White House press secretary Karine Jean-Pierre recently reiterated a point the Biden White House has been making for the past year: that inflation remains high not because of the Biden $6 trillion spending spree but because “high profit margins” captured during the COVID-19 pandemic drive up consumer prices.
We then were told that the White House’s grand strategy to bring down sticker prices further at the store is to lower business profit margins for everything from drugs and computers to food and gasoline.
How low should those evil profits go? To zero?
Wait, since when are profits evil? The ability of a company to turn a profit is the very engine of growth — also of innovation, job creation and entrepreneurship.
The only people who could possibly believe profits are nefarious are those who have never actually earned a profit. It isn’t so easy.
As the late, great economist Walter Williams of George Mason University used to explain in his Econ 100 course: Farmers in North Dakota don’t raise cattle and work 14 hours a day growing acres of wheat because they want to provide a juicy steak meal for a Wall Street fat cat. Those farmers and ranchers don’t give a hoot for New Yorkers. They raise cattle and send steaks to feed the people in Manhattan because they want to earn a profit. If there were no profit in it, the people in New York would go hungry or would be standing in soup lines.
Almost every lifesaving drug known to man was developed in the lab of a private pharmaceutical company or a biotech firm. Governments rarely invent new lifesaving drugs used by millions of people. And no, former Vice President Al Gore didn’t invent the internet. Profit seekers did, and then they built a $10 trillion industry that has revolutionized the way we live and work and play.
Steve Jobs and his colleagues virtually invented the personal computer and Apple’s relentless pursuit of profit. He perfected the cellphone and then drove down its cost so that today even many of the poorest people in Africa can afford it. Fifty years ago, even a king’s ransom couldn’t buy what a poor Indonesian farmer has in his pocket. Why? Because Apple found a way to make a profit selling it to him. Now Apple is a $3 trillion company — by selling people all over the world something they desperately want.
That’s not to say altruism and charity don’t count. It surely does — and it’s a divine inspiration. But we have hundreds of years of evidence that this isn’t as powerful a motivation as the mundane and relentless pursuit of making a profit. Even Bono of U2, a great philanthropist, has discovered with the tens of millions of dollars he has donated to worthy causes that charity is never going to solve the poverty problem. Only the free enterprise system and profits will.
The profit motive is arguably the noblest pursuit in human history. Profits have saved more lives, created higher living standards, sparked more inventions, pulled more people out of poverty and created more jobs than all the government programs and all the “nonprofit” activities combined.
A war against profits is a war against prosperity. As economist Larry Kudlow of Fox Business puts it: High-profit margins are the mother’s milk of the stock market, so lower profits (or even zero profits, which seems to be the Biden goal) would lead to a flurry of business bankruptcies, mass layoffs and a stock market collapse. Without profits, there are no businesses, and without employers, there are no jobs, and without jobs, there is no consumer spending.
And you can kiss your 401(k) plan goodbye in a land of shrinking profits.
So why are the Biden people against profits? Why don’t they get the way the world really works? Perhaps it is because, as we revealed in our Committee to Unleash Prosperity study last year, most of the Biden administration appointees have never worked for a private business. They don’t understand one of the most basic economic truisms: What drives down an economy aren’t businesses that make a profit but businesses that make a loss.
If the goal of the Biden administration is to drive down profits, the endgame will be to make everyone poorer and poorer over time. We will have reached their goal of equity and equality.
Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of the Committee to Unleash Prosperity. His latest book is “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”
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