FOR THE MONITOR

President Obama is taking a pounding for claiming that business owners are less responsible for building their businesses than everyone they’ve relied on along the way. Here’s what he said at a rally in Roanoke, VA on July 13th:

“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 President’s defenders quibbled over pronoun antecedents. They argued that what he really meant by “that” was the roads and bridges businesses rely on, and not the businesses themselves.

That’s not what he said. It may have been what he meant. And it’s still wrong on several levels.

First, Obama was wrong to credit government for the successes of business without acknowledging that the private sector creates the wealth that the government skims to pay for itself.

If you’ve got government program – government didn’t build that. Somebody else paid the taxes that made that happen.

The Eisenhower Interstate Highway System certainly makes it easier to do business in America. That’s why we pay gas taxes. For Obama to use the liberal mirage of infrastructure spending to justify higher taxes on the most successful Americans gets it exactly backwards.

The President wants successful business owners to pay more in taxes, in gratitude I suppose for the benefits of government. Who does he think paid for those roads, and those schools, and that government research he touts?

More fundamentally, Obama ignores the greatest benefit government provides to business; rule of law. A free market society is not possible without property rights and contracts that enforce them. Our system of voluntary exchange wouldn’t work if you could stop payment once you’ve received your goods, force your customers to buy your product, or steal from people who charge more than you’d like to pay.

Being a nation of laws, with police and courts to enforce them, rather than a nation of men allows entrepreneurs to take risks in the market. Capitalism and anarchy cannot co-exist. But growing government and raising taxes to our current level erodes these property rights. The President wants to confiscate unpopular profits, subsidize favored firms over their competition, and in the case of the auto bailout, tear up contracts for the benefit of his political allies in the labor unions.

Finally, Obama fails to realize that government is far from the most important partner in making us all who we are. Other than Julia, the state-dependent mascot of the Obama re-election campaign, we owe a much bigger debt to the builders and innovators of the private sector than we do to our politicians.

Even in these economic doldrums, our American lifestyle would be considered unimaginably extravagant throughout history. Those gains have come from free markets and free trade. When we can exchange ideas even more freely than goods, each new invention, innovation, and efficiency builds on the last. We take for granted technologies that our ancestors would have considered magic.

Angry Birds wouldn’t exist without the iPhone, and I wouldn’t have much to write about if Adam Smith, David Ricardo, and Milton Friedman hadn’t said it first. No one builds a business from nothing. But so what?

We all stand on the shoulders of giants. What matters is some take advantage of their head start to build something new. Each step forward should be rewarded by a rational tax regime.

President Obama’s fundamental misunderstanding is that profits are just a small fraction of the wealth the free market creates. Each new advance from the private sector is not only a risk rewarded, but a benefit to society as a whole.

Companies that create goods and services voluntarily purchased enrich their customers and provide new opportunities. UPS, Google, and Staples are part of our infrastructure, along with millions of businesses large and small around the world.

President Obama gives government too much credit for the long-term success of the American economy. But government didn’t build that. The free market made that happen.

Grant Bosse is Lead Investigator for the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord, NH.