Obama's comments on the successful: how Rush Limbaugh got it wrong
Last year I was on a local radio talk show along with the “progressive” editor of a weekly newspaper. As I have previously written, the editor said what I characterized as “one of the dumbest things I have ever heard.” What he said was that Obama and Biden were correct in advocating “spreading the wealth” because everyone contributes to the success of the successful. One of the sources of the editor’s remark was made back in September 2011 by Elizabeth Warren who is running for the senate in Massachussetts against Scott Brown.
Warren rebuts the notion that raising taxes on the wealthy amounts to "class warfare," (see my April 2012 blog) contending that "there is nobody in this country who got rich on his own. Nobody."
CBA News reports “Warren rejects the concept that it is possible for Americans to become wealthy in isolation.”
"You built a factory out there? Good for you," she says. "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."
She continues: "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."
Now the president has made essentially the same speech – with no attributing to Warren. Obama said
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.
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.”
Rush Limbaugh has gone ballistic, devoting much of two shows on this bit of the speech, claiming that Obama is insulting the successful and the private sector economy. He contends that Obama is saying that if you are successful, you have done nothing and that the government is justified in taking away all that you have earned.
My interpretation is somewhat different. As I said on the radio show, the reason that this is stupid is because the left is forgetting (or rejecting) the fact that entrepreneurship is a factor of production (the others are land, labor and capital). Yes it is true that all of society contributes to the foundation of success, it is also true that the ones who put it all together are rewarded – or not if it fails. Profits are the reward to entrepreneurs, like wages go to labor, rent goes to land and interest goes to capital.So yes it is true that the society contributes to the success of the successful. My parents were college educated and teachers. I inherited human capital from them. Yet my success came from my fully exploiting that inherited capital. I know other wildly successful people who lacked the advantage that I had, yet succeed nonetheless. However, we all have given back, educating others, hiring others, paying wages, dividends and rents. Milton Friedman once said that the responsibility of business was to earn profits for without that we all would suffer. Even though that should be obvious especially now, the "progressives" somehow reject the obvious and would have less profits which would make us all worse off.
So although Obama’s remarks are an attack on successful people, it shows yet again that this president and the “progressives” are ignorant of basic economic principles.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com