Profit rate and public deficit in the USA

ABSTRACT The federal budget of the United States displayed only 8 surpluses in the whole post-World War II period, the last of which was in 1969. Several theories have been developed in an attempt to explain the persistency of the Federal deficits. Due to the Keynesian/stagnationist views predominant among leftist theorists, emphasis has been put on the analysis of the expenditure side of government finances and its role of supporting aggregate demand. Little if any attention at all was paid to the revenue side, particularly to the impact of diminishing corporate profitability on government tax revenues. This article estimates the tax losses that have resulted from the sharp decrease in profitability in the last 45 years. It concludes by pointing out some wider economic consequences of large deficits, such as the foreign debt of the United States which is the largest in the world, and the present regressive tendencies of the American tax system.