Is socialism making a comeback?
It appears that the White House feels that the threat from those peddling socialist ideals are serious enough for the administration to do something about it.
The 72-page report from the president’s Council of Economic Advisers (CEA), bearing the deceptively mild title “The Opportunity Costs of Socialism,” took a stouthearted swipe at the trend toward greater acceptance of socialist ideas in the United States. It sought to repudiate with a salvo of statistics the popular idea that the Scandanavian welfare state could be a proper model for America; and in particular savaged the “Medicare for All” proposal of Senator Bernie Sanders, a self-identified socialist.
In economics, “opportunity cost” means the price to be paid for choosing one alternative over another. For example, if you choose not to go to work today, your opportunity cost can be figured in lost wages. The CEA makes the case that if America were to opt for socialism, the opportunity cost would be an economy like Venezuela’s, not Norway’s.
In a conference call with journalists on Tuesday, CEA chairman Kevin Hassett cited findings that suggest the selling of socialism in 2018 as a would-be boon for average Americans is not merely a mistaken proposal but grossly misleading:
“If the United States implemented policies similar to those currently in place in Nordic countries, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers.”
He added, “Note that living standards in Nordic countries … are already at least 15 percent lower than in the United States. If the United States implemented policies similar to those in Nordic countries at the height of their experiment with socialism, which was in the 1970s, the U.S. real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.”
“We find that if ‘Medicare for All,’ which is socialized medicine, were financed out of current federal spending without borrowing or tax increases, then more than half of the entire existing federal budget would need to be eliminated through cuts. Alternatively, if ‘Medicare for All’ were financed through higher taxes, GDP would fall by 9 percent for about $7,000 per person in the year 2022 due to the high tax rates,” Hassett said.
The CEA’s assertions were immediately challenged, of course, by proponents of socialist or welfare-state policies.
Joshua Smith, policy director for Sanders on the Senate Budget Committee, was dismissive, tweeting sarcastically that “The document attacks …[Medicare for All], saying you’d need to cut Social Security to pay for it if you didn’t raise taxes. (Yup, definitely what’s being proposed.)” Smith did not to address the question of how to fund the medical plan.
The report was criticized on its facts about Nordic countries, which CNN said are “not low-income. Iceland has the highest average annual full-time wage out of all developed nations, according to the OECD, with Denmark and Norway coming in fourth and fifth. In addition, the CEA paper argues that Norway’s GDP per capita is “only slightly above” the U.S. average, “despite being an oil-rich country,” when the U.S. is now the world’s largest producer of crude oil.”
The CEA was also faulted for ignoring other indices of social success, such as the 2017 World Happiness Rankings, which placed Norway at the very top.
Hassett conceded that “in terms of personal wellbeing … GDP is not the only measure that one could look at. But … it’s not … an odd choice for an economist to make use of the thing that we have the best data on.”
Given that the CEA generally confines itself to the technical task of furnishing data-dense studies to facilitate economic policymaking, some complained that the agency had erred in allowing itself to become politicized in an election season.
Hassett parried that accusation by saying, “I think that my role at CEA is not to be a politician but to be an analyst. And if our study convinced people of all parties that, if they rely on central planning and try to reduce the influence of private property by either specifically nationalizing things or regulating and taxing things just about into oblivion, that that would be bad for the overall economy, then I would feel like the paper had accomplished its objective.”
The White House was unabashed about using the CEA for an eve-of-midterm anti-socialist manifesto. Less than two hours after the call, it released a statement citing the study’s numbers, saying Democrats want to “take money from hardworking Americans to fund socialist policies.”
Whether this salvo against socialism will have any effect on the radicalism of some Democrats and propel it to a main campaign issue remains to be seen, but the issue is much bigger than the midterm elections. The surge of popularity of socialists and socialism cannot be ignored. It threatens the future of American society, not just the Republican majority in Congress. And while some of the specific points and projections the CEA makes may be debatable, the overall rejection of socialism is certainly right.