The Business of China and U.S.

Given this blog’s recent flogging of the China versus U.S. (“us”) question, here is  a primary example of how China may surpass the U.S. by becoming more business friendly as it decentralizes while the U.S. risks having to learn the lessons of socialist history all over again as our over-regulated economy grinds down to a slow crawl.

In this linked article at the American Spectator, an entrepreneur compares and contrasts the difficulties of and disincentives for creating new businesses in our country, under our increasingly socialist, statist form of governance.

http://spectator.org/archives/2011/05/10/killing-manufacturing

Money quote: “Now, this is China so the government and the state share 30% of your business, but considering the ease of entry, increased in-country sales and helpful attitude, this is a small price to pay, especially considering America’s 35% plus corporate tax rates.”

Here, the author makes an excellent point: when the State demands 35% of a company’s earnings (I believe that Mafia shake-down artists usually demand a smaller percentage in protection money, but I may be wrong), the State de facto owns a 35% equity interest in the company…with only one major difference: it shares 0% of the risk borne by shareholders.

Is America on the road to becoming a socialist paradise like, say, Europe’s former Soviet Block during the 1960s? Naaah…don’t think so! Our future will not be one of mythical straight-line Progessive projections.

I predict instead that, given American individual initiative and creativity, our trajectory will be more like that of an Argentina – once a leading economic jewel, now a pathetic, tired, broke 3rd-world backwater. In such economic environs, two groups will prosper: the government-sanctioned nomenklatura and those clever and adept enough to profit from the inevitable underground economy.

Sad story!

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Comments

  1. Charles Martel says

    Ironically, Argentina at the beginning of the 20th century vied with America as one of the top per-capita-income nations in the world. In England, there was popular saying, “As rich as an Argentine,” a tribute to the country’s robust economy.

    But, like Obama’s America, Argentina learned how to loot itself, starting with the Peron regime in the 1940s. The result is as Book describes, a pathetic little country that long ago parasitized itself. The election of 2012 will determine whether we’re smart enough to oust our Little Perons before it’s too late.

  2. says

    Bookworm: China may surpass the U.S. by becoming more business friendly as it decentralizes while the U.S. risks having to learn the lessons of socialist history all over again as our over-regulated economy grinds down to a slow crawl.

    China is far more than the U.S., yet greatly exceeds the U.S. economic growth rate. As we discussed on the previous thread, this is mostly due to the process of industrialization, as low-GDP agricultural workers move to the cities to work in high-GDP manufacturing jobs. 
     

  3. Tonestaple says

    This topic always makes me think of a line from Gone With the Wind:  Rhett said something like, “There’s as much money to be made in the tearing down of an empire as the building up.”  Problem is, it’s mostly we who profit in the building up and the grotequely mis-named progressives who gain from the tearing down since they don’t understand really understand the concept of making money.

  4. says

    Tonestaple,

    “There’s good money in empire building. But, there’s more in empire wrecking,” Rhett to Scarlett, right after he said “I’m sure I’ll clean up a million on the blockade.”

  5. says

    China only recently in 2010 surpassed Japan’s GDP. And Japan has around 20% of China’s population.

    China is far more than the US? A ridiculous and ludicrously vague statement designed and used by con artists.

  6. says

    Zachriel: China is far more than the U.S., yet greatly exceeds the U.S. economic growth rate.

    Lost a word there somehow. China is far more {centralized} than the U.S., yet greatly exceeds the U.S. economic growth rate.
     
    Ymarsakar: Chinas has more than 3 times the population yet less than 1/10th the GDP.

    Chinese GDP in 2010 was about 40% that of the U.S. 
     
    Ymarsakar: For China’s growth to match the US, they would have to grow at 100% if we were growing at 5%.

    That statement isn’t clear. The 5% seems to refer to annual rate of growth, but what’s the 100%? If China’s rate of growth exceeds that of the U.S. even by a small amount, over time, they will grow past the U.S. According to current rates of growth, China’s GDP will exceed that of the U.S. in about ten years, but there are many reasons why that may not happen right away. In any case, there’s no reason why people around the world shouldn’t be able to enjoy a higher standard of living. 
     

     
     

     

  7. abc says

    Wow.  What a great example of the difference between COMPETENT government and INCOMPETENT government.  Of course, Pol glosses over many other imporant aspects of the comparison he is drawing:  the fact that China’s corporate tax rate of 25% is actually higher than the effective rate paid by US corporations, the point that labor costs are much lower than even non-unionized labor in the US, and the key issue that his experience in moving production for a priority technology is why his ability to launch a business in China was easier.  His bio says that he is involved with distance learning companies, so he ought to know that launching an educational company in China is virtually impossible as a foreigner, given the current laws, and requires registering in each region separately.  I’ve read these particular rules, so I know this is true for the educational sector, and it is true for a number of other end-markets as well.  So his experience with carbon fiber may not be the general rule, but it IS common enough that we should worry about our competitiveness versus China…something I tried to write about previously. 

    Indeed, it is interesting to note that Chinese socialists are better at organizing the importation of manufacturing and technology because the government encourages it.  The US government, which doesn’t seek to own these companies, and which plays a much more limited role in terms of dictating what companies can and cannot do, is horribly incompetent in many of the areas where it does interact with the business community.  But this isn’t because the US government is more socialist than China–every indicator, from ease of business start-up tracked by the EIU to ownership of assets in the economy, shows that China is far more socialist–rather, it is because China’s government is more enlightened and efficient. 

    I also think that Pol ignores a ton of other factors that have caused the US to lose manufacturing to other countries.  He focuses on unions and environment, but even adjusting for those costs, the countries that have imported such manufacturing were cheaper by a wide margin for the lower-end manufacturing that moved there.  Blaming the unions seems strange considering the example of Germany, which has more strigent union rules (not to mention tougher green rules), but it competes very well in export markets, including those in the low-cost emerging markets.  He needs to explain such counterexamples as Germany, Denmark and Holland for his thesis to hold any water.

    Further, he misses another key dynamic that threatens the US going forward.  While it is the low end manufacturing that first goes abroad, it is quickly followed by higher and higher levels of manufacturing.  Soon, it is the R&D and process design that moves abroad, until finally the country outsourcing manufacturing has lost the ability to scale entirely new and innovative products or processes since they no longer have the manufacturing base to implement them.  Intel founder Andy Grove has warned about this dynamic, and it has made him less supportive of free trade as a result.  Given China’s state-driven development model, we need to adjust our own practices and assumptions.  The old socialist-versus-capitalist model, that works well versus the UK, doesn’t work so well versus China or other players.  Look at the per cap GDP and average income of someone in Manchester, England versus Stuttgart, Germany, and you will see whether the more proactive, managed trade approach has not benefited Germans while the laissez-faire model has hurt the average Briton.  If the US isn’t careful, it could go the way of its Anglo breathren.

    Finally, Pol doesn’t do a very good job of explaining the decline in new business formation in the country, which has been declining since the 1960s.  While he wants to portray this as union or environmental issue, the reality is that other factors are also (and many have argued more prominently) at play, including the fact that increased consolidation and efficiency across various sectors have killed off smaller firms and made it tough for mom-and-pop businesses to survive.  Check out the following for more on this:  http://boss.blogs.nytimes.com/2009/06/30/are-we-becoming-less-entrepreneurial/.

  8. CollegeCon says

    Calling the US corporate tax rate 35% is a bit disingenuous, since the vast majority of corporations don’t actually pay that much.  Instead they utilize a plethora of bizarre incentives and loopholes to end up with a much smaller overall tax burden.

  9. says

    I discussed the potential for a manufacturing renaissance in the U.S., and some of the inhibitors to that renaissance, <a href=”http://chicagoboyz.net/archives/22021.html”>here</a>.
    Note particularly the point about cultural prejudice against manufacturing.

  10. abc says

    David,

    Interesting link.  I have personally spoken with both the CEO of DuPont and Jarden at various investor gatherings, and have heard them both discuss this issue i particular.  Three years ago, DuPont actually has found that Michigan based workers, with much higher productivity levels than those in China or in Saudi Arabia, are starting to look very competitive.  You can imagine how much better that looks today with a still weaker dollar.  Jarden, whose products are lower-value-add, has said the same, although I was more surprised in that case.

    I don’t understand how taxes are skewed against the formation of tangible capital.  As opposed to intangible capital?  The accelerated depreciation has been a huge boon to manufacturers from commodities to drugs, while special rebates on renewable fuels has helped the paper industry immensely.  I know that these are temporary, but I don’t see how the tax code systematically hurts US manufacturing versus services.

    I also do not understand what specific rules have changed that are making the US less competitive now than 5 or 10 or 20 years ago.  Everyone speaks in generalities, but it would be nice to hear the specifics.  I ask since Germany is killing it from an export standpoint, and they have tougher union rules and more regulations than we do.  The rules are very similar to what they were under Bush, but I don’t remember hearing about how tough it was to run a business under Bush, so what has changed?

  11. Danny Lemieux says

    ABC, to help Ymarsaker with that question, let me suggest the $-trillion-plus, so-called “stimulus” funding that funneled money from taxpayers, their children and grandchildren into favored Democrat constituency groups with no discernable impact on the economy.

    CollegeCon:  “Calling the US corporate tax rate 35% is a bit disingenuous, since the vast majority of corporations don’t actually pay that much“. 

    Perhaps you would like to add some specifics to define your use of “vast majority” (other than as a Dem smoke screen). Perhaps you would like to enlighten us with information on how much they truly pay.

    Here’s information from KPMG’s Direct and Indirect Corporate Income Tax Survey (U.S. reflects average across states):

    Japan      - 40.7%
    U.S.        - 40.0%
    France     – 33.3%
    Germany – 29.0%
    U.K         – 28.0%
    China      - 25.0%

  12. abc says

    Danny, a couple of things:

    1. you are showing surveyed rates, but the effective rates are much lower than this, and the tax receipts as a percentage of GDP reflect the lower effective rates.  We need to lower the statutory rate and close the loopholes, so the average effective rate rises, but the least sophisticated companies pay lower taxes.  Warren Buffett talked about this three years ago in his annual shareholder letter, which should be a must-read.

    2. You are helping Charles, btw.  But I disagree with your answer.  The stimulus did not exceed $1TN, and it did not exclusively go into the pockets of the Democratic Party or its supporters, although politics likely entered into the distribution.  But that was stimulus to avoid a collapse of the economy, so it is hardly theft.  The 405 where I live is being widened with that money.  Was that theft like that of a South American or Middle East dictator?  I dont’ think so…

  13. Danny Lemieux says

    ABC, I do take you at good faith. Regarding point #1: please show the data on why “tax breaks” in the U.S. are any different that tax breaks anywhere else and how that affects the effective tax rates. In many countries in (esp. southern) Europe, I know, “corporate taxes” are only suggestions.

    First, the TARP funding went to preventing the collapse of the banking system. I actually agreed with that. However, since then there were two big stimulus infusions, primarily (1) the America Recovery Act at $862b plus, and I would include and (2) the Chrysler, GMC bailouts (est. $30b to $130b, depending on what your read), the (3) home mortgage bailouts ($300b+ and counting), and other programs (such as extensions of unemployment benefits) claimed to have been designed to stimulate the economy. Let’s not get into ObamaCare.

    A CBO breakdown of Recovery & Reinvestment Act costs (thus far) can be found here: http://www.ombwatch.org/node/10741

    Believe me, we in Chicago know how this works. There was a flood of money that went to a) creating part-time jobs for vote-registration in Democrat districts, 2) university research programs, 3) welfare benefits, 4) union bailouts and registration drives, 5) Inner city development projects with no accountability, 6) bail-outs of state finances in Democrat friendly states, 7) ACORN, 8) Planned Parenthood, 9) raises for Washington bureaucrats..all targeted at non-economic stimulating activities for Democrat constituencies that help generate Democrat votes. It’s the Chicago way! I call it “looting”.

  14. says

    ABC…re the tax code, accelerated depreciation helps, of course. But if you’re planning a new factory, your financial analysis is going to have to extend over 10-15 years, and will include not just the immediate purchases of plant & equipment, but follow-on purchases…hence, assumptions about expensing vs accelerated depreciation vs non-accelerated depreciation in out years will have an impact on the ROI of the project. Indeed, there are certainly pieces of equipment that if you order them today, you can’t even *get* them for 2 or 3 years.
    This also applies to transportation infrastructure, specifically freight rail, harbor facilities, etc.

  15. BrianE says

    Foreign companies doing business in China complain of unpaid bills, piracy, counterfeiting and theft of ideas and technologies. Chinese insist that the foreign companies share their technology secrets. They then learn from these secrets and produce cheaper products that compete with those of the foreign company. Some companies complain that pirated or counterfeited copies of their products appear with a couple of months after they begin production in China. Others are reluctant to do business in China out of concern that their methods, patents and intellectual property will be stolen or compromised.


    http://factsanddetails.com/china.php?itemid=349&catid=9&subcatid=62

    Not sure this has been mentioned, but is the real cost of doing business in China– theft of intellectual and patented technology.
    This represents a real threat and burden in doing business in China.

  16. abc says

    David,

    I agree that temporary tax are not effective and said as much, but how does the tax code work in a punitive way against manufacturing in particular.  You still didn’t answer my question…

    Danny,

    I appreciate the assumption of good faith and share the same sentiment, but I obviously disagree with you.  First, to answer your question, the way to look at the taxes is NOT by looking at a statutory rate that a great number of companies never pay.  You need to look at corporate tax receipts as a % of sales.  You can impute effective rates from this data, as one of the links below here shows.  Also, note that the corporate taxes as a % of sales have dropped from more than 5% to less than 2% over the last 35 years, so Buffett, who is rarely wrong, is speaking the truth in his letter of 3 years ago.

    http://www.cbo.gov/ftpdocs/69xx/doc6902/11-28-CorporateTax.pdf (summary table 1 on page 12)
    http://taxprof.typepad.com/taxprof_blog/2011/05/ny-times.html

    As for the stimulus program, I’ll write more later when I have time, but suffice it to say that there is far too much information in the economics literature for you to claim with a straight face that government spending during a time of crisis is theft.  That is the kind of argument that highlights lack of understanding…

  17. Danny Lemieux says

    ABC – taxes raise the price of products, as they have to be passed on to consumers. If the cost of taxes can’t be passed on to consumers, then profitability is lowered, which reduces the ability of companies to a) raise new capital and b) reinvest retained earnings. 

    I appreciate the link to the CBO report. On the surface of your comments, I would seriously dispute measuring tax liabilities (not receipts) as a percent of sales, instead of earnings (see previous comment above).  I won’t comment on the CBO link until I have had a chance to review it in more detail, although at first glance I notice that they report tax liabilities as a percentage of GDP.

  18. says

    The tax code is biased against manufacturing and against fixed-asset-intensive businesses in general because of the requirement (temporary incentives aside) that asset purchase or asset construction must be depreciated over a period of years rather than being deductible when incurred. If you are a branded-goods marketing company and you spend $10 million on advertising, then that will (generally speaking) be immediately deductible for income-tax purposes. But if you are that same company and you decide to integrate backward and do your own manufacturing, and you spend $10 million on machine tools and robotics, then (again, ignoring temporary incentives) you cannot immediately deduct the $10 million even though you have paid the money out.

  19. abc says

    So what you are saying is that because spending money on a super bowl ad is recognized as an expense in the year it was spent, then the construction of a manufacturing plant should also be recognized all up front in that same year (or pehaps quarter)…

    Considering that the life of the ad spend can be measured in minutes or hours, while the plant has an economic life measured in decades, it seems strange that the accounting principle of matching revenue with costs would suddenly become an American tax code disincentive to invest in manufacturing.  This idea of depreciating the long-lived asset and matching a pro-rated portion of the cost to build that asset with the revenues that it generates over time is not a new one.  Even when the US was the manufacturing leader of the world, the accounting treatment was the same.  Moreover, the countries that continue to hold large manufacturing sectors, like Germany, Korea and China, treat the accounting the same way that the US does.

    I take it that you are not an accountant…  In any case, you’ll have to explain what in the US tax code uniquely causes the domestic manufacturing base to face an uneven playing field versus non-manufacturing sectors in the US or against manufacturing sectors outside the US that are not similarly encumbered.  To point to the sound accounding concept of matching revenues with costs is most certainly not one of them!

  20. abc says

    Danny,
    “taxes raise the price of products, as they have to be passed on to consumers. If the cost of taxes can’t be passed on to consumers, then profitability is lowered, which reduces the ability of companies to a) raise new capital and b) reinvest retained earnings.”

    Raising capital and earning good returns is also dependent upon having an educated workforce, sound infrastructure, stable (and regulated) capital markets, et. al.  Those things all requires a base level of taxes.  Now, you can raise those taxes through consumption taxes, estate taxes, capital gains taxes, trade tariffs, public land sales, and a host of other ways.  But those tax revenues must be raised so that companies can operate in the environment that they do in developed countries and, increasingly, in China.  What you are describing is not untrue, but it is only part of the picture.
    “I appreciate the link to the CBO report. On the surface of your comments, I would seriously dispute measuring tax liabilities (not receipts) as a percent of sales, instead of earnings (see previous comment above).”

    Do you “seriously dispute” this analysis because it produces a result that you do not like and which runs contrary to the narrative that we always hear on Fox News?  Or do you dispute it because there is something wrong with it.  Unless it is the second, and you are able to articulate why, then I won’t take your dispute very seriously, if you see where I’m coming from (i.e., facts and logic, not pre-conceived and blindly defended ideology).

    So here is the deal.  The US corporate tax rate has been in the 30 percentage range since Reagan, but its share of total GDP has declined substantially.  It has falled, in fact, even as US-based earnings have increased–which is why you link it to a base of GDP, since corporate earnings are a huge chunk of GDP.  The ONLY explanation for this is that the amounts paid have fallen even as the statutory rate has not.  This can only be the result of tax loopholes/incentives that lower the effective rate.  Now, unless you are smarter than Warren Buffett, and have an alternative explanation, you’d be well-advised to accept this fact.  Of course, you could also play the game on Fox News or on CNBC and just ignore this fact and continue to point to the statutory rate, which is meaningless and doesn’t reflect the amount of taxes paid by corporations.

    Now, your other point is that corporate taxes are ultimately paid by end-consumers since thy buy goods whose prices will rise, or to the extent that it doesn’t get passed on, then companies will not earn their required cost of capital and will underinvest.  The problem with this analysis is that in many industries we find companies that are not spending normal levels of capex, but are actually earning well above market-dictated returns on invested capital.  Look at the drug companies or health insurance companies, for example.  The major oil companies are another example.  These companies have excess margin to pay higher taxes, according to your logic.  Or am I missing something.

    More importantly, if we have cut personal income tax rates to 50 year lows and effective corporate tax rates are also at 50 year lows, then where is the money coming from to pay for the infrastructure, public education, defense/police and market regulation, et. al. that is required to run modern companies and a modern capitalist system?  The Republicans say that the problem is that we spend too much, not that we are taxed too little, but there is never any analysis and numbers to back it up.  I think the problem is both, and I think that taxes need to rise.  If not on corporations, then on the consumers that buy their goods.

    ” I won’t comment on the CBO link until I have had a chance to review it in more detail, although at first glance I notice that they report tax liabilities as a percentage of GDP.”

    The CBO is the standard-bearer for economic analysis that informs policy decisions in the US.  The economists that are on the CBO work within the Federal Reserve, major investment banks and leading academic institutions.  Unlike the highly political OMB, the CBO tends to do good and objective work.  It should come as no surprise that they would use the analysis that makes the most rational sense, and which someone like Buffett would also recommend.  I do not know of any credible economist that would challenge this frame of analysis, although many would differ with my conclusions regarding the need for tax hikes to balance the budget.

  21. says

    ABC, I am quite familiar with accounting and finance, and fully understand the concept of matching expenses and incomes in traditional accounting. As you are surely aware, these days return on investment analysis is properly done on a cash-flow basis, and for that purpose the $10 million to purchase the machine tools or buy the advertising time is considered as an outflow in the period in which it is incurred.

  22. abc says

    David, you lost me.  First, you stated that the disincentive to manufacturing is the fact that the capex must be depreciated, so you are talking about earnings.  Now, you are saying that you are talking about cash flow.  In terms of cash flow, the outflows for advertising and plant build would both occur in a similar fashion.  So, please, explain to me what exactly the disadvantaged treatment in the tax code is for manufacturing companies.  By the way, if the issue is really taxation, then there IS depreciation for tax purposes, which is different than the cash flow that is on the financial statements and which the investor is using to value the company.  My IRR calculation might have the entire capex listed as (for example) -$100 in year 0, with positive cash flows coming back in each successive year; however, for the purposes of filing taxes with the IRS, I will have an IRS-sanctioned depreciation schedule to amortize that capex over a set of years.  This is why the periodic incentive of accelerated depreciation is powerful, since the IRS is essentially modifying those schedules on a temporary basis.  But apparently you already know all of this, so you should be able to answer, now posed for the third time, in a straight-foward way.

  23. Danny Lemieux says

    ABC – quickly to your points, because I have to work…

    Re. taxes. Nobody is disputing the need for taxes. We can have a long discussion on whether it makes sense to assess corporate taxes (that get passed on to the consumers), but that’s another story. We can also discuss whether we are getting our money’s worth from our education system. But that another story.

    Re. CBO report: I don’t dispute the statistics or the report’s conclusions per se, but I take nothing at face value. Sorry, but I’ve been around the block far too many times for that. Statistics are statistics. The devil is in their interpretation (I do that daily as part of my business). All I am saying is that I will need to read the report before I can conclude anything. It’s not a short report. As far as your aspersions regarding my objectivity, I shall ignore them as rather jejune behavior on your part.

    “Now, unless you are smarter than Warren Buffett, and have an alternative explanation, you’d be well-advised to accept this fact”.

    Sorry, ABC, but such silly appeals to authority don’t really carry weight on this blog. As far as Buffet’s infallibility…hey, I don’t even believe the Pope to be infallible. Your faith in the infallibility of our institutions (such as the CBO) is kinda cute in a naive sort of way, though. You’ll learn, with time. 

    The problem with this analysis is that in many industries we find companies that are not spending normal levels of capex, but are actually earning well above market-dictated returns on invested capital.  Look at the drug companies or health insurance companies, for example.  The major oil companies are another example.

    I wasn’t aware that the market dictates returns-on-investments. Please, enlighten us. Are you the one who will dictate ROIs?

    Thank God there are (still, for now) highly profitable drug companies: we need incentives to create new drugs and I love adding such companies to my retirement portfolio (as do millions of other Americans, directly or indirectly). So, tell us, ABC, what do you imagine that these companies do with their profits? Throw parties? I do agree with you, though: the Obama administration is doing a fine job in destroying incentives for innovation in the drug and many other industries.

    As far as “big” oil companies are concerned, their nominal profits are pretty big but their returns-on-investment, as I recall, are pretty small. The entities that really profit from oil sales are national oil companies (Saudi Arabia, Iran, Iraq) and the U.S. government. In the meantime, I would certainly hope that oil companies are fully incentivized to drill, drill, drill so that we can drop the world market price of oil.

  24. Charles Martel says

    Danny, I am offended by your use of the expression, “Drill, drill, drill.” In an era when Rush Limbaugh and Sarah Palin can inspire a lunatic to attempt the assassination of an Arizona congresswoman, and utter civility should now be everybody’s goal, I am shocked to see you use words that are so dreadfully close to “Kill, kill, kill!”

    For shame, mon ami.

  25. abc says

    Danny writes:

    “Re. taxes. Nobody is disputing the need for taxes. We can have a long discussion on whether it makes sense to assess corporate taxes (that get passed on to the consumers), but that’s another story. We can also discuss whether we are getting our money’s worth from our education system. But that another story.”

    Lots of other stories.  Care to comment on a 70% reduction in the share of taxes borne by US companies?  You seem to talk around the key point a lot without really addressing it.  I wonder why that is…  I conclude that US companies should pay more normalized (i.e., higher) tax rates, as they have over the longer history of this country.  You have offered no coherent response, other than to say everthing is “another story.”  Strange.
    “Re. CBO report: I don’t dispute the statistics or the report’s conclusions per se, but I take nothing at face value. Sorry, but I’ve been around the block far too many times for that. Statistics are statistics. The devil is in their interpretation (I do that daily as part of my business). All I am saying is that I will need to read the report before I can conclude anything. It’s not a short report. As far as your aspersions regarding my objectivity, I shall ignore them as rather jejune behavior on your part.”
    So there are no experts.  There is only accusations of “blind faith” on my part in the very institution that is looked upon as the leading authority on economic matters and opinions to drive policy.  I guess you don’t view Science or Scientific American as authorities, and you don’t see a difference between a credentialled specialist in medicine and a non-specialist or even a doctor.  This is very strange, since the rest of the country DOES rely on the CBO for such analysis.  So, taking your logic, who do we use?  Whose data do we use?  How do you comment on a problem when you have no source to measure the parameters of the problem?  Please answer these questions when you have time.  Else, it looks like you are evading…

    ““Now, unless you are smarter than Warren Buffett, and have an alternative explanation, you’d be well-advised to accept this fact”.

    Sorry, ABC, but such silly appeals to authority don’t really carry weight on this blog. As far as Buffet’s infallibility…hey, I don’t even believe the Pope to be infallible. Your faith in the infallibility of our institutions (such as the CBO) is kinda cute in a naive sort of way, though. You’ll learn, with time.”

    Appeal to authority is only a logical fallacy when the person involved is not an authority.  Buffett is an authority.  His comments on stocks, bonds and currency move the market.  You can point to the tangible impact of his words.  This is not to say that he is infallible, which you claim as an evasive measure, knowing fully well that I never said that at all.  Apparently, when the CBO and Buffett are both saying the same thing–as are NBER and dozones of economists at Princeton, Harvard, Stanford and the list goes on–then you avoid the issue by claiming falsely that I am worshipping idols blindly.  Again, present an alternative source so that we can understand why corporations are not paying too little even though their share of tax receipts is down 70% over 35 years.  Else, I will conclude that you have no answer and should be politely ignored in this debate.
    “The problem with this analysis is that in many industries we find companies that are not spending normal levels of capex, but are actually earning well above market-dictated returns on invested capital.  Look at the drug companies or health insurance companies, for example.  The major oil companies are another example.
    I wasn’t aware that the market dictates returns-on-investments. Please, enlighten us. Are you the one who will dictate ROIs?”
    Wow.  I just said market-dictated return, and you are claiming that I am dictating the return.  I guess if I say gravity-determined weight, you will say, who are you to claim you dictate the weight of something?  Do you see how off-base that comment is?  There is a risk free rate and a market premium that is imputed from the market on a second-by-second basis.  And the sum of these is a market-driven ROI.  This is finance 101.  That you do not know it makes me wonder how credible your thoughts and opinions are on economics, corporate taxation and which economic commentators are credible and authoritative…

    “Thank God there are (still, for now) highly profitable drug companies: we need incentives to create new drugs and I love adding such companies to my retirement portfolio (as do millions of other Americans, directly or indirectly). So, tell us, ABC, what do you imagine that these companies do with their profits? Throw parties? I do agree with you, though: the Obama administration is doing a fine job in destroying incentives for innovation in the drug and many other industries.”

    Have you seen the performance of big pharma stocks?  If you are glad that you have been adding them to your portfolio over longer periods of time, then you must like losing money…  Can you explain why drug companies need excess returns to make new drugs, while routing companies or defense manufacturers do not?  And if you think that they are unique, then please tell me how much excess return they need?  Also explain why Pfizer hasn’t produced a blockbuster drug since Viagra more than 10 years ago despite the excess returns?  And please explain why highly innovative biotech firms continue to put out novel molecules even when they are based in other countries where those “socialized” healthcare systems exist.  Finally, please tell me how you know what the impact of Obamacare will be on the drug pipeline given that the changes don’t hit until ’13 and the average time to bring a drug to market is 10 years.  You raise many more questions than you answer…
    “As far as “big” oil companies are concerned, their nominal profits are pretty big but their returns-on-investment, as I recall, are pretty small. The entities that really profit from oil sales are national oil companies (Saudi Arabia, Iran, Iraq) and the U.S. government. In the meantime, I would certainly hope that oil companies are fully incentivized to drill, drill, drill so that we can drop the world market price of oil.”

    The majors returns are somewhat above market averages, but nowhere near where pharma is.  Your last  sentence is really funny, however.  The US has reserves that are far too small to drop the world price of oil.  If you converted geographic size of every country on the globe to correspond to proved reserves, the US would be the size of Denmark.  Politicians and ignorant partisans like to talk about ANWAR, but all of it is less than the swing supply of Saudi Arabia  on average.  Palin invented the phrase, “drill, baby, drill,” but she doesn’t understand this although she was the highest elected official in that state, as is clear listening to comments she has repeated made on the subject.  Perhaps you should read the writings of Cambridge Energy Associates rather than relying on the jingoism of the GOP, assuming you want to know the reality of the energy markets rather than the fantasy narrative of the right wing side of the aisle.  Oh, look at me, appealing to authority again.  Silly me.  I ought to listen to know-nothings…since everyone is fallible, so there is no knowledge, experts, right-or-wrong.  I keep forgetting…

  26. Charles Martel says

    Danny, among the 1,273 words abc wrote to take you down a mighty peg, was this tocsin: “Else, I will conclude that you have no answer and should be politely ignored in this debate.”

    You have been warned, Lemieux!

    The next time he’s doing his “Jane, you ignorant slut!” routine, let’s see if he can keep it under 1,100.

    PS: How does one “politely ignore” one on the Internet? Post a note that says, “Politely Ignoring You?”

  27. Danny Lemieux says

    Sheesh! Though I do sympathize with your crie de coeur ABC, you do make one work at butting one’s head against the proverbial desk top. There’s too much here to digest, so let’s just address a few random pickings:

    Let’s start with ABC’s “Again, present an alternative source so that we can understand why corporations are not paying too little even though their share of tax receipts is down 70% over 35 years.” as a good example of why, certainly where data is concerned, one should indeed “drill, baby, drill!”:

    A good example of what I am talking about, ABC. This is an interesting contention. Don’t just throw it on the table like your last vacation’s tour book on your coffee table. Instead, provide your source along with proper analysis and perspective. May I suggest starting with: 1) share of tax receipts compared to what other receipts? 2) share of tax receipts as a function of the economy, 3) share of tax receipts as a percentage of earnings, rather than sales?

    I guess you don’t view Science or Scientific American as authorities, and you don’t see a difference between a credentialled specialist in medicine and a non-specialist or even a doctor.   This is very strange, since the rest of the country DOES rely on the CBO for such analysis.  So, taking your logic, who do we use? 

    Scientific American isn’t much better than pop science. I lost interest in that publication when I first went to university and started learning real science. On the medical side, its equivalent is The Lancet, which one of my colleagues long ago referred to as the “comic book of science”. Yet, to those untrained in the field, these publications appear very authoritative.

    Science is different, however…it is a multidisciplinary, peer-reviewed journal published by the American Association for the Advancement of Science, to which I belonged for many years. 

    I’ve read some excellent and ground breaking research papers in Science. However, that being said, a scientist would recognize that even Science is not infallible and that every published research paper will also have multiple published papers that refute it. That’s the nature of scientific inquiry – there is no place for “consensus” in real science and no serious scientist takes any research paper at face value. 

    So, yes…I do consider Science a credible publication and your juxtaposition of the two publications is apt. 

    As to who do we deign to use as resources? Well, many…but nobody at face value. Read evidence and counter-evidence from multiple sources and learn to drill into data to learn what it really means. Then make up your own mind. I understand (and am appalled by the fact) that modern universities in general do not teach their students how to do this any more and that many university departments have degenerated into little more than ideological feeding stations. “Thinking for oneself” has apparently fallen out of favor in much of academia. Plus ca change!

    Someone’s credentials matter only in that they provide evidence of an individual’s experience in a field, not of whether they are right or wrong and certainly not on the basis of whether or not they extended dinner invites to particular correspondents on this blog.

    The world has always been full of people who were intellectual giants of their time and would prove themselves colossally wrong. Very bright people from Pliny the Elder onwards provided credulous contemporaries with fantastical tales of cyclops, huge oceanic whirlpools, krakens, alchemy, phlogiston, earth-centric universes and all kinds of other information considered as infallible in their time, only to be proven wrong. In the history of science and other  knowledge, it is those that bucked conventional consensus (e.g., Galileo) that were reviled in their time and ultimately proven right. Plus ca change! 

    Just one note on that last point, ABC: contrary to popular Leftist mythology, it was not the Pope who persecuted Galileo (they actually were good friends), but the academic world of his day. 

    Finally, I do consider the CBO a very credible source. Also the OMB. However, by its own admission, the CBO’s analyses are only as good as the presumptions, directions and parameters imposed upon its research projects by Congress. That’s why it is so important to drill, baby, drill into its assumptions and analyses rather that to take anything it publishes at face value.

    Have you seen the performance of big pharma stocks?  If you are glad that you have been adding them to your portfolio over longer periods of time, then you must like losing money.

    Good point! I was speaking rhetorically: I long ago stopped investing in pharma stocks precisely because I view them as too-high a high risk, too-low a projected return. 

    Given that: 1) it can take about $1.0b to get a new drug to market due to the regulatory obstacles in its path, 2) that nonetheless single-payer health services for most of the developed world will dictate at what prices such drug can be sold…if it can be sold…and 3) that such prices (witness Canada) do not enable such companies to a) recoup their investment costs and b) realize a free-market profit (if any) and 4) that, finally, the last large free market for drugs upon which such companies depend in order to recoup are reasonable ROI is well on the path to becoming a single-payer market…I view them as a very high risk investment. I do not, however, blame the free market for this.

    The US has reserves that are far too small to drop the world price of oil.  If you converted geographic size of every country on the globe to correspond to proved reserves, the US would be the size of Denmark.

    Oh, sheesh! Rather than doing your own research, you have apparently and prayerfully consulted your intellectual icons and bought into the memes of peak oil and dwindling U.S. energy reserves. We posted on this just a short time ago: the U.S. and the rest of North America are awash in petroleum and natural gas deposits. If you wish to research the matter, start with my previous commentary on the subject and “drill, baby, drill” into the linked data so that you can refute it properly.

    As a favor, I started your research for you. Here it is: http://www.bookwormroom.com/2011/04/18/wrongly-conflating-socialism-with-generosity/#comment-119927.

    Start drilling here and come back with data and analysis, not memes.

    BTW, the fact that you so casually attribute an ignorance of energy matters to Sarah Palin is truly more reflective of your ignorance of her credentials in the energy arena, rather than her hands-on understanding of Alaska’s energy potential. 

    And, remember: name dropping is not research!

  28. says

    Danny Lemieux: Scientific American isn’t much better than pop science. 

    Scientific American is a popular magazine for the scientifically-literate reader wanting to keep up in fields outside their specialty.

    Danny Lemieux: On the medical side, its equivalent is The Lancet, which one of my colleagues long ago referred to as the “comic book of science”. Yet, to those untrained in the field, these publications appear very authoritative.

    The Lancet has an impact factor of 28, which puts it as the second highest for a general medicine journal (after the New England Journal of Medicine). That means to those trained in the field, this peer-reviewed journal is highly influential. (We mentioned this to you before when you made the same “comic book” reference.)

    Danny Lemieux: Science is different, however…it is a multidisciplinary, peer-reviewed journal published by the American Association for the Advancement of Science, to which I belonged for many years. 

    Science is also a highly influential, peer-reviewed journal with an impact factor of nearly 30. 

    Danny Lemieux: Just one note on that last point, ABC: contrary to popular Leftist mythology, it was not the Pope who persecuted Galileo (they actually were good friends), but the academic world of his day.

    Galileo was tried by the Inquisition, and found to be “vehemently suspected of heresy, that is to say, of having held and believed that the Sun is the center of the world and immovable, and that the earth is not the center and moves” and that he “must altogether abandon the false opinion that the sun is the center of the world and immovable, and that the earth is not the center of the world, and moves, and that I must not hold, defend, or teach in any way whatsoever, verbally or in writing, the said false doctrine, and after it had been notified to me that the said doctrine was contrary to Holy Scripture”. 

    Galileo was convicted of a religious crime by a religious court. 

  29. Danny Lemieux says

    Z – the Lancet may be widely read by physicians (not scientists) because it is easy to read and contains a lot of anecdotal reports, rather than scientifically tested and peer-reviewed studies. It reports without verification.

  30. says

    Danny Lemieux: the Lancet may be widely read by physicians (not scientists) because it is easy to read and contains a lot of anecdotal reports, rather than scientifically tested and peer-reviewed studies.

    You’re confused. The Lancet is a peer-review journal. Impact-factor measures how often published studies are cited by other scientific studies. It’s a valid measure of scientific influence. If The Lancet were a “comic book,” then other scientists wouldn’t be consistently citing its contents in their own published research. It has nothing to do with how many doctors are reading it. 

    http://www.thelancet.com/lancet-about

    http://en.wikipedia.org/wiki/The_Lancet

  31. Danny Lemieux says

    Your response to “Galileo” is pretty slick, Z: nothing that I said is contradicted but you respond with a factually accurate skeleton of information intended to lead others astray with innuendo.

    Yes, Galileo was convicted by the Papal Inquisition (not the same as the one associated with Torquemada in Spain, so you use guilt by association) because the leading academic authorities wanted Galileo silenced.

    Galileo was asked by by his friend, Pope Urban VIII, to tone it down, so as not to embarrass the papacy politically. Galileo nonetheless persisted, mocking the Pope in the process, thereby leaving the Pope with no alternative but to have his academic opponents have their way by calling in the inquisition to investigate Galileo for contradicting the Temple of Orthodoxy. He was convicted and sentenced (for political reasons) to a very comfortable house arrest. The fact is that there were other scholars in the Church-funded universities at the time who also pushed the same ideas and who were not prosecuted.

    Come to think of it, the persecution inflicted on Galileo from the academic authorities of his day  isn’t all that dissimilar to what Leftwing U.S. academics foists on intellectual dissenters today.

  32. says

    Danny Lemieux: nothing that I said is contradicted but you respond with a factually accurate skeleton of information intended to lead others astray with innuendo.

    Let’s review.
     
    Danny Lemieux: Yes, Galileo was convicted by the Papal Inquisition (not the same as the one associated with Torquemada in Spain, so you use guilt by association) because the leading academic authorities wanted Galileo silenced.

    So, he was persecuted by the Church academics *and* the Inquistion, not the Spanish Inquisition, but the Roman Inquisition that had burned Giordano Bruno for heresy. 
     
    Danny Lemieux: He was convicted and sentenced (for political reasons) to a very comfortable house arrest.

    But threatened with much more unless the old man abjured, the greatest scientist of the age, possibly of all ages. 
     

  33. abc says

    Danny,
    I have responded to your info requests, but you continue to evade.  This is telling.  You claim that ALL of my sources are bad, but have provided none of your own.  Now, I know that you are fighting a battle that was started by David Foster, who apparently will not produce an answer to my question, which leads to be believe he lacks one to give.  But if you are going to take up the cause, then at least have the courtesy of telling me which economic sources we are going to use.  You can have your own opinions, but we ought to be able to settle on agreed-upon facts.  So please state whose stats we use, if not the CBO.
     
    As for your questions:  “May I suggest starting with: 1) share of tax receipts compared to what other receipts? 2) share of tax receipts as a function of the economy, 3) share of tax receipts as a percentage of earnings, rather than sales?”

    1. http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm (clearly shows declining corporate taxes and rising payroll taxes in the mix, which reflects the decline in the relative power of unions and rise in corporate power since 1950).

    2. http://en.wikipedia.org/wiki/File:U.S._Federal_Tax_Receipts_as_a_Percentage_of_GDP_1945%E2%80%932015.jpg (ignore OMB projections for the last few years)

    3. there is no such data, since there is no national aggregate of earnings, just GDP.  You likely mean corporate taxes as a percentage of corporate income.  Look at:  http://ericgarland.posterous.com/us-corporate-profit-margins-1980-2011 (clearly shows that corporate profit margins have risen since the Reagan tax reforms in 1982-3 started to increase the loopholes/incentives that allow firms to reduce their share of federal taxes; therefore, their share declined as their profits rose.  While the lower taxes goosed the margins, they were hardly the only factor, as technology-induced productivity and efficiency from outsourcing and industry consolidations played meaningful roles)

    While I agree that Science is a far more authoritative publication than science, I maintain that even Scientific American is more authoritative than a layperson.  You write:  “university departments have degenerated into little more than ideological feeding stations. “Thinking for oneself” has apparently fallen out of favor in much of academia.”  And that is true.  I have already cast doubt on many economists at top schools who take money from industry and write results on demand and for six figures using selective scholarship.  Having said that, there are many other people at those same institutions that do not whore out their talents, and the institution should not be painted with such a broad brush as a result (e.g., there are crooks in Chicago, so everyone in Chicago is a crook…fallacy of composition).  While thinking for yourself is critical, so are experts.  Many policy areas are complex and a layperson lacks the knowledge to interpret the data, so the expert matters.  The existence of dishonest ones doesn’t change that.  And remember.  There are many more dishonest partisans that WANT there to be no experts, so they can continue to promulgate lies and simply say you lack the authority to discredit and undermine those lies.

    As for the fallibility of man, this is part of the human condition.  However, I will take the errings of an honest and earnest scientist or economist over the outright calculated lies of a priest or politician any day of the week.  There is far more progress that has come out of the trial-and-error process of science than out of religion.  The history of religion is one of retreat, as science and rationality come to explain more and more stuff.  And while Pliny was wrong about a lot, it was scientists standing on the shoulders of other scientists (and even ancient philosophers) that corrected him; not religious folks who believe that their flawed knowledge is static, perfect and beyond reproach even though we see that such dogma is highly problematic, logically conflicting, etc.  Imperfect knowledge is better than static fantasies.  And the fact that rational modern people go to doctors and take Rituxin when they develop a tumor, rather than going to a church priest or tribal shaman to bleed them is proof of this.  Knowledge is probabilistic, and the odds of a scientist adn expert being right is far greater than the untrained, even if the odds for the scientist are far less than 100%.  There are no gods…or even holy people that claim to be hearing one.

    By the way, the economic experts I have presented have demonstrated experience, including Buffett, in the field.  And the CBO is not filled with dummies; they are not required to present opinions or reports with inputs that do not make sense or they would struggle professionally to maintain, and this idea (loudly chanted by the right) that the only reason that the CBO has come up with such and such a decision is because they were snowed or forced to use bad inputs is beyond laughable.  The CBO is independent in the sense that they can reject absurd inputs.  OMB, on the other hand, is far more political, as anyone who knows this group can tell you.  In any case, unless and until you can supply other sources and experts with facts and descriptions of the problem that we can start with, I don’t know how to move forward with you.  I also don’t know how to reconcile your long explanation of your views on experts and scientific journals with the discussion about corporate taxes.  You’ve taken us far afield from that narrow topic to Pliny, but you haven’t really supplied an answer to the narrow topic.  I think youre evading again…

    Now to address the other topics, like pharma.  It is good that you are actually not investing in pharma, since your understanding of the sector is somewhat lacking.  You write that you have a dim view of the sector:  “Given that: 1) it can take about $1.0b to get a new drug to market due to the regulatory obstacles in its path…”  It is true that drug trials required by the FDA can cost millions of dollars, and the FDA at times has stopped development later in the funnel than it should have; however, to ignore the rising costs of development that are not driven by the regulatory process is beyond dishonest.  There are very real added costs driven by new techniques to sift through small molecule development, while large molecules (i.e., biotech) is inherenly costlier, as any pharma analyst or bench scientist can tell you. 

    But you continue: “… 2) that nonetheless single-payer health services for most of the developed world will dictate at what prices such drug can be sold…if it can be sold…and 3) that such prices (witness Canada) do not enable such companies to a) recoup their investment costs and b) realize a free-market profit (if any)…”  It is funny that government regulators can dictate returns for monopolies in the electric and gas utility sector and we can be in the middle of a boom in infrastructural rebuilds with average ROEs of 10.5%, which is slightly above market rates, and with FERC (i.e., federal as opposed to state government) granting even higher rates.  Yet you insist, in spite these widely known and ascertainable facts, that it is impossible for single-payer dictated systems to allow market-driven returns in the health care sector where drug companies have a similar monopoly position, albeit for a couple of decades (roughly) rather than permanently.  Fantasy over facts, once again.  Here is the reality.  Drug companies face average pricing that is about 18% less outside the US than in it, but even in those other markets (i.e., Europe, Canada, Australia and Japan) they price their drugs well in excess of what is needed to earn a market return on their investment.  This is born out by data I have personally collected in doing analysis on major pharma companies as potential investments.  It is also born out in the good work done by Marcia Angell, who used to be editor in chief of the New England Journal of Medicine (she has written a great book, The Truth About Drug Companies, covering a lot of revealing data on the subject).  And it is born out in the ROI data analysed by the pharma practice group at McKinsey (NY) that published their analysis in Science.  The returns earned in even the most state-centralized system, the UK, are more than adequate to cover all costs and generate a market return, contrary to your unsupported claims.

    You also write:  “… 4) that, finally, the last large free market for drugs upon which such companies depend in order to recoup are reasonable ROI is well on the path to becoming a single-payer market…I view them as a very high risk investment. I do not, however, blame the free market for this.”

    It is revealing what you ignore in your little account of the drug company mess:  the patent cliffs, the failure of major pharma to develop truly novel molecules in new area, the proclivity to focus on consumer product type of drugs (e.g., Viagra) as opposed to truly life-saving ones (e.g., Rituxin), and the tendency to only nominally innovate (analogous to adding fins to cars in the 50s rather than really changing the body style) rather than making groundbreaking innovation.  And please stop with the free market rhetoric.  There is no free market when you have a monopoly via patent protection, and you have lobbied against the government enjoying the same procurement scale economies as Walmart, and you prevent free flow of information in the marketplace by quashing adverse studies, and I could go on and on here.  What is clear is that you have selectively cited only those facts that fit your narrative, leaving out a TON of important facts that undermine it.  I wonder why that is…

    As for fossil fuels, I am aware of what horizontal drilling and fraking technology has done to natural gas supplies.  i track the price of that commodity on a weekly basis.  I was talking about oil, not gas, and I was talking about the US, not North America, just as Palin was.  You shift the goal posts when you ignore the original context of the discussion.

    Finally, I would note that I have repeatedly supplied links to an array of sources, while your idea is research apparently is to link me to another article on bookworm’s blog.  I would keep that comparison in mind before criticizing my research.  And one final aside:  while name dropping is not research, being on a first name basis with someone does afford opportunities for better research, as my interactions with Art have clearly demonstrated.

  34. BrianE says

    When abc contended that corporate tax receipts had dropped 70%, it piqued my interest.
     
    Assuming the modern economic era started in the 70’s, lets see what’s happened to corporate income taxes since 1970. Using OMB’s historical data tables 2.2 and 2.3 here’s the averages by decade as a percentage of GDP and as a percentage of the total government receipts.
     
    1970-1979     2.7% of GDP     15.03% of Total Receipts
    1980-1989     1.7% of GDP     9.26% of Total Receipts
    1990-1999     1.94% of GDP    10.5% of Total Receipts
    2000-2009     1.85% of GDP     10.4% of Total Receipts
     
     
    These are averages by decade
     
    1970-1979        low was 2.4% in 1976, high 3.2% in 1970
    1980-1989        low was 1.1% in 1983, high was 1.9% in 1988 and ‘89
    1990-1999        low was 1.6% in 1990 and ‘92, high was 2.2% in 1996, ’97 and ‘98
    2000-2009        low was 1% in 2009, high was 2.7% in 2006 and ‘07
     
    So yes, corporate income tax receipts to the government as a percentage of GDP have declined in the last 4 decades, but were trending up until the subprime bubble and subsequent financial crisis.
     
    I agree with Danny that low corporate tax rates, relative to the rest of the industrialized world benefit us. I’m one of the working peons that want to see higher wage US jobs and more of them. Taxes are passed through or absorbed in lower margins—but the problem with thinking we can just force margins lower—well abc is an analyst, so he knows what the effect of that is.
     
     
    I’ll state the obvious. Corporate income taxes are sensitive to economic conditions. They fall rather substantially in recessions and can take years to recover (especially since we often use tax policy to help them recover).     

  35. Danny Lemieux says

    I have to work for a living, ABC, so let me just take the appetizer and the dessert of your bounteous feast, leaving the middle entree course of your creation for later consumption.

    Beginning with “I have responded to your info requests, but you continue to evade.  This is telling.  You claim that ALL of my sources are bad, but have provided none of your own.”

    Nope, never said ALL of your sources were bad. My point (missed, apparently) regarded your analysis of data (or rather, the lack of it) and the importance of never accepting data at face value.

    And ending with, “Finally, I would note that I have repeatedly supplied links to an array of sources, while your idea is research apparently is to link me to another article on bookworm’s blog.”

    No, I linked you to a commentary that provided more than enough links to address your statements regarding petroleum reserves in the United States (not just Canada and Mexico). However, you didn’t read any of those links, which brings us back to the beginning of your commentary: what’s the point of bringing up information as the product of my own research when you don’t bother to read it?

    We’ve come full circle. Got to go, old boy. Ta-ta! 

  36. abc says

    Danny, I have difficulty debating with you since you play fast and loose with your words.  You launch into a tirade like this:  “Someone’s credentials matter only in that they provide evidence of an individual’s experience in a field, not of whether they are right or wrong and certainly not on the basis of whether or not they extended dinner invites to particular correspondents on this blog….The world has always been full of people who were intellectual giants of their time and would prove themselves colossally wrong.”  And you also note that CBO works with bad inputs, which, the logical inference seems to be, calls into question their analysis and conclusions.  So until I hear an unequivocal statement that we can use CBO or Uwe Reinhardt or whomever as an authority and accept their analysis and data, I will stand by my statement that you have rejected all the data and sources of authority that support my conclusions.  Please be clearer and try to stick to this and the last century rather than drawing conclusions from old Pliny.

    As for your link, I did not go there because the URL you left was a layperson’s blog.  Now, had you simply given me the EIA link that was embedded, then I would have gone there, as I subsequently did.  But you do understand that the catty comments about me not reading an authoritative source that was packaged in the wrong URL hardly can distract me from the real point, which is that your own source proves me right and your wrong.  I have said that the US is a very small player on the world stage in terms of oil production, and the specific site you listed concentrates on natural gas rather than focusing on what I did, namely, crude oil–the subject of Palin’s and others’ mantra (drill baby drill).  Further, it only shows US production, so it cannot possibly rebut my conclusion about US reserves in the context of the larger world.  Using YOUR SOURCE, the EIA, one can quickly find their estimates for world oil reserves, which show what I have stated is correct.  The US is very small in world reserves and, in sharp contrast to your claim, the US is also small in terms of North American reserves.  US reserves are about 21-22BB, which is about 11% of North America (Canada, with its tar sands, is the large holder of oil) and about 1.5% of world reserves.  (http://www.eia.doe.gov/international/reserves.html)  Now, Denmark, including its territory of Greenland, is 1.5% of the world’s land surface area (http://www.nationsonline.org/oneworld/countries_by_area.htm), so my original statement is correct is all aspects, including the analogy I used.  Facts matter.

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