Elizabeth Warren, who’s running for the U.S. Senate in Massachusetts, made quite a splash on the Internet with remarks to supporters in which she said:
There is nobody in this country who got rich on his own. Nobody. You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the 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, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big 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.
Just goes to show, you can start with a valid premise and end up with an invalid conclusion.
She’s right, of course. When you live in a society you benefit in countless ways, material and otherwise. The language you speak and think in is a social institution and would be impossible without the presence of others. So is custom, which regulates our interpersonal conduct far more than the edicts of legislatures. Money itself is an organic social institution. Of course today money is fiat paper controlled by government, but even that system has a foundation in the institution described by Carl Menger and Ludwig von Mises.
So we need not deny Warren’s premise. Human beings are social animals. Frédéric Bastiat celebrated this fact in Economic Harmonies: “I make bold to say that in one day [the average person] consumes more things than he could produce himself in ten centuries.”
Warren, then, said nothing startling. But she places what should be a mundane observation in the service of a bad cause: higher taxes. That’s a non sequitur.
In today’s society great wealth can be made by what Franz Oppenheimer called “the political means” and Bastiat called “legal plunder.” That is, many businesspeople make fortunes from government interventions that obstruct entry into their industries or limit self-employment opportunities, allowing them to earn oligopolistic rents at the expense of consumers and workers. That’s a traditional classical-liberal complaint about government and its connivance with business.
But that is not what Warren means. She says nothing about corporate-state privilege. She mentions only tax-financed roads, schools, and police—three of the worst “services” precisely because they are tax-financed government monopolies. There’s an easy remedy for State-granted privileges: repeal. But like a good corporate-liberal, she prefers regulation to repeal. And as we know, George Stigler’s theory of regulatory capture tells us that the rules will tend to be written with the regulated industries in mind, if not with their active participation.
Warren invokes a social contract, but has anyone seen this thing that purportedly obligates you to surrender a “hunk” of what you produce under penalty of violence? Sorry, I don’t trust unwritten, open-ended so-called contracts into which any advocate of government power may read conditions ex post. (There is a more reasonable notion of social contract but that must wait for another time.) Moreover, why aren’t honest production and exchange of valuable goods counted as payment forward? Just as our living standard is the fruit of previous generations’ production, so today’s producers help to raise the living standard of the next generations.
Boiled down, then, Warren’s argument is that since everyone has paid taxes to provide services without which wealthy people couldn’t have made their money, they should pay more. How does that follow? She’d first have to show that they are paying too little now. She only assumes this. That’s not good enough. And maybe the services are inferior and cost too much—wouldn’t we expect that from a protected monopoly?
She might respond that the deficit shows that too little money is collected in taxes and therefore the wealthiest should pay more. Still not good enough. As she herself intimates in another part of her speech, the George W. Bush years were marked by unfunded spending. That sounds like a problem of overspending, not undertaxation. Solution: Cut spending.
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Unemployment is not letting up. So why is this post-recession economy different from others? Warren Gibson concludes his two-part series on joblessness.
Economists who support the latest Obama administration proposal to create jobs say they can calculate precisely how successful the program would be. But Max Borders says what they do is no better than reading entrails.
When you get right down to it, our well-being is in the hands of a few people in the Federal Reserve System. Why do we tolerate this? John Allison and John Chapman say enough is enough.
Comparative advantage is the principle that everyone stands to make gains from trade. Meaning no disrespect, Richard Fulmer thinks even a caveman can understand this.
Who were the Progressives? Since it was an eclectic group, there is no simple answer. Joseph Stromberg guides us through the labyrinth.
A Supreme Court ruling fueled the debate over whether spending money to promote candidates is protected political speech. Michael Cummins says many people have missed the point.
If we were replacing the eagle or Uncle Sam as a national symbol, what might take its place? Ridgeway Knight Foley, Jr., suggests a picture of a busybody.
Our columnists labored long at their keyboards. Here’s what they have to show for it: Lawrence Reed puts in a good word for humility. Burton Folsom places Herbert Hoover’s proto-New Deal Reconstruction Finance Corporation under the microscope. Thomas Szasz demonstrates the lethality of government suicide prevention. John Stossel reflects on the government’s response to 9/11. Walter Williams debunks alarms about overpopulation. And Steven Horwitz, reading the claim that Keynesian economics isn’t about big government, replies, “It Just Ain’t So!”
Books coming under inspection look at Pearl Harbor, the financial crisis, statism, and justice.
This being December, our annual index concludes the issue.—Sheldon Richman