This article originally appeared on Fox News on June 23, 2019.
In a recent tweet, presidential candidate Bernie Sanders confused the basic economic concepts of revenue and profit. Sanders tweeted that “[t]he video game industry made $43 billion in revenue last year. The workers responsible for that profit deserve to collectively bargain as part of a union.” Of course, the $43 billion was revenue, not profit – and there is a difference.
Profit is what’s left after a business pays the costs of generating revenue. Sanders’ failure to understand this difference highlights the biggest problem with his entire economic agenda – it depends on ignoring costs.
Profit is an intuitive concept. As a boy growing up in a Cleveland suburb in the 1950s, I quickly realized that what I charged to cut our neighbors’ lawns (my revenue) had to exceed my costs – such as what I paid for gas for the lawnmower — or I would have no cash left over (my profit) to purchase a new baseball mitt or fishing rod.
When I was working my way through law school, my wife and I often had to juggle bills so that, at the end of the month, we didn’t run out of money. Our earnings mattered, but so did our bills.
Maybe Sanders cut lawns when he was a kid, but he’s spent most of his career in the federal government, where costs routinely exceed revenue. Which is a very lucky thing for Socialist/Progressive politicians, like Bernie, who promise to give people all kinds of free stuff they know we can’t afford. Everyone is used to it, so nobody laughs them out of town, but it’s still incredible to think how much contempt they must have for our intelligence.
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