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The Truth About Socialism in America

Ivory Johnson|Founder, Delancey Wealth Management, LLC
Wednesday, 3 Oct 2012 | 11:08 AM ET

With an end to the contentious presidential campaign just a few weeks away, there remains a lingering question about whether President Obama introduced the United States to socialism, and with it, the death knell of traditional American values.

President Barack Obama speaking in Nashua, NH on energy.
CNBC
President Barack Obama speaking in Nashua, NH on energy.

To put this matter into perspective, socialism is defined as a system in which the means of production are owned and controlled by the state, often described as central planning. It’s been said that Obama is a socialist because he uses the government to pick winners and losers and attempts to redistribute wealth in an effort to support the welfare state.

Some might argue that socialism began on January 20, 2009, yet anytime public policy gives one demographic a competitive advantage over another, a central body is said to have distributed wealth. It may not be considered polite conversation, but past discriminatory environments allowed many households to profit from the state sanctioned absence of competition.

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In fact, recent Libertarian arguments are predicated on the basic tenets of Austrian Economics, which rejects the idea that there is anything at all the government can do to stabilize macroeconomic fluctuations. But even F.A. Hayek, author of “Road to Serfdom,” believed that when legislation is used to determine the winners and losers, it is a function of socialism. Lo and behold, lobbyists and special interest groups are known to write the laws for the lawmakers, impacting important pieces of legislation that ultimately shift profits.

If we can be honest, many Americans thrive in a state run economy, associal security, Medicare and Medicaid represents 43 percent of the federal budget and the projected shortfalls created by those programs will be financed by future generations without their consent. Many baby boomers mistakenly assume they paid for these benefits, but studies show that seniors receive far more in services than they pay into the system.

Nevertheless, 40 percent of the country has been convinced that America is becoming a socialist state, a decidedly right wing opinion. How strange that the states who receive the most federal aid relative to the taxes they pay tend to vote conservative? For a demographic so opposed to government handouts, one with the highest concentration of the 47 percent that pays no federal income taxes, they certainly have all the trappings of a centrally planned economy.

It’s also worth mentioning that the tax code incents certain activities, giving homeowners a mortgage interest deduction at the expense of renters. For what it’s worth, Canada has no such deduction and still boasts a higher rate of homeownership. Moreover, 70 percent of nursing home residents are on Medicaid, the middle class once again dipping into the beleaguered pockets of Uncle Sam.

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Meanwhile, military spending is 3.5 percent of the economy, 15 percent of the workforce is represented by public sector workers and the United States has over 2,000 federal subsidy programs to support favored industries and pet projects, increasing in number by 21 percent during the 1990s and 40 percent during the 2000s.

This country has picked winners and losers from its inception, distributing wealth through a variety of legislative atrocities, questionable tax policies and a willingness to help those in need, even if they turn out to be the loudest arbiters of a pure free market system that hasn’t existed for some time. To suggest that the government’s role in the economy is a new phenomenon only serves to obscure the broader problem: the United States has $16 trillion in debt, $62 trillion in unfunded liabilities, and with so many covert recipients of public assistance in complete denial, no reasonable means by which to pay it off.

Ivory Johnson, CFP®, ChFC, is the founder of Delancey Wealth Management, LLC and has over 20 years of investment experience. He can be followed on DelanceyWealth.com. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Delancey Wealth Management, LLC, A registered investment advisor and separate entity from LPL Financial.

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