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It’s Government That Can’t Exist Without Businesses

In a recent speech, Barack Obama delivered the line that Mitt Romney is quickly turning into the centerpiece of the 2012 presidential campaign: “If you’ve got a business, you didn’t build that; somebody else made that happen.” The Obama campaign is crying that this line is being taken out of context. Well, you can see the larger context in the video below, and it doesn’t make Obama look any better.

The basic thrust of the speech is that wealthy people need to pay higher taxes because the government provides services for them. This is a common argument for liberal politicians because they are always trying to increase taxes. So, I thought I might tackle this oft-repeated theme.

First, it isn’t the case that businesses can’t exist without government services; it’s government services that can’t exist without business. Government may build some of the things that businesses use. However, everything that government has is taken from businesses. Without them, government has nothing.

Second, businesses rely on some government services because government regulations forbid the private sector from providing them. Look at education: Government requires it, forces everyone to pay for it, and then stifles competition by opposing school choice programs. Despite that, virtually everyone who can afford to pay twice for their children’s education opts to send their kids to private schools, even public school teachers. The public education system is extremely expensive and does an incredibly poor job, and that is the sad truth of almost everything that government does.

That is reality. We are all forced, by the government, to pay extremely high taxes for incredibly bad services. Then, if the government actually manages to do something that isn’t completely useless, we are expected to get down on our knees and praise government workers because they “made that happen.”

It’s as certain as the sunrise that when a liberal politician wants to raise your taxes, they will tell you how much you need the one or two government services that people actually use. They will threaten you and say that those services will be cut if your taxes aren’t raised.

When they do threaten you, remind them that your taxes already overpay for those services. Remind them that you pay excessively high rates for those crummy services because government, unlike the private sector, is a monopoly. Remind them that, for every government service that you use, you pay for a thousand others that are completely useless. Remind them that most of the money that you are forced to pay into each government program is wasted. Remind them that it is the politicians that should get down on their knees and praise you because without your money, they wouldn’t have jobs. Remind them that it was your work and your taxes that “made that happen.”

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July 20, 2012 at 11:03 am
1 comment »
  • September 12, 2012 at 9:18 pmM

    Listen, have you ever heard of the concept of a positive externality? You talk about education in your post; that’s a perfect example. Society as a whole benefits from having an educated population. However, when in a free market economy, people make decisions, they make decisions based on their own private benefit, not societal benefit. For example, imagine I were to gain 500$ worth of benefits in the long term from purchasing something. Imagine also, that society as a whole would get an extra 200$ worth of benefits if I purchased this product. Any rational economic actor would pay only 500$ (because that is how much private benefit the actor gets).

    The problem arises when it turns out that the market does not provide the optimal amount of this positive externality product. Producers supply more of a product when they can sell it for a higher price, and the societally optimal amount of product is the one produced when the price in 700$, not 500$. When the price is 500$, there is too little of the product sold, and the outcome is not optimal.

    The government can step in to subsidize the producer (yes, with your tax dollars), ie pay the producer an extra 200$ for every unit of the product purchased, so that we reach the societally optimal level of production. This is what the government does with education. You get benefits from the public school system even if you don’t have kids who go to public school (educated population = less crime, better productivity etc.), and you pay for those benefits through your property taxes.

    The real problem with public schools isn’t that they’re not privatized enough, it’s that there are gross inequalities in the system, and a kid growing up in a poor neighborhood often has a worse school than a kid growing up in a rich neighborhood.

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