"Five myths about free enterprise"
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Responding to the Warren-Obama proposition--a synthesis

Professor Elizabeth Warren and more recently the President have advanced a now famous proposition. Taking a little liberty, I express the proposition as follows: success in business depends at least partly on other people, particularly government employees. Government provides bridges, roads, schools, police and fire protection, and originated the Intenet, among other services, that successful businesses use. Successful, high-income businessmen should, therefore, be willing--even happy--to pay higher taxes to fund these services, services that contributed significantly to their success. 

Political conservatives had a fair amount to say in response to Professor Warren and have had a huge amount to say in response to the President. Since I'll be discussing this debate in one of my fall classes, I've tried to compile and organize the conservative responses. For any who might find the results interesting, I provide my synthesis here. I think there are six major points.

1. If bridges, roads, schools, police and fire protection were the main things government did, conservatives wouldn't object (and successful businessmen probably would be content to pay their taxes).

A. "Only the straw-men conservatives of Obama’s imagination yearn for an America with no roads and bridges."

B. ". . .the interesting thing is her examples of the services for which he should be grateful—roads to transport goods; education of workers; protection from predators. This sounds like a libertarian state to me. Warren, who is running for Senate in Massachusetts, did not tell the factory builder to subsidize ACORN so it can picket him/her, or to pay to extend unemployment benefits so people do not have to work in the factory, or to subsidize NRDC lawyers to prevent the permits needed to operate."

C. But note that conservatives would also want to take a good look at what the firemen are doing:

 2.  Higher-income people have been, and are, paying a lot for those services.

A. According to a recent CBO report, in 2009 the highest earning 5% paid 39.6% of all federal taxes. The highest earning 20% paid 67.9%. The lowest-earning 20% paid 0.3%. (If we look at just income taxes, the percentages for the "rich" are higher.)

B. In 2010 about 41% of all income-tax filers paid zero income tax. (Up from 25% in 2000.)  "So unless Obama is seeing different facts than the rest of us, upper-income earners are definitely not getting a free ride, or even half of a free ride, on the backs of middle-class earners. So the “somebody” who “invested” in “publicly funded widget XYZ” is actually the wealthy person Obama is bashing."

C. And wait, didn't higher-income people help pay for those bridges, roads, etc. when they were built? Why should they have to pay for them now, again?

D. Most importantly, successful people pay for government benefits in more ways than just through taxes:

1. "Another major error is to assume that people must repay their debts through taxes. I don’t know what Thomas Edison paid in taxes. But I can safely assume that he did more to repay his 'debt to society' through his inventions than by paying taxes." 

2. "If Steve Jobs had paid his fair share back to society after he made his first ten million, Apple today would today be a relatively small company worth little and employing few. It would not be the world’s largest company in market cap, it would not employ 60,400 people worldwide, and we would not have the IPads, IPhones, Apps, and other innovative Jobs products, which improve the quality of lives and raise living standards. Apple shareholders would not hold shares worth a half trillion dollars."

3. Yes, there are many smart and hard-working people. But creating and maintaining a successful business usually requires a lot more. For one thing, willingness to take significant risk

A. "Indeed, there are millions of people who work very hard at their jobs. But to start a business you've got to do more than work hard. You've got to create something entirely new. You've got to be sensible, you've got to be ambitious. You've got to be willing to quit your day job, run up a lot of credit card debt and maybe risk everything in order to turn your dreams into reality."

B. Note that the Soviet Union and a lot of other bad economics had bridges and roads and schools and the rest. What permits success is "the freedom afforded by the United States of America; the opportunity to use [a person’s] native skills and determination — without undue government interference."

C. Let's give the last word on this particular point to Ayn Rand (from Atlas Shrugged):

“He didn’t invent iron ore and blast furnaces, did he?


“Rearden. He didn’t invent smelting and chemistry and air compression. He couldn’t have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.”

She said, puzzled, “But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?

4. The claim about some government services being helpful to businesses is true but incomplete. What about all the ways government discourages entrepreneurship and success?

A. "But here's the question to ask--how many more successful businesses, inventions, products, services, toys, tools, insights, and just plain fun would there be, if government did not in the first place make it so ridiculously difficult to start a business and keep it going? I don't see our young president taking credit on behalf of the state for all the failures it help cause, all the ideas that never got off the ground because the regulatory hurdles were so high."

B. "Or in the case of 13-year old entrepreneur Nathan Duszynski in Holland, Michigan, who tried to start a business, and somebody else (government bureaucrats) made that not happen."

5. Being anti-excessive-government is not the same as being anti-community or anti-any-government. The argument conservatives advance is not about total government but about the current marginal cost of government being greater than the marginal benefit.

A. "All that’s true enough, but what is the point supposed to be? That we need to 'do things together' to succeed? Well, obviously. But as Aaron Powell and Jason Brennan rightly ask, why should we assume that 'we' and 'together' has to mean 'through government'? Why can’t 'we' do things 'together' by . . .  well, forming businesses? Clubs? Civic organizations? Churches? If we’re assigning credit for past achievements—and implicitly, the debt we owe for them—why the federal government and not, say, our fellow citizens directly, or state and municipal authorities, or the whole of humanity engaged in mutually enriching global trade?"

B. "The argument between Left and Right is about what you do beyond infrastructure. It’s about transfer payments and redistributionist taxation; about geometrically expanding entitlements; about tax breaks and subsidies to induce actions pleasing to central planners."

6. Last, the proposition can easily be extended to the point of absurdity.

A. Without food, nobody would live let alone be successful. Shouldn't those extra tax dollars--and all the rest, besides--be handed to our farmers?

B. Or maybe organized crime?

C. And, finally, what do sexy people owe the government?