George Rebane
[This is the transcript of my regular KVMR commentary broadcast on 30 March 2012.]
The modern liberal finds little fault with the continuing stream of cost increasing mandates that flow out of the country’s bureaucratic regulation mills. Every such mandate is welcomed by the left as unquestionably promoting health, safety, the environment, equality, justice, or social fairness. With such government diktats, what’s there not to like?
Moreover, many ostensibly capitalistic corporations willingly accept such cost increases while other companies face financial disaster. Why such different responses? Before considering that, we recall that the good part of capitalism is that it always games the system of which it is a part, and that is also the bad part of capitalism. Another hard to understand truth is that corporations don’t pay taxes, their customers pay them because a corporation’s tax expense is directly factored into the price of what it sells.
To keep it simple, profit dollars are what’s left over or owed when total costs are subtracted from total revenues. And profit rate is the percentage obtained from dividing profit dollars by revenue dollars.
For businesses, government mandates come in flavors that are risky or essentially risk-free. For industries dealing in necessities – products or services that we must buy because they are basic to living – industry wide government mandates cause everyone’s costs to go up. In response, every such company reacts by appropriately increasing prices to maintain its profit rate, while happily enjoying the resulting increase in profit dollars it then collects and disburses. However, that is not the case for suppliers of discretionary goods and services. If in response to the risk laden mandate they increase prices, they will definitely lose customers and receive lower revenues that reduce both the rate and the amount of profits.
That is why companies dealing in energy, food, healthcare, etc are essentially immune to the next set of cost increasing regulations that come down from above. They just factor the cost of compliance into their overall costs, and all of us pay the price while only some of us understand the source of the added pain in our wallets.
Big corporations in cahoots with government may even put up a little public opposition to a new mandate to soothe their customer base, but they really don’t care. And the smaller companies delivering discretionary stuff are shoved closer to or over the brink of bankruptcy. Meanwhile, every added regulation increases the barrier to entry for new businesses seeking to compete with better or cheaper products. In this corporate/government game, all of the established players win while the public loses.
Most of us don’t understand that our reward for all this is an economy with higher prices, fewer jobs, fewer market choices, higher taxes and fees, and less government services. I hope that at least by now everyone in California has noticed that our taxes are now among the highest in the nation, and that government services at all levels have reached new lows with the bottom still not in sight.
Let me be absolutely clear here – such riskless mandates uniformly boost the profit dollars collected by established companies supplying the necessities of life like groceries and gasoline. The mandated regulations only hurt the consumer who remains convinced that government is somehow making life better in the face of evidence that points the other way. And all of this is kept going by people who are overwhelmingly ignorant of how businesses make business decisions, while voters continue to elect politicians who promote and prey on this ignorance.
Unfortunately it is mainly our friends on the left who keep buying the claptrap of the politician who promises to make the corporations ‘pay their fair share’. Especially in today’s economy, a moment’s thought should convince people that most of government induced costs on businesses is just a vote-buying ruse to convince the mentally inert that forcing businesses to pay such ‘fair share’ will create more jobs, lower consumer costs, and generally improve the quality of life for everyone, when the realworld effects are just the opposite.
My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where this transcript appears. These opinions are not necessarily shared by KVMR. Thank you for listening.
To keep it simple, profit dollars are what’s left over or owed when total costs are subtracted from total revenues. And profit rate is the percentage obtained from dividing profit dollars by revenue dollars.
For businesses, government mandates come in flavors that are risky or essentially risk-free. For industries dealing in necessities – products or services that we must buy because they are basic to living – industry wide government mandates cause everyone’s costs to go up. In response, every such company reacts by appropriately increasing prices to maintain its profit rate, while happily enjoying the resulting increase in profit dollars it then collects and disburses. However, that is not the case for suppliers of discretionary goods and services. If in response to the risk laden mandate they increase prices, they will definitely lose customers and receive lower revenues that reduce both the rate and the amount of profits.
That is why companies dealing in energy, food, healthcare, etc are essentially immune to the next set of cost increasing regulations that come down from above. They just factor the cost of compliance into their overall costs, and all of us pay the price while only some of us understand the source of the added pain in our wallets.
Big corporations in cahoots with government may even put up a little public opposition to a new mandate to soothe their customer base, but they really don’t care. And the smaller companies delivering discretionary stuff are shoved closer to or over the brink of bankruptcy. Meanwhile, every added regulation increases the barrier to entry for new businesses seeking to compete with better or cheaper products. In this corporate/government game, all of the established players win while the public loses.
Most of us don’t understand that our reward for all this is an economy with higher prices, fewer jobs, fewer market choices, higher taxes and fees, and less government services. I hope that at least by now everyone in California has noticed that our taxes are now among the highest in the nation, and that government services at all levels have reached new lows with the bottom still not in sight.
Let me be absolutely clear here – such riskless mandates uniformly boost the profit dollars collected by established companies supplying the necessities of life like groceries and gasoline. The mandated regulations only hurt the consumer who remains convinced that government is somehow making life better in the face of evidence that points the other way. And all of this is kept going by people who are overwhelmingly ignorant of how businesses make business decisions, while voters continue to elect politicians who promote and prey on this ignorance.
Unfortunately it is mainly our friends on the left who keep buying the claptrap of the politician who promises to make the corporations ‘pay their fair share’. Especially in today’s economy, a moment’s thought should convince people that most of government induced costs on businesses is just a vote-buying ruse to convince the mentally inert that forcing businesses to pay such ‘fair share’ will create more jobs, lower consumer costs, and generally improve the quality of life for everyone, when the realworld effects are just the opposite.
My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where this transcript appears. These opinions are not necessarily shared by KVMR. Thank you for listening.
George,
Here is an example of a large company willing to go along with the government and those buying fuel from Shell are paying the price at the pump. When we bought diesel on our most recent RV trip, Shell was the highest of all the vendors. We are paying for AB-32.
Royal Dutch Shell CEO, Peter Voser affirmed his company’s commitment to AB 32, California’s climate change legislation, and also explained why a carbon trading system is crucial to the development of alternative energy sources.
“We are clearly in favor of cap and trade systems,” he said to an audience of Silicon Valley business people and climate experts Wednesday in Burlingame. “We’d like to have it globally, to level the playing field.”
This statement from Shell, the global oil and gas company headquartered in the Netherlands and one of the world’s largest companies, is notable when you consider the strong opposition to AB 32 from the oil industry at large. In 2010, Proposition 23 attempted to derail the imposition of AB 32 provisions and was largely bankrolled by Tesoro and Valero, two Texas oil companies.
High producers of carbon dioxide, especially oil refineries, will be hard hit when AB 32 goes into force. So what’s the rationale of Shell’s apparent “green” attitude?
Voser explained that the company is not waiting for cap and trade to be commonplace. Several years ago, he said Shell started taking into account a charge for CO2 of $40 per ton to reflect the future price of CO2 in its internal accounting. What he didn’t say is that in Europe, where Shell is headquartered, an emissions trading scheme is already in existence and the implementation of AB 32 would arguably make Shell more globally competitive.
The above was from the KQED Climate Watch Blog.
Posted by: Russ Steele | 30 March 2012 at 09:08 PM
Good example Russ, thanks.
Posted by: George Rebane | 30 March 2012 at 09:18 PM
Michael Anderson
George,
I finished putting the kids to bed a while ago, and had an interesting conversation with my ten-year-old. He was in Auburn this afternoon participating in a regional scholastic competition called "Nature Bowl." It's sort of like Jeopardy, and the kids have to answer questions as well as make presentations. You can learn more about it here: http://www.dfg.ca.gov/education/naturebowl/
Anyway, my son's presentation was on sewage treatment, which involved the two of us taking a tour of the Lake Wildwood sewage treatment plant a couple of weeks ago. He learned all about chemistry in the real world, such as the difference between nitrate, nitrite and nitrogen. Pretty cool stuff.
His presentation was at the top of the heap (proud poppa!), and as I was getting ready to turn out the light he began to tell me about some of the other presentations. One kid in particular had a rough time of it, his subject was ethanol. My son said that the judges asked some additional questions about whether turning corn into gas was such a good idea, and the student had a hard time responding.
So I explained to my son that perfectly reasonable people once thought that turning corn into gas might be a way to stop having to buy oil from countries that don't like America. But once the technology matured, and it became clear that the amount of energy input wasn't worth the energy output, corn ethanol became a technology that needed to go away.
And that's when we had our teaching moment. He said, "so corn ethanol is gone now, right?" I hesitated, and then thought what the heck and launched into a complicated explanation about gov't subsidy, and how once you fund something with tax-payer dollars it's really hard to get rid of it. More questions from him led to explanations about the congressional-district/lobbyist loop, how industries get created, then destroyed, by gov't fiat, and that employees who aren't paying attention get caught in the crossfire.
He gave all of this some serious thought, and then he said: "So it isn't good to have a fake job, right?"
Out of the mouth of babes...
Michael A.
Posted by: Michael Anderson | 30 March 2012 at 11:22 PM
Michael,
Excellent account of some great teaching moments. Well done!
Now if a 10 year old can understand the issue, why is it that our political leaders in Sacramento can not grasp the truth? Money?
Posted by: Russ Steele | 31 March 2012 at 07:36 AM
MichaelA 1122pm - A "fake job" indeed; more to be said about that. Your son is fortunate to have you as his dad. Thanks for sharing.
Posted by: George Rebane | 31 March 2012 at 08:00 AM
Here is another example of large corporations toeing the government line, and the consumers are going to pay the bill.
“General Motors, the world’s largest carmaker, has confirmed that it is pulling funding from the Heartland Institute, an ultra-conservative thinktank known for its scepticism about climate change.
“The decision by the GM Foundation to halt its support for Heartland after 20 years underlines the new image the carmaker is seeking to project as part of its social responsibility programme.
In the past GM has itself been associated with efforts to discredit climate change science, but in recent years it has been investing heavily in green technologies and cars including the electric/petrol hybrid, the Chevy Volt.
“In a statement, GM said that it now runs its business ‘as if climate change is real and believe we have a role to play in developing new cars, trucks and technologies that can make a difference.’
The problem is that climate change is not real, there has not been any significant global warming for the last 17 years. Even though we had a warm winter in the lower 48, it may surprise you that 2011/12 was the 11th coldest globally just behind 2008 among the 34 winters in the satellite era.
1 1985 -0.299
2 1989 -0.217
3 1984 -0.207
4 1993 -0.194
5 1979 -0.173
6 1986 -0.141
7 1992 -0.107
8 1990 -0.072
9 1982 -0.052
10 2008 -0.033
11 2012 -0.022
12 1997 -0.008
Posted by: Russ Steele | 31 March 2012 at 08:26 AM
“Let me be absolutely clear here – such riskless mandates uniformly boost the profit dollars collected by established companies supplying the necessities of life like groceries and gasoline. The mandated regulations only hurt the consumer who remains convinced that government is somehow making life better in the face of evidence that points the other way. And all of this is kept going by people who are overwhelmingly ignorant of how businesses make business decisions, while voters continue to elect politicians who promote and prey on this ignorance.”
Yes and the new patent laws do the same for large companies pilfering the thoughts of others. And they name it the "America Invents Act"; when it should be called the Rip off the American Inventor Act. Yet, it is celebrated / sympathized with by the left, just as gulag prisoners mourned the death of Stalin.
Just as blowing up Condit hydroelectric dam was cheered by the ill informed.
Seen Here:
http://photoblog.msnbc.msn.com/_news/2011/10/26/8500522-hole-blasted-in-condit-dam-to-restore-endangered-fish-habitat
I want to cry along with the Indian (Native American) at the stupidity of the now increased pollution from the Wind$$$ / Solar$$$ and backup gas fired turbine power replacing the non polluting dam.
Well, at least the owner, Warren Buffett, will make more money allowing him to finally pay his secretary fairly!
Posted by: David King | 31 March 2012 at 11:00 AM
It was a grand week for Mr. Obama. First, his administration got a ban on off shore drilling for the next five years. The EPA effectively shut down all the coal plants in the USA via its new regulations. Unfortunately his new plan to tax the oil companies did not garner one Democrat vote in the Democrat controlled Senate. Well, two out of three ain't bad. Misunderstanding markets? Nay, it kill baby kill.
Posted by: billy T | 31 March 2012 at 05:14 PM
Why is "the liberal mind" and "the left" a monolithic block of completely amalgamated granite, with no fracture lines visible, and yet the Right comes in so many different flavors here? Perhaps the Right can only be discerning when they are up close to something, and their view of the Left is much like the classic New Yorker cover of Manhattan's view of the rest of the USA? The favorite duck and cover, shuck and jive, drill of the Right here is to claim that whoever or whatever is being attacked by the left, is "not really a conservative, or a conservative position."
Posted by: Douglas Keachie | 01 April 2012 at 09:33 AM
"The problem is that climate change is not real" ~ Russ Steele ~
That never stopped any advertising depts before, why should it now? Besides, over the long term, cleaner air is a desirable outcome, regardless of stated motives. You are objecting to a business in business setting out to make money? Shame on you, it's as American ss apple pie.
Posted by: Douglas Keachie | 01 April 2012 at 09:40 AM
These folks, are of course "not conservatives" by the standards here, even though they may spend millions advertising that they are 'conservatives." http://www.dailymail.co.uk/news/article-2119493/Private-jets-13-mansions-100-000-mobile-home-just-dogs-Televangelists-defrauded-tens-million-dollars-Christian-network.html
Posted by: Douglas Keachie | 01 April 2012 at 10:01 AM
180,000 hits for "Tea Party" and "Trinity Broadcasting Network" of which this is just one: http://www.alternet.org/news/150690/meet_the_religious_right_charlatan_who_teaches_tea_party_america_the_totally_pretend_history_they_want_to_hear/?page=4
Posted by: Douglas Keachie | 01 April 2012 at 10:11 AM
I'm beginning to suspect that Douglas and George are working together. George posts on liberal thinking and Douglas provides examples.
Posted by: Account Deleted | 02 April 2012 at 09:04 AM
ScottO 904am - Well hell, I guess the jig's up. Nobody was supposed to pick that up, but I suppose it was too good to last. Nevertheless, if DougK is willing to continue with his examples, I'm more than willing to go on posting updates from the research into this interesting and important area.
Posted by: George Rebane | 02 April 2012 at 10:05 AM