by Denny Smith
Margaret Thatcher supposedly observed that the problem with socialism is that eventually you run out of other people’s money.
Whether she said it exactly that way hardly matters. It’s a terrific line—and, unlike many government programs, it fits comfortably within its original budget.
Something interesting is happening in America. Socialism, once a word politicians handled like a dead raccoon, has become increasingly fashionable, particularly among younger Americans.
Before those of us old enough to remember Soviet bread lines start hyperventilating, there’s an important distinction.
When a 25-year-old says, “I like socialism,” I doubt he’s envisioning government ownership of the local Taco Bell. He’s probably thinking affordable healthcare, cheaper college, student-loan relief, childcare and perhaps someday owning a house without first winning Powerball.
And I understand the frustration.
Imagine being 27, working full time, paying $1,800 a month in rent, carrying student debt, making a $900 car payment on something apparently engineered by NASA, and discovering that the modest starter home your parents bought for $82,000 now costs $425,000.
Then somebody arrives and says:
“We can fix all of that.”
Naturally, you ask, “How?”
And here comes the magical answer:
We’ll tax the rich.
Ahhh. Now THAT is good politics.
Government will provide more healthcare, housing, education and assorted other goodies—and somebody you’ve never met will pick up the check.
Unfortunately, eventually the waiter arrives with the bill.
And arithmetic is a stubborn little devil. It doesn’t care whether you’re Republican, Democrat, socialist, conservative or currently identifying as a Subaru.
There simply aren’t enough billionaires.
We can debate whether wealthy Americans should pay more taxes. We can debate corporate taxes and capital gains until everyone in the room requires sedation.
But if government promises become large enough, “tax the rich” eventually becomes:
“Good news! We’ve expanded the definition of rich, and apparently it now includes you.”
Congratulations on your promotion.
That’s the part Americans sometimes miss when admiring European social democracies. Yes, many provide generous public benefits. They also collect substantial taxes from ordinary middle-class people to pay for them.
The honest political question isn’t:
“Would you like government-funded healthcare?”
Of course you would.
Try this:
“Would you like it badly enough to personally pay considerably higher taxes for it?”
Suddenly the room gets quieter.
But capitalism shouldn’t get too smug.
If millions of younger Americans are flirting with socialism, defenders of free markets might ask why instead of simply calling them idiots.
A lot of people believe they’re doing everything they were told to do—work, get educated, save money—and still can’t get ahead.
That frustration is real.
America, meanwhile, has developed its own wonderfully hypocritical economic system. We despise socialism right up until the government benefit has our name printed on it.
Social Security? Essential.
Medicare? Hands off.
Farm subsidy? Protecting agriculture.
Corporate tax incentive? Economic development.
Student-loan forgiveness?
SOCIALISM!
Apparently the philosophical distinction sometimes depends upon whose mailbox contains the check.
So whenever any politician—left, right or somewhere out beyond Pluto—promises something “free,” ask three questions:
Who gets it?
Who pays for it?
And what happens when it costs twice what they promised?
Government can tax money, borrow money, print money and redistribute money.
But despite decades of determined bipartisan experimentation, government has yet to repeal mathematics.
There is no free lunch.
There’s just lunch where somebody else gets the check.
And sooner or later, that somebody may be you.
Denny Smith is a retired Master Plumber and financial advisor who somehow convinced WIBC to give him a microphone 23 years ago —and, remarkably, nobody has asked for it back yet.
