Monday, March 07, 2016

Government Theft, and the "You Didn't Build That" Idiocy

So when last we talked, it was about the fact that any proposed policy change involving either the distribution of the tax burden or welfare programs was highly likely to be a change that that produced both winners and losers versus the status quo. The status quo holds no special status, with the possible exception that is the devil we know, whereas a change to the status quo may bring about unintended (but often not unforeseen) consequences. 

As such, people generally decide (or like to think that they decide) between the status quo and a redistributive change on the basis of some understanding of what they regard as fair.  And here is where the works get all gummed up, and certain fundamental differences between commie liberals and freedom-loving conservatives emerge.  Fairness, unfortunately, is in part in the eye of the beholder; moreover, even when two people agree in principal about what is fair in the abstract, they may have a very different understanding of the mechanisms by which all of the goodies in the economy have been distributed absent, or prior to, the heavy hand of government. 

To see how people on both sides agree in principal, we can say straight out that (barring a few outliers) most people regard it as wrong and unfair for someone to break into your house and steal your possessions.  Indeed, there is no groundswell on the left for changes in the law arguing that theft should be legal in certain circumstances, such as where the thief is poor and the victim rich.  Theft on this micro-level is widely considered an act of violence.  In fact, the primary argument against anarchy is that some government is necessary, to be endowed as a legitimate “monopoly on violence,” to protect people from just such plunder.  If we all spent our days with no police protection, we’d split our time in four ways –protecting ourselves from theft, working to produce something, robbing others, or watching Netflix.  As it stands, with effective laws and enforcement, the “protection from theft” is provided by specialized labor, and the rest of us can concentrate our time on productive work and leisure.

So while it seems that everyone would feel personally violated if five people broke into their home and stole all of the money they had stuffed in their mattress, a slight tweaking of our example draws a quick divide between left and right.  If five poor people rob my house, everyone understands this is wrong, and doesn’t begrudge them receiving a just punishment.  But suppose those same five guys lobby the government to tax me, with the proceeds going to those five to be divided evenly.   If I resist the tax, now I am the one on the wrong side of the law, and failure to pay it may lead to garnishment of my wages, government seizure of my property, or jail.  My peaceful resistance will be met with government “violence” in the sense that force will ultimately be employed to take my money, just as it would with an armed burglar in my house. 

Clearly this goes on at a macro level in any welfare state; it is not as personal as the example suggests, but the broad application of a redistributive tax and welfare scheme is ultimately doing this same thing – it is taking by force from some for the benefit of others.  There is no distinction between theft via government policy and theft the old fashioned way. 

A government that protects us from theft, in any guise or form, allows us to concentrate on work and the pleasures of family and friends in our leisure time.  Because we can dedicate more time to these things, and not worry about stealing from others or protecting ourselves from others, our lives are inexorably richer.  And here is the rub – once government is seen as a legitimate mechanism for redistribution, we lose that efficiency – now we have to decide to split our time between work, leisure, lobbying the government to plunder others for our sake, or lobbying the government to keep others from plundering us.  The pie gets smaller because the latter two categories are not productive – they are what economists call rent seeking activities.  They do not add to the size of the overall pie we get to split; in fact they subtract from it by diverting our time in part to such activities.

I know, I know – the above analogy is so crystal clear that no one can possibly argue that government redistribution is fair in a way that direct theft is not; and, like widespread direct theft, government redistribution has the deleterious effect of making us poorer overall.  So why is the left so accepting of government plunder and redistribution?  The short answer is that in part they view it in the opposite fashion – to them it is the returning of stolen property to rightful owners.  And this is where the Bernie Sanders socialism that underlies all of the American left comes into play – unfettered market capitalism, in their view, is in large part theft from the poor by the rich through “exploitation” or, in the case of some groups, through “discrimination.”  And that exploitation is, in the view of the left, insufficiently redressed under current tax and welfare policies – more is needed to counteract the theft.

The free market, in other words, gets it wrong when we look at how all of the goodies of society get distributed.  (They think it gets it wrong in other respects as well, but the primary focus is upon its distributional consequences.) One particularly popular variant of the free market injustice  argument is the “you didn’t build that” meme from Elizabeth Warren, echoed by Obama.  The quote in its entirety:

“There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Scientific measurements of the ratio of asininity to words in this quote from Elizabeth Warren shatter what scientists had thought was humanly possible.  Let’s unravel the four basic claims – you, the rich guy who started a successful business, owe us, the poor schleps, because 1) you didn’t get rich on your own; 2) we built the roads you move goods to market on; 3) we educated your workforce; and 4) we are keeping marauding bands from taking everything you have.

First, it is indisputable that no one ever got rich on his own.  (I am going to use masculine pronouns throughout, because I am pretty sure Ms. Warren has some convoluted feminist argument that rich women would be somehow exempt from the above arguments).  Everyone has parents, relatives, mentors, teachers, and friends who they would credit for helping them get where they are.  It is the implication that Warren draws from this truism that is shockingly stupid.  The instrumental people generally aren’t asking for the rich guy to pay them back.  And there is something truly twisted in suggesting that what you owe to these people, who ask for nothing in return, should be collected by the government and distributed to a bunch of random people who had nothing to do with your success.  This is like being invited to someone’s house for a dinner party, and in lieu of sending a thank you card, you send a check into the government.  Gratitude is owed to those whom it is owed to; not to amorphous “society.”

It gets worse from there.  The entire quote is premised on a straw man assumption that either factory owners do not currently pay any taxes, or alternatively that someone is arguing that they shouldn’t have to.  The status quo tax system is the complete opposite of the Warren straw man.  U.S. corporate taxes are among the highest in the world, so any argument in favor of reducing them is not the same as an argument in favor of eliminating them, and few are arguing for that (although complete elimination of corporate taxes would be good economic policy). And if her quote is directed toward the owner of a business in his personal capacity, who has gotten rich, the fact of the matter is that rich owner is paying a highly disproportionate share of income taxes, even excluding what he may pay at the corporate level.  (If he owns a C-corp, any profit he makes in the business is taxed at 35 percent, and if he dividends those profits to himself as owner, he pays additional tax).  The top 1% of income earners in the U.S. account for 45.7% of federal income taxes; the top 20% pay 84% of federal income taxes.  So the “rest of us” didn’t entirely pay for the roads that bring the factory goods to market, or for the education of the workforce the business owner relies on; in fact many didn’t pay squat for it.

Second, the factory owner is not profiting from the fact that public roads that can be traversed for free make it less costly to get his goods to market.  If he had to pay a toll for a private road, he’d pass the cost of that straight onto the customer, and because he doesn’t pay a toll, the customer gets the savings.  There is no business owner who is inflating his prices and his profits because people suffer from the illusion that he is paying exorbitant transportation charges.  So with respect to the contribution of public infrastructure to commerce, the benefits fall almost exclusively to consumers, not producers.  Any infrastructure that greases the skids of commerce no doubt contributes to his ability to sell goods in more far flung places, but because all of these transactions are voluntary, there is mutual benefit to him, his workforce, his suppliers (who is also see increased demand), and his customers.  Each of these people in turn is further enriched.

Moving on from infrastructure, Ms. Warren seems to think that the successful business owner owes something to society for all of that great productivity stuffed into the heads of his workforce, all of the benefits of which somehow flow to the business owner.  Here is a little pesky fact about employees that almost 100 percent of employers can attest to – they expect to be paid for their work.  The only exception to this rule is sycophantic power-hungry recent college grads who will gladly work for free for congresspersons who are only too happy to get their services gratis (so this highly annoying attribute of the workforce is probably lost on the good Senator); in general, no one is rushing to the dismal factory as a volunteer.  Because the business lobby has been entirely unsuccessful in its efforts to legalize indentured servitude in this country, we know a little something about each of the factory owner’s employees – each prefers the job he has to any other job in that he is capable of getting.  Otherwise he’d fly the coop.  It is these workers who are the primary beneficiaries of their own education, not their employer.  And of course these workers also pay taxes.

What Ms. Warren lacks in intelligence, she makes up for in prose style, as she saves her most shocking claim for last – that the factory owner should foot the whole bill for government (or at least significantly more than he does) because government is the one keeping the marauding bands from taking everything he has.  There has never been a more revealing quote about the immorality of the welfare state than this.  It is the argument of the mafia – we, on behalf of the people we represent, want you to pay us for protection from the people we represent. We can do this the hard way, or we can do this the easy way – you decide. 

The social contract, then, has nothing to do with a universal rejection of legitimizing theft in society.  Apparently everyone is OK with theft, or at least the governing majority is just fine with it, and the trick of government is how to figure out the optimal way to do this while keeping the peace.  You don’t want to steal so much that the factory owner shuts down the business, or never starts it in the first place, but short of that every dollar you make is fair game for us to take.  And if you should balk at our suggestion about how much of the total bill we stick you with, we’ll let the pitchforked mob find you where you sleep.

This same idea was shamelessly put forth by Obama, who said as much to Wall Street in the aftermath of the financial crisis – I am the one keeping you guys safe from the pitchforked mob, so you better play ball.  Actually, laws on the books which make violent crime illegal is what keep us all safe, including those on Wall Street, and our protection under those laws is not (and should not be) contingent on certain behavior from an otherwise disfavored group.  It is the duty of the executive branch of government to enforce those laws even when it is otherwise unsympathetic to the potential set of victims.  Obama says shit like this all of the time, and no one seems to have an issue with it.

I’ll close with remarking how bitter and ungrateful the entire tenor of her quote is toward entrepreneurs and business owners.  If they never paid a dime in taxes, such gratitude will still be owed in spades; the fact that they do in fact pay the lion-share of taxes and still decide to stay in business, rather than cashing out and sticking their toes in the sand on a warm beach with a Corona in hand for the rest of their lives, makes gratitude even more deserved.  And then there is Ms. Warren, the poor oppressed Indian squaw, who has gotten rich through manipulating affirmative action policies, rather than doing it the old fashioned way, by investing her money in a business where she risked losing that investment entirely.   She has no employees she feels responsible for, no suppliers who are thankful to her for her business, no customers who are enriched by the consideration she puts into her products – she has only the gratitude of bitter losers like herself who ask not what they could do for others, but instead what others can do for them. 

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