Who Built That Prosperous Society?

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In the hope that not everyone has become bored with the debate about President Obama’s statement that “If you’ve got a business — you didn’t build that,” I thought I would add my own two cents.  From the perspective of politics, I believe it is perfectly legitimate to focus on this one line because it captures in a quick and simple way Obama’s government-first approach to the economy.

But there is so much more here.  For now, let me just focus on what I believe are some of the most important aspects of Obama’s argument.

1. Obama’s point about the business creator not building his business is that he was benefited by other people – not just any people, but government people.  This, of course, is amazingly statist, since it leaves out all the good that people do in the nongovernmental, civil society.  But let’s just put that to the side.

2. Obama claims that the creator of the business was helped by others.  Well, of course, he was.  Who could possibly deny it?  We live in a society – in a social network – because we are benefited by others in that society.  Obama’s making this the basis of his argument shows that he is attacking a straw man.  When someone says they built something – or accomplished something – they don’t mean that no one helped them in their entire life or even with respect to the accomplishment.

3. From my perspective as a consequentialist, the key point is not whether the government (or someone else) helped a business creator, but whether the additional taxes on the business creator that Obama seeks to justify would promote the economy and people generally.  The problem with Obama’s approach is that the taxes and government he favors would be harmful and not beneficial.

Even if the help that business creators received from the government people did allow it to tax and regulate them freely, that does not mean the government should take harmful actions.  As Tom Smith says, the higher taxes on business creators (not to mention the excessive regulations he favors) will result in less wealth (and of course less liberty) for the nation.  How do we “thank” these government actors?  Certainly not by giving them more taxes.

4. There is another problem with Obama’s argument.  He says that people gain from the government’s provisions of bridges and teachers.  True enough, at least sometimes.  But notice that most people pay taxes for these services and so have already paid for the benefits conferred.  Why is that enough to end any debt that they have to the government?  Well, perhaps Obama would argue that people benefit more from the government services than they pay in taxes – that is, as the economists say, they derive consumer surplus from the benefits provided.

For beneficial government actions, that is probably true.  But think about it.  People also benefit from businesses.  They buy goods from them and get jobs working for these businesses.  They benefit more from the goods than they pay for them and they benefit more from the jobs than the labor they supply.  That is, they derive consumer and producer surplus from them.  So if Obama believes that business owners owe more to the government than their taxes, doesn’t that mean the society (and the government) owe more to the business owners for the benefits they provide?  Do we pay these business owners back with additional taxes?  Once again, Obama’s argument rests on statism and an unjustified preference for government.