The updated budget and economic outlook released on Wednesday by the nonpartisan Congressional Budget Office (CBO) contained good news for corporations, but bad news for the rest of the economy.
The CBO now estimates that the economy will grow even slower than it expected in its previous economic outlook. Not only that, it now expects that wages and salaries will comprise a smaller portion of that reduced economic pie. The report suggests that troubling long-term trends in our economy are getting worse. Middle-class wages have been stagnant for over a decade. Steven Greenhouse notes in the New York Times that “overall employee compensation — including health and retirement benefits — has also slipped badly, falling to its lowest share of national income in more than 50 years while corporate profits have climbed to their highest share over that time.”
At the same time, the CBO increased its estimate for corporate profits. Workers’ low wages are good news for corporations: the CBO explains that “lower labor costs are expected to reduce businesses’ expenses,” which means higher profits.
Yet while corporate profits are higher than ever, corporations are paying a much smaller portion of the total federal tax burden than they did in the past. Corporations paid slightly more than 30 percent of total federal taxes in 1953 but only around 10 percent of the total tax burden in 2013.
But this is not an immediate emergency, since the annual budget deficit is very low right now. In fact, short-term federal deficits are so low that the CBO projects that the total federal debt will actually fall in each of the next four years as a share of the total economy. It still projects that federal debt will grow to unsustainable levels in the long-term, however, due to an aging population, growing health care costs, and an inadequate tax system. With corporate profits higher than ever, it is only reasonable to expect corporations to contribute their fair share to help solve our long-term budget challenges.
And while there is no immediate deficit crisis, there is an ongoing economic crisis for middle-class and low-income families. Stagnant wages are not keeping up with rising expenses. American productivity has increased, but those gains are not making it to low-wage workers, or even those making wages in the middle. The CBO report suggests that this problem is only getting worse. To solve this crisis, politicians will need to enact new policies that grow the economy so that everyone benefits from increased prosperity, not just the wealthy and big corporations.
Harry Stein is Associate Director of Fiscal Policy at the Center for American Progress.