February 29, 2012

Faith as a Grain of Mustard Seed

Be patient with me here, because I’ll attempt to show that a popular interpretation of an important scripture is incorrect and leads to corrupted thinking.  First, let me make a rather obvious statement: Math and logic are types of languages. For example, the function f(x) = a + xb can be expressed in plain English as an equation that describes a straight line, where x is the slope. Similarly, the statement “If x, then y” also has a corollary in both grammar and logic.

Consider, for example, the following sentence that is a reference to the game of basketball: “If you are tall, you can rebound.” Here, the initial clause establishes that being tall is a necessary condition for what follows, which is the ability to rebound. Now, I’m not saying the sentence is true. I’m only summarizing what the expression is trying to say. Regarding its veracity, however, most people would agree that all else being equal—relative athleticism, strength, experience, and the ability to leap and grasp—the taller of any two men will be the better rebounder in a game of hoop.

Let’s now make a small adjustment to the sentence. Add the word “even” to the beginning of it and the result is this: Even if you are tall, you can rebound. Anyone who thought the previous sentence was intuitively correct will find fault in this one. Why? With this change the condition of being tall is disparaged. The meaning of the sentence is, in effect, that the ability to rebound is a fait accompli. It will occur despite one being tall.

This is an important distinction because it’s at the center of what I consider a misreading of an important declaration Christ makes in Matthew Chapter 17. In a passage that begins with verse 14, Jesus performs a miracle His disciples had attempted, but failed, to accomplish. When asked why previous efforts had been ineffective, Jesus answers that it was because of the “unbelief” of His followers. He goes on to say:

For verily I say unto you, If ye have faith as a grain of mustard seed, ye shall say unto this mountain, Remove hence to yonder place; and it shall remove; and nothing shall be impossible unto you.

Notice that Christ’s words are couched as a conditional statement similar to the one I introduced above. That being said, when people quote the scripture, they tend to disparage faith the size of “a grain of mustard seed” and interpret the statement as though it begins with the term, “Even if.” In doing so, they imply that bigger is better. However one can assume from a literal reading of the scripture that Christ isn’t being critical of a small grain-sized amount of faith, but is presenting a necessary pre-condition for the miraculous in life to occur. It’s possible that He’s describing an ideal!

Perhaps what He’s saying is that faith doesn’t imbue us with power despite its small size, but rather because faith at its most powerful is small and inconspicuous, that it doesn’t walk with a swagger but admits that it doesn’t know. Admitting to a lack of knowledge is the beginning of true learning. On the other hand, when we convince ourselves in an a priori fashion that the Bible is an infallible rendering of reality, then we become apologists to everything it contains, including, for example, its approval of slavery. In this way, apologists don’t discover anything new, because they don’t seek knowledge or wisdom. What they seek is only comfort and confirmation and they’ll obtain both, even if it requires them to ignore facts and discrepancies.

The difference in people who practice true scholarship verses apologetics is remarkable. The difference is especially clear when comparing the accomplishments of the people of my church—the Mormons—verses people who identify as being Jewish. I once heard a Jewish friend of mine say that if you put two Jews in a room, you will have between them five different opinions. That’s because they welcome questions and intellectual inquiry, even if it countermands previously held notions of truth. One of their heroes, the 13th Century thinker Maimonides, coined the phrase “Teach my mouth to say I don’t know.” Maimonides taught that to admit to a lack of knowledge was a noble and courageous act.

To Mormons and other fundamentalist Christian sects, however, doubt and questioning has been elevated to a sin. Disbelief is deemed the fault of individuals, rather than an implication of life’s uncertainty. When scriptures lead to moral ambiguity, it becomes the duty of Christian apologists to ignore the discrepancies. That’s the message of Mormon leaders who have excommunicated church intellectuals for speaking truthfully—but too critically—about the organization’s past. One of its leaders, Boyd K. Packer, has demonstrated his mistrust of intellectual inquiry by saying, “Some things that are true are not very useful.”

How these two differing worldviews translate into a regard for scholarship is clear. There are roughly as many people in this world who self-identify as being Jewish as there are Mormons, but while 185 Jews have earned Nobel Prizes, no Mormon has yet to receive the honor.

Coincidence? I don’t think so.

February 26, 2012

Repatriation of Offshore Corporate Profits

Yesterday Mitt Romney made a statement about the repatriation of corporate profits that got me hopping mad.  It angered me, in part, because Romney certainly understands the issue better than most people, but obfuscated the truth in order to score political points with an unknowing public.  He said that as president he would encourage the return of a trillion dollars currently held by foreign subsidiaries of US corporations so the funds could be invested in jobs here, rather than in outside markets.  Presumably he would do this by reducing, or eliminating, the income tax on repatriated dollars.  According to him, these dollars arise when a US corporation establishes an offshore presence—his example was an auto plant in China—from which it generates profits.  These profits, he said, will be invested in foreign markets if not brought back to the US.

This analysis is disingenuous on so many levels.  The first is related to how the profits are derived.  Romney is right when he says they’re generated by the foreign operations of US corporations, but what he failed to say is that in most cases the profits arise through something called transfer pricing associated with interactions with shell companies.  Transfer pricing is an important aspect of the tax and treasury operations of many global businesses.  In fact, it’s so important that people who understand its ins-and-outs are paid as if they were professional athletes.

The way transfer pricing works is by first establishing a shell company in a tax haven—the Cayman Islands, for example.  The shell company is then caused to purchase important licenses or other rights that are central to the corporation’s operation.  High tech companies are especially fond of selling software licenses to their offshore entities.  Since the shell companies have no assets, they must raise cash to purchase the licenses, but this is generally accomplished through intercompany loans.  These transactions—the selling of licenses and the borrowings—are, of course, transactions only on paper. 

Here is what a corporation is then able to do.  Every time a product is sold, it owes its foreign shell company a licensing fee, which appears as an expense on the corporation’s income statement and thereby reduces its taxable income.  In other words, this is essentially a means to avoid the payment of tax.  The shell company, on the other hand, is located in a tax haven, and though it receives revenue, it incurs no tax liability.  It can use a portion of the fees it receives to make interest and principal payments on the intercompany loan.  Over time, however, the shell company records substantial excess cash balances that in a real sense represents the parent company's deferred tax obligation. 

If the corporation wishes to repatriate the balances, it can do so through a dividend payment, but that would be a taxable event.  However, teams of tax accountants and lawyers work to come up with other ingenious ways to move cash around, including intercompany lending from the shell company to the parent.  I mention this for several reasons.  First, the repatriation of corporate cash is an issue that arises primarily because global companies have found creative ways to AVOID their tax obligations.  Second, allowing the repatriation to occur in a tax-advantaged manner, as Romney suggests, only gives corporations more reason to continue with the practice.  Third, corporations can find creative ways to return cash to their home operations, but they won't do so until domestic demand increases and requires expansion.  The tax-free repatriation of cash is another example of how conservatives are only interested in supporting corporate and other well-heeled interests and should be flatly rejected.  

Finally, Romney and other conservatives say repatriated dollars will be invested in such a way that it will result in job creation here.  If that's the case, why haven't corporations used the over $2 trillion contained in domestic corporate bank accounts to grow manufacturing?  US corporations are generating tremendous profits due to efficiencies gained through massive layoffs.  They're sitting on those profits and will continue to do so until Americans begin to consume again.  The key to overcoming our economic malaise is not to allow corporations to withhold contributions into the community pot that benefits us all, but to put more cash in the pockets of the middleclass.  It's time corporations pay their fair share.