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Socialism in the United States – Part 1

Socialism is a pie-in-the-sky utopian economic dream. But it has a hard “rubber-meets-the-road” impact on each of us, whether we like it or not.

Economic socialism relies on the false assumption that there is a fixed amount of wealth in a nation or in the world. The resultant corollary is that if one person makes a lot of money, he is depriving someone else of his “fair share” of the available money. This leads then to the erroneous conclusion that everyone has a right to an equal share in the nation’s wealth. Because some people do make more, and others less (or do not work at all), this logic necessitates a plan to redistribute the wealth. This is the basis for the welfare state, where some people work and others (who could and should work, but don’t) get a free ride on money ultimately derived from the efforts of those who work.

Scottish economist Adam Smith wrote in his The Wealth of Nations that the wealth of a nation is not limited but is based on the labor of the people applied to the nation’s resources in the production of goods and services for the people. In other words, the wealth of a nation is not finite. Each person applies his or her own efforts to the resources available in the production of goods or services, and then personally benefits from the results of his or her work. Since different individuals have different skills and access to different resources, the individuals in a society can benefit and thrive in a system of free enterprise where each individual (or group of individuals) is able to provide the goods and services needed by other individuals in that society. In some cases, one society may have to make an agreement with another society to provide or obtain goods or services, which are not naturally available from within a society.

Under socialism, the government inappropriately takes the responsibility to make sure that everyone gets his or her “fair” portion of the so-called finite wealth. This is done by passing a complex set of laws that ultimately work together to bring about redistribution of the wealth – purportedly leveling the economic playing field for everybody. Taken to its logical conclusion, socialism cannot be limited to a single nation, but must involve the redistribution of the wealth in the entire world.

To use an analogy, if there are a limited number of fish in the sea to feed everybody, then you need to distribute a specific number of fish to each person so that each person has something to eat. However, if there is an unlimited supply of fish (e.g., they keep reproducing), then you teach people how to fish and leave the rest to them. Socialism assumes that there are a limited number of fish in the sea. The reality is that Adam Smith is right – the fish do procreate. There are abundant and myriad kinds of resources to which individuals can apply their labor to produce goods and services in return for appropriate compensation.

As America hands out more fish, fewer people are learning, or even care to learn to catch fish.

According to a July 7, 2011 editorial, “Starting in 1964, when President Johnson launched the War on Poverty, a well-intentioned crusade to end poverty, the U.S. has spent an estimated $16 trillion trying to help the less well-off.

“LBJ and other well-meaning Democratic politicians at the time also hoped that the burgeoning welfare state would make people more self-sufficient, a noble goal. It didn’t work.

“Today, some 44 million Americans are on food stamps. In 2007, it was 26 million. Treasury Secretary Tim Geithner recently boasted that the U.S. issues more than 80 million checks a month. But while the U.S. has more than 70 means-tested welfare programs, the poverty rate today is higher than it was in the late 1960s.” (According to Robert Rector, Senior Research Fellow at The Heritage Foundation, means-tested welfare programs differ from general government programs in that they provide aid exclusively to persons or communities with low incomes.)

On April 5, 2011, Mr. Rector testified before the Congressional Subcommittee on Income Security and Family Support, where he explained that the rapidly increasing welfare state is growing out of control, and is not addressing the problem of poverty.

“For the past two decades, means-tested welfare or aid to the poor has been the fastest growing component of government spending, outstripping the combined growth of Medicare and Social Security spending, as well as the growth in education and defense spending. Over the 20-year period between FY 1989 and FY 2008, total means-tested spending increased by 292 percent over the period. The increase in combined Social Security and Medicare spending was 213 percent over the same period.

“Welfare spending has grown enormously since President Lyndon B. Johnson launched the War on Poverty. Welfare spending was 13 times greater in FY 2008, after adjusting for inflation, than it was when the War on Poverty started in 1964. . . . Means-tested welfare spending was 1.2 percent of the gross domestic product (GDP) when President Johnson began the War on Poverty. In 2008, it reached 5 percent of GDP. Over the next decade, total means-tested spending is likely to average roughly 6 percent of GDP.”

To allude briefly to our analogy – If people had been learning to fish rather than being given fish, the government would be distributing far fewer fish.

The Rubber Meets the Road

The money distributed under these various “means-tested” welfare programs comes from your pocket and from mine – from the wallets, purses, and budgets of everyone who works and pays taxes. This means that the more of our money the government can take to pass out to others (especially those who should and could work but don’t or won’t), the less we have to provide for our families.

In theory, the ideal end result of socialism would have to be the reduction of the available income to every working household and the increase of the available income to every poor or non-working household until every household had the same available income. From a socialist point of view, an important role of the government would be managing the distribution of the money so that every household has the same available income (and savings and property) – no more, no less.

Under this extreme example of socialism, regardless of how hard you work, how creative you are, or how important your service or product is to others, your available income would be determined by laws implemented by bureaucrats. This does not motivate people to do their best, or even to do well.

Thomas Jefferson pointedly warned, “A government big enough to supply you with everything you need is a government big enough to take away everything that you have. . . . The course of history shows that as the government grows, liberty decreases.”