Sunday, August 23, 2009

Are We Socialist Yet?

To answer this, we have to define what socialism is. There’s often confusion surrounding this, of course. An article in my local paper this week upbraided a previous week’s writer who had decried our country’s “headlong rush into socialism.” The article said this was ridiculous, because Obama isn’t trying to turn the U.S. into the old Soviet Union. While this may be debatable (I say, only half joking), who said anything about the Soviet Union? The Soviet system was what we refer to as communist. Importantly, communism is little more than a logical extension of socialism, with even more power in the hands of the state. But what the letter writer was really objecting to is what he sees as our country’s adoption of European style socialism, with its protected working class, socialized medicine, high tax rates, etc.

Have we become Finland, or France? Again, it seems we need a definition here. Philosophically, socialism is about a large and powerful state, which necessarily comes at the expense of personal liberties. A government can’t spend money without taking it from someone first.

But still, this is a vague definition, and I like to quantify things. I started my thought process with tax rates, but quickly realized this would be difficult to calculate. After all, how many forms of taxation are there in our country? Hundreds? Thousands? One easily forgets all the small taxes built into things like the monthly cable bill. My colleague Daniel Grasman, a European who knows his socialism, suggested I look at total government expenditures as a percentage of the overall economy. Bingo! All taxes find their way into spending, so this method captures everything.

On the next page is the data for OECD countries going back to 1991.

General government total outlays as a % of GDP

A little hard to see, I know, but that archetypal socialist country, Sweden, tops our list, along with France and the other Scandinavian nations. No surprises here. Note, though, that the Scandinavian countries have been inching away from socialism while we have been inching towards it. The gap between Sweden and the U.S. in 1991 was 23.6%. By 2010, it is projected to be 15.1%. And the U.S. numbers don’t even include an assumption for nationalized health care.

By my way of thinking, every country on this list is socialist, including the U.S. Some are just worse than others. To appreciate this, let’s look at a longer term view of the U.S, because this has been creeping up on us for a long time:

The trend is as clear as it is unsustainable. As Margaret Thatcher once famously said, “The problem with socialism is that you eventually run out of other people’s money.” Well, yes, but the problems run deeper than that, including the creation of a culture of dependency, something that runs counter to America’s long standing tradition of self-reliance.

But these numbers don’t capture the whole picture. Socialism is about power focused in the state, and power is not always manifested through money. The state can pass laws compelling citizens to do things. For instance, in Southampton, Long Island, the town board has passed a law saying that henceforth all pools must be heated with solar panels. An 800 square foot pool will require 500 square feet in solar panels. Where to put them? The town board won’t solve that problem for you, but they feel good about themselves because they are saving the planet. A small liberty – the right to heat your pool – is lost. These things add up.

An even more threatening example? The “cap and trade” bill passed recently by the House mandates that your house must undergo an “environmental audit” if you wish to sell it. In other words, a federal bureaucrat will be able to hold up your house sale indefinitely if you don’t have the right kind of light bulbs. To make the policing of this possible, the bill plans to increase the staff of the EPA from 10,000 to 45,000 people. Yikes!

There has been an interesting backlash of late in town halls and letters to editors, and I have a theory about this. The graph on the previous page tells an interesting story. It says that statism has been very effective at advancing its interests over the decades, but it has done so incrementally. This was clever because, like the frog that doesn’t know it’s in boiling water until it’s too late, the logical foes of statism have largely ignored statism’s steady advance. Why? Because, I think, these logical foes are busy with their lives. They have jobs and families, and would frankly not like to take time out from these pursuits to do things like read twelve hundred page bills.

This is quite contrary to the “activist,” whose very life is often organized around advancing an agenda. I noticed this dynamic first in college. The activists seemed to have few other pursuits. Many of us certainly opposed them philosophically, but this opposition was about our fifth priority behind things like sports, socializing, sleep, and yes, even studies. Where activism was concerned, we may have had them outnumbered, but we were at a complete disadvantage.

This dynamic persists in the real world. The activists go into politics, or work for advocacy groups, while the rest of us just…work. Take ACORN, which seems to be able to muster a crowd of people on virtually any weekday. Who are these people and how did they manage to get the day off? They didn’t, because this is what they do.

An ACORN Protest – How Do They Have the Time?

So, for decades now, these folks have successfully, incrementally, advanced the power of the state. Over the last seven months, though, they have decided to reach for the brass ring. They want everything on their wish list, and they want it now, and this has turned out to be a large strategic error. It was so much, so fast – one trillion dollar bill after another – that the “silent majority,” as they are often called, said to themselves, “hey, maybe we should actually pay attention to this.” A tipping point had been reached, and an angry backlash began. The honeymoon for Mr. Obama is definitely over:

I believe the huge dip in the stock market last winter was largely attributable to the prospect that Mr. Obama would be able to get his entire agenda through, and people were suddenly getting clarity as to what that agenda really was. The huge rally since began almost to the day that it became apparent that cap and trade would likely never get through the Senate, and the rally gained steam as health care floundered. Stay tuned, though, this isn’t over.