WASHINGTON, March 24, 2017 — When Barack Obama was elected president in 2008, he promised to fundamentally change America. Most voters thought that meant he would institute policies much different than those implemented by former president Bush, but still consistent with American principles.
Instead, Obama moved to move the U.S. closer to the kind of ingrained socialism that has long been dominant throughout most countries in the E.U. In 2017, President Trump is trying to deliver on his promise to reverse Obama’s policies. But that effort is proving to be more difficult than he thought.
The question to consider: How are Socialist policies different from Capitalistic policies?
Very broadly, Capitalism supports private ownership of resources, market-driven decisions about production and prices, and minimal central government control. In theory, the government only intervention in a market when a potential disaster, or at least a very difficult situation, would arise from a lack of government intervention.
On the other hand, Capitalism—at least the variety that has been dominant in America—also concedes that the central government should offer some goods and services that should be available to all Americans (called public goods) regardless of social class or income level. Such elements include primary education, defense of the country and a functional and fair judicial system. Beyond public goods such as these, the tenets of Capitalism emphasize allowing the market to decide what products are made, what price they should carry and how changes in the production process are established.
Capitalism, importantly, also advocates very little or no redistribution of income.
Socialism, on the other hand, generally supports primarily private ownership of resources, but advocates more government control of markets and prices. A Socialist government takes a greater role in deciding what products are produced and often what the price to the consumer of these products should be.
Many more goods and services are put into the category of “public goods” under a Socialist government. To pay for that, income redistribution becomes increasingly aggressive. Thus, the average citizen enjoys many “free” government services, while those who earn higher incomes pay very high tax rates to pay for those services that are provided free to certain individuals and social classes as defined by the government.
The U.S. implemented a system of free market capitalism from its very beginnings. It took about 150 years for America to evolve from being a new nation to becoming the largest and most vigorous economy in the world, with worker output and personal incomces far exceeding those in every competing country, even even in the case of countries and civilizations that are hundreds or even thousands of years older.
Obama wanted to fundamentally change America. As has gradually become clear, he certainly did.
Obama applied the Socialist model at a time when America’s Capitalist model had become badly damaged largely as a result of a quietly creeping socialism his fellow Democrats had gradually put into force, particularly in the area of real estate lending.
Obam offered more “free” goods and services to carefully targeted and generally poor Americans. He increased the scope and generosity of the food stamp program. He increased spending on welfare and removed the work requirement that had been imposed by a bipartisan coalition in the 1990s. He offered (falsely) free or subsidized health care to every American. To pay for these redistributionist giveaways, he raised income taxes on the highest income earners by 10% and raised capital gains taxes by a whopping 58%.
The result was that instead of recovering from the Great Recession, the American economy stagnated throughout Obama’s entire eight years in office. In fact, Obama is the first president to have served his term in office without enjoing even a single year of economic growth of at least 3%.
Donald Trump was elected president to change that track record. Yet the major problem he faces is that once people are given something at a reduced cost or for no cost at all, it becomes extremely difficult, perhaps impossible, to take it away.
Obama’s income redistribution policies echoed his “share the wealth” campaign themes. After eight years of this, the recipients of these new and growing entitlements now believe it is their right to have those things, which the government has no right to take away. That’s precisely why objections have arisen to Trump’s proposed budget, which aims to reduce considerably the government’s increasingly huge imprint on the American economy.
Trump’s proposed budget generally reduces government spending for so-called “social programs.” At the same time, Trump also wants to significantly reduce taxes on businesses and wage-earning Americans. But, as with Obamacare, Trump will run into issues raised by Obama loyalists as well.
If Trump proposes a 10% tax cut for all Americans, then a high-income earner who pays $50,000 per year in taxes would get a $5,000 cut while a lower income earner who pays $4,000 per year in taxes would get only a $400 cut. The opposition will promptly scream that Trump’s policies are simply “tax cuts for the rich,” since the rich will get a $5,000 tax cut while the average American will only get a $400 tax cut.
The only way for Trump to be successful in reversing the Socialist policies of Obama will be to use executive orders to reverse the growth-stifling executive orders Obama signed in the first place. He then must push the enactment of policies that will grow the economy so that opportunity will be provided for all, not just a chosen few. Once the U.S. returns to a strong growth profile and once more Americans find greater economic opportunity there will be less need for “social programs.” For that reason, reducing spending on them will become easier.
Trump’s policies, if put in place, will stimulate economic growth, reduce taxes for all Americans, reduce government spending and add freedom back into the economic system. That’s really the only way to reduce socialistic policies and restore an American economy that is once again based on the pro-growth dynamic of Capitalism.
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