The policy consequences of “you didn’t build that”

The policy consequences of “you didn’t build that”

I am temporarily interrupting my series of posts on lame duck scenarios to join the “you didn’t build that” discussion.

Governor Romney and his allies have been hammering President Obama for two sentences he said in Roanoke, Virginia on July 13th, colored in red below. Team Obama counters with the blue text and accuses the Romney Team of ignoring key context. I’m adding even more context than the Obama team.  I think the bold text reinforces the critique of the President and, while less punchy for campaign purposes, is just as important as the red text. Here is the full text of the President’s Roanoke remarks, and here is video.

THE PRESIDENT: 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.

President Obama and his allies say Governor Romney and his allies are taking the President out of context by quoting only the sentences in red. How, then, do the President and his defenders explain the bold sentences of the first paragraph shown above? Here the President dismisses the importance of intellect and effort as contributors to success. Is there any more charitable way to interpret this text?

While in the Roanoke remarks President Obama stresses the importance of government as a contributor to the economic success of businesses, in other contexts he emphasizes the importance of luck in economic success.  He frequently refers to the rich as “blessed” and “fortunate.”  Here are just a few examples:

… those of us who’ve been most fortunate get to keep all our tax breaks … (source)

… we can’t reduce [the deficit] without asking folks like me who have been incredibly blessed to give up the tax cuts that we’ve been getting for a decade. … (source)

H.R. 9, however, is not focused on cutting taxes for small businesses, but instead would provide tax cuts to the most fortunate. (source)

I’m not going to do more if we’re not asking folks who have been most blessed by this country — like me — to just pay a little bit more in taxes, to go back to the rates that existed under Bill Clinton.  (source)

In these cases and many others President Obama describes the rich as passive recipients of blessings or good fortune.  He rarely credits skill, intelligence, savvy, hard work, or risk-taking as contributors to economic success. According to the President’s language, the rich are that way because they are blessed and fortunate (i.e., lucky), not because they worked harder than others, or were smarter, or savvier, or took bigger risks or sacrificed more. In this framework, success is given to you, not earned by you.

Policy consequences

The obvious conclusion that President Obama makes at Roanoke and elsewhere is that we need more government spending on infrastructure and services.  Since roads and bridges, education, and basic scientific research contribute to economic growth, he argues, we therefore need more of all of them. This conclusion does not necessarily follow for several reasons.

  • Government infrastructure and services are financed by taking resources from the individuals and firms that produce them. If the disincentives created by these taxes are greater than the growth benefits of increased government spending, it’s a net growth loss to the economy.
  • Government infrastructure spending is often guided by politics or policy goals other than accelerating economic growth.
  • Marginal government spending increases are going to increased transfers to the elderly, not growth-enhancing government investments in physical or human capital.

In addition to the spend-more-on-infrastructure conclusion, if you think that luck and/or government contribute more to success than effort, ability, sacrifice, and risk-taking, then two further important policy consequences follow.

  1. Incentives matter less and taxes don’t do as much damage. Raising taxes on economic success won’t undermine future success or significantly slow economic growth.
  2. If you didn’t earn it, you don’t really deserve it.  There is a lower moral cost when government takes from the rich or from businesses, to the extent their economic success is due to luck or government.

The President’s framework supports his policy objectives.  By crediting government with an important role in the success of American business, the President justifies increased government spending. By stressing luck as an important determinant of who is successful, the President reinforces his argument for higher taxes on rich individuals and successful small business owners.

“You didn’t build that,” and “You didn’t get there on your own,” and “blessed” and “fortunate” have one thing in common.  They deemphasize the idea that success is earned.  This makes it easier for President Obama to justify taking more from those who have succeeded.

(photo credit: Keith Park)

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