After Barack Obama was elected in 2008, the no-longer-printed Newsweek magazine declared in a cover story “We are all socialists now.”
This month, as WND reported, a new poll examining the political leanings of the next generation of leaders found 31 percent of millennials identify as “democratic socialist” or “socialist” while 40 percent of men in that age group say the same.
Now, the Trump administration is offering an educational resource through its Council of Economic Advisors that asks whether or not socialism has ever delivered on its promises.
It’s an empirical question, contends the 72-page report “The Opportunity Cost of Socialism,” published Tuesday, not an abstract philosophical debate.
The report examines not only the track record of socialist experiments that once were vaunted in the West, such as the Soviet Union, Cuba and Venezuela. It looks at hard data to evaluate the Nordic states that many on the left now hold up as models.
The panel of advisers, chaired by economist Kevin Hassett, begin by pointing out that with the 200th anniversary of Karl Marx’s birth, “socialism is making a comeback in American political discourse.”
They reference a “broad body of literature” on the subject and delve into “socialism’s historic visions and intents, its economic features, its impact on economic performance, and its relationship with recent policy proposals in the United States.”
“We find that historical proponents of socialist policies and those in the contemporary United States share some of their visions and intents,” the advisers say in the executive summary. “They both characterize the distribution of income in market economies as the unjust result of ‘exploitation,’ which should be rectified by extensive state control.”
The Truman administration established the Council of Economic Advisers in 1946 to provide presidents with objective economic analysis.
The new report juxtaposes current policy proposals with iconic lines from the Communist Manifesto.
Major proposals include “single-payer systems, high tax rates (‘from each according to his ability’), and public policies that hand out much of the Nation’s goods and services ‘free’ of charge (‘to each according to his needs’).”
The panel acknowledges that “contemporary democratic socialists denounce state brutality and would allow individuals to privately own the means of production in many industries.”
Their point is that socialist policies “provide little material incentive for production and innovation and, by distributing goods and services for ‘free,’ prevent prices from revealing economically important information about costs and consumer needs and wants.”
The report cites former British Prime Minister Margaret Thatcher famously observing in 1976 that socialist governments “always run out of other people’s money.”
“Whether socialism delivers on its appealing promises is an empirical question,” the report says, pointing out that Maoist China, Cuba and the USSR “seized control of farming, promising to make food more abundant.”
“The result was substantially less food production and tens of millions of deaths by starvation,” the advisers write.
“Even if highly socialist policies are peacefully implemented under the auspices of democracy, the fundamental incentive distortions and information problems created by large state organizations and the centralized control of resources are also present in industrialized countries, as is currently the case in Venezuela.”
What about Denmark?
What about the Nordic countries of Sweden, Norway, Denmark, Finland and Iceland that are so often cited by the left?
Those countries, the panel contends, also “support the conclusion that socialism reduces living standards.”
“In many respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism,” the advisers argue in the executive summary.
“For instance, they do not provide healthcare for ‘free’; Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes.”
The Nordic countries also tax capital income less and regulate product markets less than does the United States.
“However, the Nordic countries do regulate and tax labor markets somewhat more; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies.”
Living standards in the Nordic countries, they note, are at least 15 percent lower than in the United States.
They acknowledge that American socialists may envision moving U.S. policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with the traditional definition of socialism.
But the economists on the panel estimate that if the United States were to adopt those policies, its real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.
What if the U.S. adopted the Nordic and European versions of socialized medicine that have been viewed as so desirable by modern U.S. socialists?
The “Medicare for All” proposal, for example, would distribute health care for “free” — without cost sharing — through a monopoly government health insurer that would centrally set all prices paid to suppliers such as doctors and hospitals.
“We find that if this policy were financed out of current Federal spending without borrowing or tax increases, then more than half the entire existing Federal budget would need to be cut,” the report says.
If it were financed through higher taxes, GDP would fall by 9 percent, or about $7,000 per person in 2022, due to high tax rates that would reduce incentives to supply the factors of production.
The bottom line: “Evidence on the productivity and effectiveness
of single-payer systems suggests that ‘Medicare for All’ would reduce both short- and long-run longevity and health despite increasing somewhat the population with health insurance.”
Getting ahead of ‘new fad’
Dylan Matthews, writing for the left-leaning news site Vox, was not impressed with the report on socialism, calling it “a truly bizarre document.”
“Its bibliography is a mix of books about mass atrocities in Communist regimes, economics papers on the distortionary effects of taxation, and works by socialists, like the essay Vox published by Jacobin staff writer Meagan Day defending democratic socialism.”
In contrast, Steven Hayward of Powerline blog thought that with socialism “becoming the new fad for Democrats,” it was “good to see the Trump White House getting out ahead of it.”
He said the report “clearly and succinctly lays out a powerful case against all of the leading Democratic nostrums that are likely to be the heart of the Democrats’ 2020 platform.”