The left is all gaga over a video of Senatorial Candidate Elizabeth Warren giving her position on taxes. Warren constructs a hypothetical factory owner and then proceeds to rip him apart using thinking that should scare anyone with a modicum of intelligence.
This is part of what she said:
“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.”
When we first read this quote, we were dumbfounded.
In her hypothetical, the guy who built a factory suddenly loses his rights to roads, education, etc. Suddenly the things he had been contributing to – and to which he still contributes – are no longer in joint ownership with the rest of the people who pay taxes. In Warren’s world, once the factory owner opens the factory, roads, schools, police, fire departments, etc. belong to “them” collectively, and the factory owner is not a part of that collective. Once he opens a factory, the owner’s previously paid taxes mean nothing.
In Warren’s view, it is “us” versus the factory owner who now needs to be paying more simply because he is providing jobs, providing goods or a service, and making money.
Obviously we disagree and we are not alone.
We scouted around the web and came up with some comments which lay waste to Warren’s position.
From Jonah Goldberg at the National Review Online:
It’s a nice little riff, but I’m not sure it’s nearly as powerful an argument as the progressives who are hearing what they want to hear think it is. First of all, the factory owner already pays a hunk — a big hunk — for the next kid who comes along. The “rich” already pay a very disproportionate share of that freight. Warren makes it sound like that’s not happening now, which is of course bunk.
Meanwhile, if you listen to Warren closely, she could just as easily be making the case for if not a minarchist government, then something pretty close. Defending factories from marauding bands is an important function of government, but it doesn’t really take up much of the budget. Ditto fire departments. Education, likewise, is not a huge part of the federal budget (though that’s changing). Moreover, those functions are mostly a local responsibility. I very much doubt this mythical factory owner has much objection to paying for any of that stuff. So far all of her verbiage about the social contract is pious misdirection.
Building roads is more of a mixed federal-state responsibility. But, I don’t know many conservatives who think the government shouldn’t build and maintain roads. What they object to is the grotesque waste and inefficiency inherent to public-works projects imposed by unions and regulations. As I wrote the other day, the reason Obama had to discover there’s no such thing as shovel-ready jobs isn’t because they don’t exist. It’s because there’s no such thing as shovel-ready government, thanks to liberals like Ms. Warren (see Steve Hayward on the point here).
Of course conservatives believe in a social contract, albeit a more bare bones version than the one liberals believe in. Insinuations otherwise are a red herring. But you can believe in a social contract and also believe the Left is pursuing class warfare. The suggestion that one contradicts the other is entirely bogus.
Allahpundit over at Hot Air chimes in:
What I like about this is how unbothered it is by the question of what the factory owner’s fair share of taxes might be. The implication, clearly, is that no amount would ever be fair. “We” built an entire civic infrastructure around this factory, without which it couldn’t operate, so really the factory owner can never thank us enough. It’s a blank check for tax hikes unto eternity. In essence: “I helped pay for that sidewalk, now give me your wallet.” In fact, if you had no knowledge of American tax law while listening to this shpiel, you might reasonably conclude that “factory owners” pay no taxes at all. They’re complete free riders — using the roads, relying on the police, making bank off the backs of public-educated workers, and never offering so much as a thin dime to the system in gratitude. In reality, that factory owner is paying for more of that road, public school, and cop’s salary than you or I are. Beyond that, though, I’m amazed at how easily she overlooks the wealth created by the factory as a contribution to society. Not all of it ends up in the owner’s pocket, even though he/she assumed the massive risk of starting the plant. The factory provides jobs; it generates demand for suppliers; and if it’s successful it cranks out a product that others use to generate wealth of their own. And the more wealth there is, the easier it is to pay for those roads and cops and schools. Memo from factory owners to Warren: You’re welcome.
Ace of Spades has a round up of comments including this one on Warren’s “marauding bands” assertion:
“You don’t need to worry about marauding bands coming to your factory and stealing everything.”
Obviously, you’re not Gibson Guitars.
Yeah. About that social contract. There is a good case to be made that the economic and regulatory environment can make or break a viable enterprise, but that’s not the case Warren makes by a long shot. It’s already a rock solid fact that the rich pay more than their “fair share” in taxes. The rich not only pay more than the rest of us for those roads and police, they pay more than their fair share for the regulators who waltz into businesses and order the owners to comply with whatever new harebrained regulations people like Warren have dreamed up. The rich pay more than their fair share for the IRS agents who presume guilt rather than innocence. And in many cases, when the entrepreneur built his factory, the government ordered him to build the roads to it. Warren takes none of these facts into account, and doesn’t regard the damaging impact that taxes and the regulatory state can and do have on free enterprise.
It’s not Warren’s place to say “good for you, now keep a big hunk” of your own money. That arrogance ought to be laughed out of polite society.
Warren’s remarks do constitute class warfare, along with more than a tinge of Marxism. That they reflect mainstream Democratic thinking, of the type that Steven Benen find praiseworthy, ought to worry everyone.
Bob Higgs has a great graphic on this:
Yet maybe the best dismantling of Warren and her position comes via A. Barton Hinkle at Reason.com:
A few points.
(1) This is a pretty powerful takedown—of a position nobody holds. Or at least nobody outside an Ayn Rand novel. If Warren can find someone who thinks he does not live in community with other people, then she might have an argument. But don’t sit on a hot stove waiting.
(2) For someone who objects to the term class warfare, she sure draws a mighty bright line between “you” and “the rest of us.”
(3) The question is not whether a captain of industry should pay taxes—but how much. Reasonable people can debate where to set marginal tax rates. But when the richest fifth of Americans pay 64 percent of federal income taxes while the bottom two-fifths pay less than 3 percent, the case for even greater progressivity is not beyond rational debate.
(4) Outside of a few anarchist collectives, there isn’t a soul around who minds paying taxes for roads, cops, firemen, or schoolteachers. It’s the jillion other things government does—from corporate welfare to the Iraq war—that people object to.
(5) Plenty of smart, well-meaning people also think even government’s core functions could be delivered better and for less—just as the Obama administration has used the Dartmouth Atlas to argue for greater efficiency in medical care. E.g., since 1970 inflation-adjusted per-pupil spending in public K-12 education has doubled. Class size has been cut in half. Neither change has produced any substantial effect on academic performance. Why don’t we have the equivalent of a Dartmouth Atlas for public education?
(6) Warren’s remarks epitomize the caricature of a progressive as someone who loves jobs but hates employers. She implies the captain of industry is simply sponging off society and hoarding the proceeds. But hiring workers is a huge social good. So is providing a funding basis for pensions, which generally rely on stock returns. So is creating products people want. Five bucks says Warren has a smartphone and a DVR and a bunch of other modern conveniences, and that she didn’t buy any of them with a gun to her head. So why is she so mad at the people who offered to sell them?
(7) Warren suggests the principle of fair play means the industrialist owes society a debt, to be repaid in steep taxes because his other contributions do not count. But this argument is one of the weakest of all the arguments for political obligation, for reasons most people can figure out after a few minutes’ thought. (E.g., Suppose I mow your lawn without asking, then demand payment because it’s “only fair.”) Why hasn’t she given them any?
(8) Perhaps, like film critic Pauline Kael, who famously didn’t know anyone who had voted for Nixon, Warren doesn’t know anyone who believes government and taxes should be small. And, therefore, perhaps she does not understand their reasoning. She certainly doesn’t give any indication that she does.
As we stated, many Democrats and the left agree with Warren which is really quite sad.
UPDATE: Our friends over at “Questions and Observations” dismantle Warren and her premise. As usual, they are deadly accurate in their analysis. We suggest you read the whole thing, but until then, this snippet will do:
That’s not the social contract. The social contract is “We maintain civilization because we all benefit from it. And we all have a responsibility to pay for it.” Ms. Warren’s version of the social contract boils down to, “You have to pay more for maintaining our society because you can, and we outnumber you, and can force you to do so.” That’s not a contract. That’s just extortion by majority. The millionaire’s responsibility is not to “pay forward” any more than any of the rest of us, because he doesn’t benefit any more than the rest of us.
To the extent that a “social contract” even exists, it is to provide the minimal necessary public infrastructure—physical and legal—for society to maintain itself. Ms. Warren’s concept of the social contract is that the millionaire derives some special benefit from society, so he should make special payments. But, since no special benefit actually exists, there is no excuse for extraordinary payment.
But, even so, the millionaire does make an extraordinary payment. As we’ve harped about endlessly here, the top 20% of income earners, with an average income of $264,700 per year, pay 69.3% of all federal income taxes. The “rich” are already covering 70% of the cost of “society”—loosely defined—at the federal level.
But Elizabeth Warren thinks they’re too stingy, and the “rest of us” deserve more.