Is there a prize for denial in economics reporting? If so, the competion this week was tighter than an Iowa caucus…
Runner-up prize has got to go to the cheer-peddlers covering the December jobs report. The private sector added 212,000 jobs in December; the official unemployment rate is down to 8.5 percent. Take that, you preachers of double-dip recession doom, say the cheer-peddlers, the horizon’s looking bright.
Reliably, Dean Baker has a grasp on reality: “At this pace, we would not get back to pre-recession levels of unemployment until 2027.” Baker points out that a quarter of the (very similar) gains made this time last year came from one industry—couriers—and by this time last year, all of those couriers newly hired in December were once again out of work. Even on their face, the numbers aren’t that good. Government jobs took a beating—falling by 12,000 (280,000 over the year); 5.6 million workers continue to be unemployed for twenty-seven weeks or longer, with devastating impact on their job prospects.
The prize for denial this week, though, has to go to coverage of a Bureau of Economic Analysis report on corporate taxes. The Wall Street Journal headline was classically upbeat: “U.S. Tax Haul Trails Profit Surge.” That’s one way of putting it. In a nutshell: corporate profits rose to a record high ($1.97 trillion) in the third quarter of 2011, while corporate income tax payments did not. Corporate taxes were under $200 billion in November, well below the pre-crisis $380 billion and still far below what the government’s counting on—$332 billion for 2012.
Why corporate receipts have grown so slowly is “really puzzling,” one economist tells reporter David Reilly. Dutifully puzzled, Reilly trudges through all the possible explanations—globalization, tax breaks, bookkeeping technicalities—until he concludes, you’ve just gotta have hope: “Eventually, as the economy regains ground, breaks like accelerated depreciation expire and companies burn through things like deferred tax assets, actual taxes paid should increase. But it may be a painful wait until they do.” (Painful, because of course, government will shrink spending and squeeze more out of the rest of us to make up for the corporate freeloaders.)
There’s no reason to agree with Reilly that change is in the works. Corporate tax payments haven’t shrunk by accident over the last year or two. It’s not a matter of “Honey, I shrunk corporate tax!” Corporate income taxes have been on a planned slide for half a century: 26.4 percent of federal revenues in 1950; by 2007 they had fallen to 14.4 percent. In 2011, individual income taxes were $1.09 trillion, compared with $181 billion in corporate taxes.
Why? Oh why could that possibly be? Maybe it has something to do with who owns Capitol Hill. Ask Senator Dick Durbin if you forget.