Questions and Observations

This week seems to be the week for the more leftward-leaning members of the political elite to try to sneak past a unilateral revision to the "social contract". Bruce pointed out one example from Paul Krugman, and now I want to address another one, from Elizabeth Warren, formerly of the Obama Administration and now candidate for U.S. Senate in Massachusetts. Ms. Warren opined:

“I hear all this, you know, ‘Well, this is class warfare, this is whatever. No. 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.”

Let’s unpack this idiocy a little bit, shall we?

There is nobody in this country who got rich on his own — nobody.

This is a meme the Left has been pushing in recent years. The trouble is that it’s not just wrong, but it’s self-evidently wrong. It wasn’t "society" that gave Mark Zuckerberg the idea for Facebook, any more than it it gave Dale Carnegie the idea of teaching public speaking, or turned Bob Williamson from an alcoholic, drug-addicted homeless drifter to the Founder and CEO of WASCO and Horizon Software. Nor did society have to do much with Steve Jobs and Steve Wozniak selling homemade computers out of Woz’s garage. There are any number of lists of people who started with little or nothing, and who became extraordinarily wealthy due to their drive, entrepreneurship, and talent.

"Ah," say the Lefties, "but without society, none of this would have been possible!"

Now, this is perfectly true, I suppose, but not in any way helpful to their argument. Without society, half of children would die in infancy, life expectancy would be somewhere in the low 40s, a significant number of people would be eaten by wild animals. Pretty much everybody else would be carried away at a young age by disease, infection, injury, or roving bands of sadistic steppe horsemen. So, sure, society helps, in the sense that the Zuckerberg/Winklevoss dispute wasn’t ended when their craniums ended up a pile of skulls deposited by a detachment of Genghis Khan’s hordes after razing their small farming village, but in courts of law to which everyone has access.

But the Progressive argument about the usefulness of society is different, and silly.

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.

But, of course, those roads didn’t get built, and those workers didn’t get educated so that capitalists could oppress the proletariat. That stuff got built because they were universally seen as a positive good in and of themselves. Millionaires aren’t taking advantage of roads, everyone is. For instance, it’s how the millionaires get all that food delivered to our supermarkets, and iPods to our electronics stores. We benefit from the millionaire using the roads in delivering stuff we want to us. The only reason millionaire is using our roads because we want the stuff he makes and that’s how he delivers it to us.

Everyone uses the roads. Everyone benefits from education. Everyone benefits from fire and police protection.  We have those things not because they are a positive good—though they are—but because they comprise the minimal requirements for maintaining a civilization that we all derive benefits from.

So, not only do the millionaires not derive some additional benefit from their existence, we would still want them even if millionaires didn’t use them at all. And we’d still pay for them, because we all derive an equal benefit from having them. They provide no special advantage to the millionaire that the rest of us don’t enjoy.

What the millionaire does—the only reason he’s even a millionaire—is to provide us with goods and services we willingly purchase. If we didn’t buy his product, he wouldn’t be a millionaire. Whatever advantages he accrues comes not from some benefit he derives from our roads, or teachers or our police. He accrues them because of our desire to give him money for his product. We are the beneficiaries, because we put a higher value on his product than we do on our money, or on someone else’s products. We choose to make him a millionaire, because we value his product more highly than other things. He doesn’t send hulking thugs to our door demanding our money. We go out and buy his product intentionally.

And let’s dispense that the millionaires are using services "the rest of us" paid for. The millionaire is using services that he paid for along with us. And he probably paid more for them, in absolute terms, than most other people. He also indirectly pays for maintaining society through the salaries for all those "workers the rest of us paid to educate". The payments those workers provide to maintain society only exist because the millionaire’s business provided their jobs. Without those jobs, society’s overall wealth would be smaller, and our ability to maintain that society would be proportionally lessened.

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.

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.

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Dale Franks
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