I have been highly critical of President Obama for his economic policies. But, to be fair, President Obama does have one significant accomplishment to his credit: restoring the pre-crisis level and distribution of corporate profits.
As the chart above shows financial sector profits are again over 30% of all corporate profits and heading higher. Now, ratios are tricky and this could be due to a massive slump in non-financial corporate profits. It could be, but it isn’t. As the chart below shows, total domestic corporate profits are almost back to their pre-crisis level as well.
As Felix Salmon concludes when examining the chart above:
What this chart says to me is that nothing has changed, and nothing is going to change. . . . Any dreams of seeing a smaller financial sector have now officially been dashed. And the big rebound in corporate profits since the crisis turns out to be largely a function of the one sector which we didn’t want to recover to its former size.
Now, one might want to object that Obama has done little more than recreate what existed under the previous administration and therefore doesn’t deserve much credit. But, we have to remember that in the pre-crisis period we had first a stock market and then a housing bubble driving up financial profits. We don’t have bubbles any more. Thus, government policy is really the main cause of these soaring financial profits and that is why I credit President Obama. For example, the Federal Reserve bought trillions of dollars of bad financial assets from the financial sector. It also aggressively lowered interest rates to near zero, keying a recovery of stock and bond markets and making it possible for banks to obtain new funds at little cost.
In short, one has to give credit where credit is due. Of course, it would have been nice to credit President Obama for policies that helped working people, but . . .
And be prepared for still more bad news. Having generally accepted the destructive Republican line that the federal deficit is the primary cause of our slow economic recovery, President Obama is apparently preparing a budget proposal that includes significant reductions in social spending. Those reductions won’t be as big as those proposed by the Republicans; that way he can say that we really do have a choice. Some choice. What we really need is more spending and more taxes on the rich and corporations, and a restructuring of existing patterns of investment and production, changes that the majority of Americans appear to support.
One can only hope that events are working to shape a coalition of middle-class youth (who face a future with debts and no full time employment), urban poor (who face a future with no jobs and no social programs), and union members (who face a future of low wages and economic insecurity without union rights) that will prove able to transform the political environment.