Wednesday, July 25, 2012

Obama has it backwards

Even if you grant him the full context of his remarks, they are still pretty damning.

President Obama is taking heat for saying "If you've got a business, you didn't build that." His defenders, here for example, say he is being taken out of context. But if you grant his remarks their full context, his words still reveal a basic misunderstanding of business and the economy.

Here is an excerpt from his remarks, quoted from the White House web site. I trust I have included enough context for fairness; if not, the above link will give you the whole speech. I have emphasized the bit that is most controversial.

 You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there.  (Applause.)
     If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business -- you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet.
     The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.  There are some things, just like fighting fires, we don’t do on our own.  I mean, imagine if everybody had their own fire service.  That would be a hard way to organize fighting fires. 

Those who have been paying attention to the national scene will recognize this as a retread of previous remarks by Elizabeth Warren,  remarks I critiqued previously. What Obama and Warren are both overlooking is that government money comes from successful enterprise in the first place. It comes from taxes. Most of us pay taxes out of wages and salaries paid by enterprise. The government worker pays taxes too, but that money also comes from enterprise, since government salaries are paid by taxes paid by the rest of us--and that money comes from enterprise.

A good deal of the costs left over are paid by corporate taxes and capital gains taxes and other taxes and fees--on enterprise. Some of the money that pays for the government comes from government borrowing. Government money that comes from borrowing is in the end underwritten by the taxpayer; it is not magic money from nowhere. So then, what the government does is empowered by those at work in the private sector.

At this time, a number of people involved in private enterprise are saying that government has gone far beyond helping and is at this point getting in the way of growth, with a rising tide of regulations, new costs and demands and a generally business-hostile attitude. The cost of government, which is deducted from company profits and your wages, has become startling if you include the skyrocketing Washington debt. The complexity of government is incredible; government seems to have an interest in all areas of your life and business dealings.

Money a business sends to Washington cannot be used to re-invest in the business or increase your wages or hire new workers. You do not get to spend or save or invest all you earn; Washington spends it for you. That is what Tax Freedom Day is about: it marks the day when you can finally say you are working for your own benefit, or your family's, not for other people or the presumed benefit of society in general. It is a way of keeping track of how much all this government is costing. I am reminded of Will Rogers' quip, "Be thankful we're not getting all the government we're paying for."

Obama, in copying Elizabeth Warren's line of reasoning, is like her one sided. He is oblivious to the flip side of his sunny vision of government's role. Government is not all about helping and enabling; it is not a fairy godmother to enterprise, but more like a vampire, feeding on the hard work and hopes of the people who strive and save and dream. The idea that all the money paid in taxes, or even a substantial part of it, comes back to enterprise in the form of indirect benefits is an innumerate fantasy. A great many things government spends our money on are wasteful, counterproductive or self-serving.

The trouble with Obama's thinking is it seeks justification for government policies that are harming the country. Because enterprise is the engine that drives everything, it should be fostered and protected, but now it is scapegoat, whipping boy and target for Obama's populist campaigning. Blaming the rich will not solve the problems of the poor, and taking more out of the productive part of the economy will not solve the problems of a government that already spends more than the people can afford.

There are two visions here. Only one of them can be right. To find out which one, try this thought experiment. If the federal government were to shut down, business would continue. It might be messy and there would, doubtless, be some problems with crooks and profiteers that would take a while to sort out on the state or local level. If business were to shut down, though, all government would perish. Of course, either scenario is an extreme case that will not be played out in the real world. But perhaps it points to the reason why business people are frustrated, along with many of the rest of us, with the refrain that says "We're from the government and we're here to help you."

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