Thursday, June 12, 2008

Windfall Profits

With all the hand wringing in the congress over the possibility that someone other than they would have some control over money one has to seek answers to some critical questions. Why is the profit structure of any American corporation the business of the United States Congress? Where in the statutes or the constitution is any mention of regulating the amount of profit any business might seek? Personally, I am outraged that these paid servants of the people would be wasting time considering this. If a business is operating within the law and pays the stated tax rate, there is no reason for the congressional concern.

If the electorate or for that matter their legislators were educated anywhere other than in government schools they would know certain truths. Corporations are not owned by a tiny cabal of greedy men. They are in fact owned by you. If you are retired under just about any pension plan, participate in a 40lk, belong to a union, or have mutual funds and you don’t have an interest in oil company’s profits, your managers are asleep. Oil industry stocks have represented one of the very best long term opportunities for the last few years. The bulk of the share holders (read that, the bosses) are folks of average income. Average shareholder annual income is reported to be $69,000 per household. If that “average Joe” has a kid or an aged dependent, that amount won’t really spread too far.

In any business, the goal of management and the shareholders is gaining a return on investment. There is a term which defines this return; it is net profit. It is expressed as a percentage of the gross revenue. The net is obtained by figuring the total revenues, deducting all of the costs of purchase or manufacture and the myriad other legitimate expenses and then stated as a percentage. A 10% return in most businesses is considered outstanding. In low margin items, like groceries, which have the advantage of high turnover and higher gross sales a margin of 4% would be great. From these net profit margins comes the wherewithal for dividends to shareholders, research and development, capitol improvement and prior debt service. Obviously if your revenues are measured in billions, so are your profits.

The greatest threat to a profit margin is in the cost of operation. If the raw product rises in price then the resultant sale price must immediately reflect that increase. Whether it’s groceries or oil, the necessity is the same. Given the law of supply and demand, decreased material availability requires an increased acquisition cost. If the market is flooded with product then the cost will diminish. It requires expert management to constantly adjust to these changes to maintain net profit levels. What happens to managers who fail to respond to market variance, miss opportunities and don’t get a grip on market changes? They get fired!

The demagoguery for those in congress who are constant critics of the American capitalist system is scapegoating, pure and simple. By misrepresenting the system they are attempting to find a palliative cure for a complex problem. The three factors at work here are the ignorance of the average American of the workings of corporations; the legislator’s unwillingness to endorse those things which would actually provide a solution to our energy problems; plus, that age old failing, covetousness

Our lawmakers have constantly thrown up roadblocks to further exploration for energy on the North American continent. They fought off attempts to construct new oil refineries yet despite their best efforts we finally have a new one approved to be constructed in North Dakota. It will be the first new facility built in over thirty years. They are willing to subsidize any and everything which doesn’t actually have a meaningful response to the energy crisis we have. We recently covered the costs of subsidizing wind and solar energy. At the same time they have effectively declared nuclear energy off limits in regard to new construction.

We are constantly reminded that drilling in ANWAR would not result in pumping actual crude until at least ten years. Thanks to a complicit media, what we don’t hear about is the affect that positive action would have on the oil futures market. That, after all, is what determines the spot price. If the coast lines were included plus further development of oil shale deposits which is now available, we would be in a commanding position. The oil is there in abundance and the technology to recover it is available. What is missing is a congress with the will to solve the problem. They will go to any lengths to convince you, the citizen, that the government is the only available solution and that the corporations who have done a masterful job of bring product to the people are villains. One of the loudest protestors of ANWAR drilling is our very own Claire McCaskill, right here in the Show Me state.

The device used to cover up this entire charade is that which we were warned of in Exodus 20:17. “Thou shalt not covet thy neighbor’s house; thou shalt not covet thy neighbor’s wife, nor his manservant, nor his maid servant, nor his ox, nor his ass, nor anything that is thy neighbor’s.” Does “anything” include the profits of the oil companies? By blaming our current problems on others who produce what we require by the use of class envy is not only stupid but also contravenes the laws of God. The entire business of inciting anger and envy toward those who for whatever reason have more than we have is in reality just an attempt to divert us from their own incompetence.

We have learned just this week that the Senate dining room has decided to privatize because it has run at a loss for several years. By allowing an independent entrepreneur to run their food service, they understand they can eliminate the excessive costs of government operation. Thus, they are effectively saying: “we can’t run a dining room at a profit but we are capable of running Exxon/Mobil.”

This mindset is not the exclusive property of either party even though it does “seem” to be held more often by one. Apparently they confuse the power of the office with the actual capability to manage. There is a growing consensus that the two are mutually exclusive. It is extremely important that each elector have knowledge of his representative’s actions and attitudes. We have an opportunity every two to six years to replace those who are more interested in their own job security than the interests of the American people. My prayer is that you will examine yours more critically.

In His abiding love,

Cecil Moon

1 comment:

mattlowry said...

i now vote for no incumbent for the very reasons you outline
the argument that it takes several years or terms to get anything done is only valid because of the assumption that they have a lifetime to get anything done.
so long as this is the assumption, nothing will get done.

term limits will never happen, so the only way to erase the assumption is for the electorate to term limit them in the voting booth.
this has nothing to do with party or ideology...only an objective of effective governance and representation.