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Home Publications Blogs Beat the Press Come on Folks, Take Notice of the Record Profit Share Reported on Wednesday

Come on Folks, Take Notice of the Record Profit Share Reported on Wednesday

Friday, 02 August 2013 04:47

Amazingly, it seems that the media managed to completely ignore the sharp upward revision to profit shares reported on Wednesday. This one is pretty simple. By redefining many corporate expenses for research and creative work as investment, which depreciates through time rather than being a one-time cost, profits will be increased. As a result of this change the profit share in recent years was revised sharply upward. The after-tax share of profits in net corporate income for each of the last three years was higher than at any previous point in the post-war era.

Is there some reason that this fact was not mentioned in any of the reporting on the GDP?

Comments (4)Add Comment
written by skeptonomist, August 02, 2013 2:52
Have corporations' expenses for research and creative work been increasing in recent years? If not, then why would this revision increase the size of the recent huge upward jump in corporate profits (if that's what Dean is saying)? This actually started around 2002 and was only briefly interrupted by the 2008-9 crash. The reason for this jump is what has not received enough attention. What economist will give us an explanation?
written by John Parks, August 02, 2013 7:18
Not as an economist but as a casual observer of human behavior, I would suggest the answer is "enlightened self-interest." If I, as either a board member or CEO/CFO, can show the stockholders an increased profit through mere sleight of hand or an accounting trick, thereby enabling me to an increased salary, bonus, stock option I am going to change my accounting procedures.
The rise is in the revisions
written by Dean, August 02, 2013 8:33

i was talking about the change between the old data and the new data. That was due to measurement -- and yes, spending on R&D has been increasing.
written by http://usapangaso.com/blogs/post/16017, August 05, 2013 10:46

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.