Special for News Talk Florida
America needs to be more American and go back to its roots of authentic capitalism instead of the corrupted crony capitalism we have today, or the Socialism-lite that is gaining popularity.
The next Presidential election in USA is likely to present us a choice between 2 models: continue the crony capitalism we have today, or Socialism-lite. None of these two models embody the American Way.
What is the American Way?
The American Way is to have a level playing field for all, encourage self-help and entrepreneurship, a small Government and low taxes. This is what most Americans want and think of as a natural model for their country.
Failure of capitalism
What we have instead (and probably have had for decades) is privilege for some, low social mobility, and big Government with high taxes. This crony capitalism is also described as caring socialism for the privileged, ruthless capitalism for the rest.
This unnatural crony capitalism has been sustained for decades because the privileged have gamed the Government and our democracy, and used it against us. George Monbiot says “The oligarchs have discovered the formula for persuading the poor to vote for the interests of the very rich”.
“In an economy where the rate of return on capital outstrips the rate of growth, inherited wealth will always grow faster than earned wealth. So the fact that rich kids can swan aimlessly from gap year to internship to a job at father’s bank/ministry/TV network – while the poor kids sweat into their barista uniforms – is not an accident: it is the system working normally”. The Economist Thomas Piketty explores privilege for some, and lack of social mobility in his influential book ‘Capital in the Twenty First century’ and says “I think the level of inequality we have today is not only unfair but it is also not efficient for the working of the economy”.
We don’t have a growing economy at the time of writing but a bubble sustained by cheap money from Quantitative Easing and low interest rates. Peter Schiff, CEO of Euro Pacific Capital, explains “The truth of the matter is, we don’t have a booming economy. We have a bubble. And when you have a bubble economy, debts go up. Budget deficits go up. Trade deficits go up because you’re not productive. You’re just going into debt to consume”.
New and Shiny
We don’t fix things; we just buy something new and shiny. Instead of fixing problems in the food supply, consumers want to go vegan and stop eating meat and dairy. Instead of lowering the bloated cost of higher education, we just want the government to pay for it. It seems there is a prevailing cultural trait to not fix a problem but to buy into something completely new while ignoring the new set of problems it will bring.
This crony capitalism and the failure of Neoliberalism will lead to demand for Socialism as the shiny new thing. The Canadian journalist Don Pitts says “capitalism is the hands-down winner in making ordinary people rich, healthy and happy are also convinced that right now U.S. capitalism needs someone like him(Bernie Sanders)”. In other words, the greed of crony capitalism went too far and Socialism-lite is the backlash.
This Socialism-lite is Capitalism funded social programs such as expanded Medicare, Medicaid, free higher education, more Paid-Time-Off, and government imposed minimum wage. This Socialism-lite will in turn create its own problems.
A middle-class family anywhere in the westernized world earning about US $75-100k/year will pay 33-50% of their income as direct and indirect taxes. The excuse for high taxes is that the government is taking care of the less fortunate. In reality, “Income security programs—veterans’ benefits, food and housing assistance, federal employee retirement, and disability—account for 17 percent of the budget”. It is a politically popular but extremely inefficient way to take care of the less fortunate.
The American Way is not for the government to give handouts to struggling people. Why would you want the government to take $1 from someone to give you $0.17? Why not earn the $0.17 yourself or save more during the good times? The America Way is for homeowners to rent their room using AirBnb, or to supplement income with driving for Uber/Lyft, or to improve your skills and get a job that pays more.
People accept their government stealing from someone else after demonizing them, and giving it to them as handouts. Politicians will promise it, and the government and the corporations are happy to administer it. As the British say, ‘they all have their snouts in trough and their two front trotters as well’ in this legalized extortion.
The architects of these programs envision that the taxes needed to support these government programs will come from billionaires and corporations. The fear is that these new taxes will likely come from the middle class. Peter Schiff, well known economist and CEO of Euro-Pacific Capital says “So, how did we pay for those things? Through massive tax hikes on the middle class and on the working poor”. This is because government find it easier to tax and penalize middle class and harder to tax and penalize the billionaires and corporations as they can hire professional accountants and lawyers to find loopholes and escape. “Already, wealthy people and corporations easily get around today’s rules. However tough any new laws might seem, they’d soon be undercut”.
The new shiny Socialism-lite will have its unintended consequence of making the government bigger, corporations bigger and stronger, and the people poorer.
The darker side to having big government and big corporations is that it has a tendency to descend into Fascism. “Fascist dictatorships were borne to power in each of these countries(Italy and Germany in the 1930’s) by big business, and they served the interests of big business with remarkable ferocity”.
Call to action
We can expect new Government programs funded by high taxes on middle class if the Socialism-lite model wins. We can expect more of the corrupted capitalism if the crony capitalism model wins. It is a lose-lose for the public.
America has had enough of the crony capitalism and privilege which has denied the vast majority its rightful share by gaming its democracy. America doesn’t need Socialism or a caring sharing European or Canadian or Scandinavian economic model which sucks the life out of entrepreneurs and winners with its high taxes.
America needs to go back to its roots of authentic capitalism, level playing field for all, self-help, entrepreneurship, low taxes, and small Government.
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5 – Green New Deal