President Obama’s instantly infamous “You didn’t build that” speech is a major turning point of the 2012 election not because it was a gaffe but because it was an accurate and concise summary of core progressive fiscal dogma. It was also a political blunder of epic proportions because in his speech Obama unintentionally proved the conservatives’ case for limited government.
This essay will show you how.
When Obama implied at the Roanoke, Virginia rally that some businessmen refuse to pay for public works from which they benefit, he presented a thesis which, like a three-legged stool, relies on three assumptions that must all be true for the argument to remain standing:
1. That the public programs he mentioned in his speech constitute a significant portion of the federal budget;
2. That business owners don’t already pay far more than their fair share of these expenses; and
3. That these specific public benefits are a federal issue, rather than a local issue.
If any of these legs fails, then the whole argument collapses.
For good measure, we won’t just kick out one, we’ll kick out all three.
“Small Government” Is Not the Same as “No Government”
Progressives critique the fiscal conservative/Tea Party/libertarian position by purposely misrepresenting it as anarchy. When fiscal conservatives say “We want smaller government,” progressives reply, “Oh, so you want no government?”
“Government” in this particular discussion is shorthand for “communal pooling of resources for mutual benefit.”
Fiscal conservatives have never called for no government — that’s the anarchist position, and contemporary anarchism is actually dominated by extreme leftists, not extreme conservatives. Instead, fiscal conservatives clearly and consistently call for limited government, or for smaller government — but not for the absence of government altogether.
So when President Obama and his mentor Elizabeth Warren justify their call for tax hikes by pointing out that all entrepreneurs benefit from communal infrastructure, they’re committing the classic Straw Man Fallacy by arguing against anarchy — a position that their opponents do not hold.
Here’s the shocking truth: President Obama and Elizabeth Warren are correct — we all benefit from certain taxpayer-funded collectivist government infrastructure projects and programs. And here’s the other shocking truth: Therefore, we should limit government expenditures to just those programs. Why? Because most of the other government programs either
• hinder, constrict or penalize entrepreneurial activity; or
• benefit some people to the detriment of others; or
• waste money on bureaucracy, overhead or ill-considered expenditures that end up indebting the nation and by extension all Americans.
Below are videos and transcripts of Obama’s speech as well as the Elizabeth Warren speech that inspired it. First watch or read both speeches, and then we’ll list all of the programs that they both mention, and see what percentage of our taxes goes toward those programs.
Here is Obama’s game-changing speech from Friday, July 13 in Roanoke, Virginia:
There are a lot of wealthy, successful Americans who agree with me — because they want to give something back. They know they didn’t — look, if 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 there. 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. (Applause.)
If you were successful, somebody along the line gave you some help. 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. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.
The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.
And here’s Elizabeth Warren’s original 2011 speech, upon which Obama’s was based:
And the transcript:
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.
OK, now that we have both speeches in front of us, let us list the exact government programs and projects that Obama and Warren use to justify their position:
• Education (Obama: “There was a great teacher somewhere in your life.” Warren: “You hired workers the rest of us paid to educate.”)
• Transportation (Obama: “Somebody invested in roads and bridges.” Warren: “You moved your goods to market on the roads the rest of us paid for.”)
• Public Safety (Warren: “You were safe in your factory because of police forces and fire forces that the rest of us paid for.” Obama: “There are some things, just like fighting fires, we don’t do on our own.”)
• The Internet (Obama: “Government research created the Internet so that all the companies could make money off the Internet.”)
…and that’s it.
OK. Fine. Let’s absolutely concede this point to Obama and Warren: There are some government activities that benefit us all, including business owners.
And for the sake of argument let’s just allow for a moment that the federal government is the best, most efficient and only supplier of these benefits. You win, Elizabeth and Barack.
But having conceded this central point, let us now ask the key follow-up question, which is the first leg of their three-point hypothesis: What percentage of the federal budget is devoted to these universally beneficial public works?
And if you’re a progressive reading this, you’d better get off the stool because it’s about to fall down.
Here is the federal government’s budgetary breakdown for a recent fiscal year:
What percentage of this is devoted to education, transportation, public safety, and creating the Internet (i.e. basic research)?
I’m going to be as generous as possible to the progressive position and include ALL of defense spending in their column, since defense aids both basic research and public safety. Highways and roads are covered by the Department of Transportation. The Department of Education covers, well, education. And various other smaller departments — Department of Justice, National Science Foundation, etc. — contribute in varying degrees to public safety, research, and so forth.
Ready? Here we go:
Below is a list of all government expenditures, with Obama’s and Warren’s “public benefit” programs highlighted:
Social Security 19.63%
Department of Defense 18.74%
Unemployment/welfare/other mandatory spending 16.13%
Medicaid and SCHIP 8.19%
Interest on the national debt 4.63%
Health and Human Services 2.22%
Department of Transportation 2.05%
Department of Veteran’s Affairs 1.48%
Department of State 1.46%
Department of Housing and Urban Development 1.34%
Department of Education 1.32%
Other on-budget discretionary spending (1.8%): $149.67
Other off-budget discretionary spending (1.3%): $108.10
Department of Homeland Security 1.21%
Department of Energy 0.74%
Department of Agriculture 0.73%
Department of Justice 0.67%
Department of Commerce 0.39%
Department of Labor 0.38%
Department of Treasury 0.38%
Department of the Interior 0.34%
Social Security Administration 0.27%
National Science Foundation 0.20%
Corps of Engineers 0.14%
National Infrastructure Bank 0.14%
Corporation for National and Community Service 0.03%
Small Business Administration 0.02%
General Services Administration 0.02%
Other agencies 0.56%
Other off-budget discretionary spending 2.97%
So, let’s clear away the irrelevant government expenditures and list just the ones noted by Obama and Warren:
Department of Defense 18.74%
Department of Transportation 2.05%
Department of Education 1.32%
Department of Homeland Security 1.21%
Department of Justice 0.67%
National Science Foundation 0.20%
And that, of course, is being absurdly generous to the Obama position, since in reality huge portions of the defense budget, the Department of Education budget, and so on, have basically nothing to do with promoting public safety or educating workers. And let’s be even more generous and round that 23.4% up to 25%, or one-fourth of the budget.
So what Obama and Warren are really stating is this:
Only one-fourth of your federal tax dollars go to projects and programs that benefit the general public and entrepreneurs; the other three-fourths are essentially a complete waste, or are at best optional.
Which of course is exactly what fiscal conservatives have been arguing all along.
So yeah, I agree with Obama: Let’s slash the federal budget by 75%, and only fund services and programs that directly serve the public good.
The first leg of their argument has snapped, and the stool has toppled over. Since the essential programs aiding “the commons” are only a small percentage of an overall bloated budget, we don’t need to raise taxes to fund them.
And now for the second leg.
The Wealthy Already Pay Far More Than Their “Fair Share”
Are you ready for the happy news? If we stick to Obama and Warren’s “essentials only” budget, we can eliminate all taxes for 99% of Americans, and even lower taxes for the top 1%, and still have enough to pay for defense, transportation, public safety, education and all the rest. How? Because the top 1% of all taxpayers — the wealthy elite businesspeople who benefit from roads and schools and firefighters — pay about 37% of all federal taxes, far more than enough to cover the essentials, plus interest on the debt and plenty of extras besides.
Clonk. That’s the second leg hitting the floor.
Kicking Out the Third Leg: Education, Public Safety and Roads Are Covered by Local Taxes, Not Federal Taxes
The final component in Obama’s thesis is far and away the weakest, but for some reason few pundits have noted it. Obama and Warren have intentionally conflated local taxes with federal taxes. In most localities across the country, public education, police and firefighters, and street repair are primarily paid for by property taxes, local sales taxes, and state taxes. Federal grants can supplement local funds, but rarely is a school district or a police department propped up entirely with federal money.
So if we revisit Obama’s and Warren’s speeches, they’re actually making an argument for increased local taxes. And yet they and their audiences somehow imagine that the arguments given are a legitimate rationale for increased federal taxes.
As I said at the beginning of this essay, Obama has just unintentionally proved the conservatives’ case for limited government, and for decentralization and local control.
The stool is now in pieces on the floor. But I just can’t stop kicking.
Obama’s Fallacy that the Goal of Government Research Is to Benefit the Private Sector
“The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”
Now, everybody agrees that a great number of scientific and engineering breakthroughs have happened as a result of “government research,” primarily military research: not just the Internet but nuclear power, GPS systems, jet aircraft, and many more. But Obama is sorely mistaken in claiming that the Internet was created “so that all the companies could make money” off it. Actually, the Internet was created to facilitate defense-related research as well as to strengthen military command-and-control capabilities. It was most definitely not created “so that all the companies could make money,” as a very early ARPANet handbook explained:
It is considered illegal to use the ARPANet for anything which is not in direct support of Government business….Sending electronic mail over the ARPANet for commercial profit or political purposes is both anti-social and illegal.
In this instance as well as almost every other instance, government-funded engineering or scientific breakthroughs were originally and exclusively for military purposes; it was only much later that entrepreneurs came along and found a profit-generating and society-benefitting civilian use for military hardware.
Similar contravening facts undermine other aspects of Obama’s and Warren’s emotional arguments. Take transportation, for example. Prior to 1956, the vast majority of roads and highways and rail lines in the United States were built either privately, by local communities, or by states. It was not until the arrival of the Interstate Highway System in 1956 that the federal government became deeply involved in building roads — and even then, as with the Internet and most other massive federal projects, it was originally for defense, not for commerce.
But the highway system is by now already in place. And the cost of maintaining it and building whatever new highways are needed is a tiny fraction of our federal budget, far less than even 1%. And the business owners who benefit from roads are already paying more than enough taxes to cover their cost.
Progressives have been so intoxicated first with Warren’s speech and now with Obama’s that I’m not so sure they’re even aware that anyone has presented a criticism; progressives probably think that conservatives just avoid this whole topic because the entire arc of Warren’s and Obama’s line of reasoning is so convincing and devastating that it’s best to change the subject. But I predict that the pushback against this speech will grow so large that eventually word of it will reach the far left, and when that happens they may come back with the following retort:
Warren and Obama were just presenting a few examples, not a comprehensive list of public benefits from taxation. These were just off-the-cuff speeches, not policy papers. There are many other federal programs from which business owners benefit and toward which they should therefore contribute.
If so: Let’s see that list. Let’s get down to the nitty-gritty.
Did businesses benefit when in cities across the country HUD built massive housing projects which instantly turned into pre-fab ghettos?
Do businesses benefit when the EPA awards itself unilateral power to impose its interpretation of environmental laws, with no hearings and no warning?
Will businesses benefit when they are forced to abide by byzantine, onerous and expensive Obamacare regulations?
The progressive stance might be: “But we all benefit when everyone is healthy, when global warming is stopped, when children have high self-esteem, when no American goes hungry!”
But by this stage we’ve already passed from measurable physical benefits like roads to fire-fighting to vague claims about intangible potential benefits for which there is no proof. Obama said, “Somebody invested in roads and bridges” because the audience could understand a concrete example; he didn’t get up and say “Somebody invested in high self-esteem” because it would expose the slippery slope underneath this line of reasoning.
Should businesses pay enough taxes to support the nation’s basic physical infrastructure? Yes. Of course. And they already do. But should they pay taxes to fund every progressive social fantasy? That’s open for debate, and that’s not the point Obama and Warren were making. Overtly, at least.
We should thank President Obama for finally revealing the central justification for his economic policy. Now that we see what’s at the heart of his fiscal philosophy, we can demonstrate that he has only ended up proving the opposite of what he intended.
Others Debunking Obama’s Speech
This wouldn’t count as a comprehensive takedown if I didn’t note and link to some of the other pointed critiques of Obama’s speech. Here are some of the best, many of which cover points I didn’t even mention here:
- LauraW at Ace of Spades HQ
“[Warren and Obama] completely discount risk (and hard work). Risk is nearly the whole game. The whole thing, this entire American enterprise, rests on people who are willing to take a risk.”
- Paul Ryan
“As all of his big government spending programs fail to restore jobs and growth, he seems to be retreating into a statist vision of government direction and control of a free society that looks backward to the failed ideologies of the 20th century.”
- Rick Moran at PJM’s The Tatler
“The notion that it takes a village to build a business ignores the idea of a voluntary community and smacks of forced altruism. To Obama, we are all cogs in a machine with individual rights and achievements taking a back seat to a collective sense of worth imposed by a soulless government.”
“And it’s completely a straw man argument as if conservatives and Republicans are arguing to disband the fire department and the police department so we could all individually do it on our own. The idea that infrastructure is necessary and good is as old as the republic. It’s older than that. The Romans had the Via Appia, and that wasn’t exactly a new idea.”
- Mitt Romney
“The governor notes that the money that created those roads and bridges came out of the pockets that Obama is now looking to pick in the name of fairness.”
- Richard Fernandez at the Belmont Club
“The key ideas are familiar. Spread the wealth. Tax people so that they may “give something back.” Limit incomes at the top to maintain fairness….If no business can exist in a vacuum, neither can any politician’s talking points. It is perfectly understandable that Barack Obama’s economic and political philosophy are not entirely of his own making. Most of it is derivative.”
“I challenge anyone to find more than a small handful of highly successful businesspersons who have actually said the equivalent of ‘I got there on my own’ in first-person singular….Obama and Warren aren’t mad because successful people are out there saying ‘I did it on my own’ — because they’re not. They’re mad because these successful people aren’t saying ‘I did it because the government helped me.’”
“The[se] are the arguments that kings have made for enslaving the people in all ages of the world. You will find that all the arguments in favor of king-craft were of this class; they always bestrode the necks of the people, not that they wanted to do it, but because the people were better off for being ridden.”
“Obama has declared the un-Constitution, one that holds that all men are created dependent, with their only inalienable right being their continued obligation to support the governing system into which they are born. This is the antithesis of what our Founders sought to create, and it runs counter to the contract between government and people that we know as the Constitution.”
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