Saturday, September 01, 2012

You Didn't Build That

(Not Quite Top Shelf)

I would like to start where I ended my GDP post, with Justice Hand, because I think something in here is the dividing line between liberal and conservative views of individuals and government.

Justice Learned Hand in 1934 when he was on the 2nd Circuit

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
 The courts ruled “over and over again” because over and over again, government reaches, believing that the money actually belongs to “society” and thus to it.  It treats tax avoidance as equivalent to tax evasion, as if money is being stolen from The People.  Liberals are absolutely on board with this idea, believing that there is indeed something sinister, something unpatriotic, about sending your money away from the tax bite, to Switzerland or the Caymans.  They simply don’t get that theirs is the unamerican idea.  The People is not Society is not The Government.  These are not interchangeable concepts, however blurry the lines between them are.  Red is not blue is not yellow just because green and orange exist.


But more foundationally, there are only a few roads that can lead one to a place where one thinks that it is sinister and unpatriotic.  You either have to believe that the money ultimately belongs to the government and/or you have to believe that the money was acquired by luck, help by others, or exploitation.  Those seem like extreme claims, I acknowledge.  But there aren’t any other paths there.  All other arguments eventually resolve themselves into one of those positions. If you disagree, try it.  Look for the excape hatches, most of which will start with a claim that these things are partially true but needn’t be carried to their end, and see if they don’t all have no stopping point which prevents this.

Obama says “You Didn’t Build That,” and he is expressing quite forcefully the idea that everyone who makes money had help, and therefore does not have an absolute claim.  Well of course.  As I said before, someone can always say that you couldn’t have grown the crop if they hadn’t sold you the seed, or scored 47 on the Lakers if they hadn’t turned on the arena lights.  Every action is most certainly in a context. But Obama’s comment is slyer.  He is saying “without laws, and markets, and enforcement – that is, without government – you couldn’t have made this money.  So we deserve some, and we’re taking it.”  But that is true in any country, under any government.  Afghanistan’s got a framework.  Denmark’s got a framework.  Somebody built the roads for delivery, somebody printed the currency, somebody posts a set of rules for buying and selling. Again, of course.

But such systems have a practical claim on us only insofar as they are themselves practical, and have a moral claim on us only insofar as they are themselves moral.  The questions are “How practical is this system you’re charging us for, Barack? And how moral is it?  And come to think of it, how did it get that way?” Ah but the mask is off then, isn’t it?  If we’re being charged rent for using the system because it’s a really good one for making money, what are its good features and who built them?  If there’s a fee charged for having justice, who’s responsible for that?  And what did Barack Obama have to do with it?  It is fair to turn and say “Barack, You Didn’t Build That.”

I’m quite grateful that I live under a system where it’s possible for me to make a living and have confidence that most people are treated decently.  But I am more grateful to those who came before me and built this place, plus my fellow-citizens who go about doing their jobs, than I am to Barack Obama, or even to government in the sense of everything it wants to do.  I am grateful for some parts of the government, not so grateful for others, and expect we will not all agree on those parts. Putting up with paying for government stuff I think is useless or even pernicious is an expected cost.  I don’t mind paying it.  But I don’t define that a good. It’s an unavoidable friction, to be minimised, not praised.

My uncle sent me a Paul Krugman essay about why we should tax the 1% more.  The claim was that we could get X trillions in revenue, as opposed to the woefully inadequate Y trillions in cuts proposed by Paul Ryan.  I’m not even fussing about his numbers at this point – it’s his assumptions that I’m taking issue with.  It was clear throughout the essay that Krugman has default positions based on sliding definitions:

Krugman assumption that society owns it.  That they can charge money for the
privilege of living here that is unrelated to the ability to make money. A society can physically do that - hell societies can require you to go to a particular church or wear certain clothes if they want.  They have the power to do that.  That doesn't make it moral. If you can make 10x in society A and 3x in society B, and A will charge you 70%, while B will charge you 20%, you still might go with A, just because your net is greater.  Even if A does stupid or immoral things you might go there.  It's power.  They make the rules.

But when A declares that the stupid things are actually morally superior,
and you are cheating the populace by trying to minimise the take, there is
no foundation for that.  


karrde said...

Most of those "we should charge x% more in taxes" are done as a static analysis. They assume that the amount of money earned by the targets of those taxes will stay roughly the same for the next decade.

This way of thinking ignores the possibility that Judge Learned Hand realized: People can, and do, work to minimize their taxes-paid.

And raising tax rates will cause behavior to shift. First it will be people at the margins of the group affected. But these shifts will cause others to change their actions, causing a ripple effect that touches almost everyone in the economy.

One examples of this that I used to hear cited was a national-level tax on the sale of luxury yachts.

The targets of the tax (the rich people buying multi-million dollar yachts) bought them in other jurisdictions, from foreign suppliers.

Most of the anticipated tax went uncollected. And several American ship-yards lots a lot of business. Many non-millionaire craftsmen lost income.

All in an attempt to get the wealthy to pay more.

Sam L. said...

"Most of the anticipated tax went uncollected. And several American ship-yards lots a lot of business. Many non-millionaire craftsmen lost income."

I have to wonder--was this an intended consequence, or are they really that dumb. I go with dumb.

Texan99 said...

Even if I could persuaded that you could reliably raise more taxes by raising rates on rich people, I still have a problem with mixing a progressive tax system with a one-man-one-vote political system. I can't make out how it's a good idea to let 51% of the voters enact laws to confiscate the property of the other 49%. Isn't it blindingly obvious where that will go, and soon?

Wyman said...

Your notion that his comment is "slyer" seems a bit overstated, seeing as what the general point of the speech was "the government has helped people," which is a pretty standard political statement from any Democrat.

Assuming you've seen this. It skips the first section, about how Obama's "you didn't build that" is more of a grammatical error than a political one, but the rest is there.

The first few minutes are on news coverage, which you won't care about, but the last couple minutes are on point.

This is especially timely seeing as how much of the RNC was built off this one line, including that horrifying country song.

Assistant Village Idiot said...

I grant it was milder than portrayed. It was one of those political gifts, which his opponents made more of than was deserved, like Al Gore's claim to have "created" the internet, which wasn't entirely crazy. I believe it was still the core intent, however, because as you note, Democrats do believe strongly that government has helped. They aren't wrong in that. But they overvalue it.

james said...

Learned Hand was a good writer.
"What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws, and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it; no constitution, no law, no court can even do much to help it. And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow." P. 190, The Spirit of Liberty (1944).

karrde said...

...and I feel like I wandered from the main point.

It's related to the GDP post, and both posts are joined by the quote from Learned Hand.

And it's really, really simple.

If Obama meant you didn't build that alone, he might have made a point that could be disputed. It could be argued how much Society helped various people build their wealth. Still, there is the distinction between Society, The People, and Government to contend with.

But if he meant you didn't build that, he is (in most cases) wrong. Most people who are wealthy can take a large part of the credit for their wealth. Especially if they weren't born wealthy.

As a thought: compare Bill Gates and Warren Buffet to William Clay Ford, Jr and the Walton children. Gates and Warren were not born rich. Neither were Sam Walton and Henry Ford.

The Walton children and Bill Ford have benefited greatly from their inherited wealth. They have also stayed close to the family business. How much of their current wealth was inherited, and how much was due to their success in the family business? It's hard to say.

But I don't think Society gets much credit for a wealthy son/daughter who maintains and extends the family fortune, any more than it gets credit for the progenitor who turned a good idea into his own fortune.

Texan99 said...

The response I have is, the people who want to collect taxes from me these days didn't build it either, and the people who did build it have already been paid what they asked for it. There's no excuse for anyone to claim the right to charge rent on it now.