Obama’s Profit Problem
It’s really the Left’s free-enterprise problem.


Lee Habeeb

Most of us get excited about all of that choice and competition. The not-so-well-educated masses intuitively know that all of those competitors, in their ruthless scramble for customers, create more efficiency and lower prices. But President Obama’s mind wanders farther:

If we could only squeeze out all of the profits from the big and not-so-big potato-chip companies, and all of those fat-cat executive salaries, and all of that marketing money each of the companies spends to attract customers, if only we could just get rid of all of that waste and redundancy and inefficiency, and have just one big government-run potato-chip company, we’d all be better off!

If his thinking is correct in health care, then why not pass the Affordable Potato Chip Act?

But does anyone believe the government would be better at potato chips than the private sector? Or more efficient? Of course not, because we all know what that potato-chip aisle would look like if the government ran it. There would be one brand — The National Potato Chip Company — and it would offer one flavor. The bag would be dull and boring like the chips themselves, and they’d more often than not be stale. And they’d be $10 a pop.

Does President Obama not understand why businesses form in the first place? Does he not understand that without profits, there is no business, and without profits, there are no jobs, and without profits, there is very little to tax, and without profits, there is very little left in anyone’s 401(k)?

Does he know how hard it is to generate profits, and how ephemeral they are? That the moment a company begins to make a profit, competitors soon come crawling out of every crack and crevice trying to get a share of those profits? And that this pursuit of profit — and all of the messiness it engenders — makes for the remarkable choices American consumers have at their disposal?

It is the hope for profit, and the threat of losses, that actually forces owners in the free-market economy to produce at the lowest possible cost. Too many on the left simply can’t wrap their heads around a simple idea: Walmart makes big profits because it delivers such low prices.

Back in January, House liberals were not happy with gas prices and set about to lower them. Did they roll out a plan to dramatically increase supply? Nope; that sounds like something a capitalist might do. They instead rolled out the “Gas Price Spike Act” to go after profits they deemed were not reasonable. And who should define “reasonable” profits?” A newly created Reasonable Profits Board.

But drill down even an inch deep on this notion of “reasonable profits” and the whole idea collapses. Exxon Mobil made $30 billion in 2010, a mountain of money. But Exxon’s profit margin was 8.6 percent. That’s about 36 cents per gallon — which is less than the nearly 50 cents the federal government took in on every gallon.

But back to that “reasonable profits” board. It turns out that Coca-Cola had an almost 34 percent rate of return last year. Microsoft’s rate of return was 30 percent, Google’s 29 percent, and Apple’s 21.5 percent. Most Americans see profit margins like that, and think, “I’d love to own that company!” And they call up their broker and buy a few shares. But liberals see big profits, and think, “Let’s form a commission and figure out a way to tax those profits. Or squeeze them out through some kind of regulatory regime so that money can be put to more productive use.”

The fact is, statist politicians and academics may not like profits, or the profit motive that is the driving force of our free-enterprise system, but they are dependent on those profits to fund their fancy ideas. The balancing act for them, always, involves choices on how much they can skim — in the form of rent seeking, taxes, and regulations — from the free-enterprise system without causing it to crumble.

This is the real-life paradox new-age socialists have to live with every day. The very people who decry profits and free markets can least afford to live without either. And the more they win, the more America’s economy loses. That’s what the 2012 election, and the next few elections, are all about.

— Lee Habeeb is the vice president of content at Salem Radio Network, which syndicates Bill Bennett, Mike Gallagher, Dennis Prager, Michael Medved, and Hugh Hewitt. Mike Leven is president and chief operating officer of the Las Vegas Sands Corporation and a member of the Job Creators Alliance.