Profit as a Four Letter Word

GOP Bloggers, quoting Sen. Dick Durbin on oil company profits. (Sunday)

From the Meet The Press roundtable on gas prices this morning:

SEN. DURBIN: Am i the only one of your guests here that think that profit taking is a problem? I understand the basic laws of supply and demand. I understand if the input costs have gone up, it's going to reduce your profitability. Here we have the most enormous profits in the history of the United States of America in business. The equivalent of $1,000 per household in America for profits. All of the market factors you've described may suggest that the product is going to be more expensive to sell, but they don't forgive what i think is an outrageous profit taking by this industry. And let me also say to Mr. Cavaney, to suggest that these are average, average profits? They're the largest profits in the history of American business. And to suggest that Mr. Lee Raymond’s retirement gift is an average gift, $400 million for his service to the company? That's $3 for every household in America that they paid ...

Does Durbin think that Americans shouldn't ever earn a profit, rather they should just pay all their earning to taxes?

Here's Thomas Bray, Detroit News, via RCP:

And just who is the profiteer here? While the average profit on the sale of a gallon of gasoline is nine cents, the average state and federal tax on that same gallon of gasoline is about 45 cents (and 52 cents in Michigan). And if we must have an investigation, how about investigating the extent to which government regulations drive up prices and block new production?

As usual, Washington politicians are eager to ride the latest "oil crisis" to fame and glory, proposing all sorts of inane ideas to deal with it. At the core of most of them is the populist notion that profit is a four-letter word - and never mind that the profits of many other industries, including banking and food and beverages, are far heftier than in the oil industry.

I once heard management guru Peter Drucker remark, with his usual drollery, that profit is "whatever government lets a company keep." But most folks have a vastly inflated view of corporate profits. One regular survey of Americans found that the majority believes that the average corporate profit is between 30 percent and 40 percent of sales, while the real figure is closer to four percent.

Washington should cool its carburetors. The pursuit of profit is one of the main engines of Western progress and prosperity. And as people in my neck of the woods are fast learning, it is only out of profit that we can afford to pay for a comfortable retirement. As profits in the steel, airline and auto industries erode or even vanish, so do pensions and health care benefits, not to mention jobs.

If oil really is running out - of which there is little sign, since world reserves keep increasing -- profit provides the surest possible motive for finding or inventing new sources of energy.

Bray should know about dying industry, living in Michigan. And it's no comfort to know Illinois may be next with a Senator like Durbin, (not to mention our governor.)

Either an economic dunce or a demagogue. Take your pick.

UPDATE: Ace of Trump has a good related post here, as it affects Illinois and the governor's race. He links to the Illinois Policy Institute, which I excerpt here:

The real reason for the higher taxes, of course, is that Illinois has far more government graft and therefore pays more for road maintenance than do other states. In fact, Illinois’ hides an 11 cent per gallon tax that has nothing to do with rode maintenance—8 cents for “environmental impact” of your driving your car and 3 cents for cleaning-up abandoned underground storage tanks—all this on top of the 18.4 cents the Federal Government gets. That’s right, combined federal and state taxes add 58.4 cents per gallon! But it gets even better— Illinois is one of only seven states that also imposes its retail sales tax on gasoline purchases—so on top of excise taxes for the feds and state, and environmental taxes, they charge a sales tax.

This sales tax is particularly insidious, because it means that the State of Illinois actually profits from rising oil and gas prices—at the same time these price increases takes money out of your pocket, the State considers it a reason to take more.

(And then there's Cook County's gas tax.) Also, good article in Reason. Hat tip Extreme Wisdom.