Wednesday, July 18, 2012

Government and Business

In his speech on businesses last week, President Obama never did spell out how people become successful. He told us that they did not become successful because they are smart or hard-working.

You've been successful. You didn't get there on your own. You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out here. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

So how do people become successful? The implication is that they received government help at critical points in their life.

There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business, you didn't build that. Somebody else made that happen.

A lot of people have argued this point complaining that their success is their own, not the result of the government. Many businessmen including some very small ones have complained that the government hurts them more than it helps.

The thing about Obama's statement and the one that Elizabeth Warren made earlier is that they make successful people sound like leeches who have not paid their fair share. The truth is that businesses already pay a lot of taxes. In addition to income taxes they pay real estate and fuel taxes which pays for teachers and roads. There is nothing in this pitch to show why top earners should pay a marginal tax rate of 39.6% instead of 35%.

Another flaw in Obama's logic is that teachers, roads, etc. are available to everyone. So why isn't everyone rich? Maybe the wealthy do work harder or are smarter. Or maybe they take more risks than the rest of us. A lot of people started computer companies in the 1970s but most crashed and burned. Bill Gates and Steve Jobs didn't have any special government assistance. At one point Bill Gates was living in Microsoft's small office suite because he couldn't afford that and an apartment. Jobs started Apple out of a garage. Their companies went on to dominate the world and made their founders fabulously rich. Does Obama really mean to say that they owe their success to the government?

Mitt Romney has a great quote on the subject:

The taxpayers pay for government. It's not like government just provides those things to all of us and we say, 'Oh, thank you government for doing those things.' No, in fact, we pay for them and we benefit from them and we appreciate the work that they do and the sacrifices that are done by people who work in government. But they did not build this business.

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