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Thursday, January 19, 2012

Only A Democrat Could Try To Create A Board To Determine 'Reasonable Profits'

By Susan Duclos

Everyone that starts a business does so to earn as much in profit as possible. It is capitalism and the American dream to not have a limit of how high you can fly.

Which is why The Hill headline "Dems propose 'Reasonable Profits Board' to regulate oil company profits," simply astounded me.

Democrats want to set up a board that would determine what type of business profits are "reasonable" and not even have any industry representative on the board.

Brings me right back to 2010 when Barack Obama went off script and teleprompter and informed an audience that "at a certain point you’ve made enough money."

I repeat... only a Democrat would propose creating a board to determine what "reasonable profits" are for a company that is in business to make as much money as possible.

Turning this over to Hot Air's Ed Morrissey for some context here:

First, a reality check is in order. While politicians like to hyperventilate over the gross dollar amounts of profit from oil companies, profit is most accurately measured as a percentage — the ratio of profits to the cost of producing those profits. Does the oil industry have a record of exploitive profit margins? Hardly. For 2009, the oil and gas industry ranked 9th on Fortune’s list with a margin of 10.2%, exactly half of that of the network/communications industry, which finished first in 2008 as well. In fact, the margin for oil/gas decreased by three and a half points between 2008 and 2009.

The 2009 list is actually rather instructive. Internet retail has a 19.4% margin, and no one in Congress would dare talk about seizing profits from Amazon (for instance) as “unreasonable,” even though the margin in that industry is almost twice that of oil/gas. That, however, highlights a pattern of politically-motivated outrage for Democrats on profit. Remember in 2009-10 when Nancy Pelosi and her fellow Democrats castigated insurance companies as “villains” who profited while Americans suffered? They finished 22nd on the Fortune list with a barely respectable 4.5% average profit margin.

So let’s put this in real terms. If the oil/gas industry had $500 billion in sales, then a 10.2% margin would be roughly $60 billion in profit — after investors spent $440 billion to generate those sales. Is that unreasonable? That’s a decision that should be left to the investors and the consumers who buy the product. Guess who gets excluded from the “Reasonable Profits Board”?

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