China's house of cards tumbling? States battle the Big Boys in Beijing.

[printdust]

http://news.yahoo.com/china-local-goverment-loans-issue-greater-thought-moodys-021748152.html

Sure as hell sounds like there's problems that rival ours.

 

[The Big Ragu]

Their banks might be at risk, as Moody's is suggesting. But it's nothing the Chinese central bank couldn't clean up relatively easily if there was about to be a rash of defaults that put faith in its banks at risk.

Moody's is suggesting that China has $900 billion of public debt, instead of $530 billion.

Contrast that to the $14.3 TRILLION of public debt the U.S. has, and it would be difficult to say that they have problems rivaling ours.

The Chinese say their public debt is 20 percent of GDP. Moody's puts it at more like 35 percent of GDP.

Our Federal debt just passed 96 percent of our GDP.

 

[LongTimeListener]

And also, China has a system where the government tells the companies how it's gonna be. We have a system where the companies tell the government how it's gonna be. I think we'd all bet the same way on which system would lead to a more efficient solution for the debt problem.

 

[Michael_ Gee]

It is always difficult to tell what's what in these stories as China's large institutions, both governmental and non-governmental, treat accounting and statistics as branches of the creative arts and make up numbers as they see fit.

 

[Armchair_QB]

And also, China has a system where the government tells the companies how it's gonna be. We have a system where the companies tell the government how it's gonna be. I think we'd all bet the same way on which system would lead to a more efficient solution for the debt problem.

Worked well for the Soviet Union...

 

[Hokie_pokie]

Yep, and Cuba's kicking butt, too.

 

[LongTimeListener]

And also, China has a system where the government tells the companies how it's gonna be. We have a system where the companies tell the government how it's gonna be. I think we'd all bet the same way on which system would lead to a more efficient solution for the debt problem.

Worked well for the Soviet Union...

Yep, and Cuba's kicking butt, too.

There you go. Good comebacks both. Yeah, China's not a growing economic power at all, they are definitely headed for doom. Stick with that ...

Not saying I would want to live under that system. Just saying that when the government has a problem related to the economy, the government has a smoother path to solving that problem if it's in charge. We have a massive debt crisis and we can't even get companies to pay a dollar of tax on billions and billions of dollars of profit.

 

[printdust]

Don't forget the thriving western sector of the country..... caviar and the best of wines for all....

 

[The Big Ragu]

And also, China has a system where the government tells the companies how it's gonna be. We have a system where the companies tell the government how it's gonna be. I think we'd all bet the same way on which system would lead to a more efficient solution for the debt problem.

Worked well for the Soviet Union...

Yep, and Cuba's kicking butt, too.

There you go. Good comebacks both. Yeah, China's not a growing economic power at all, they are definitely headed for doom. Stick with that ...

Not saying I would want to live under that system. Just saying that when the government has a problem related to the economy, the government has a smoother path to solving that problem if it's in charge. We have a massive debt crisis and we can't even get companies to pay a dollar of tax on billions and billions of dollars of profit.

Our debt problems are public. It has nothing to do with our market economy.

Our government has spent too much and it hasn't generated enough revenue.

Your statement: "We can't even get companies to pay a dollar of tax on billions and billions of dollars of profit," is silly and wrong. The U.S. corporate tax rate is 35 percent, easily among the highest in the world.

As for the thread topic, China may or may not have a local debt problem. Jim Chanos, who is fairly well known short seller, had been sounding this horn for a while, saying that China's local government debt problems are worse than our subprime problem was, and that their banks might be in danger. That could be true. It's just hard to know.

Along the lines of what Gee said, China has made very strong moves toward a market economy. But in order to function as one efficiently, there needs to be transparency, and investors need information to make informed decisions. And the Chinese can be very opaque and even downright dishonest, still, even if their reporting requirements have gotten much better. So, even though what Moody's issued guidance about isn't something no one had thought about already, it's nice to at least see it doing what a rating agency is supposed to do, for once -- even if it still is following (the lead of people like Chanos) rather than leading.

 

[Azrael]

What did Exxon pay in US Federal taxes last year? -$156 million

http://money.cnn.com/galleries/2010/news/1004/gallery.top_5_tax_bills/2.html

Exxon paid the most taxes last year of any U.S. company, by far -- but not a cent went to the IRS for income taxes.

 

[LongTimeListener]

Ragu -- I was thinking of the GE story in the New York Times a few months ago about their tax bill of zero dollars on profits of $14 billion. But Azrael's Exxon link illustrates the point just as well. Those aren't uncommon occurrences.

 

[The Big Ragu]

Ragu -- I was thinking of the GE story in the New York Times a few months ago about their tax bill of zero dollars on profits of $14 billion. But Azrael's Exxon link illustrates the point just as well. Those aren't uncommon occurrences.

I thought your statement was saying that U.S. companies are evading taxes. I am sorry if I was incorrect.

In the case of GE, they are a global company, and because our tax rates are higher than 95 percent of the world, they headquarter elsewhere and pay taxes there. It's pretty rational.

In the case of Exxon, our lawmakers give them subsidies because of the giant game of interest politics that runs our political system. You can buy off politicians. Corporations are not the only entities that do that to their benefit, for what it is worth. And your problem should be with the politicians who trade their influence for that cash like that, as much as, or more, than with the entities that play the game to their advantage.

What I said remains true: Our government has spent too much and it hasn't generated enough revenue.

That has nothing to do with our market economy.

 

[LongTimeListener]

Ragu -- I was thinking of the GE story in the New York Times a few months ago about their tax bill of zero dollars on profits of $14 billion. But Azrael's Exxon link illustrates the point just as well. Those aren't uncommon occurrences.

I thought your statement was saying that U.S. companies are evading taxes. I am sorry if I was incorrect.

In the case of GE, they are a global company, and because our tax rates are higher than 95 percent of the world, they headquarter elsewhere and pay taxes there. It's pretty rational.

In the case of Exxon, our lawmakers give them subsidies because of the giant game of interest politics that runs our political system. You can buy off politicians. Corporations are not the only entities that do that to their benefit, for what it is worth. And your problem should be with the politicians who trade their influence for that cash like that, as much as, or more, than with the entities that play the game to their advantage.

What I said remains true: Our government has spent too much and it hasn't generated enough revenue.

That has nothing to do with our market economy.

I would argue that not generating enough revenue and our capitulation to corporate interests and our market economy are all inter-related, but that's a whole other tangent.

 

[The Big Ragu]

Ragu -- I was thinking of the GE story in the New York Times a few months ago about their tax bill of zero dollars on profits of $14 billion. But Azrael's Exxon link illustrates the point just as well. Those aren't uncommon occurrences.

I thought your statement was saying that U.S. companies are evading taxes. I am sorry if I was incorrect.

In the case of GE, they are a global company, and because our tax rates are higher than 95 percent of the world, they headquarter elsewhere and pay taxes there. It's pretty rational.

In the case of Exxon, our lawmakers give them subsidies because of the giant game of interest politics that runs our political system. You can buy off politicians. Corporations are not the only entities that do that to their benefit, for what it is worth. And your problem should be with the politicians who trade their influence for that cash like that, as much as, or more, than with the entities that play the game to their advantage.

What I said remains true: Our government has spent too much and it hasn't generated enough revenue.

That has nothing to do with our market economy.

I would argue that not generating enough revenue and our capitulation to corporate interests and our market economy are all inter-related, but that's a whole other tangent.

Then I'd argue you are seeing a highly selective picture that fits a narrative you want.

Their capitulation? The politicians are running the show. They have for sales signs on their campaigns, and in some cases they extort the money.

And it's not corporate interests that avail themselves of influence peddling the most, when you look at the game in practice.

Successful corporations that produce goods and services that are in demand can compete in the marketplace quite well without having to pay off politicians for favors. And they also know that they are usually the first scapegoats the fingers get pointed at, due to class warfare populism, which gets easy votes. So by and large they do their best to pay as little as possible. What companies such as Microsoft, for example, do end up paying isn't the result of trying to get politicians to capitulate. It's more like extortion money to keep the Federal government off their backs.

The exceptions are industries that are not competitive and need the playing field made unfair in order to stay relevant, and they very willingly pay. It's why you see accounting firms give so much to campaigns, for example. They need a complicated Federal tax code and an overregulated securities environment filled with inefficiencies to even have a business.

But this largely isn't a game of corporate influence.

Make the connection by going to opensecrets.org and looking at their "heavy hitters" list of the organizations and entities that have given the most money to federal level candidates since 1989. It's a who's who list of organizations that need political influence to advance their cause, because they have no leverage without it.

In the top 10, there is one corporate interest, AT&T, which has survived as long as it has because of political favors, and one commercial interest, the National Association of Realtors.

The others? ActBlue (which has become number one on the list despite only being around since 1994), The American Federation of State, County and Municipal Employees, the National Education Association, The Service Employees International Union, the American Association for Justice (the lawyer's group that fights tort reform), The International Brotherhood of Electrical Workers, The Laborers International Union of North America and The American Federation of Teachers.

I can argue quite convincingly, and with good evidence if given the time and place, that our politician's misplaced allegiances to trading favors for the money those organizations give them, has done way more to put us $14.3 trillion in debt than their tax policies regarding companies such as GE (which doesn't get any special breaks, as far as I know anyhow) or Exxon's subsidies.

Both are insidious. But I'd urge you to forget your narrative and look at the big picture and how the game works and who ALL of the players are.