There’s been a lot of Elizabeth Warren conversation on the blogosphere for the last week or so, due to her claim to be a Cherokee when there is scant evidence to back that claim. There is another claim by Elizabeth Warren that I think is even worse, worse for our country, and worse for those who are unsophisticated enough to believe it. Somewhere on the Internet you can find it for yourself, I’ll just tell you the rough outline of the content. Warren claims that businesses and the rich should be taxed more because they made their money because of public investment in infrastructure. WE (the government) provided roads, schools, sewer lines, etc. and the businesses benefited from them, therefore, soaking them with more taxes is only (wait for it….) FAIR.
The woman has got it backwards. But, it rings as sweet to the ears of the leftist as sugar to the tongue of a child. The only problem is… it’s dead wrong and people need to know why.
There are certain things the government should do, that a central organizing body for a community is better at than private individuals might be. Providing police protection and courts, building community infrastructure like roads and sewers, and things like that.
Why are they needed? What comes first? Does a town spring up out of nowhere and suddenly people are living there and suddenly demanding roads and bridges and schools?
No. Some commerce begins. People start transacting business. Other businesses are attracted to a location as it grows. There is a demand for the things that a government can do for a community better than private individuals might be able to do it, or at least with consistency that private individuals might not provide (why have a thousand different sewers when you can have one with a thousand connections to it?). Who pays for that infrastructure? The government has no money of its own. No government does, local, state, or federal. BUSINESSES PAY for that infrastructure. Individuals pay for it through taxes levied on them, taxes they could only pay because of the businesses in which they work pay them a wage (notice how little there is to tax from an unemployed person). The government, ultimately, is providing certain services which the local businesses and those employed by the businesses pay for through their taxes.
There are roads to businesses because businesses paid for them. There are nice streets in residential neighborhoods because businesses employed the people and communities decided to enhance their quality of life by utilizing tax revenue (collected from businesses and employees of businesses via sales tax, property tax, or income tax) to pave streets, install curb and gutter, and supply sewer and water. Communities also build schools. Why? To educate the children so that they too can get jobs and contribute their labor more effectively, or perhaps start businesses of their own.
This stuff isn’t a gift from government. Government can’t give gifts because it has no money of its own, it has only the money it takes from the citizens. You can’t give me a gift purchased with my own money (at least you can’t once you’re past the age of 10 or 12).
It also comes back to the question, “why build this infrastructure?” The answer is “to facilitate commerce.” The infrastructure is necessary because of the business being done, it is paid for because of the business being done.
This is the exact reverse of the way Elizabeth Warren stated it. She said the businesses owe the government because the government provided infrastructure made the businesses possible. No. The infrastructure is possible because of the businesses. Sure, some of the businesses that created the demand for the infrastructure, and that provided the tax money (business income, property, sales, and personal income from the employees) might be gone, and new businesses might be taking advantage of what was built in the past, but what difference does that make? They are paying for upkeep and additions. It’s not the new computer chip maker’s fault that the buggy whip manufacturer went out of business, but they’ll certainly take advantage of the sewer line to the facility, and their tax money will go to paving and upkeep of the roads leading to the business as well.
Have you ever seen a dead town? What’s missing? Is it government? No. It’s businesses. Have you heard of the Chinese ghost towns, where the government built cities–modern cities with all of the infrastructure in place (the Elizabeth Warren view of the government providing the infrastructure first)? Nobody lives in them. Why? There’s no reason to. There’s no business being done there. All the infrastructure money can buy is right there to be had, yet they are ghost towns because there is no reason for them other than a “great plan” by some bureaucrat.
People like Warren seem to think that that’s how the great cities of America were created. Some government bureaucrat decided to build Boston (she’s running for Senate against Scott Walker in Massachusetts) and now the businesses that move in there should pay for the foresight of the bureaucrats who built such a wonderful metropolis. She has it completely backwards. The businesses built the city, the city didn’t build the businesses.
A friend of mine (a forced friendship, due to his relationship with a relative), a socialist, claims that all the best things are socialist: the schools, the highway system, etc. It drives me crazy, and not just because the schools are a horrible example of a “best thing” our society does. Why was an Interstate Highway System a great idea? Because it facilitated commerce! It wasn’t just some whimsical “wouldn’t this be nice for the people” idea of a socialist bureaucrat. It facilitated business with better, faster transportation of goods and enabled workers to move from here to there more rapidly. Yes it was paid for by tax dollars, and those dollars were obtained collectively, but the source of the money was not the government, the source was businesses. The source is businesses engaging in free market capitalism. The highway system is a tribute to the wealth created by capitalism such that extra money siphoned off for such projects doesn’t cripple the businesses and pays for things that enhance the ability to do business. It’s not a tribute to government.
With leftists like Elizabeth Warren and my friend it always comes back to killing the golden goose. They don’t see that the things they like were provided by the golden goose laying the golden eggs. They think the good things that result from the egg laying will persist in the absence of the goose, or, worse, that the things they like provide the goose, rather than the goose providing the things they like. They have it backward.
They have it backward, yet they think of themselves as “progressives.” Frustrating.