Commentators call it the gaffe that will cost Romney the election. At a small donor event, the candidate said that 47 percent will vote for Obama “no matter what”—those who are “dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it.”

Conservatives defend Romney on the grounds that government indeed creates dependent people who tend to vote themselves more benefits. This is not a new insight. In the nineteenth century, many classical liberal thinkers argued that by seizing revenue and conferring benefits, the state produces a class of victims and a class of parasites, giving the latter an incentive to favor the continuing plunder and redistribution.

Yet Romney’s formulation falls far short of this older class analysis. Most strikingly, it is simply a conservative myth that about half of Americans do not pay taxes. Some will more honestly say, “income taxes,” but this precision undermines the whole point.

Janet Novack in Forbes explains it well: “more than 60% of those non-income tax paying households did pay federal payroll taxes—meaning Social Security and Medicare taxes.” And over 60% of Americans fork over more in payroll than income taxes. Moreover, almost all Americans pay “state and local taxes—state sales taxes, real estate taxes (either on their homes or built into their rents) and possibly state income taxes too, since those taxes tend to exempt fewer poor families than does the federal income tax. If they buy gasoline, liquor or tobacco, or have telephones, they’re also feeding the federal purse.”

Progressives argue that the poor pay more than their fair share and conservatives claim the reverse. But in fact, everyone pays an effective rate that dwarfs the tiny tax rates over which Americans fought a revolution against Britain. From a free-market standpoint, it is impossible and even obscene to say that 47% of Americans do not pay enough taxes.

Romney also seems to neglect the many likely Republican voters who get a check from Uncle Sam. When he dismisses those “dependent on government” is he counting the millions of active duty soldiers and veterans, the millions of police officers, the government contractors, the many millions of senior citizens on Social Security? And how can he campaign against Obama’s dismal record on unemployment when millions of unemployed would presumably fall in the 47% he dismisses?

Perhaps Romney’s comments were “off the cuff,” as he insists. Yet even after having time to clarify his remarks, he dug himself in deeper:

It’s a message which I am going to carry and continue to carry, which is that the president’s approach is attractive to people who are not paying taxes because frankly my discussion about lowering taxes isn’t as attractive to them. Therefore I’m not likely to draw them into my campaign as effectively as those in the middle.

Tragically, Romney is conceding that his program of “lowering taxes,” which he associates with shrinking government and bolstering free enterprise, offers nothing to the poor. He thus accepts the typical progressive line that the government on balance serves the least fortunate, and without big government the poor would get poorer and the rich would get richer.

This should outrage anyone who actually favors free markets. The government does not on balance serve the poor. Through its myriad privileges and distortions of the free economy, today’s government props up corporate power while depriving the poor of opportunities through licensing laws, taxes, and regulations that only the rich can afford to circumvent or obey. Even those on welfare are receiving a pittance compared to what the state has deprived them in opportunity.

And indeed Romney does not promise to liberate the poor from the clutches of government. He wants to shave a few percent off the income tax. But he does not propose to cut regressive Social Security taxes—which Ronald Reagan raised in the 1980s. Romney does not suggest scaling back corporate welfare, or eliminating the privileges to the banking establishment, big finance, and defense contractors. He does not propose cutting the war machine and national police infrastructures that employ millions of government and quasi-private workers every bit as reliant on Washington as food stamp recipients. Nor does Romney propose a way to help Americans become less dependent on government and more active in the market economy.

Romney’s agenda is not a free-market agenda. Nor is it anti-government—which makes since given that he wants to take over the government. What Romney offers is a slightly more rightwing version of the welfare state. This is nothing new. England first adopted poor laws not to reduce inequality but to control prices and keep beggars and vagrants in line. The modern U.S. welfare state traces its origins to Prussian autocrat Otto von Bismarck, who saw entitlements as a way to ensure national unity, strengthen the military, and coopt the opposition.

America needs an honest discussion about how government takes from some and gives to others, and how modern democracy encourages people to see the state as savior for doling out crumbs after crushing their opportunities at self-reliance. We could use an open debate over how politicians foster a cycle of dependency, not just in social welfare but in corporate welfare and middle-class programs like Medicare, Social Security, and public education. We should for once consider ways that the most needy could benefit not from higher taxes and wealth redistribution, but through eliminating the state-created barriers that obstruct the poor and middle class from pursuing the American dream.

Instead, Americans on both right and left accept Romney and Obama’s premise that political economy is a zero-sum game, that high-income taxpayers and the poor are pitted against each other. They use this faulty premise to keep us divided and conquered. Ultimately, the true class struggle is between the political class and the rest of us, and although Obama and Romney use different rhetoric and cater to different constituents to secure their power, they both offer plans that encourage dependence, keep the poor down, and fleece trillions from all productive Americans.