Only a Liberal…

The modern demagoguery of BIG pharmaceutical or BIG oil or BIG insurance relies heavily on the disturbingly common misconception that really high profits are an indicator of criminal activity (with rare exception such as the profits of companies run by Al Gore). Otherwise intelligent people will by the pernicious nonsense put forth by politicians about their opponent du jour. No one laments when Exxon has a bad financial quarter, but god forbid they have a record-breaking quarter. Almost on cue, politicians will come out of the woodwork talking about windfall profit taxes and investigations and hearings PURELY based on the amount of profit without a shred of evidence.

If a crime is being committed, it can be found at the transactional level. If you look at the transactions of the company and find they are legitimate, then you have no quarrel. But if BIG oil makes billions of these transactions, thereby multiplying their profit margin by the number of transactions, their final profit will be substantial. I suspect most people who understand the concept of profit margin would be flabbergasted to learn how low it is for some of the richest companies in the world, especially in the oil and medical industries.

I wrote about it last year… while politicians routinely attack BIG oil for its high profits, the same politicians are silent about the highER profit margins of Apple, Google, Microsoft, and Yahoo. For every dollar Exxon keeps after paying their bills, Google keeps $3. Exxon is attacked because they sell more units than Google, but in reality, Google is keeping more of the customer’s money. Politicians don’t concern themselves with this kind of stuff, because Google is very popular with the electorate, and oil companies are not. A large enough proportion of the population has been convinced oil companies are hurting the planet, so demonizing their large profits is easy.

MSNBC - “The cost of crude oil accounted for about 47 percent of the cost of a gallon of regular gas in 2004, the latest figures available from the Dept of Energy. Federal, state, and local taxes accounted for about 23 cents of every dollar spent at the pump. Uncle Sam gets about 18.4 cents per gallon and state and local taxes average about 21 cents — though state taxes vary widely.”

At the pump, only about 4% of the price represents oil company profits. So if you wiped out all oil company profits, the price of a $3 gallon of gas would become $2.88. If you confiscated ALL profits, you would save 12 cents a gallon. When gas was $4 per gallon, Exxon got 16 cents from that gallon, while 60 cents went to taxes. You’re mad at oil companies? You should be mad at the government.

Health insurance profits

This slide shocked me when I saw it… for every dollar spent on health insurance, the insurance companies keep THREE CENTS. It is a terrific illustration of how difficult it is to run a medical insurance company.

So all this nonsense about insurance company profits and executive compensations driving up the cost of your health care is all total and utter nonsense. Is it annoying when some Yahoo gets millions of dollars in bonus even if the company does terribly? Hell yes it is, but taking it back will only fuel your need for schaudenfreude, not increase the weight of your wallet. You take all the insurance company profits back, and your health care costs go down a fraction. Use your head.