The Road to Socialism

It has been apparent to me for some time that the United States has been sliding down the road to socialism.   This slide has continued in both Democratic and Republican administrations.  Large numbers of people, perhaps even a majority, want the government to provide for them in every way, and our politicians are more than happy to accommodate them.   Politicians who promise the most are the ones who get elected.   Our politicians clearly recognize the wisdom of George Bernard Shaw who said, “A government that robs Peter to pay Paul can always depend on the support of Paul.”   

Even before the current crisis in the financial markets had resulted in widespread panic,  Republican Senator Jim DeMint of South Carolina made the following comments at an event sponsored by the Heritage Foundation:   “I'm afraid that America is sliding towards socialism.  Government is now the nation's largest property owner (controlling nearly 1/3 of the land mass), it effectively owns more than 1/3 of the profits of all businesses and more than 1/3 of the incomes of most working Americans.   Government controls the majority of education and healthcare services in America.   It owns the primary retirement income plan for most Americans (Social Security).   The federal government, through a burdensome regulatory system and undecipherable tax code, effectively controls a significant portion of the nation's economic development and business activity.”  

During the few short weeks since Senator DeMint made those comments, our slide toward socialism has accelerated dramatically.   In the last few weeks alone, the U.S. government has (i) nationalized Fannie Mae and Freddie Mac, which means that the government now stands behind $5 trillion of mortgages, or nearly half of all home loans outstanding, (ii) taken over control of American International Group, Inc., the country’s largest insurer, (iii) guaranteed $29 billion of distressed assets in order to induce J.P. Morgan Chase to purchase Bear Stearns, (iv) encouraged the sale of Merrill Lynch to Bank of America,  (v) agreed to guarantee $3.4 trillion in money market mutual funds, and (vi) requested Congress to authorize the government to purchase up to $700 billion in distressed mortgage-related assets from private firms.

This is scary.   In the past few weeks, the U.S. taxpayers have incurred real or potential liabilities of trillions of dollars to bail out private businesses.   All of these dramatic steps have been taken or recommended by a Republican Administration and by two men, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who were previously known for supporting free trade and for their belief in limited government involvement in private business.   According to The New York Times, Mr. Paulson explained his shift in thinking by saying, “There are no atheists in foxholes and no ideologues in financial crises.”

Although there are disagreements over the details, Republicans and Democrats alike, with a few exceptions, seem to agree that the recent steps taken by the government have been necessary in order to prevent an even worse crisis in the financial markets.  In a few years, with the benefit of hindsight, we will know whether these steps were effective in reducing the impact of the current crisis on the overall economy.  For now, Mr. Paulson and Mr. Bernanke remind me of a coach who is forced to call a play with 10 seconds remaining in a national championship game.   If the play works, the coach is a genius.   If it doesn’t, he’s an idiot.    History will treat Mr. Paulson and Mr. Bernanke as geniuses or as idiots.

Aside from the current financial crisis, my primary concern today is that we will never be able to turn back the clock and reverse the country’s slide toward socialism.    Over the years, I have observed that politicians and government entities are always trying to expand their power and authority over individuals and businesses.   They never want to relinquish power they already have.  I am confident they will not want to give up their recently acquired powers even after the current crisis is over.  If the government refuses to give up its new powers, our slide toward socialism will continue, and the freedoms I have enjoyed during my lifetime will not be available to my children and grandchildren.