Why Profits are Actually a Good Thing

Originally posted March 6, 2009

“There will be a time for them to make profits…now’s not that time. And that’s a message that I intend to send directly to them”
– President Barack Obama, January 29th 2009.

We got the message. That was back when the market was still over 8,000. If you remember, that was also when I said “no President Obama, now is exactly when we need profits”. And why would I say that? Unfortunately, many Americans including our President don’t know.

Profits drive our economy

When a company makes money, that is what allows it to invest in growth, expand employment, and spend. When the companies spend, even on verboten items such as private aircraft, it allows other companies to grow, employ, and spend.

Profits also allow companies to be competitive. With more money they can offer higher salaries to their best workers, and steal workers from other companies who can’t pay as much. Workers are rewarded, and when profits are high enough companies are even free to hire uneducated students and others our government is currently subsidizing through work opportunity credits and welfare. Profits do what Obama promised only government can. Profits create and save jobs.

But most important, when a company makes profits they can distribute those profits to their owners. So who owns corporate America? Chances are, you do. Many are shocked, especially our socialist friends, to learn that they are the very shareholder parasites they despise. But if you have a 401k, IRA, HSA, pension plan, mutual fund, or even some types of bank accounts you are a partial owner of corporate America.

Of the people, for the people and by the people.

It always amazes me when the socialist says we need to vote power away from corporations and give it to the people. Who do you think controls, owns, and works for corporations? The people own corporations and the people work for the corporations. And even if you don’t have specific voting rights, you can vote with your dollar when you choose what stocks to buy and sell. Right now shareholders are voting against bailouts and tax increases. By the way, they are also voting against corporate retreats and CEO bonuses.

Every American employee, contractor or supplier of corporate America has the opportunity to own their employer.

And why would shareholders buy stocks? Because those evil corporate profits go to shareholders through dividends. That’s right, you don’t have to steal corporate profits through government taxes. You can buy Exxon Mobile and get your portion of their ever growing profits. When the government takes windfall profits, they are taking them from yours and my 401k.

“Someone has to go to jail” (from National Treasure)

Yes, we are all upset. Some corporations were mismanaged, some corporations were forced to make bad decisions, and some made those decisions on their own. It’s easy to misdirect our anger. It’s easy to say the Government needs to tax corporations more. But who is the government taxing? Let me re-emphasize.

GM doesn’t pay taxes. Ford doesn’t pay taxes. Exxon doesn’t pay taxes. Shareholders pay taxes. Workers pay taxes. You and I pay taxes.

President Obama is going to continue to advocate punishing those “greedy” businesses, and is going to continue to bleed your retirement fund through his anti-business and anti-growth policies. But if ever we needed profits, now is the time. And our economy won’t come back until our government realizes it.

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