You wrote:
> I agree 50% of median income is arbitrary. As it happens, though, the poverty
> rate
> using that level comes pretty close to one figured on a basic needs
> basis (the updated market-basket approach), and also comes close to
> what Americans tell pollsters a poverty-level income is. And it's
> pretty easy to do the 50% of median calculations every year, while
> the market basket/basic needs approach is a lot more work.
>
True enough that 50% of median income tends to come pretty close most of the time to a "real" measure of what poverty is. Though I see no logic as to why this has to be the case. But why rely on such a proxy when a "real" measure is close at hand? As I explained, the BLS family budgets, measured to reflect *social* need and calculated by family size already is the happy melding of absolute and relative standards you are looking for. True the annual publication of the numbers based on the detailed consumption basket was killed by Reagan in '81. But, at the least, those numbers can be adjusted for inflation since. Very little work there. Only changes in the basket items to reflect changes in social needs would be missing. That might not even be much work.
Two other points:
(1) The "official" poverty number is a political joke foisted on the rest of us by Lyndon Johnson during the creation of his "war on poverty". I won't repeat the detail I included in my original post (particularly now that there is an archive), except to say the poverty line was and is based on an emergency food budget not intended to sustain life, times an essentially unsupported multiplier of three to reflect the rest of family needs. At the time Johnson announced his joke, the BLS was publishing data that showed real needs were more than twice the "official" amount. Point is, no one on the left should give official poverty numbers credibility by treating them seriously.
There are groups now pushing for, e.g., "living wages" based on concepts of real consumption needs. Remiscient of the George Wiley's Welfare Rights Org. slogan in the 60s for $6500 minimum for welfare payments (based, again, on consumption needs and double the poverty rate at the time), except we're mostly talking wages now, not welfare. Whether or not you think this is a good tactic, these things should at least be supported with the budget numbers showing their contention about real needs is correct (or at least in the ball park). Treating official poverty numbers as if they had real economic meaning undercuts that.
(2) Amazing as it may seem, the BLS urban family budgets capture almost precisely the marxian concept of social subsistence, the reproduction cost of productive labor. Consider this, Doug. There are government numbers that can be used to measure all but one aspect of the marxian categories (c+v+s), necessary to understanding the laws of motion as they now play out today. The BEA capital consumption allowances correspond to the constant capital used up in a round of production. Surplus value is simply a residual after the other things are subtracted. The BLS family budget numbers measure the reproduction cost of productive labor. All that remains is an estimate of the quantity of productive labor expended. Unfortunately that's a killer. You need a definition of what is productive labor (still lots of disagreement there). And some way to distinguish prod/unprod labor using labor force data. Once a definition of prod labor is in hand, though, this can probably be done well enough so that aggregate trends can be seen. However, I take seriously EO Wright's point that the prod/unprod distinction is by task; many workers do both in the course of a work day, so I don't mean to say things would be easy.
But the value of this exercise is, in my opinion, enormous. It yields an estimate of surplus value and allows you to catalogue all the ways it is realized besides profits (return on capital). All surplus value is, theoretically, potential profits; but all of it cannot be realized as such. That leads to an analysis of the contradictions caused by capital's competing and complementary realization needs. It allows an assessment of the meaning and importance of reported profits (not as important as bourgeois analysts think). And many other things.
> >As to the profit rates you use in the article, first a question. Does the
> >profit rate for nonfinanciial corps you use in the table on p. 122 contain
> >interest payments (they are not mentioned)?
> >They should be included.
>
> Depends on what you're looking at though. Yes, they should be
> included if you're looking at capital as a whole.
> If you're looking
> at the division of surplus between industry & finance, you should
> look at them separately.
Yes, by definition.
> If you're looking at the funds available for
> investment - which, aside from their contribution to the state of
> animal spirits, is the reason profits are important, right? - then
> you should exclude interest.
Yes, this would be an important consideration if you were constructing a theory of growth, instead of discussing trends in product shares. But in your article you were doing the latter, weren't you?
Let me add another point. As you know, NIPA nonfinancial corporate profits are not the same numbers business reports to the IRS. Profits are recalculated by the BEA. Primary difference: a recalculation of depreciation, instead of using that which is defined by the tax code. Why? Because book depreciation has been so distorted by the political influence of capital as to be meaningless. Depreciation itself is a calculated number (dividing cash flow between profits and depreciation). But the tax code has been written so as to accelerate the capital writeoff beyond any meaning of asset life, thus reducing book profits on which taxes are owed. In the 70s the BEA finally decided to ignore those numbers and completely recalculate depreciation (called capital consumption allowances) to reflect some consistent view of asset life and technical change, so as to try to give the numbers a clear *economic* meaning. As far as I can tell, they have done a decent job in reducing the distortions caused by business book numbers.
> This is an important point, though. Most of the recovery of
> profitability (measured vulgarly, by bourgeois standards) is the
> result of a lower interest bite.
More recently, yes, that has been an important effect. But some of the "decline" in profitability in earlier periods was a mirage resulting from the failure to include interest payments as part of capital's share. Thos studies ignore debt holders and include only the return to equity holders.
> These figures tell the story (the
> NIPA convention is that net interest is paid by the business sector
> to the household sector - so it enters the accounts as a cost to
> business and income to households):
Yes. Interest paid by nonfinancial corps is treated as a cost (this is one reason, btw, why the gross product and factor shares of financial corps makes no sense in the NIPA). But the money for interest paymenst must be received as part of revenue, of course--just like profits--before it can be paid to debt holders. Those debt payments are analogous to the dividends paid to stockholders. Together profits and interest payments of nonfinancial corps comprise the return to capital for them.
> >Why do you use pretax profits (I see it often in other work too, including
> >marxian stuff)? Only after tax profits are capital's share, the actual
> >reward to suppliers of capital.
>
> I use pretax because I'm trying to measure long-term economic trends,
> and the tax code is endlessly fiddled with.
>
Uh oh. It looks like some neoclassical bullshit may have crept into your thoughts on this point. Your answer seems to presuppose the following model in its bare bones. A firm (i.e., an individual capital) (1) prices so as to achieve a pretax return because it cannot affect the price of its products sufficiently to take account of changes in income tax rates, and (2) has no influence over said tax laws (either individually or as part of capital as a class). In the extreme (its neoclassical/textbook version) this means that the firm is simply a price taker (in a competitive market) and tax changes are "noise" from outside the market, that interferes with an understanding of the "true" division of product. Put another way, tax rates are imposed exogenously and capital has no way to either affect them or adjust for them. Both premises are, of course, false. Firms generally price with a view to achieving an after-tax return because that is all stockholders care about (e.g., they may use a target rate of return, a pricing theory that has been around since at least the 30s in well known formulations (Gardiner Means)). Individual capitals and capital as a class have considerable influence over business income tax rates. Capital has succeeded in reducing corporate profit taxes more than once since the 50s.
Yes the tax code is endlessly fiddled with. You must abstract from that. Measuring long term economic trends in factor shares requires eliminating the effect of changing tax rates, using after tax returns throughout a given period.
Now add this thought to what I said above. To understand economic trends of factor shares, you must ignore the effect of both business taxes as paid to the IRS and depreciation as specified in the tax code for essentially the same reason. They are political, not economic numbers with meaning for factor share studies. It's better to use after tax nonfinancial corporate profits as calculated by the BEA.
>But in practice the two
measures tell pretty much the same story.
I don't think so. Certainly from the 50s through the 70s you get different profit rate trends depending on whether pre- or post-tax profits are used because of the reductions in profits tax rates during that time. But I'll have to come back to that point when I have more time.