Divorced one like Bush’s Second Post on Making Money and How its Changed Over Time

This post is by reader Divorced one like Bush.


In a past posting, I presented some graphs that suggested to me that we have changed the way we make money. Our focus has changed from the Adam Smith focus on labor to a focus on capital. I think it is important that we understand this change in order to make better choices at the polls. Even the data analysis Cactus has been producing, suggesting there is a party selective results to our overall economy, there has been the signs of the switch to a focus on money. Spencer’s chart of Real Non-residential Fixed Investment further supports that a change was made. The best performing curve in his chart is pre 1980’s. The mighty Clinton years don’t come close to the pre 1980’s.

One could argue that things are different with the move to globalization and thus, we should not expect such growth as pre 1980’s. I disagree. I would interpret our poor performance since the Reagan revolution not to competition but to poor policy/management in the response to the competition. At least in business that is how it would be interpreted. If you are with or behind the rise, then you are not being successful in growing the business.

The first chart is GDP vs Income types. This is a stacked chart. From the top line to the bottom they are: GDP, Profits after tax, Disposable Income, Personal Dividend, Personal Interest, Wages and Salaries. Again, the greatest acceleration is happening after 1981. Note, that income in the form of wages and salary is rising the least. We know that wages and productivity split in 1973. The extra income from the rise in productivity, based on this chart must be in the form of corporate profits, dividend and interest.

The next chart is Distribution of Profits. The lines from top to bottom are: Profits after taxes, Personal Dividends, Personal Interest, Wages and Salaries, Depreciation, Net Non-residential investment. In my first post, I noted there were 3 distinct changes in tax policy based on the graph. The first was the greater increase in depreciation starting after 1981. However, based on this chart, the profit is not solely from that. The next was Net dividends. It’s rise started in 1987. The third was a near vertical rise in non-distributed corporate profit. One thing is certain in this chart, the income is not going into wages or investment by the companies (at least not in this country). The money is staying in money.

The third chart compares disposable income (income everyone has left over) to income from assets. The top line is asset income the bottom is disposable income. This supports that a greater share of income is from money and not labor.

The fourth chart of distribution of asset income shows dividends rising faster again supporting that we are making money from money.

The final chart is Wages vs Industry type. The lines from top to bottom are: Service Industries, Distributive Industries, Goods producing Industries, Wages and Salaries. The first thing to notice is that wages and salaries do not rise as fast as any of the industries. It is probably the most important finding to note if we are concerned about the worker. This chart shows that there is no sector of employment that will allow the employee to benefit from the rising economy.

When we look at these charts, is it any wonder that our auto industry (as the most exemplary of goods producing) is in trouble? Is it any wonder that labor (those earning money using their bodies or their minds via employment or self employment) is struggling? Is it any wonder that the market keeps going up even though consumer spending is down? The money that is being earned by companies is not going out side the company. They are not investing within this country, they are not paying the help and they are paying less in taxes. What money they are distributing is going to those who own the company or who have loaned the company money.

Finally, if we look at just 2006s income and use the top 1%’s share from 1976 of 8.86% there would have been $816.47 billion more for the rest of us. Even at 1948’s % share, there would have been $556.37 more for the rest of us. Imagine how much more federal revenue that would have generated just in income taxes alone. Or how about the stimulus to the economy in consumer spending? Or how about the local taxes that could be paid because the worker could afford it. But, imagine how much better off we would be if the share of income had stayed at 8.86% for the past 30 years.


Because there is sometimes confusion on long posts, let me reiterate… this post was written by reader Divorced one like Bush.