The $85 billion in automatic federal spending cuts that began last week will make a superficial scratch in corporate profits (only about 1 percent), the New York Times reports this morning, but the cuts are expected to cost about 700,000 American jobs. This is good news for Republicans. The so-called sequestration more or less just keeps the United States on the same path we've been on—the path of the GOP's agenda. It's a path that lifted the stock market near record highs last week, and now the country's largest corporations, despite a recession that devastated workers and persists in the form of high unemployment, are scooping up their largest profits in decades:
As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.
Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.
“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.
The GOP needs the sequestration. Republicans can no longer mobilize their base by opposing gay marriage, by thwarting attempts to protect women, or by using immigrants as their whipping boy—at least, not like they used to with a national audience—so the party is ostensibly united around fiscal austerity. But that's not what this is about. In the hearts of their leaders, theirs is the party of corporate profits and neutering the power of workers, particularly the poorest workers, and now they hatch two birds with one egg. And all they had to do is do what they do best: nothing.