TOS Blog: Daily Commentary from an Objectivist Perspective

Sunday, January 22, 2012

The Immorality of a “Reasonable Profits Board”

Posted by Trevor Conn at 5:50 pm

Bureaucrats at WorkA recent bill before the U.S. House of Representatives, known as the “Gas Price Spike Act” (HR 3784) aims to create a body known as the “Reasonable Profits Board.” The Board’s mission would be to oversee the profits generated by businesses in the fossil fuel industry, to determine whether those profits are “reasonable” and, if not, to levy a windfall profits tax. Such a Board would plainly violate the rights of the owners and managers of oil and gas companies by overriding their judgment about how to allocate their resources and run their businesses, and by subordinating their judgment to the whims of government bureaucrats.

What would the Board regard as a reasonable profit? The text of HR 3784 tells us: “The term ‘reasonable profit’ means the amount determined by the Reasonable Profits Board to be a reasonable profit.” This is patently circular and arbitrary.

Where does the government propose to allocate the “unreasonable” portion of the businesses’ profits? Supporters of the bill want to use the money to fund government-sponsored “clean energy initiatives,” to reduce fares for publicly funded mass-transit, and, in the words of Rep. Kucinich, to finance “forward-thinking transportation alternatives.” Since two of the six representatives sponsoring the bill are from California, namely Bob Filner and Lynn Woolsey, both of whom advocate more government involvement in transportation, including high-speed rails, one may reasonably conclude that the “forward-thinking transportation alternatives” would include boondoggles such as the project to build a high-speed rail linking San Diego to San Francisco, the projected cost of which is now close to $100 billion. Further, nothing in the bill limits the government from using the businesses’ “unreasonable” profits on pet projects like Solyndra and Evergreen Solar.

As if all that weren’t enough to damn the bill, could anyone possibly believe that the power of a “Reasonable Profits Board,” once created, would remain limited to its initial intentions? Surely its power would soon extend into other industries, such as banking when the next financial crisis hits or the internet when bureaucrats determine that Google and company have “unreasonable” profits too.

In short, HR 3784 would violate the rights of oil and gas companies by forcing them to subsidize their otherwise incapable “competitors” and politicians’ pet projects, and it would set the stage for more of the same in other industries. In a word, it would be immoral.

HR 3784 and the very notion of a Reasonable Profits Board should be cast into the sewer, where it belongs.

Related:

Image: http://commons.wikimedia.org/wiki/File:Bureaucrats_at_work.jpg

Posted in: Business and Economics, Individual Rights and Law

Comments are welcome so long as they are civil.
  • Anonymous

    Absolutely. However, I’ve given a lot of thought to this question and have come to the conclusion that things would be better if the profit taken by any and every body was governed more by rational self-interest than sheer avarice.

    I have no problems with genuine wealth-creators making their fortunes. However, I do have problems with wealth manipulators feeding off their backs.

    Surely there is room for more of the much-vaunted but little seen “trickle-down effect”? If I were super-rich I am certain that I would take pleasure in rewarding deserving employees and raising their standars of living closer to my own.