in profits or more from 15% to 21%. 

The government could also choose to maintain the current corporate tax rate of 21 percent, which was established by the Trump Administration in 2017 in the Tax Cuts and Jobs Act. Trump wants voters to believe that if he is reelected, he will not prioritize corporate tax cuts. In January, Bloomberg reported that Trump plans to “keep[] corporate tax levels unchanged in an appeal to working and middle[-]class voters.” Stephen Moore, an economic advisor to Trump, told the Washington Post that Trump “said that he really wants to focus more on small businesses than corporations” and that “he’s fine with the corporate rate where it is.” 

The government could also choose to cut the corporate tax rate even further and facilitate even larger corporate profits. Trump has expressed interest in lower corporate tax rates, perhaps as low as 15%. Project 2025, a blueprint for Trump created by the Heritage Foundation and a large coalition of conservative groups, suggests cutting the corporate income tax rate to 18%

 

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April 18, 2024 Heather Cox Richardson

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I will not spend the rest of 2024 focusing on Trump and the chaos in the Republican Party, but today it has been impossible to look away.

In Trump’s election interference trial in Manhattan, Judge Juan Merchan this morning dismissed one of the selected jurors after she expressed concern for her anonymity and thus for her safety. All of the reporters in the courtroom have shared so much information about the jurors that they seemed at risk of being identified, but Fox News Channel host Jesse Watters not only ran a video segment about a juror, he suggested she was “concerning.” Trump shared the video on social media.

The juror told the judge that so much information about her had become public that her friends and family had begun to ask her if she was one of the jurors. Legal analyst Joyce White Vance noted jurors’ fear for their safety was a concern normally seen only “in a case involving violent organized crime.”

Nonetheless, by the end of the day, twelve people had been chosen to serve as jurors. Tomorrow the process will continue in order to find six alternate jurors. 

It is a courtesy for the two sides at a trial to share with each other the names of their next witnesses so the other team can prepare for them. Today the prosecution declined to provide the names of their first three witnesses to the defense lawyers out of concern that Trump would broadcast them on social media. “Mr. Trump has been tweeting about the witnesses. We’re not telling them who the witnesses are,” prosecutor Joshua Steinglass said. 

Merchan said he “can’t blame them.” Trump’s defense attorney Todd Blanche offered to “commit to the court and the [prosecution] that President Trump will not [post] about any witness” on social media. “I don’t think you can make that representation,” Merchan said, in a recognition that Trump cannot be trusted, even by his own lawyers.

An article in the New York Times today confirmed that the trial will give Trump plenty of publicity, but not the kind that he prefers. Lawyer Norman L. Eisen walked through questions about what a prison sentence for Trump could look like.

Trump’s popular image is taking a hit in other ways, as well. Zac Anderson and Erin Mansfield of USA Today reported that Trump is funneling money from his campaign fundraising directly into his businesses. According to a new report filed with the Federal Election Commission, in February and March the campaign wrote checks totaling $411,287 to Mar-a-Lago and in March a check for $62,337 to Trump National Doral Miami.

Experts say it is legal for candidates to pay their own businesses for services used by the campaign so long as they pay fair market value. At the same time, they note that since Trump appears to be desperate for money, “it looks bad.”

Astonishingly, Trump’s trial was not the biggest domestic story today. Republicans in Congress were in chaos as members of the extremist Freedom Caucus worked to derail the national security supplemental bills that House Speaker Mike Johnson (R-LA) has introduced in place of the Senate bill, although they track that bill closely. 

The House Rules Committee spent the day debating the foreign aid package, which appropriates aid for Ukraine, Israel, and Taiwan separately. The Israel bill also contains $9.1 billion in humanitarian aid for Gaza and other countries. A fourth bill focuses on forcing the Chinese owners of TikTok to sell the company, as well as on imposing sanctions on Russia and Iran. 

At stake in the House Rules Committee was Johnson’s plan to allow the House to debate and vote on each measure separately, and then recombine them all into a single measure if they all pass. This would allow extremist Republicans to vote against aid to Ukraine, while still tying the pieces all together to send to the Senate. As Robert Jimison outlined in the New York Times, this complicated plan meant that the Rules Committee vote to allow such a maneuver was crucial to the bill’s passage.

The extremist House Republicans were adamantly opposed to the plan because of their staunch opposition to aid for Ukraine. They wrote in a memo on Wednesday: “This tactic allows Johnson to pass priorities favored by President Biden, the swamp and the Ukraine war machine with a supermajority of House members, leaving conservatives out to dry.”

Extremists Marjorie Taylor Greene (R-GA) and Thomas Massie (R-KY) vowed to throw House speaker Mike Johnson (R-LA) out of the speakership, but Democrats Tom Suozzi of New York and Jared Moskowitz of Florida have said they would vote to keep him in his seat, thereby defanging the attack on his leadership.

So the extremists instead tried to load the measures up with amendments prohibiting funds from being used for abortion, removing humanitarian aid for Gaza, opposing a two-state solution to the Hamas-Israel war, calling for a wall at the southern border of the U.S., defunding the Federal Emergency Management Agency (FEMA), and so on.

Greene was especially active in opposition to aid to Ukraine. She tried to amend the bill to direct the president to withdraw the U.S. from NATO and demanded that any members of Congress voting for aid to Ukraine be conscripted into the Ukraine army as well as have their salaries taken to offset funding. She wanted to stop funding until Ukraine “turns over all information related to Hunter Biden and Burisma,” and to require Ukrainian president Volodymyr Zelensky to resign. More curiously, she suggested amending the Ukraine bill so that funding would require “restrictions on ethnic minorities’, including Hungarians in Transcarpathia, right to use their native languages in schools are lifted.” This language echoes a very specific piece of Russian propaganda.

Finally, Moskowitz proposed “that Representative Marjorie Taylor Greene…should be appointed as Vladimir Putin’s Special Envoy to the United States Congress.” 

Many congress members have left Washington, D.C., since Friday was to be the first day of a planned recess. This meant the partisan majority on the floor fluctuated. Olivia Beavers of Politico reported that that instability made Freedom Caucus members nervous enough to put together a Floor Action Response Team (FART—I am not making this up) to make sure other Republicans didn’t limit the power of the extremists when they were off the floor.

The name of their response team seems likely to be their way to signal their disrespect for the entire Congress. Their fellow Republicans are returning the heat. Today Mike Turner (R-OH) referred to the extremists as the Bully Caucus on MSNBC and said, “We need to get back to professionalism, we need to get back to governing, we need to get back to legislating.” Derrick Van Orden (R-WI) told Juliegrace Brufke of Axios:  “The vast majority of the Republican Party in the House of Representatives…are sick and tired of having people who…constantly blackmail the speaker of the House.”

Another Republican representative, Jake LaTurner of Kansas, announced today he will not run for reelection. He joins more than 20 other Republican representatives heading for the exits.

After all the drama, the House Rules Committee voted 6–3 tonight to advance the foreign aid package to the House floor. Three Republicans voted nay. While it is customary for the opposition party to vote against advancing bills out of the committee, the Democrats broke with tradition and voted in favor.

Notes:

https://www.nytimes.com/2024/04/18/opinion/donald-trump-trial-prison.html

https://www.politico.com/live-updates/2024/04/18/congress/hfc-on-alert-00153097

https://www.jns.org/house-rules-committee-debates-israel-aid-package-as-house-speaker-confronts-right-flank/

https://www.cbsnews.com/news/donald-trump-new-york-court-criminal-trial/

https://www.thedailybeast.com/jesse-watters-goes-juror-by-juror-to-sow-doubt-in-trump-hush-money-case

https://www.salon.com/2024/04/18/juror-quits-over-fear-of-being-outed-after-fox-news-host-singled-her-out/

https://www.rawstory.com/jake-laturner/#cxrecs_s

https://www.cnn.com/2024/04/18/politics/mike-johnson-speakership-rules

https://www.rawstory.com/freedom-caucus-2667810851/

https://rules.house.gov/bill/118/hr-8034

https://rules.house.gov/bill/118/hr-8035

https://www.usatoday.com/story/news/politics/elections/2024/04/18/trump-campaign-funnels-money-to-his-businesses/73344744007/

https://www.axios.com/2024/04/18/mike-johnson-gaetz-motion-to-vacate-ukraine

https://www.axios.com/2024/04/18/jake-laturner-retire-house-gop-kansas

https://www.axios.com/2024/03/27/house-members-retiring-quitting-productivity

https://www.nytimes.com/2024/04/18/us/politics/house-israel-ukraine-aid-package-explainer.html

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April 17, 2024 Heather Cox Richardson

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Senate nominee bankrolled by far-right activist trashing MLK and the Civil Rights Act Judd Legum

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Founder and executive director of Turning Point USA, Charlie Kirk, speaks on July 15, 2023, in West Palm Beach, Florida. (Photo by Joe Raedle/Getty Images)

Last month, Bernie Moreno won the Republican nomination for U.S. Senate in Ohio. Moreno benefited from an early endorsement from Turning Point Action, the far-right activist group founded by Charlie Kirk. On May 10, 2023, Kirk posted on X that he was “proud to support Bernie,” and Moreno had Turning Point Action’s “full endorsement.” 

In response, Moreno wrote that he was “honored to be endorsed by Charlie Kirk and Turning Point Action.” Moreno said that “[f]ew have done more to fight back against the radical left than they have,” and he looks “forward to working with them to defend for our America First conservative values in the US Senate.” 

In 2023, Kirk repeatedly featured Moreno as a guest on his popular podcast and consistently promoted Moreno’s candidacy to his 2.9 million followers on X. At the end of 2023, Kirk donated the maximum legal amount of $5,000 to Moreno’s campaign through the Turning Point PAC. 

At the same time, Kirk, known for his embrace of fringe views and conspiracy theories, launched a sustained attack on Martin Luther King Jr.’s life and legacy. At a December 2023 convention hosted by Turning Point USA, Kirk said that King “was awful” and “not a good person.” Kirk’s critique extended not just to King himself but to the civil rights movement itself. “We made a huge mistake when we passed the Civil Rights Act in the 1960s,” Kirk declared, trashing the legislation that outlawed segregation in public places and many businesses. 

In his convention speech, Kirk blasted the Civil Rights Act of 1964 as an effort to “re-found the county” and “get rid of the First Amendment.” He criticized courts for enforcing the law, which prohibits discrimination on the basis of race, color, religion, sex, or national origin. “Federal courts just yield to the Civil Rights Act as if it’s the actual American Constitution,” Kirk complained. 

A spokesperson for Turning Point USA, Andrew Kolvet, defended Kirk’s attacks, saying respect for King’s legacy was based on “fake history.” 

Kirk announced he was “gonna tell the truth about MLK Jr” on MLK Day in January 2024. According to Kirk, a podcast episode attacking King and the civil rights movement was being put together by his producer, Blake Neff. In 2020, Neff was forced to resign from Tucker Carlson’s show on Fox News after it was revealed Neff was posting racist comments online under a pseudonym.

The episode, titled “The Myth of MLK,” kicks off with Vince Everett Ellison – a right-wing activist who claims that voting for a Democrat will send you to Hell. Ellison describes King as “despicable,” “immoral,” and “perverted.” Kirk repeatedly suggests that King’s legacy has harmed “Black America.” He asks Ellison if the lives of Black Americans have improved “the more that we have worshipped MLK.” Kirk also invites Ellison to talk about how “MLK’s narrative and political activism led to the modern welfare state.” Ellison responds by accusing the civil rights community of keeping Black people poor, adding that the devil “rest[s] his head at the DNC” and that the DNC “use[d] MLK and all of those perverts with him.”

“I could say declaratively this guy is not worthy of a national holiday. He is not worthy of god-like status. In fact, I think it’s really harmful,” Kirk says after the conversation with Ellison ends. Then Kirk, alongside Neff, spends roughly 30 minutes attempting to demonize the Civil Rights Act. According to Neff, the Civil Rights Act is “directly against this colorblind world that conservatives think MLK brought.” Kirk tells listeners that “in reality the language and the application of the Civil Rights Act…is a color preference act, not a color blindness.” Kirk adds that the Civil Rights Act “is making it harder for us to pursue Excellence as a society” because, as Neff puts it, “you have to discriminate against men, against white people.”

On X, Kirk wrote that the “deification of MLK and his proto-DEI ideology marks the exact moment that the progress of black America goes sideways.” Kirk suggested that MLK was responsible for the “disintegration” of “their cities,” the “collapse” of “their families.” Because of MLK, Kirk claims, “they” are “enormously dependent on government support.” 

Kirk’s crusade against King and the civil rights movement did not appear to impact his relationship with Moreno. On March 14, 2024, Turning Point Action donated $100,000 to the Buckeye Values PAC, Moreno’s Super PAC. 

Buckeye Values PAC is tightly aligned with Moreno’s campaign and was responsible for organizing and financing a key rally featuring Trump and Moreno on March 18, the day before the Ohio primary. 

The day after his primary victory, on March 20, Moreno appeared again on Kirk’s podcast. At the beginning of the interview, Moreno expressed his gratitude for Kirk’s support. “Thank you, Charlie,” Moreno said. “And thank you for your early endorsement. You were with me from the very beginning.”

The Moreno campaign did not respond to a request for comment. 

Moreno suggested white people should get reparations

Moreno himself has also had controversies involving racial issues. When he launched his campaign for Senate, Moreno floated the idea of reparations for white descendants of Union soldiers that were killed during the Civil War. “They talk about reparations. Where are the reparations for the people, for the North, who died to save the lives of Black people?” Moreno said. “I know it’s not politically correct to say that, but you know what, we’ve got to stop being politically correct.” 

“We stand on shoulders of people like John Adams, James Madison, Alexander Hamilton, George Washington… That same group of people later, white people, died to free Black people,” Moreno said. A campaign spokesperson for Moreno told the Cincinnati Enquirer, “Bernie was right when he said political correctness is killing our country, and the crocodile tears from the left expose the Democrat hypocrisy he was referring to in the clip.”

Moreno’s companies have “faced multiple lawsuits alleging discrimination against employees in the run-up to the sale of his high-end Cleveland car dealership,” the AP reported. One 2017 lawsuit involved “a Black former service manager” at a dealership owned by Moreno, who “alleged that he was targeted for discipline and then demoted after taking concerns to human resources about white peers and a subordinate being paid the same or more than him.” He “claimed racial discrimination led to his demotion and eventual wrongful termination.” The lawsuit was “settled out of court,” and the terms of the settlement “were kept private.”

A campaign spokesperson said that “Moreno is ‘a proud minority businessman’ who based his company ‘on the colorblind principles of merit and hard work.’” The statement said that “Bernie has always been committed to giving opportunities to all of his workers, regardless of race, color, gender or creed.”

 

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