Washington, DC, January 31, 2006 --  

With Exxon Mobil reporting an all-time record profit of $36 billion in 2005,¹ outrage is growing on the left side of America's political spectrum at the greedy behavior of America's big oil companies. In the minds of it's detractors, Exxon Mobil's has sinned by earning the highest annual profits of any company in American history at the very same time working class Americans were struggling to pay record prices at the pump.

It is with such ill-gotten profits in mind that a group of Democratic lawmakers led by Sen. Byron Dorgan (D-ND) proposed enacting a windfall profits tax on profits from oil sold for over $40 per barrel.² Though it has a certain populist charm, this proposal is terrible tax policy. Commodity companies, including Exxon Mobil, are at the mercy of prices set by world market forces outside their control.

When prices are low (as oil prices were in the late 1980s and late 1990s) commodity companies simply can't make money. When prices are high, they do. When prices are at record levels, like now, it can seem as if commodity companies have won the lottery. And just as with the lottery, it is only the promise of the big reward that makes people willing to take the risk.

While most educated people understand this logic, left-leaning Americans have trouble accepting it when it comes to big corporations. A similar debate came up in Maryland recently, where the state passed a law singling out Wal-Mart, demanding that it spend at least eight percent of payroll on employee health care.³ The law was backed by a group of unions and left-leaning Democratic state legislators who argued tht the state was subsidizing Wal-Mart by picking up the health care costs of its uninsured employees who ended up as charity cases at public hospitals in Maryland.

There are huge two problems with this reasoning. First, nobody at Wal-Mart forced the state of Maryland to pay for treating its uninsured employees, so it's hard to justify holding the company financially responsible. Secondly, the vast majority of the uninsured don't work at Wal-Mart anyway. Most employed Americans without health insurance work for small companies. Mom and pop operations often can't afford health insurance, especially for the kind of low-skill part-time employees found at Wal-Mart. But Maryland didn't go after mom and pop companies -- its legislation only applied to companies with more than 10,000 workers in the state. And Wal-Mart is the only one.

Attacking large corporations is a persistent theme among left-leaning politicians. It's okay for small companies to earn windfall profits and have uninsured employees. But when told that a big company has either, leftish Americans start foaming at the mouth. To some extent, this is because big companies are big, easy targets. But it's more than that. The American left is simply prejudiced against big corporations.

Only prejudice can explain why logic goes out the window when discussing elementary economic principles relating to big companies. In a recent study, Emory University psychologist Drew Westin scanned the brains of self-described Democrat and Republican participants.⁴ When presented with negative information related to politicians in their party, the participants rationalized it away. Brain scans showed "reward centers" firing to reinforce the participants' illogical conclusions. The researchers compared such partisan irrationality to drug addiction. This is clearly what's going on when you try to reason with a lefty about Wal-Mart or Exxon Mobil.

To be fair, there are plenty of reasons to be skeptical of big companies. There is a long track record of many of them abusing their employees, spoiling the environment, and bilking the taxpayers. But any prejudice, even one held by enlightened socially liberal citizens, is destructive when it clouds thinking and prevents rational conclusions.

What's more, prejudiced action by left-leaning activists often leads big companies to engage in worse behavior than the otherwise would have. When a company is attacked in the public sphere, one of the first things it does is increase spending on lobbying.

Consider Microsoft. Before the Justice Department started its antitrust investigation, the company spent almost nothing to lobby the government. Its spending then skyrocketed from $16,000 in 1995 to $1.6 million in 2000.⁵ In the last election cycle, Microsoft PAC spent $1.9 million.⁶

While big companies like Microsoft may start out lobbying defensively, a large lobbying infrastructure provides an irresistible temptation to begin predatory lobbying. Once such lobbying starts, the rewards end up being market quotas, special government exceptions, and huge taxpayer subsidies like those given to Archer Daniels Midland, Northrop Grumman, and other corporate welfare empires.

General Motors, once a vanguard of American industry, is now using its lobbying clout to seek a government rescue of its massive health care liabilities. GM Chairman Rick Wagoner would like nothing more than to have a health care cost structure like Wal-Mart. For the past year, he's been using his company's lobbying clout to explore a way to get it.⁷

Such lobbying is certainly not the intention of the do-gooders who seek action against Wal-Mart and Exxon Mobil. But this is the ultimate result. By encouraging companies into more lobbying to fight their prejudiced views of big business, left-wing Americans are hurting their own cause.

Notes:

1. Reuters, Record Profits Spark new Backlash Against big Oil, January 30, 2006

2. CNN Money, Oil Industry Under Fire, October 28, 2005

3. Baltimore Sun, Wal-Mart Veto Falls, January 13, 2006

4. Washington Post, Study Ties Political Leanings to Hidden Biases, January 30, 2006

5. ZDNet, Microsoft's Budget For Political Lobbying Exceeds That of Enron, February 12, 2002

6. The Center for Responsive Politics, Open Secrets Database, January 2006

7. Associated Press, Wagoner: Businesses, Government Must Tackle Health Care Costs, January 28, 2006