Obama: right about business, wrong about government

by Russ Roberts on July 19, 2012

in Budget Issues, Complexity & Emergence, Cooperation, Debt and Deficits

Many people have excoriated President Obama for suggesting that entrepreneurs can’t claim credit for their success.

It appears that many of these critics have taken the President’s remarks out of context. (Full text here.) Never mind. Even out of context, the critics are wrong and the President is right.

Of course no one creates a business on their own. And yes, government played an important role as the President suggested–creating the schools that educated your workers (often poorly, but I’ll give him the benefit of the doubt), the roads that your product traveled on, the bridges your trucks crossed, etc.

But so what?

Who disagrees with that? Who thinks government shouldn’t spend money on roads and bridges when the money is spent well? Education is a different matter. Government does it poorly, but even there, very little of educational spending is federal, so the President’s example is mainly meant to play to your heart strings thinking about children. But you can toss in other things that government contributes to the success of entrepreneurs–the rule of law (when we have it), the enforcement of contracts, the punishment of thieves and so on. These are all things that let entrepreneurs achieve greatness.

What does that have to do with the President’s reason for mentioning all this, that the rich shouldn’t mind paying more in taxes because their success is aided by government?

Nothing.

If government would stick to what it does fairly well such as roads and bridges and even giving the President an enormous benefit of the doubt, education, what does that have to do with our current predicament? We’re spending a trillion more dollars than we take in and we’re spending more than we ever have before. If we spent our money wisely, there would be plenty of money for the infrastucture government produces that help us work together creating businesses, wealth, and communities.

The problem is that government spending is out of control.

It’s like a Dad giving all the kids their own credit cards and at the end of the month, finding out that there isn’t enough money to pay the mortgage. So he tells everyone that next month, everyone has to work a little harder because after all, you can’t succeed as a family without a roof over your head. But everyone agrees with that. The failure to recognize that isn’t what got the family in trouble. What got the family in trouble is the stuff they put on the credit card that wasn’t crucial to happiness or well-being or achieving success. The mortgage payment should be the first money that’s spent. Not the last. If it’s the last, you better get control over the process.

So the President foray into business philosophy really wasn’t so bad. It’s his political philosophy that needs some work. I wish he would lead. I wish he would say that we’ve tried to do too much and it’s time to do a little bit less but to do it well.

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