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Playing the “Socialist Card” in a Mixed Economy

As Bernie Sanders makes the shift from a populist insurgent to an arguable front-runner, we should expect to see the Socialist Card deployed with much greater frequency than ever before. By “Socialist Card,” I mean the argument that Sanders (who, after all describes himself as a “socialist”) represents the antithesis of everything that makes American great: capitalism, free-enterprise, the Constitution, and freedom itself—none of which is compatible with socialism, which is just another name for both communism and hating Jesus.

The Socialist Card turns a discussion of appropriate percentages into a forced choice between two incompatible values, and that's just silly.
Michael Austin
There is an element of truth to the Socialist Card. Socialism, in its purist form, is a bad economic system. It maps very poorly onto the essential selfishness of human nature, and therefore invariably requires state coercion in the form of a dictatorship and a secret police.This is why nobody really wants to live in the workers paradise of North Korea.

But capitalism in its purist form is a bad economic system too. It maps entirely too well onto the essential selfishness of human nature and invariably results in massive wealth inequalities, monopolies, plutocracy, and the worst sort of social Darwinism—which is why nobody really wants to live in the libertarian utopia of Somalia.

I’m not saying anything new here. In the modern world, pure economic systems—socialism or capitalism—can only be found in failed states. Everybody else has a mixed economy that combines some elements of capitalism with some elements of socialism to produce a society where people have the incentive to create wealth and the legal requirement to participate in the redistribution of wealth through taxation. This redistribution allows modern people to have things like roads, bridges, police protection, military protection, education, and, to some degree or another, health care.

Nobody seriously doubts this—we just spend a lot of time and energy arguing over percentages. If you look at the tax rate as a percentage of the GDP—a fairly good metric for measuring the amount of wealth that is redistributed at the federal or national level—you see that most modern democracies fall somewhere around 25% (Australia is at 25.8%) and 50% (Denmark actually has the highest redistribution rate at 49%). In other words, most stable societies redistribute somewhere between one-fourth and one-half their gross domestic products.

The United States falls pretty far on the low side of the equation, with a rate of 26.9%, right in between South Africa and Bolivia. The countries on the low end—Lybia (2.7), Angola (5.7), and Sudan (6.3) for example—do not tend to be shining cities on a hill. Conversely, few countries on the high end—The Netherlands (39.8), Norway (43.6), and Sweden (45.8)—could be described as uninhabitable hell holes. And both prosperous and impoverished countries can be found all along the spectrum.

And the spectrum of political possibility in American politics is much narrower than the 25-point spread that accounts for most modern democracies. Strong political pressures against either raising taxes or cutting services keep the overall redistribution rate in a pretty tight range. All the rest of us do is try to exercise a little bit of influence on the margins. If Bernie Sanders were granted a sympathetic Congress and a bag of socialist fairy dust, he might be able to raise the rate to 30% (about where it was during the Eisenhower administration). A Ted Cruz or Marcio Rubio landslide that came with a guarantee of four years of complete congressional cooperation might, under just the right circumstances, lower the rate to around 22%.

I do not mean to minimize the difference between a 22% and a 28% redistribution rate, since the difference involves many billions of dollars and has a real impact on people’s lives. But the Socialist Card turns a discussion of appropriate percentages into a forced choice between two incompatible values, and that’s just silly. We are not going to be asked in the next election to choose between “socialism” and “capitalism.” We made that choice long ago, and we chose neither. Like just about every country on earth, we chose a mixed economy—and all we really do from election to election is tinker a little bit with the mixture.

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