Pot calling kettle black?
Obscene profits? McCains would know
Oil grosses more, but alcohol’s percentage is greater. Both are due to politics, to the failure to recover oil rent and to the interference against small business. We trim this 2008 editorial from Newark NJ’s Star-Ledger of June 29, a Sunday; the writer is on the staff.
by Paul MulshineJohn McCain recently decided to branch out into energy policy. He lashed out at what he called the "obscene profits" of the oil industry and then went on to state that the oil men should start "sharing their profits in a variety of ways" adding that "there is very strong and justifiable emotion" about their profits.
Not on the right, there isn't. If you look at the rate of return for these companies in any given quarter, it's usually a 5 to 10 percent on sales. Now’s no different.
Let's compare those profits to profits in the beer industry. Anheuser-Busch, the nation's biggest brewer, can rack up profits in excess of 20 percent in a good year. Recall that the candidate's wife owns one of the biggest Budweiser distributorships in America.
Where does a guy whose family fortune derives from the beer industry get the nerve to criticize the oil industry?
When questions about Cindy McCain's background in beer arise, they usually come from the left. Liberals love to note that her late father, Jim Hensley, who founded the company, was convicted of bootlegging back in the 1940s.
Good for him, say free-market guys. It's not the bootlegging that bothers them. It's the rent-seeking.
"Rent-seeking" is a term that is commonly used by economists. The "rent" in question is not money paid to a landlord, but money received by rigging the market, generally through buying the favors of public officials. And here's where it gets interesting when you compare the beer industry to the oil industry.
Apologists claim all sorts of anti-competitive practices are tolerated in the alcoholic beverage industry but not in the oil industry. The result is that a beer distributor like Cindy McCain has just got a shovel, shoveling money into the bank account.
Small brewers are often at the mercy of the distribution giants. The giants get to rig the market against the little guys. The big wholesalers are the ones who have developed big war chests. They're usually in the top 10 when it comes to PACs. And that PAC money is used to win legislative approval for a number of sweetheart deals.
That's because of the 21st Amendment, the one that ended Prohibition. As part of the deal to lift the ban on booze, Congress had to concede to state legislators the power to regulate the sale of alcoholic beverages in any way they desired. And what they desired, once the liquor lobby got to them, was to permit all sorts of exclusive deals, franchises, and sweetheart arrangements for beer, wine, and booze distributors.
This sort of thing rarely makes the news. An exception was in 2005 when the US Supreme Court took the side of small wine producers in permitting them to ship wine across state lines directly to the consumer, thus bypassing the stranglehold of the wholesalers. Though this represented just a tiny cut in their profits, the wholesalers fought it as viciously as they fight any attempt to create a free market in alcoholic beverages.
But the market on the whole remains rigged. The result is that big distributors like the Hensley Co in Phoenix have a guarantee of what McCain might call "obscene profits" if they occurred in the oil industry. McCain doesn't have to defend those profits, though. He doesn't make them public. He releases his own financial data but keeps Cindy's secret.
Mrs. McCain, a beer heiress with an estimated $100 million, along with her husband owns at least seven properties, including condos in California and Arizona. I wish my wife owned a beer distributorship that made us rich enough to own a condo overlooking the Pacific as well as six other houses. But Cindy McCain failed to pay the taxes on a condo in La Jolla CA.
How do Hensley's profits compare to the profits of Hess, Exxon-Mobil, and the others? I'd love to share the answer. In addition to Bud, Hensley distributes a number of microbrews. So if you're in a sharing mood, senator, ship me a case of Kona lager.
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