Profit rate and public deficit in the USA

The federal budget of the United States displayed only 8 surpluses in the wholepost-World War II period, the last of which was in 1969. Several theories have been developedin 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 theanalysis of the expenditure side of government finances and its role of supporting aggregatedemand. Little if any attention at all was paid to the revenue side, particularly to the impactof diminishing corporate profitability on government tax revenues. This article estimates thetax losses that have resulted from the sharp decrease in profitability in the last 45 years. Itconcludes by pointing out some wider economic consequences of large deficits, such as theforeign debt of the United States which is the largest in the world, and the present regressivetendencies of the American tax system. JEL Classification: H25; H62.