Spreading The Wealth: Is It Socialism?

It’s been an interesting week so far as reaction to the whole Joe The Plumber escapade has heightened people’s awareness of Barack Obama’s agenda.

For the sake of full disclosure, and ensuring people don’t accuse me of taking his words out of context, you can see the full transcript of the conversation between Obama and Joe here. I’m going to focus on one sentence that Obama said:

I think when you spread the wealth around, it’s good for everybody.

One can argue a hundred different opinions on this topic, and there’s been a lot of comments around how this is a Socialist agenda (and many consider this to be pretty obvious).  However, the new argument from the Left is that there’s nothing new here that make Obama’s plans more Socialist than we are today.  Or more Socialist than we have been for nearly 100 years.  I received an email today that essentially said that socialism in all countries to some degree, and referenced things like Social Security, public libraries, universities, etc. as examples.

I could spend some time arguing different aspects of these points, but keep in mind that Socialism is not truly one fixed defined process, but rather:

a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods, and the creation of an egalitarian society (Wikipedia).

In an artical by David Lightman and William Douglas, the authors try to make a case for defining socialism in its purest state (state owned industry, and state controlled wealth distribution), which does help the conversation.  They make the fair statement that our current government system oversees a mixed Capitalistic/Socialistic structure.

Where they fall short and spill out all over the pavement is in their assumption (indirectly asserted) that the current state of affairs is acceptable.  That progressive taxation must be okay since we’ve been doing it for 95 years. That since everyone agreed to the big Wall Street bail out, that is okay.  That any benefits provided by government to individuals or corporations in the form of tax breaks or preferred procurement is good and therefore justifies some degree of Socialism.  Since Socialism is not actually communism (although many consider it a specific step toward implementing Communism), it is okay.

You lose this argument with me right away because I think these benefits listed by Lightman and Douglas are not appropriate functions of our government.  I want to see all of it repealed.

We could spend a lot of time arguing about whether different social programs (such as those mentioned in the email I received) that don’t actually redistribute wealth, but rather provide free or discounted services at the expense of progressive taxation (whether income or property), are socialistic or not.  Since these don’t typically amount to direct access to economic wealth, this is a bit of a stretch for me.  In some theoretical sense, a case can be made, but the fundamental problem with Socialism is not with community services.  It’s in the stagnation of growth.

Since we are working in the realm of politics, we tend to be forced to use terms and definitions that a broader set of people can grasp quickly.  I would tend to use the term Socialism to help people understand what I’m talking about, but it truly does not accurately depict the problem I have with Obama’s position.

The technical term I would use is Economic Egalitarianism.  This is also known as Wealth Redistribution.  Or good old Robin Hood’s “Robbing from the rich to give to the poor”, or as Obama stated “spread[ing] the wealth around”.  Properly defined, it is providing equal access to economic resources and wealth to everyone.

I’m happy calling it Wealth Redistribution.  But what’s wrong with it?  Key examples where it exists and fails are:

  1. The Wall Street Bailout
  2. The Savings and Loan Bailout of the 80’s
  3. Welfare
  4. Progressive taxation

I’m going to ask you to accept the idea that the community, whether through the churches, non-religious community organizations, or government management, should always work to ensure that those who are unable to meet the basic needs of food, clothing and shelter, somehow get those needs met.   You can call this socialist, I call it humane.    Most would believe that this is the definition of “welfare”, but what our government provides through the welfare system often exceeds the basic needs, and our concern sits in this excess.

Wealth Redistribution ends up having the following impacts:

1. Those that receive (actual welfare) benefits are inclined to seek ways to continue to receive the benefits.  This leads to:

a. Program Retention (people tend to maintain the level of income/success to ensures there is a continued flow of benefits).

b. Program Growth (people who are above the guidelines for benefits may allow their income/success fall so as to become eligible for benefits).

c. Administrative Apathy (those running the program give up trying to help people improve their situations due to lack of interest).

2. Those that receive the benefit of more wealth (through lower taxes within a progressive tax structure) are inclined to seek ways to continue maintaining the current level of wealth retention.  This leads to:

a. Maintaining the status quo. With less motivation to earn more, since earning more means getting taxed more disproportionately, people are less likely to try and improve their overall income/success.

b. Reduced investing.  Investing might cause additional income… see item above.  Also, those in higher income brackets have less motivation to invest since more of the investment income would be taxed at the higher rate as well.

c. Downward pressure on median income. As those in the upper tax brackets find opportunities to reduce their income in order to reduce their tax obligation, incomes overall go down.

3. Higher corporate taxes will mean:

a. Reduced business growth.  More businesses will adjust by simply restricting growth and maintaining status quo.

b. Higher retail prices. With higher taxes, margins will need to be stabilized by increasing prices.

c. Employee benefits cut. Again, margin stabilization will sometimes be achieved by reducing other costs involved in employee benefits.

d. Increased business failure. Many businesses of differing sizes will fail.  This will increase unemployment, raise retail prices (reduced supply increases prices), and negative impacts on dependent businesses.

So, less motivation to grow as an employee, a business, a society.  This is the core failing of Socialism, that is, a society bent on Wealth Redistribution.  Some see the of Capitalism v. Socialism as a pendulum, but reality is that the pendulum is the public perspective of the impact of the policies that try to produce one or the other.  The fact is, with 95 years of a mixed bag we have never really established a strong and pure market managed Capitalism.  We’ve seen the reason for this over the course of this year’s disasters in the financial markets: we won’t allow real failure.  Even though we know that success over time requires failure to learn and strengthen, we get too scared and try to save every business that fails.  That act, as driven by a “benevolent” government, does more to hurt society than help it in the long run.

It really doesn’t matter what you call it, spreading the wealth around is not good for America.  Never has been, never will be.

There is certainly more than one right answer.  The issue will continue to be how to fairly tax us.  Which is really a contradiction as long as Congress continues its selfish power-ride by maintaining the Income Tax.  Let me be clear about that comment: the Income Tax exists and might never be eliminated because it gives Congress power over the people.  Congress uses it to manipulate our behavior and has few other tools at its disposal that are as powerful as this tax.

The best answer currently on the table, in my opinion, is the Fair Tax, which is essentially a type of national sales tax.  I’m convinced it would work.  We need to really work on our Congresspeople to make it a reality.  If you have questions about the Fair Tax, click here.

About the Author

Mr. Smith is the Publisher of The Conservative Reader. He is Partner/Owner of Ambrosia Web Technology as well as a Systems Architect for Wells Fargo. Art hold a degree in Computer Science from Drake University in Des Moines, Iowa, and is a political blogger at the Des Moines Register. Art's views are purely his own and do not necessarily reflect the views of Wells Fargo.

 

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  1. DJ Durant | Oct 24, 2008 at 11:04 am | Reply

    Brother Smith:

    This clearly and concisely sums up the problem, defines socialism and relates it to what will be in an Obama Administration, an economic disaster.

    Great job!

    DJ

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