November 8, 2011
Recognition of media distortions started for me back in the 1970s when strife over oil supply and demand came roaring to the surface. Seemingly (almost) overnight, gas prices at the pump doubled. The media cried out “Oil Company (fill in the blank) profits soar 100%!” and in some cases, 200%!!
The public was outraged at both the price of gasoline and the supply shortages. Teddy Kennedy wanted to “nationalize” the oil companies. The media missed the context. To the “profits soar 100%” shout, it happens to be true: The Return of Equity of the typical oil company did double – from 2% to 4% – and that is, in fact, a 100% improvement. Thanks to media distortions, if you stuck a microphone in front of most people on the street and asked what the profit of oil companies were at the time, I suspect you’d heard 100% or even 200% angrily said with outrage, concealing the truth that the ROE was among the lowest of any industry at that time. The other part the media missed is that the Arab-American Oil Company (ARAMCO) price-fixed the price of oil and OPEC decided they should control the market to the market-price, not by bureaucrats influenced by the US government. Also missed was that the tax and the growing pernicious environment policies made it less expensive to import than to develop and produce domestically.
The distortions happened again during the oil price run up that was unleashed by speculators circa 2008. Once again the media cried out: EXXON PROFITS $15 BILLION in the quarter. The $15 BILLION cry was shouted, and even the normally rational Chalie Gibson during an interview with the CEO of Exxon, followed the call like an automaton on a mission never putting the number into context. In fiscal quarter, Exxon’s profits were a tad over 8% of sales. In the quarter before and in the quarter after, Exxon’s profits were between 5% and 6% – not exactly ripping off anyone.
Recently, it was a case of “here we go again!” The new cry was GENERAL ELECTRIC PAID NO TAXES. A more accurate headline would be “General Electric Suffers Huge Losses from financial division, and investments in “green energy” and profits slammed!”
The media and much of the public seems convinced that “taxing the corporations” is salvation, completely missing the fact that taxing corporations is only a sales tax because that cost of doing business (taxes) is passed down to the consumer like any cost of business. The continuing cry of “increase taxes on the wealthy” misses the context of two points: the top 1% of income earners already pay 38% of the taxes, yet they call this “the fair tax” and that if the net wealth of all the 1% were to be confiscated, it would not dent the squandering debt of the current administration.
Collectively, all of these media indignations only fuel the class war to those who do not study the details and profoundly miss the greatest indigation of them all: the media bias by itself.