Corporate Profits Are NOT Cause of Low Employment or Wages

ZeroHedge links to a video of CNBC’s Rick Santelli who suggests firms seeking higher corporate profits are causing lower employment and lower wages. ZeroHedge has a graphic overlay that shows corporate profits rising and the percentage of US population with a job decreasing.

This is incorrect, as tempting as it is to blame corporations. The primary reason for the soaring corporate profits, which have peaked, is the government budget deficits. This is because a deficit in one GDP account must appear as a surplus in another GDP account. The deficit is in the federal budget while the surplus is in corporate profits. See this post for the accounting identity.