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Sam. Saint gonna change. Welcome, friends, to edition, you might call it even, the Thanksgiving edition of Economic Update, a weekly program devoted to the economic issues, the incomes, the debts, the jobs that we all have, that we hope we will have in the future, that we hope our children will have. And there are more and more questions about it these days, aren't there? I'm your host, Richard Wolff. I've been a professor of economics all my adult life. I currently teach at the New School University in New York City. I want to begin today's Economic Update program by responding to some questions that came in over the last week about comments I made a week ago regarding corporate taxes, since they are scheduled to be lowered by Mr. Trump's government when he comes into power in January. And it's likely to happen, everyone says, because Mrs. Clinton was also in favor of lowering corporate taxes. And so perhaps the Democrats will go along with it. I don't want to repeat what I told you all about last week there. The key thing was to understand the difference between the nominal rate 35% in this country and something called the effective rate, what companies actually pay attention out of their profits, which is much lower than the 35% because of the deductions, the exemptions, the legal ways they have to get around the taxes they owe. And I told you then that the average is rumored to be because there's different ways of calculating it in the neighborhood of 22, 23% as the effective average rate of American corporations, which is not very different from what it is in most other countries. And so the argument that we are bizarrely higher because 35% is nominal and that's higher than the nominal in other countries. The truth of it is it doesn't matter because we give corporations more exemptions and deductions. That brings the nominal down to the effective. Well, some of you asked about more specifics. And so I found, and I'm going to tell you where it is, some work done by the Standard and Poor corporation with Global Market Intelligence Unit. Standard and Poor is a major company in this country that studies risks and evaluates the riskiness of securities and so on. Their Market Intelligence Unit produced some statistics which were then carried in an article in the New York Times on November 13th. So if you'd like to follow this up, that's the place to go to do it. And what is very nice done there is that the New York Times takes the top 50 corporations in the Standard & Poor 500. The Standard & Poor 500 is a index maintained of the major corporations Here in the United States, though, the top 50 in the standard and poor top 500, those are some of the biggest names. And you know, Boeing, Verizon, Amazon, Alphabet, Apple, IBM, Coca Cola, you get the idea. And the New York Times looks at the top 50 and it asks itself the question and uses the statistics of standard and poor to work it out. What's the proportion of the profit earned by these giant companies that they pay out in taxes? Taxes to the federal government, taxes to state governments, taxes to local governments here in the United States, taxes and adding into it taxes to foreign governments, when that's applicable to what they do. So let's compare then what they actually pay to all levels of government with the 35% rate that is in the United States levied just by the federal government. Let me make sure this is clear. Corporations have to pay 35%, that's the legal rate, on their profits to Uncle Sam. But they also have to pay taxes on their profits to the state governments in the states where they're active, to the local governments. Let me give you an example. If McDonald's makes X dollars of profit, they have to pay a portion of that in tax to Uncle Sam. But they also have to pay a property tax in the little village where the McDonald's hamburger stand is, because property is taxed in most cities and towns in America. And if McDonald's sits on a piece of land that they own, they will have to pay a property tax on that land and on that building. All corporations therefore pay taxes to the federal government, the state government and the local government according to what they have where. So the federal government wants them to pay 35%. And I've already told you that the effective rate they pay to the government is less. But it turns out that big corporations are so good at cutting their tax bills that even when you add the state, the federal, the local and the foreign taxes they pay. I'm going to give you a list of corporations and tell you what they actually pay to all levels of government and compare that in your mind to the 35% nominal rate on paper they're supposed to pay to the federal government. I'll start with the one I found stunning. Boeing Aircraft, the major producer of jet engine jet aircraft in the United States. The total percentage of its profits that it pays to federal, state, local and foreign is 7.8%. That means that they have reduced their federal probably down to next to nothing. And my guess is they've done that with their state and local and foreign taxes as well. That's why all taxes together that they actually pay is 7.8%, even though nominally, legally they, they are in the 35% to Uncle Sam alone bracket, but not really because of all the exemptions and deductions they take. I'm going to give you the other numbers, but keep in mind these are what they actually paid to all governments versus the 35% that keep hearing about in the press as if anybody paid it. Verizon 12.5% Amazon 12.5% Alphabet, that's the former Google 16% IBM 17% Bristol Myers Squibb 18% AT&T 19% Berkshire Hathaway, that's Warren Buffett's firm 20% bank of America 23% PepsiCo 24% Merck 28% Walt Disney 31%. In other words, the major corporations in the United States, the big ones, the ones that dominate and control this economy, don't pay anything remotely like what you hear about in the newspapers. They don't pay the 35% rate to the federal government. They don't pay 35% to everybody combined. That's how little they pay. When you hear from corporations complaints about their tax bill, you're listening to people that are counting on your not knowing what the reality is. And the least I can do is try to do something about that. Next. The Trudeau government in Canada is about to do something or has announced it is going to do something that is extremely dangerous, economically speaking. And I want to talk about it because it's a marker not only for which direction Canada is going toward under the liberal so called leadership of Mr. Trudeau, but it is also something that we're going to see in the United States and you're going to see in many other countries. Many other countries have failed over the years, like Canada and like the United States, to raise the taxes needed to maintain the infrastructure, the roads, the bridges, the tunnels, the seaports, the harbors, all of that stuff that is absolutely crucial to how an economy works, to how profitable it can be, to how successful it can be in raising the productivity of its workers, their incomes, the prosperity level. You have to move things around. You have to have the facilities that enable production and circulation of goods and services to happen. And if you don't take care of it, the that'll come back and undo your economic situation. But of course, in order for the cities and towns and governments to maintain the infrastructure that they are held responsible for, they would have to have the resources to do it. They would have to raise the money either by taxing the population or by borrowing the money. And after all, if you tax the money well, then you get it and you spend it and you maintain your infrastructure. Politicians don't like to tax, it makes people upset to pay the taxes. And politicians have chosen most of the time the much easier route of borrowing the money instead, because then they don't have to raise the taxes and they can still do at least the minimum. But that after a while doesn't work out real well because when you borrow you have to pay not only the amount of money that it costs to maintain the infrastructure, but you've got to pay more because there's interest on the borrowed money that you have to pay to the lenders. So it ends up being more costly to take care of infrastructure when you borrow to do it than it would have been when you tax to do it. It gets doubly ugly. The economics here, when you realize that the wealthy folks who lend the money to to the government only have that money to lend to the government for infrastructure because that government didn't tax them, which would have been the other way to get that money. Of course it would have been better for the government to tax them because then all the taxes would be used for the infrastructure that they raised and there'd be no interest charge on top of it. When they choose instead to borrow, they not only save the rich from the taxes they might have had to pay, but give them a reward in the form of interest on lending the money that otherwise would have been taxed away from them. That ought to be a scandal, but it is stunning how many people don't even understand it. Well, now you do. And you might have expected that governments now faced with the need to upgrade the long delayed infrastructure because the politicians didn't want to tax particularly the rich and can't borrow anymore because they're already now having enormous interest costs on the borrowings they've done in the past. What can they do now? Still unwilling to tax the rich because it's too politically dangerous, now not willing to borrow either because that will be an interest cost on top of whatever already is more than the people can stand, the mass of people because their incomes are already too pinched, and the rich because they don't want to pay taxes and they're used to getting away with it. So what happens? A new plan. And Mr. Trudeau's government in Canada is leading the way. New infrastructure programs, upgrading roads, building bridges, repairing harbor facilities, whatever it is, will now be done and get ready folks, by a public private partnership here's how it's going to the government is going to partner with private investors. That's right. The bridge you go over on your commute at home will soon be a bridge that is partly owned by private investors. So will be the road on which you're driving. So will be the harbor that you may be using. Get the picture? Now, of course, the investors are again the rich people who you didn't tax to maintain the infrastructure from whom you used to borrow to maintain the infrastructure infrastructure. Now you're not going to tax them and you're not going to borrow. You're going to allow them to invest, to become investors in part owners of the public facilities. And guess what? They're not going to invest unless they get a good return. Otherwise they'll put their money somewhere else. This is privatization in a whole new form. The general transformation of the public facilities into privately owned and privately profitable. How is the profit going to be made by the investors? Will we see a return of toll roads to use the highway? We're going to have to pay more money, not just to maintain the highway, but to pay off the investors who provided the money to to upgrade that highway. We're coming to the end of what capitalism can figure out as to how to maintain itself without taxing the rich, without interfering in the rich becoming richer and the rest of us squeezed and squeezed. This new plan to finance infrastructure by making it a paying investment proposition for for the rich. Their profits will come out of our payments for an infrastructure that could otherwise be the way it once a public service paid for by a just tax system that taxes people according to their ability to pay. The rich don't want to and have the political clout to work it out this way instead. The next update has to do with a side effect that I want to put in your minds of the anti immigration rhetoric that Mr. Trump rode into power in the election earlier this month. You may not have thought about this and that's one of the reasons why I want to bring it to your attention. It became clear to me in my position as a professor when over the last two weeks or so, since the reality of the election result has sunk in and I have been approached by a remarkable number of foreign students. For those of you that are not aware of it, the proportion of foreign students attending American universities is probably higher today than it has ever been for many Americans over the last 20 years, the cost of higher education, particularly graduate education, that is education beyond the bachelor's degree, has become too expensive. And the job prospects once you get a master's or a PhD degree too questionable to justify borrowing the money to get an advanced degree. As a result, many, many graduate departments around the country, that is Post BA programs, only survive to the extent that foreign students, students from other countries come and pay to enroll and get these degrees, degrees which are often very valuable to them back in their home, from which they come because a degree from an American university is respected there. So they don't have the kind of job prospect difficulties that American young people do. And so we have seen a shrinkage in the number of American students and a growing number of, of foreign students. What they're telling me is they are reacting to the election and particularly to the anti immigration thrust of Mr. Trump's campaigns, and they are reevaluating whether they're going to stay in the United States, whether it is safe for them to plan to get married, to have children, to search for a career. All of those things which they had thought to do here, where they've been educated, where they have often lived for quite many years and adapted, found romantic partners among Americans, etc. Etc. They're leaving. That's the blunt bottom line that I want to drive home. They are leaving. And that means the United States will have done something very interesting, spent quite a bit of resources training and educating creative, productive young people. But instead of reaping the benefit of what they've learned to do, instead of getting the productivity that they can bring to jobs all across the United States, we're driving them out. We are making that productivity serve the economies of, from which they came. By the way, good news for those economies, but not good news for the United States. That's a cost of this kind of behavior, even just the discussion of it, let alone the implementation, if indeed that materializes. But we're talking serious effects. Let me take it a step further. Many graduate programs in our universities will collapse. That is, they'll stop functioning. Because if you don't have a steady flow of foreign students, you can't sustain the salaries of the professors assigned to teach them, the personnel that have to service a graduate program, and so on. You're going to see if this continues a major shrinkage in the advanced educational structure of postgraduate education in the United States. And that has all kinds of costs as well. It'll mean that more and more colleges and universities will not be able to sustain graduate faculty who often do a disproportionate amount of the research that goes on in universities. More and more of our teaching institutions will be exclusively teaching institutions, whatever research they once did, no longer sustainable because neither American nor foreign students are coming in to provide the money, the classroom audience, et cetera, that a graduate program needs. Has anyone calculated the costs to the United States of the research that won't be done, the costs to the United States of these trained young people now leaving the United States having gotten an education here, but delivering the fruits of that somewhere else? The answer is no. Campaign rhetoric being what it is, the nature of the mass media following campaign rhetoric being what it is, the real issues, the real costs of these arguments and these claims and these promises awaits those of us who start looking seriously at these situations. Doesn't take rocket science to ask these questions, but it is the politically difficult thing to do for most of the media and of the academic world too, even though it is most directly threatened by all of this. The last economic update we have time for today in this first half of the program is a response to several of you sending me requests to talk a little bit about the business of real estate, stimulated, of course, by the fact that, you know that Donald Trump comes from the real estate industry. So I want to talk about real estate economics a little bit. Well, first, real estate. What do we mean? Well, we mean, first and foremost, the land. Real estate is about land, and it's likewise about what's built on the land, an apartment building, a factory, a store, a mall, whatever it is. Real estate is about land and property on the land and the business of that. A real estate investor, a real estate business is then mostly about the land and the buildings on the land. Mr. Trump is not a builder in the sense that he operates a construction company. That's a different kind of industry, usually called construction, the ones who actually make the buildings. That's not Mr. Trump's business. He's in real estate. That means he owns land and he owns buildings that other people built. He may have purchased those buildings after they were built by somebody, or he may have arranged to pay the construction company, excuse me, to make the building. But real estate is about owning land and buildings. It's clear, I believe I don't have to explain it to you, that the person who owns the land didn't produce it. Nobody did. The land is there if you're a religious person, because God put it there, or if you're not. The land is there because of the evolution of the solar system and the planets. And here we are, and we've got land, we've got surface of the earth. And likewise, the owner of the building Very rarely himself or herself built it. Yes, there are people who build their own homes. I've admired that. But there are not many. The vast majority of people who own buildings didn't build them. Which means that a real estate dealer like Mr. Trump produced neither the land nor the buildings that he owns. That is, he produced, to be blunt, nothing. He's an owner. And how does he earn his money? By allowing other people to use what he owns for a period of time and to pay him for doing so, he rents out the land. He leases or rents the buildings. That's what he does. And his income depends on whether people want that land or not and whether people want use of that building or not. He depends on whether society moves in a direction that people come to where he owns the land, then the value of that will go up. If people want to use whatever buildings he has, then the value of the rents and leases go up. He's dependent upon what society does for all of his income. If people leave the area, he has no income. If people don't want his particular building, he has nothing. He depends on society. He produces nothing. He earns because of how society develops. That is the economics of real estate, and that's what produced Mr. Trump. We've come to the end of the first half of economic Update for this Thanksgiving weekend. Please stay with us. We will be back right away with a number of major discussions of issues of enormous importance in the world today that we will have time to give the analysis that they need and much too infrequently obtain. Stay with us. We'll be.