Economist discusses modern-day parallels with American Revolutionary War

I was born March 6, 1958, in the city of Detroit, to a Polish-American mother and Irish American father. I was welcomed into a close-knit middle class Catholic household of nine children, of which I was the middle child. We grew up with pride in America, our theology and ancestral roots, and with great respect for people of all races and creeds. My parents constantly stressed the United States’ greatest strengths were her system of limited government and the melting pot of people that was America. If I were to summarize how my parents raised us, it would be “parenting by Leo Burnett.” Burnett was the well-known advertising executive who once famously said, “Reach for the stars, you may not get one, but at least you will not end up with a handful of mud.” Because of my parents, my siblings and I truly believed with hard work and a strong moral compass we could accomplish just about anything.

Even though I have not lived in Detroit since 1976, it was a wonderful place to grow up – a place that has, and always will have, a warm spot in my heart. I often return to the city and when I do, I make excuses to drive by the historical monument of a horse-mounted General Thaddeus Kosciuszko, a Polish war hero who bravely led colonial troops for General George Washington’s Continental Army during the American Revolution. Kosciuszko’s leadership was of great help in defeating the British, winning independence and establishing these United States of America. 

Three of my four grandparents passed away before I was born, yet I was extremely blessed to know my grandfather on my mother’s side, Joseph Glosek. My mother’s father was born in 1893 in the town of Ostroleka, Poland, roughly an hour north and east of the Polish capital, Warsaw. His parents sent him to the United States in 1906 at the age of 13, with not much more than the clothes on his back, to escape conscription into the Russian Army. He passed the Statue of Liberty and entered the United States through Ellis Island. He followed the advice of New York Tribune Editor Horace Greeley (who is credited with coining the phrase “Go West young man” in 1865) and settled in the Motor City.

My grandfather loved America and worked his way up to the position of foreman in a Chrysler plant in Detroit before his retirement. He had always hoped to bring other family members to the United States but was never able to do so. By the time his finances afforded him the opportunity, the Communist Revolution had taken place in Russia, World Wars I and II had been fought, the Yalta Agreement had been reached and the Iron Curtain had descended across central and eastern Europe. Unfortunately, Joseph Glosek died in 1976, 13 years too soon to witness the collapse of the Berlin Wall and the fall of Communism in much of central and eastern Europe. However, I was able to somewhat fulfill a dream of his to return to his country of birth, when I traveled with some economist  friends to Poland in the fall of 1989 and met my grandfather’s niece (my mother’s cousin) and her husband in a restaurant in Warsaw. We enjoyed a beautiful dinner with my friends, shared hugs and tears and knew that the freedom my grandfather had enjoyed most of his life was now beginning to reemerge in Poland. As we returned to Frankfurt, West Germany to come home to the United States, our train traveled through then-Communist East Germany. It was just after American Thanksgiving on the train from Warsaw to Frankfurt at a stop in East Germany that my friends and I were notified that the figurative (and soon to be literal) collapse of the Berlin Wall had begun.

In my almost 33 years since meeting my Polish relatives in Warsaw and reflecting on my life as a person privileged to have been born in America, I have traveled by the monument to General Kosciuszko in downtown Detroit numerous times. I often wonder what may have happened to the American Revolution had a great general like Thaddeus Kosciuszko not been sympathetic to the American cause and voluntarily left Poland to fight for the Continental Army. What if he had not sailed for America in the summer of 1776 or French supporters had not provided money and armaments to General Washington and the Army established by the second Continental Congress? What if Kosciuszko had not applied to and been accepted into the Continental Army in August of 1776? Kosciuszko was not only a brilliant military general, but he was an engineer and early on, at the request of general George Washington helped build the fortifications at Fort Billingsport, Paulsboro, New Jersey. This fortification provided protection of the banks on the Delaware River and prevented numerous British advances up the river to the colonial stronghold of Philadelphia. Kosciuszko also fortified the U.S. Military Academy at West Point. Kosciuszko, like many other foreign generals, played a vital role in the American Revolution and the establishment of the United States of America.

The voice of liberty was answered by heroes foreign and domestic in this country in 1776, at the Berlin Wall in 1989 and is again crying out today in Ukraine. May all who can, answer today’s call and come to the aid of those seeking freedom in Ukraine and Russia. May God’s divine wisdom and intervention guide the leaders of the United States and NATO to help bring an end to Russian  tyranny in Ukraine and illuminate the light of liberty once again.

Dr. Timothy G. Nash is director of the McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University.

A windfall profits tax for profiteering?

In a free and competitive market, price always allocates scarce resources and directs production. When allowed to function freely, the U.S. oil industry is a shining example of this dynamic.

Oil is a driving force in the global economy that most of us take for granted.  Petroleum fuels our cars, heats our homes, and is found in thousands of daily-use items from hearing aids to computers. About 80% of all oil consumed in America is produced by small U.S. entrepreneurial ventures.  Without oil, our standard of living, life expectancy and potential for a brighter future would be greatly reduced. 

Drilling for oil to produce gasoline is one of America’s best risk-taking success stories. Drilling for oil places large amounts of capital at risk acquiring permits, finding customers, building pipelines, etc.  Oil entrepreneurs will take risks if they are confident in the potential outcomes. However, even at today's higher prices, many in the oil industry are not confident in expanding operations due to the Biden Administration’s restrictive energy policies.

 

GOVERNMENT RESTRICTS MARKET AND WANTS TO SEIZE SCARCE RESOURCES

Recently, U.S. Senators  Warren (D-MA) and Sanders (D-VT) proposed a windfall profits tax on U.S. petroleum as West Texas Intermediate Crude recently reached  $130 a barrel – about $17 shy of its 2008 record  – and gasoline realized an all-time high. The average national price for a gallon of gasoline on March 13 hit a record $4.32 (up from $4.01 the week before, $3.48 a month ago, and $2.85 a year ago) helping consumer inflation reach a year-over-year 40-year high of 7.9% in February.

Misguidedly, high prices for petroleum and record high gasoline prices have many thinking a windfall profits tax is a good idea, including former Michigan governor and U.S. Secretary of Energy Jennifer Granholm and President Biden who insist U.S. oil companies stop “profiteering” from high oil prices. What does this mean?

 

ARE U.S. OIL COMPANIES TRULY EARNING WINDFALL PROFITS? IS A WINDFALL PROFITS TAX BAD POLICY?

Data sets below from Professor Aswath Damodaran’s work as Professor of Finance at The Stern School of Business at NYU show a windfall profits tax on oil is a bad idea, citing the actual performance of the Oil and Gas sector as it relates to Total Market performance from 2008-2021 (representing over 7,000 publicly traded companies across 90 industries).  The data sets represent publicly traded U.S. companies (sources: Bloomberg, Morningstar, Capital IQ and Compustat). Due to a timing lag of data availability and posting, financial data for each year comes from the October-September timeframe (12 months combined).  We used average net margin (net income as a percentage of revenues) as our point of comparison. The Total Market performance for the 14-year period revealed an annual average net margin of 7.18% among 7,035 companies.  The Oil/Gas Production and Exploration industry produced an annual average net margin of –10.6% across 266 companies.  The Oil/Gas Distribution industry showed an annual average net margin of 5.05% (38 companies).  The Oil/Gas Integrated industry produced an annual average net margin of 6.09% (12 companies).  The data shows the Oil/Gas industry underperformed the Total Market.  From 2008-2021 the Total Market never recorded an average net margin loss, however, the Oil/Gas sector recorded large average net margin losses multiple times.

Using data from company annual reports and 10k filings, if you compare the top eight U.S. oil producing companies to just the top eight technology companies, the variance is even greater. Average net margins in 2021? … Top eight oil companies – 7.37%; top eight technology companies – 27.98%, or nearly four times greater. This follows 2020, a tough year for oil due to Covid-19, the emerging remote workplace and the enactment of many government travel restrictions, where the top eight oil companies showed an average net loss of 11.75%, while the top eight technology companies showed an average net margin of 21.33%.

If there was a windfall profit, it certainly was not earned in the U.S. oil industry since 2008.

Also, we predict when 2021-22 income is realized and profit is calculated for the U.S. petroleum industry, it will show short-term price spikes based on changing supply and demand conditions. This does not equate to profiteering – period.

 

CONCLUSION

Finally, we analyzed gasoline prices adjusted for inflation from 2008 through 2021 (in 2021 inflation adjusted dollars). We found gasoline averaged $3.11 a gallon, with less than a $0.20 fluctuation over the period  based on Bureau of Labor Statistics (BLS) data. This indicates a stable and dependable market for consumers regardless of short-term fluctuations due to world crises or regulation.

Enacting a windfall profits tax at any time is wrong. We believe the market process, driven by the forces of supply and demand, works.

The irrefutable financial data on and the dynamic economic structure of the U.S. petroleum industry compels us to conclude a windfall profits tax on petroleum is indefensible.

 

About the Authors: 

Dr. Timothy G. Nash is director of the McNair Center at Northwood University.

James M. Hop is chair of the Entrepreneurship program at Northwood University.

Lisa McClain is a member of the U.S. Congress from the 10th District of Michigan.

Academics estimate average cost per American attending a Super Bowl party will be $79

Will you pay 5.9% more to attend a Super Bowl Party this weekend?

We carefully analyzed data from the U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis, U.S. Federal Reserve Bank, Statista and the National Retail Federation on issues related to the upcoming 56th Super Bowl and then drew the following conclusions on money spent on and around the Super Bowl and related festivities.

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How close is Michigan to having a Pittsburgh bridge?

It’s hard not to discuss the state of roads and bridges in the United States after we heard of Friday’s collapse of a bridge in Pittsburgh, Pennsylvania.

It is sad and ironic that on the same day the bridge collapsed, President Joe Biden traveled to Pittsburgh to tout the implementation of his $1.2 trillion infrastructure bill, which only allocates $110 billion (9.17%) for what would be considered traditional infrastructure, U.S. roads, bridges and related projects.

The Wall Street Journal recently estimated 43,000 bridges in the United States need of repair at an estimated cost well above the $40 billion currently allocated for bridge repair in President Biden’s $1.2 trillion infrastructure bill. The funding for roads and bridges is spread out over 10 years and is woefully inadequate. Hundreds of billions of dollars in the president’s transportation bill that are being spent on less-needed green energy initiatives and other programs could easily be reassigned to shore up this nation’s roads and bridges in a more timely fashion.

The three of us happen to live in Michigan, and on a daily and weekly basis, we drive across numerous urban and rural bridges, and as a result of what happened in Pittsburgh, we are greatly concerned about our safety and that of all Michiganders.

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‘Tell America what should be done to fight inflation’

The following is a recent discussion between U.S. Congresswoman Lisa C. McClain, Northwood University Economics department chair Dr. Dale C. Matcheck and Dr. Timothy G. Nash, director of the McNair Center for the Advancement of Free Enterprise and Entrepreneurship at Northwood University. The conversation centered around recent comments by U.S. Federal Reserve Bank (Fed) chairman, Jerome Powell and how the Federal Reserve intends to bring our nearly 40-year high rate of inflation down to levels prior to 2021.

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