22 September 2011

Getting rich on your own

P.E. Gobry quotes Elizabeth Warren:
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 maurauding 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 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.
Warren is right. Sort of. Individual action is necessary but not sufficient for production. However...

(1) Yes, the rest of us paid for those roads. But so has the factory-builder. Before the factory-builder has gotten rich or even built the factory, he's chipped in for roads just like the non-factory-builders. And as he's been paying taxes to pay for them ever since. Having done something productive with the roads doesn't necessarily obligate him to begin paying even more for them than he was.

(2) "The rest of us" who pay for these things is an increasingly small portion of the population, so Warren really ought to say "some of the rest of us" paid for these things. I don't see any reason to believe this trend is reversing.

(3) It's one thing to ask the factory-builder to help pay for the things which make it possible for him to produce, but he is also asked to pay for the things which make it difficult for him to produce. Taxing him to build roads to bring goods to market is very different from taxing him to give a subsidy to a politically-favorable competitor or to administer licensing regimes which stand in his way.

(4) Warren's argument, narrowly interpreted, is that you should pay for the public goods that you've used.* Okay. But this argument quickly degenerates into a blanket presumption that the factory-builder should be taxed more.** Every time the state writes checks it can't cash, just go back to the factory-builder. He didn't get rich on his own, after all!

It quickly ceases to be about making him pay for the public goods he benefited from, and becomes about finding someone with deep pockets to pay for whatever it is we decide the state ought to be doing. Look at how gas taxes, which are supposed to pay for the very roads Warren cites as making production possible, have been funneled to pay for luxury rail lines and inefficient-but-photogenic trolleys.

(* If that's what she wants, surely she should support privatizing some of those functions? Or shift many of them to a pay-for-use system so no one can free-ride?)

(** Maybe Warren wouldn't do this, but most of the people who enthusiastically quote this passage will.)

(5) The definition of the "Big Hunk" the state gets to take keeps changing. And rather arbitrarily, I would add. In Warren's conception, it's whatever the political elite feel to be your "fair share." The size of the hunk you get to keep doesn't change as a function of how much society has done to support your production, it changes as a function of political mood and how much the state finds itself desiring your money to direct for its own purposes.

(6) Warren's statement overlooks the fact that the goods from this factory are already making life better for "the next kid who comes along." The benefits of this production are accruing to people besides the factory owner through his voluntary transactions with them. In fact the factor-builder's richness is evidence that he satisfied a huge amount of consumer demand — and thus has already enriched others!

(7) If you ignore (6) it looks like a decision between letting the factory-builder keep the fruits of his work and taking some to improve the lives others. But that's not the case; the factory owner is already benefitting others. Is the state going to make better decisions about how to do that than he is? Who is going to benefit society more by controlling those resources, the politician with his mastery of electoral politics and popularity, the technocrat he appoints, or the man who already got rich satisfying other people's demands enough that they have given him their money willingly?

(8) Don't forget the time factor! Under what set of circumstances is that factory going to come into existence? And the next factory? Warren seems to be operating under a presumption that government provisioning of public goods is currently so low that the next generation won't be able to build productive investments of their own without increased taxation now. I worry about the opposite: that taxation —both pecuniary and regulatory — is already high enough now that the next generation won't want to build productive investments.

Edited to add — (9) Everyone has access to these same roads, fire and police squads, educated workers, etc. as the factory-builder.  But not everyone does something productive with them. It's a odd position to claim that the factory-builder, by virtue of having made productive use of societal resources and thereby expanded the wealth of society at large, deserves to bear the burden for providing further societal resources.* Couldn't one argue that it is more just to direct our opprobrium, administered by the tax man, towards those who have failed to put these resources to productive use?

Such a theory puts us in tricky and uncomfortable territory, but I believe those problems are resolved by looking at the other side of the ledger, that is, basing our decisions about the deserts of taxation on consumption rather than production.

(* I describe this as "odd" because I do not think it is necessarily wrong, but it is certainly not obviously, prima facie correct either, which is something which Warren and others seem to take it to be.)

1 comment:

  1. There is nobody in this country who raised their children on their own. Raising children takes a village. You bought a home - good for you. You own your home because the title clerks, city records office, and highway department built roads to it. You used workers the state paid to educate. You are safe in your home because the state employees police and fire-fighters. You paid off your home and raised your children into terrific subjects. God Bless in a non-denominational, inoffensive way that doesn't imply the state sanctions any religion - especially yours. But from the underlying social fabric you have taken and taken. Now you must pay for the next family who comes along: you owe us your children