Well, socialism seems reincarnated in America in 2019. People talk about it as a credible idea, sometimes throwing the word “Democratic” in front of it for good measure. It’s fascinating.
First off, let’s be clear… words’ meanings change over time, especially in politics. Socialism is technically a planned economy with all means of production owned and operated by the government. This is the stuff of Joseph Stalin and Mao Zedong and it always seems to end with large portions of your population dead of starvation and totalitarianism. I don’t think that’s what people (except maybe Bernie Sanders) mean in America today when they say socialism.
Today’s American Socialism
As far as I can tell, most people who support “Socialism” in America today appear to want a hybrid system with a private – but highly regulated – economy, huge taxes on those who succeed in that economy and a big public support structure for everyone. At a minimum, that support structure would include health care, unemployment benefits, retirement funding, and education.
That sounds great to a lot of people. After all, why wouldn’t it? We all could stop worrying about some big, critical expenses in our lives and 607 US billionaires can pay for it all and still have enough money for a vacation home. But things get rough fast when you pop the hood on this utopia.
When US politicians push the idea of this type of “socialism,” they typically use Scandinavia as an example of its successful implementation. They don’t mention that the public support structure is literally the only feature those countries’ systems have in common with the system proposed by American politicians and backed by many Americans.
Scandinavian Reality
Norway is immediately eliminated as a meaningful comparison because its population is just 8 million people and the country has the world’s largest sovereign wealth fund because of oil in the North Sea. Nobody else in the world can come close to matching that math. Sweden and Denmark are more instructive comparisons. Both became wealthy nations with free markets and without public social support structures, but they’ve implemented those structures since becoming wealthy.
That’s where the similarities with US politicians’ proposals end. Sweden’s and Denmark’s governments both intrude far less into their economies than the US does today, even before the addition of the new intrusions proposed by our politicos. The Scandinavians understand their economies need to be going full-speed-ahead to support the expensive social systems.
But the differences don’t end there… contrary to what many Americans think, the US already has one of the most progressive income tax systems in the world. That means the wealthy in the US already pay a bigger share of income taxes in the US than almost anywhere else. Tax rates in Sweden and Denmark are far flatter across income levels and higher than in the US. Anyone earning over about $50,000 in Sweden pays 52% income taxes and a Value Added (sales) Tax of 25% when they spend their after-tax dollars. Maybe read that again… that’s the most average of Swedish Joes, paying taxes approaching 75% of their income. An American earning a similar amount currently pays 24% in Federal Income taxes and also whatever sales and income taxes (far less than 25%!) their state imposes.
Life with Socialism in America
All those extra taxes are necessary to support Scandinavian social programs despite the fact that Sweden and Denmark spend about 1/3 of what the United States does on defense as a percentage of GDP. I don’t think most supporters of today’s “American Socialists” understand the hideously bad math behind their policy ideas or the differences between American proposals and Scandinavian reality. Further, I don’t believe most Americans who currently favor these proposals would support them if they understood the Federal government would eventually have to take around 70% of THEIR pre-tax earnings to fund the programs. Don’t forget to add in your state’s income tax and then give the whole number a little bump to account for all our defense spending.
Independent analysts estimate Elizabeth Warren’s plans would cost around $34 trillion over the next ten years! There simply aren’t enough billionaires and millionaires to go around. Her plan would ultimately be paid for by EVERYONE just like it is in Scandinavia, but with more restrictions on our economy. Imagine 75% of YOUR income going to the government that is simultaneously burdening the economy with new regulations and corporate taxes. Despite your having almost no discretionary income left; we would still almost certainly increase our already critical government debt load in order to support these programs. The math isn’t the only thing disqualifying these policies from being sound ideas for the United States, but even on its own, the math should disqualify them from consideration.