Steel City Cowboy

Tuesday, April 25, 2006

Some Basic Business Sense

Moving house... shorthanded at work... spending all available non-family time on personal IT projects for future billionaire-hood... not a whole lot of time to think about issues pertinent to the mission of this blog, let along to actually write anything... but...

A quick note to the completely idiotic socialists in both the U.S. federal and Pennsylvania state level governments: businesses are simple economic engines that match consumer capital with product. That product might be a physical object; it might be a personal service; it might even be something abstract like a legal right or an option to do something in the future. But in the end, all business endeavors follow this simple template: at the time of capital exchange, the business agrees to deliver (or has already delivered) a certain product. Period.

If the product costs more to make than consumers are willing to pay for it, then the product either will not sell, or (depending on the type of market) will sell at a loss, putting the business out of business. If the product costs less to produce (and by produce, I mean, produce and deliver to the consumer) than consumers are willing to pay for it, then the company makes a profit. Very, very simple.

That is all that business does. To a business, everything is either a revenue (money coming in) or an expense (money going out). The cost of materials is an expense. The cost of employees is an expense. The cost of insurance is an expense.

The cost of taxes is an expense.

To a business, the cost of taxes is nothing more than another expense. It has no special status. (Well, okay, it has a particular moral stench to it, as an expense, but from a General Ledger and numeric standpoint, it doesn't.) This means that any taxes levied on a business go into the necessary calculations of what the minimum price is that the business can charge for their product and still make a profit.

So, if you, say, levy some kind of penalty tax on a certain kind of business, like, say an oil company, you've just added a large chunk to their "expense" category. What then, under the very kindergarten-level rules of business and economics, will happen to the price that the business must charge?

That's right, Arlen Specter, Ed Rendell, Rahm Emanuel, Ted Kennedy and all of you crazy, can't-understand-basic-economics socialists in both government and private life: the price that business charges for that product will go up.

So, if they would enact some kind of "windfall profits" tax on oil companies, the price of gasoline would actually increase. But couldn't the oil companies just be forced to keep their prices the same? Prices artificially low on an in-demand product? Hello gas shortages. Hello board members and CEOs being brought up on charges, because they have a legal obligation to maximize shareholder value. Hello chaos.

Which really brings up the question: Are these people so unbelievably stupid when it comes to economics that even this most basic reality eludes them, or are they just trying to score political points during a time when the polity is annoyed enough to bitch, but not hard-pressed enough to go to the wild extremes of attempting to carpool with people from their neighborhoods? And, if the pols calling for a penalty tax on the oil companies are just trying to score points under the aforementioned conditions, doesn't that mean they're flat out lying? In either case, it makes them unfit for public office.

Maybe there should be a small test for potential candidates. It consists of this:

"Do you think socialism is a good idea, and it's only problem is that it's never been given a proper chance/implemented well enough?"

If you answer "Yes", we smack you in the back of the head and show you the door.