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Thursday, May 7, 2009

Obama's Economic Policies and the Definition of Socialism

Here is how Wikipedia defines socialism.

broad set of economic theories of social organization advocating state ownership and administration of the means of production and distribution of goods,

So, an economy that is centrally planned and controlled is one that defines Socialism. So, is President Obama trying to manage the economy? (the definition of centrally planned)

So, let's look at what the president did with Chrysler. When Chrysler was about to file for bankruptcy the president stepped in. He orchestrated a deal that would give most of the company to UAW. That would be followed by the government itself being a minority owner and then Fiat. Its creditors would be in the weakest position. Most of the creditors accepted this deal. Why? It's because most of the entities owed also themselves owed to TARP. It was companies like Goldman Sachs, Morgan Stanley, etc. As such, when the president said jump these companies said "how high". The only ones to balk were those financial institutions that didn't owe to TARP.

Does this sound like centrally planned and controlled? Even the most ardent supporters of President Obama aren't going to deny that. Through TARP, the president now controls the actions of most of the banking system. Now, any business that these banks do is controlled and monitored by the president. The fiasco surrounding Chrysler shows this.

The president claims he doesn't want to own the car companies. Of course, that's hard to believe given that he wants a majority stake in GM and a minority stake in Chrysler. Actions speak a lot louder than words. Currently, the government is negotiating with both car companies to take an ownership stake in each.

Then, there's the signature pieces of President Obama's domestic agenda: cap and trade, health care, and education. Cap and trade will control how much of what types of energy sources each and every company will be allowed to use. Does this sound like government control and central planning? Again, even his most ardent supporter would need tortured logic to deny this.

Universal health care would of course also put the nation's health care in government control. First, there would be a government run health insurance that would "compete" with private insurance. I say "compete" because unlike private plans, the government's health insurance need not be profitable. It can be paid for with tax increases, borrowing, and printing money. Since the private insurance carriers have no such luxury, that's not really a competition. Then, there is the government run health insurance exchange. All health insurance carriers would have their health insurance policies run through a centralized system run by the government. Again, does anyone doubt that this is central planning and control of health care?

So, what is the president trying to do? He's trying to plan and control banking and financial services, automobiles, energy, and health care. Isn't that the definition of socialism? Of course, we aren't even done yet. The biggest way for the government to control and plan the economy is through government spending itself. The more money the government puts into the economy, the more it controls the economy. Well, the president has issued a massive $787 billion "stimulus". His budget is the biggest in history, and he's created a mortgage bailout, and banking bailout. The amount of spending by this president is unprecedented. Isn't that central planning and control.

The president's defenders will say he is simply responding to a horrible economy. All of this is temporary. That's nonsense. Neither universal health care nor cap and trade are temporary. There is absolutely no exit plan from control of either the autos or the banks. Furthermore, this isn't necessary. Different presidents respond differently to economic downturns. Reagan came into office during stagflation and he not only cut taxes but government spending on everything but defense. Warren Harding followed a similar model during the recession he dealt with. The Irish cut taxes and their economy boomed. The president is doing this not because it's the only choice. He's doing it because it's the choice he wants to use. Make no mistake...the central planning and control the president is creating is NOT necessary. Rather it's being done because this is the policy he believes in.

Now, is he a socialist? Well, compared to folks like Daniel Ortega and Hugo Chavez he certainly is not. Unfortunately, he is creating a level of Socialism in our economy never seen before, and it's a matter of policy that he believes in.


Anonymous said...

yeah Ireland cut taxes and the economy boomed.

You didnt finish the story. How is Ireland doing now?

mike volpe said...

The tax cuts were about a decade ago. Are you actually blaming them for whatever problems they have now.

The economic cycle has natural peaks and valleys. You're blaming the tax cuts for what happened a years later. Come on.