I'm not an economist, but.... aren't the profits of the corporations more or less directly tied into the Gross Domestic Product? E.g. the GDP is the entire economic output of the private and public sectors.
If you mean that the profits of all companies in the world are more than the entire GDP of the United States, well, yes. That makes sense. But if you mean that the profits of the US based firms are more than all the money those US firms make, then it doesn't make any sense at all.
Kinda yes and kinda no. GDP only accounts for income that is retained within the nation, or essentially the Value of the Corporation of the US. Many US based corporations earn income outside the borders, but the income is applied to the Corporation at home. The corporations are required to pay tax on this as it is considered standard income, but it does not account to the US GDP (it actually hurts it in some areas because imports on auto parts for example count against US Exports taking away potential trade surplus.).
Um to maybe make it more clear.
Franchise McDs in Canada sends 12.5% of Profits to Corporate > Corporate pays taxes on this and keeps the money.
Since the Money comes from Canada, it is applied instead to the Canadian GDP, and not the US GDP. Hence why the Total Corporate profits can out scale GDP.
(still don't know if that made any sense.)
Also to be clear I am talking about Growth not Final dollar. Corporations Profits only represent like 12% of US GDP currently. (and those who invest in Corporations only make up like 8% but that is 20% or 1/5th of your GDP just tied up in money to Corporations.) With Government Spending accounting for 19.5% and followed by Trade at about 9%, and about 50% is based on personal incomes/expenditures of the population of the US.
The problem is the Gap between Corporations Profits, and the Personal %'s Since the 80s Personal Consumption has declined from about 70% of GDP to 50% today, with Corporations rising nearly 2:1 with the remainder of the fraction now dependent on government (hence its rise from about 12% in the 80 to 19.5% today)
Essentially people have less money to buy stuff, so they only pay what they need to pay, government tries to provide assistance to boost leisure money that is used to help stimulate corporate production to hopefully entice more jobs, but that hasn't worked, government cuts taxes (lowering its revenue) to help create jobs that hasn't worked. US companies move out of country to create cheap product and resell it the US, this cost people more money...and the cycle of degeneration repeats.
If Corporations brought their profit ratios down to 1:1 with the people they employ, Government could back out of spending, and then reduce taxation on the people as the money allows. More people with more money buy more stuff, this pushes more profits up, and allows more people to become employed.
Or that is how it should work, ideally Governments involvement in private money would drop, and the true spirit of capitalism would take effect. But unlike true communism we can not have it because there are always men of greed power and corruption, unfortunately Capitalism is ripe target for Greed and Corruptiuon, because with money you buy power. 2008 Was all about Greed, rich people wanting to become even richer gambling with the money of their 300 million serfs. Today it is still about Greed, and is why poor people are poor and more are becoming poor each day. Edited, Oct 25th 2013 4:42pm by rdmcandie