Though Bidenomics will likely increase the price of your cookout, July Fourth is still a celebration of everything that made America great—namely, our dedication to the defense of freedom and our other God-given natural rights.
Regrettably, that’s a dedication not shared by all. Though Washington has always had its share of demagogues, they have increasingly turned their attention toward destroying our way of life. Specifically, this movement is focused on maligning wealth, property, and those who pursue a better way of life through innovation.
Listening to these policymakers, you could be forgiven for thinking that our national wealth mostly consisted of gold bars sitting in a safe on a yacht bound for the nearest tax shelter—a collection of idle idols. As such, much of the policymaking debate in Washington has zeroed in on taxing, regulating, and redistributing wealth.
This mindset couldn’t be further from the truth, however. The wealth of American households overwhelmingly reflects the value of productive assets, such as factories, office buildings, delivery trucks, and your favorite corner restaurant.
But there is another important component of wealth—the intangible value breathed into these productive assets by innovators and entrepreneurs. Their work, aided by investors who vet new ideas, brings these productive assets together in ways that make the total truly greater than the sum of its parts.
When innovators and entrepreneurs are free to make new discoveries and harness them into new production methods and products, they enrich our lives. Not only do their inventions and businesses extend our quality and length of life, but they also free our time of tedious labor and allow us to fill them with purpose.
Societies with more productive assets (capital) at their disposal produce more output per worker. This leads to higher wages and more flexibility over your time; that is, more time to spend with your family and in your community.
Conversely, when nations strangle the formation of capital, they suppress productivity and with it, they suppress wages and force people to spend more time on a treadmill at work and in an impoverished state, deteriorating the fabric of civil society.
These are the rotten fruits of anti-wealth policies. The new anti-wealth agenda in Washington stands at the crossroads of willful ignorance and malicious disregard for this delicate process that is the foundation of our prosperity.
They obscure a critical fact: Wealth and innovation drive each other and enable both material prosperity and our ability to free our time to live purpose-filled lives.
Only 11.8% of the assets of the wealthiest 0.1% of American households are made up of real estate and consumer durables, which include houses, cars, and other personal items. The other 88.2% of their assets are made up of stocks, bonds, and other assets that are directly tied to businesses and the economic engines that reduce prices for consumers and that increase wages for workers.
The net worth of the wealthy is often discussed purely in dollar terms, as if that is their wealth—something that could be easily picked up and redistributed. This misses the point disastrously. Their wealth isn’t cash or money that is tied up in a company. Their wealth is the company itself and its capacity to produce.
The broad categories of assets that cover yachts, private planes, and Rolexes, represent only roughly 0.5% of household assets—$1 out of every $200 of household assets. These categories also cover every single motorcycle, bicycle, recreational vehicle, motorboat, watch, wedding ring, collector coin, etc., in the entire country.
To boot, almost all the cash that’s actually sitting in a safe is held by the Federal Reserve banks. Almost all of the rest is circulating around the economy.
The truth is that almost all the assets of Americans are themselves directly linked to the productive engines of the economy.
If every customer of Amazon switched overnight to a competitor, virtually all of Jeff Bezos’ net worth would dry up overnight as well. The market value of Amazon is simply an approximation of the real value created by the company for its customers, workers, and the small businesses that sell through Amazon.
Bezos’ net worth reflects a portion of the value created by Amazon, of the value created for tens of millions of people through his innovative business model.
Every time you walk into a restaurant or a store to buy something, you are using the wealth owned by the wealthy. You don’t need to own the factory that made your grill in order to have it for your July Fourth barbecue. Henry Ford personally used very few of the millions of cars his factories produced. The use of the wealth he owned went to the millions of American families that could now afford a car.
Wealth is, ultimately, impossible without the work of innovators and entrepreneurs to generate prosperity for the rest of society. Their work very much creates productive wealth that is in service to others.
Our Founders understood this process—that among the many blessings of a free society is the freedom to innovate and to pursue the good life for ourselves and the rest of society. Our national commitment to these principles allowed us both the material and political freedom to lead purpose-filled lives and to strengthen and enjoy our strong civil society.
Free of government interference, that’s exactly what innovators and entrepreneurs do. The stark reality is that to regulate or tax the creation of wealth, or to attempt to redistribute it, is an act of destruction. It simply removes assets from their productive application—or prevents their creation in the first place.
The anti-wealth storm clouds in Washington do not ultimately threaten the wealthy. They threaten everyday Americans. They threaten the abandonment of the principles of a free and natural rights-respecting society. They threaten the very foundations that have made America, for more than two centuries, the center of innovation and wealth generation, and with it, the engine of global prosperity.
Rejecting this anti-wealth demagoguery, and embracing our innovators and entrepreneurs, will ensure that our kids and grandkids can celebrate a prosperous America on every July Fourth for generations to come.
This piece is a part of The Heritage Foundation’s Wealth and Innovation project which stands to defend and promote the freedom to innovate, create and use wealth. These are essential to the delicate process by which innovators and entrepreneurs work to build a prosperous and purposeful society.
