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Elizabeth Warren’s ‘Social Contract’ an Ideological Fantasy

Warren and other politicians should not be able to dictate what "hunk" of the earnings of others they forcibly seize.

by
Ari Armstrong

Bio

September 28, 2011 - 12:00 am

To hear Massachusetts Senate candidate Elizabeth Warren tell it, successful business owners get rich off the efforts of taxpayers and contribute nothing in return until they pay a hefty tax bill themselves. Warren gets the story exactly backwards.

Productive business leaders create the wealth that enables us to thrive, seek employment, and on the side pay for governmental services. Such producers typically work long hours, often for years with little pay, risking their own time and money to bring their vision to life. They turn metals, gasses, plants, and other natural resources into valuable commodities, and they direct others’ labor to more prosperous ends, expanding our quality of life.

Some say business leaders should “give something back.” But those operating in a free market never took anything from anybody, except in voluntary and mutually beneficial trade. Instead, they produce the goods and services — the computers and cell phones, the health care, the books and movies, the automobiles, the plumbing pipes — than enrich and extend our lives.

True, some pretenders in businesses shamefully use the political process to loot the taxpayers through “bailouts” and corporate welfare, and they seek to forcibly impair their competitors. But such actions should be stopped, not used as an excuse to vilify the true producers who oppose such political interference on principle.

Great producers deserve our gratitude and respect, not the ugly, envious sneers so often directed at them by today’s political left. Above all these business leaders deserve a government that protects their rights, including their right to produce wealth and use the resulting profits as they judge best.

Warren invokes the “social contract,” but if that means anything sensible it is to protect individuals from the violence, fraud, and plunder of others. In seeking to peacefully pursue our own lives and interact with others on a voluntary basis, we agree to respect the equal rights of others. We institute government to protect those rights for everyone.

Warren argues that business owners use the roads and education system, the “police forces and fire forces that the rest of us paid for.” Warren ignores the fact that the most productive already pay the lion’s share of the tax burden. As the Associated Press recently summarized,

The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office.

The wealthy also pay more in state and local income, sales, and property taxes (where applicable). In other words, the wealthy pay for most of the governmental services that others use.

Obviously, mere access to governmental services does not create a successful business leader; otherwise, everyone would be a wealthy entrepreneur. Steve Jobs did not build Apple computers, Mark Zuckerberg did not create Facebook, and aspiring presidential candidate Gary Johnson did not grow a multi-million dollar handyman service because politicians and bureaucrats helped them. Instead, business leaders succeed by intelligently working hard to provide the things their customers want. They succeed despite the onerous taxes and controls of government, not because of them.

Notably, the core governmental services that protect people from harm — the military, police, and the courts — constitute a sliver of the the budget of federal and state governments. Most political spending goes toward entitlements at the federal level and welfare or union-dominated education at the state level.

Moreover, businesses directly pay for many of the services that Warren mentions. Businesses pay for their road use through gasoline taxes. Any given business faces a miniscule risk of a large fire breaking out, because businesses provide their own sprinkler systems, alarms, and other fire-prevention infrastructure. Private firms hire more security guards than the total number of police officers in the country. Regarding education, not only do many business leaders finance schools and scholarships, but businesses spend large sums training and educating their employees. (Whether government ultimately should provide services not directly related to law and order, and if so how, are broader issues.)

Warren presumes that politicians and bureaucrats in Washington can spend the wealth created by business leaders better than they can manage themselves. The failure of government-backed Solyndra illustrates some of the problems with that thinking. The wealthy don’t just light fires with their extra cash; they invest it in their own business or the ventures of others, spend it with other firms, or voluntarily finance the charities of their choice. The notion that the likes of Nancy Pelosi can spend the money of Amazon’s Jeff Bezos better than Bezos can is laughable on its face.

Warren contends “there is nobody in this country who got rich on his own.” In a sense she’s right: people get rich by providing enormously valuable goods and services to others who willingly pay for them. Warren and other politicians should not be able to dictate what “hunk” of the earnings of others they forcibly seize. Any social contract consistent with justice recognizes that legitimate government does not loot “the rich” (or anyone else) but instead protects people’s rights, including their rights to their earnings.

Ari Armstrong publishes FreeColorado.com. He runs Liberty In the Books, a monthly free-market discussion group, and he is the author of "Values of Harry Potter."
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