Tag Archives: Basic Economics

How much does the average American corporation make in profit?

How much profit does the average American corporation make?
How much profit does the average American corporation make?

A while back, there was a story about how Americans vastly overestimate how many people in the USA are homosexual. According to Gallup polls in 2011, Americans estimated that 25% of the people in America were homosexual. In 2015, it was 23%. The actual number is about 3%. So it’s very clear that Americans can have wildly inaccurate perceptions about reality. Why are Americans so wrong? I think it’s because they see a lot of gay people in high profile areas, particularly in the entertainment industry.

I thought about this failure to perceive reality when I saw a story about how much profit Americans think that corporations make. My guess was that the average corporation makes about 5-10% profit margin. I know this because I used to buy and sell stocks regularly and that’s one of the numbers I would look at. Most Americans own stocks, so I thought they most Americans would know the number as well. But it turns out that American perceptions of corporate profits are wildly off the mark.

Check out this article from the prestigious American Enterprise Institute:

When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC International polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.

How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials (see chart above).

[…]“Big Oil” companies make a lot of profits, right? Well, that industry (Integrated Oil/Gas) had a below-average profit margin of 5.6% in the most recent period analyzed, and separately, the Production and Exploration Oil/Gas industry is losing money, reflected in a -6.6% profit margin. For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%. And evil Walmart only made a 2.1% profit margin in 2017 (first three quarters) which is less than the industry average for general retail, possibly because grocery sales now make up more than half of Walmart’s revenue and profit margins are lower on food than general retail.

Sometimes, the government makes MORE from the sale of goods or services than the company that does ALL the work:

Interestingly, Walmart’s profit margin of 2.1% is actually less than one-third of the 6.5% the average state/local government takes of each dollar of Walmart’s retail sales for sales taxes. Think about it – for every $100 in sales for Walmart, the state/local governments get an average of $6.50 in sales taxes (and as much as $10.12 in Louisiana and $9.45 in Tennessee, see data here), while Walmart gets only $2.10 in after-tax profits!

I think that Americans are getting their false anti-corporation views from listening to the mainstream media. The mainstream media is overwhelmingly leftist according to recent studies of their political donations. I think that the anti-corporate views of the average American comes from their uncritical consumption of mainstream media propaganda. They think they are getting objective news reporting, but what they’re really getting is socialist propaganda.

Here is a short little video that explains more about profit margins, and what would happen if a socialist like Bernie Sanders were put in charge of a corporation:

If you’d like to help with this problem of anti-business economic illiteracy, please watch the video and share it, or share the AEI article, which contains the video. America will be a better country when Americans have accurate, informed beliefs about important issues.

How well is socialized health care working in Britain?

The National Health Service is government-run socialist health care
The National Health Service is government-run socialist health care

Back in 2009, a radical leftist named Paul Krugman wrote about the health care system in Britain. As a leftist, it’s his view that government-run health care is better than free market health care. Basically, he thinks that people get better health care if it’s run like the US Postal Service is run, instead of how Amazon.com is run.

Let’s see what he says in the far-left extremist New York Times:

In Britain, the government itself runs the hospitals and employs the doctors. We’ve all heard scare stories about how that works in practice; these stories are false. Like every system, the National Health Service has problems, but over all it appears to provide quite good care while spending only about 40 percent as much per person as we do. By the way, our own Veterans Health Administration, which is run somewhat like the British health service, also manages to combine quality care with low costs.

And what about the people who say that the NHS doesn’t provide quality health care, despite getting a huge portion of the all the taxes that are collected in Britain?

At this point, all that stands in the way of universal health care in America are the greed of the medical-industrial complex, the lies of the right-wing propaganda machine, and the gullibility of voters who believe those lies.

Every bad story that you’ve ever heard about socialized health care is a lie, and you’re gullible if you believe those lies.

Well, see, now I’m confused. Because if I turn the page of the New York Times from an editorial to a news story, I read this:

At some emergency wards, patients wait more than 12 hours before they are tended to. Corridors are jammed with beds carrying frail and elderly patients waiting to be admitted to hospital wards. Outpatient appointments were canceled to free up staff members, and by Wednesday morning hospitals had been ordered to postpone nonurgent surgeries until the end of the month.

Cuts to the National Health Service budget in Britain have left hospitals stretched over the winter for years, but this time a flu outbreak, colder weather and high levels of respiratory illnesses have put the N.H.S. under the highest strain in decades.

The situation has become so dire that the head of the health service is warning that the system is overwhelmed.

[…]“The N.H.S. waiting list will grow to five million people by 2021,” Mr. Stevens said in an impassioned speech to health care leaders in November. “That is one million more people, equivalent to one in 10 of us, the highest number ever.”

Over the past week, hospitals have increasingly declared “black alerts,” an admission that they are unable to cope with demand, the health service confirmed, without releasing numbers. Most hospitals have been unable to meet emergency-ward targets of seeing patients within four hours because of a shortage of beds and staff.

Britain spends billions and billions of pounds on health care every year, but it’s never enough. And British citizens already pay far more in taxes than Americans, who get much better care.

Sometimes, statistics are not as good as a good horror story…  On this blog, I’ve written about dozens of NHS horror stories. But Paul Krugman says they are all lies, including this one from the same New York Times article:

“There’s no real system or order; it’s a jungle in here,” said Nancy Harper, who had accompanied her 87-year-old grandmother, who was lying down and complaining of excruciating pain in her lower back.

“It’s been more than five hours,” Ms. Harper said. “We get to the front of the queue and then someone more ill comes in and we get pushed back. It’s outrageous.”

The UK Telegraph had some more information about the NHS health care system:

Every hospital in the country has been ordered to cancel all non-urgent surgery until at least February in an unprecedented step by NHS officials.

The instructions on Tuesday night – which will see result in around 50,000 operations being axed – followed claims by senior doctors that patients were being treated in “third world” conditions, as hospital chief executives warned of the worst winter crisis for three decades.

[…]Trusts have also been told they can abandon efforts to house male and female patients in separate wards, in an effort to protect basic safety, as services become overwhelmed.

50,000 scheduled surgeries canceled. If this were private sector health care, then the patients would have some recourse. But when the government is running health care, good luck trying to sue them for pain and suffering. They’ve already got your money from taxes, too – you can’t get it out to go somewhere else for surgery.

Although this seems horrifying to Americans, this is pretty standard all year round for Canadians, who have a true single payer health care system. According to the Fraser Institute, the average Canadian family pays about $12,000 in taxes for their free health care. And when they need things like MRIs or knee replacements, they have to wait for months. The average wait time there for “medically necessary treatment” is 21.2 weeks. Medically  Necessary Treatment. When I ask for an MRI in America, I get in the same week that I call.

When conservatives like me oppose government-run health care, it’s because we have looked carefully at government-run health care as it exists in comparable countries, and we have decided that it does not work. Progressives need to take a look at reality in countries like Britain and Canada. How well does it work? How much does it cost? It’s no good making policy decisions with feelings instead of facts.

Ted Cruz in CNN debate: taxing the rich 100% isn’t enough to pay for socialism

Ted and Heidi Cruz have a plan to simplify the tax code

On CNN, you get anti-conservative propaganda 24 hours a day. The only exception are the policy debates they sometimes air, in which intelligent conservatives get to speak. Past debates have featured Senator Ted Cruz of Texas, who is the most intelligent conservative debater in the USA. On Tuesday night, Cruz was joined by Senator Tim Scott of South Carolina, another able conservative. They debated two radical leftists – Bernie Sanders and Maria Cantwell.

The Washington Examiner had an excellent summary.

Excerpt:

Sen. Ted Cruz sniped at Sen. Bernie Sanders’ often-used complaint about “millionaires and billionaires” not paying enough in taxes during the CNN town hall debate on Tuesday, and quipped there aren’t enough of them to “pay for all the socialism that Bernie and the Democrats want to give away.”

The comment came as Cruz, R-Texas, took aim at the line of attack favored by Sanders, I-Vt., and the Democrats against the GOP tax reform about how it’s a tax cut for “the rich,” but Cruz said that really means it is a tax cut for “taxpayers.”

“Democrats have one talking point on taxes: It’s a tax cut for the rich,” Cruz began. “And they say it over and over and over again in response to everything. The most important thing for you to know when you’re at home is when they say rich, they mean taxpayer. Every time they say ‘rich’ they mean taxpayers.”

“Why is it? Because the very rich — there aren’t enough of them,” Cruz continued. “Bernie ran for president, he rolled out a tax plan. His tax plan was a massive tax increase. If you took every single person in America making over a million dollars, and you taxed them 100 percent of their income, you took every penny they earned — you came in in jackboots and confiscate it — it would pay 8 percent of the cost of Bernie’s tax plan. You know where they get their money? They get it from you, they get it from the the middle class.”

Cruz went on to cite a quote from his and Bernie’s prior CNN debate in which Sanders, while describing his preferred tax plan, said “everybody will pay some more.”

“You’re a single mom, you’re working, he says you’re going to pay some more,”‘ Cruz said afterwards. “You’re a small business owner, he says you’re going to pay some more. And the reason is, there aren’t not enough millionaires and billionaires to pay for all the socialism that Bernie and the Democrats want to give away.”

[…]”You said we’re going to tax the middle class but then you said, ‘we the Democrats are going to give it back to you. We’re going to give you free stuff, free healthcare, free education,'” Cruz said. “But you know what, it’s going to be Bernie and Maria deciding what you get. Tim and I have a simpler view. You keep your money, you get to decide if you want to invest in your decision.”

Is Ted Cruz correct about this point? Yes.

In 2012, John Stossel wrote this in Forbes:

If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion.

In 2011, the Tax Foundation explained that even if you taxed ALL THE INCOME from all the people who make $200,000 or more, you would only raise $1.53 trillion dollars:

So taking half of the yearly income from every person making between one and ten million dollars would only decrease the nation’s debt by 1%. Even taking every last penny from every individual making more than $10 million per year would only reduce the nation’s deficit by 12 percent and the debt by 2 percent. There’s simply not enough wealth in the community of the rich to erase this country’s problems by waving some magic tax wand.

Finally, to put everything in perspective, think about what would need to be done to erase the federal deficit this year: After everyone making more than $200,000/year has paid taxes, the IRS would need to take every single penny of disposable income they have left. Such an act would raise approximately $1.53 trillion. It may be economically ruinous, but at least this proposal would actually solve the problem.

That’s much less than the $10 trillion that Obama added to the debt in his 8 years in office. And much much less than the current national debt which is over $20 trillion. Taxing the rich isn’t enough to pay for our current spending – we have to cut spending. 

Tax cuts are designed to spur economic growth by putting money into the hands of job-creating entrepreneurs. It’s the entrepreneurs who make inventions like smartphones and online marketplaces and streaming online media which make us all more productive. Competition between entrepreneurs drives quality up, and prices down. That’s why we give tax cuts to entrepreneurs – people and businesses who create economic growth by innovating. Giving taxpayer money to the Department of Motor Vehicles generates ZERO economic growth. Giving money to innovators and job creators is what gets us the new inventions and services that grow the economy. 

As Ted Cruz noted in the debate, we do indeed see increased economic growth and higher tax revenues when we have cut taxes in the past, e.g. – under Ronald Reagan. Not the mention the millions of jobs that are created by putting money back in the hands of entrepreneurs.
According to the radically-leftist communist NPR, Bernie Sanders’ most recent tax proposals would add $18 trillion to the debt over 10 years. That’s $1.8 trillion PER YEAR – much more than the $1.53 trillion you get from taxing the rich. So again, even if we take every penny made by those who earn $200,000 or more per year, we aren’t going to be able to pay for socialism. And those people aren’t going to just keep working if you take everything they earn anyway. They’d either stop working or just leave the country – just like the rich left France when they impose a top tax rate of 75%. This is how the world really works, OK. People don’t work for nothing. They probably wouldn’t even work if the government took half of what they earned. I certainly would not.

Back to the debate…

Here is a clip of Ted Cruz explaining how there isn’t enough money to pay for the Democrat spending platform even if you take every penny earned by the top earners:

Here is my favorite clip of Tim Scottt:

I like this clip of CNN cutting off Ted Cruz when he is presenting evidence, too:

The full video of the CNN debate is here:

And here is the full transcript.

Dr. Jennifer Roback Morse lectures on basic economics

Dr. Jennifer Roback Morse
Dr. Jennifer Roback Morse

Here is a podcast on basic economics from Dr. Jennifer Roback Morse.

About the speaker:

Dr. Morse is the founder of the Ruth Institute, a global non-profit organization focused on keeping the family together, protecting the rights of children and helping the millions of people who have been harmed by family breakdown.

She has authored or co-authored four books and spoken around the globe on marriage, family and human sexuality. Her work has been translated into Spanish, Chinese, Korean and Polish. Her newest book is The Sexual Revolution and Its Victims.

She earned her Ph.D. at the University of Rochester and taught economics at Yale and George Mason Universities.

A bit more about her economics credentials: Dr. Morse served as a Research Fellow for Stanford University’s Hoover Institution from 1997-2005. She received her Ph.D. in economics from the University of Rochester in 1980 and spent a postdoctoral year at the University of Chicago during 1979-80. She taught economics at Yale University and George Mason University for 15 years.

The MP3 file is here. (49 minutes)

Topics:

  • The study of economics is anti-postmodern – there is objective truth independent of what people think
  • The study of economics believes in fixed principles of human nature
  • Economics studies the allocation of scarce resources that have alternative uses
  • Economics studies how people exchange resources
  • How both people who engage in a voluntary trade always believe that they will be better off
  • How both people who engage in a voluntary trade both benefit from the exchange
  • How incentives motivate people to act
  • Understanding supply and demand
  • Understanding how “free” government services are rationed
  • Understanding opportunity costs
  • How prices signal producers to produce more or less, and consumers to buy or not buy
  • Market-driven prices versus price controls
  • The role of substitution
  • The necessity of allowing failure in a free market

The requirements of economic growth:

  • private property
  • contracts
  • the profit motive
  • competition
  • free trade
  • entrepreneurship, creativity and innovation
  • the rule of law

If you want to learn more about basic economics, I recommend picking up a book or two by Thomas Sowell – the first book I usually give away is “Intellectuals and Society”, and then next “Basic Economics”. A shorter introduction is “The Politically Incorrect Guide to Capitalism” by Robert Murphy. You can find a good list of books on the website of The Institute for Faith, Work and Economics.

I think it’s important for Christians to understand basic economics, because so much of the impact we have depends not only on our personal finances, but on our ability to promote economics policies that will affect our personal finances. For example, whether you have a job or not depends on economic policy. Whether you can get food and other required resources depends on economic policy. Often, big-government regimes with poor economic policies (e.g. – North Korea) will make it impossible for you to have other liberties, like religious freedom.

Just think about how hard it would be for you to pursue a Christian life plan in a place like Venezuela, where your priorities would not be apologetics, but just finding food and avoiding death and theft at the hands of criminals. Closer to home, we are now seeing Seattle restaurant workers having their hours cut and even losing their jobs – because they decided to raise the minimum wage rate (bad economics).

Excerpt:

This latest study from the UW team looks at the effects of both the first and second jumps. The second jump, in January 2016, raised the minimum wage to $10.50 to $13. (The minimum wage has since gone up again, to the current $11 to $15. It goes up again in January to $11.50 to $15.)

The team concluded that the second jump had a far greater impact, boosting pay in low-wage jobs by about 3 percent since 2014 but also resulting in a 9 percent reduction in hours worked in such jobs. That resulted in a 6 percent drop in what employers collectively pay — and what workers earn — for those low-wage jobs.

For an average low-wage worker in Seattle, that translates into a loss of about $125 per month per job.

“If you’re a low-skilled worker with one of those jobs, $125 a month is a sizable amount of money,” said Mark Long, a UW public-policy professor and one of the authors of the report. “It can be the difference between being able to pay your rent and not being able to pay your rent.”

The report also estimated that there are about 5,000 fewer low-wage jobs in the city than there would have been without the law.

As I blogged previously, 93% of economists agree that raising the minimum wage hurts job seekers. It actually hurts young and/or minority job seekers the most, because they are the ones looking for entry-level jobs. That is why in countries that have embraced bad economic policies, the unemployment rates for young people are at or above 50%.

Youth unemployment in socialist countries
Youth unemployment in socialist countries

Look at what the far-left UK Guardian says:

In Greece, 59.2% of under-25s are out of work. In Spain, youth unemployment stands at 56.5%; in Italy, it hovers around 40%.

[…]In the words of Enrico Giovannini, Italy’s employment minister, this is a disaster all the more shocking because it is hitting Europe’s best-educated generation: in Spain, nearly 40% of people in their 20s and early 30s have degrees; in Greece it’s 30%; in Italy, more than 20%.

Having an education isn’t what gets you a job. What gets you a job are the economic policies that make it viable for an entrepreneur to risk their capital in the hope of being able to keep more of what they earn – instead of paying it to the government so that bureaucrats can spend it on social programs.

Imagine it was you who lost your job or couldn’t find work due to bad economic policy. Think of how that would affect your ability to even drive to church on Sundays, or purchase a Bible, much less being able to organize an apologetics event at the university and pay for a speaker to fly in and stay in a hotel. Economics is important for Christians to understand, because so much of our influence and effectiveness depends on it.

Why don’t young Americans understand the effects of socialist policies?

Supermarket shelves empty thanks to socialist policies
Supermarket shelves empty thanks to socialist policies

Here is an interesting article by Kathryn Blackhurst, writing for LifeZette.com. The article reports on how the mainstream media has covered the situation in Venezuela, which has been under socialist rule for decades.

Kathryn explains:

Out of approximately 50,000 total evening news stories on ABC, CBS and NBC combined in the last four years, just 25 have covered the ongoing crisis in socialist Venezuela, according to a Media Research Center study published Tuesday.

After Venezuela’s former socialist president, Hugo Chávez, passed away in March 2013, the country has spiraled into economic disaster and civil chaos. So far in 2017, more than 50 Venezuelans have been killed during protests against current Venezuelan President Nicolás Maduro and his socialist policies. Many Venezuelans are starving due to shortages of food and other essentials. The country’s inflation rate is set to surpass 700 percent and 25 percent of Venezuelans will be unemployed.

“Yet the Big Three evening newscasts have tried to pretend this crisis does not exist, offering virtually no coverage as the situation has deteriorated over the past four years,” MRC Research Analyst Mike Ciandella wrote.

“The networks have also been reluctant to attach the ‘socialist’ label to Venezuela’s government, and have utterly failed to criticize liberal politicians and celebrities who have praised the Chávez and Maduro regimes,” Ciandella added.

Indeed, out of the 50,000 total evening news stories on the three networks, just 25 covered Venezuela, and only seven mentioned “socialism.” In addition, NBC Nightly News only broadcast 13 stories spanning 16 minutes and 54 seconds, ABC’s World News only covered 8 minutes and 34 seconds over seven stories, and CBS Evening News only offered 3 minutes and 11 seconds over five stories.

“The network evening news programs seem allergic to reporting on the ongoing crisis in Venezuela,” Ciandella told LifeZette in an email. “Even worse, the few times they have managed to cover the widespread poverty, starvation and government oppression in that country, they somehow find ways to do that without mentioning the word ‘socialism.’”

That’s why your children can go through public schools and consume mainstream media news without ever understanding what effects follow from left-wing socialist economic policies. There just isn’t anyone intelligent and honest enough in the mainstream media to give the historical context that explains what policies were tried in the past, which resulted in the effects in the present.

Over 100,000 Venezuelans pouring into Colombia from the Venezuela in order to buy food
Over 100,000 Venezuelans pouring into Colombia from the Venezuela in order to buy food

Economist Stephen Moore has more about the situation in Venezuela, in this Investors Business Daily article.

He writes:

Venezuela is a human rights crisis of epic proportions ‎with mass hunger, mass poverty, despair, ghetto upon ghetto, and a mass exodus of private businesses and anyone with money. There are no rich and no evil corporations to loot anymore. The inflation rate is almost 500% as the currency is now about as valuable as Monopoly money.

The Wall Street Journal reports that Venezuela now employs 100,000 security forces — not to repel foreign threats or invaders, but to keep the government leaders like corrupt president Nicolas Maduro safe from their own citizens. Adjusted for population size, this would be the equivalent of one million Americans employed every day to stop riots in the streets. More than 40 protesters have been shot so far this year by the guardsmen.

The average pay has fallen to less than $50 — not per day, or per week, but per month. How’s that for a minimum wage?  ‎The people eat dogs if they can find them and the world was shocked by the story earlier this year of the raid on the municipal zoo to eat the animals. How bad off does a population have to be to start carving up elephant meat?

The burgeoning resistance throws molotov cocktails, rocks and even human feces at the security forces during the nonstop rioting. It’s like a scene out of an HBO movie. “I don’t fear death because this life is crap,” one protester told the WSJ.

[…]What is stunning about this story is that this is a nation that was once one of the wealthiest places in South America. Unlike places such as Subsaharan Africa where extreme poverty is the norm,  there is no excuse for Venezuala’s steep fall into the abyss because this is a resource-rich nation.

Under thug Hugo Chavez the former socialist dictator, Venezuela began its relentless conquest of private wealth and it’s process of nationalizing private enterprises. Chavez was lionized by the American left and the Hollywood elite — Sean Penn and Chavez were BFFs — for his “progressive” policies.

There’s literally no difference between the views of Chavez and Maduro and mainstream Democrat economic policy in the United States. They’re just further along the road to serfdom than we are, because their population is less economically literate than we are. For now.

I’d be willing to bet that many of these starving protestors in Venezuela voted over and over again for the socialists. That’s what happens when people vote with their feelings instead of knowledge of basic economics. But where would ignorant Venezuelans have picked up a knowledge of basic economics? Come to think of it… where would ignorant American millenials, who hold entire conversations in memes, pick up a knowledge of basic economics? They certainly wouldn’t get it from public schools teachers or the mainstream media “journalists”.