Our Unbelievable American System Didn’t Undermine And Overcharge Us

One of the most famous controversial phrases of the past decade has been then-President Barack Obama’s 2012 “you didn’t build that” comment. With his former vice president about to be president, armed with trillions of dollars of promises for government to build more, and some already calling the upcoming presidential term the third Obama administration, it is worth reconsidering that statement and its implications.

One sentence of Obama’s speech – “if you’ve got a business, you didn’t build that” – was taken by some as an attack on businesses and entrepreneurs. So his defenders quickly responded by pointing to surrounding parts of the speech:

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.

Backers insisted that what Obama meant somebody else made happen was not business success, but “this unbelievable American system that we have that allowed you to thrive,” and the teachers, roads, bridges, etc., provided by government, that “gave you some help.”

However, that “clarification” was both confused and ominous for America.

Most ominous was the mistaken equation of society with government. Starting from the correct premise that one’s society plays a role in successes, he incorrectly jumped to the non sequitur that the successful therefore owe more taxes to government. Society and government are not the same. In fact, in many ways, as Albert Jay Nock wrote, “the interests of the state and the interests of society … are directly opposed.” Or as Thomas Paine put it, “Society in every state is a blessing, but government, even in its best state, is but a necessary evil.”

First of all, only a very small part of what government does – protecting our lives and property from our neighbors and the invasions of outsiders – can be justified as making our voluntary social arrangements work better, advancing the general welfare. But that can only justify very low, shared burdens, not high and greatly disproportionate taxation.

Government has also coercively displaced voluntary market arrangements in so many areas that many cannot even conceive of government not doing things that were done by others before. Teachers are just one illustration. Some share of many successes does belong to teachers. But it is those “special” teachers that deserve our gratitude, not the government that has commandeered the education system from parents’ control into its power. That gratitude does not require that we must pay more to those teachers after the fact, as they taught voluntarily for compensation they agreed to. It does not require that we pay different teachers more today, either. And we do not owe government still more today just because they took over a function – education provision – that does not require their intervention, and then hamstrung it more than they advanced it.

Government, with its massive inefficiencies, also vastly overcharges citizens for their services, as study after study has demonstrated. Roads and bridges have been prime examples, laden with pork-barrel earmarks, prevailing-wage rules, union restrictions, project labor agreements, environmental extortion, buy-local restrictions, and more. Such inefficiency cannot justify making “successful” people pay more to make up for overcharging us for what we could do more cheaply and voluntarily, if government would only stop denying us the freedom to do so. If anything, it justifies a rebate to compensate for government “price gouging.”

Vast areas of government spending that supposedly justify higher taxes also inhibit voluntary social arrangements, rather than enhancing them. Much of what our alphabet soup of regulatory agencies do fits that mold, as do price controls (e.g., minimum-wage laws), many labor and zoning laws, occupational-licensing requirements, ad infinitum. Such restrictions cannot even be justified as advancing Americans’ general welfare, much less as demonstrating a need for us to pay government more to create ever-more roadblocks for voluntary arrangements to overcome.

Taxes, whose burdens are almost universally understated, also create roadblocks to voluntary arrangements. Every dollar the government takes in, it takes from others. But acolytes of the state ignore the wonders individuals could have worked with the resources taken away to fund all that the government does. Taxation also distorts people’s incentives, which imposes further costs on society. Just as, say, a regulatory burden of 30% eliminates some voluntary arrangements that would otherwise have created wealth for both parties involved, so does a 30% marginal tax rate. The gains crowded out dramatically raise the cost of government beyond just the budgetary cost, increasingly so as government grows larger, so that the appropriate standard for government to meet is that every dollar it spends must be worth not just more than a dollar, but far more. Very little government spending can meet that standard, and all its spending beyond that level undermines rather than advances our “general welfare.”

Most of our “unbelievable American system,” which Obama portrayed as provided by government, and expanding along with government, is in fact due to centuries of voluntary arrangements with one another. But those arrangements weren’t due to government. The opposite is true. The unimaginable success of America was made possible because we more stringently limited government than ever before, as with the Constitution’s creation of the world’s largest internal free-trade zone and the Bill of Rights’ “thou shalt not” limits on what the federal government is allowed to do.

Obama was right that we have inherited an “unbelievable American system,” but he totally misunderstood what made it unbelievably good. That was not government doing more and more. It was the social coordination and wealth made possible by keeping most things off limits from government meddling and extortion. And that incomparable social inheritance from reining in government that Americans enjoy cannot justify undermining that success by further expanding government.

It is true that then-President Obama’s “you didn’t make that happen” comment was twisted by some. However, without any twisting, his words reflect both a misunderstanding of, and a threat to, what has made America great. He forgot what Albert Jay Nock observed long ago: “It is a curious anomaly. State power has an unbroken record of inability to do anything efficiently, economically, disinterestedly or honestly; yet when the slightest dissatisfaction arises over any exercise of social power, the aid of the agent least qualified to give aid is immediately called for.”

Given the amazing growth in the size and reach of the federal government even since Obama told us what we didn’t build, what we have experienced has clearly illustrated the points made here. Government is bigger, but social cooperation has been vastly diminished. And no amount of confused “clarification” makes the latter something to be grateful for.

In fact, over a century and a half ago, English philosopher Herbert Spencer analyzed how grateful we really should be for government, as we have been forced to endure it, far more accurately than Obama and those who follow his logical foot(mis)steps. As he pointed out in his 1857 “Representative Government – What is it Good For?”

Our political machine … Its parts are extremely numerous: multiplied, indeed, beyond all reason. They are not severally chosen as specially qualified for particular functions. No care is taken that they shall fit well together: on the contrary, our arrangements are such that they are certain not to fit … had the problem been to find an appliance for the slow and bungling transaction of business, it could scarcely have been better solved.

And the consequence is that we should be anything but grateful for the growth in government, because:   

Countless facts prove the government to be the worst owner, the worst manufacturer, the worst trader: in fact, the worst manager, be the thing managed what it may. But though the evidence of this is abundant and conclusive … legislators … cling to the implausible theory of an officially regulated society in spite of overwhelming evidence that official regulation perpetually fails.

Gary M. Galles is a professor of economics at Pepperdine University. 

Note: This article is adapted from a chapter in Galles’ latest book, “Pathways to Policy Failures,” published in December by the American Institute for Economic Research.