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THE
GREAT DEBATE: CAPITALISM VS. SOCIALISM Did you watch Bill Clinton's speech Monday night at the Democratic Convention? "We think the role of government is to give people the tools and conditions to make the most of their lives...They think the role of government is to concentrate wealth and power in the hands of those who embrace their political, economic, and social views, leaving ordinary citizens to fend for themselves on matters like health care and retirement security." If you find these words from a two-term President chilling, you are beginning to understand the seriousness of the battle for ballots that took place after the 2000 election. Were you equally disturbed when Bush and Congressional Republicans joined the bidding for ballots with the largest expansion of Medicare benefits in history? Did the audience reactions to Clinton's calls for higher taxes to support more socialism and an even larger government remind you of the coliseum crowds from the Gladiator or remind you of the scenes of Pontius Pilot and the cries to "Crucify Him"? Have you considered the possibility that if we don't turn back the clock on socialism there is a growing threat that the Gokhale-Smetters clock is going to run out? Pundits from both parties have countless proposals to limit the out of control growth in the costs of each and every socialist program. For each cost cutting scheme, there are twice as many revenue raising proposals. Not one, either by itself or in conjunction with any other proposal, is offered as a permanent solution to balancing revenues against liabilities. Rather they are all offered only as a means of postponing for a limited time the eventual bankruptcy of socialism and/or the United States itself. Republicans joining in the bidding for ballots is a sure sign the Socialism Genie is out of the bottle. Equally alarming, no one inside politics is raising any question regarding the fact that Congress has no Constitutional authority for the creation of any of these socialistic programs. Look carefully at our first graph on the left. True capitalistic economies depend on savings to grow economic output. Savings are invested in capital equipment and/or training to increase productivity. Rising productivity leads to higher incomes which will support not only even larger savings, but also greater consumption. Greater productivity and competition inevitably lead to lower prices. Everybody benefits and everyone shares the progressively rising standard of living. Capitalism is a self perpetuating virtuous circle. In contrast, socialism encourages sloth, subsidizes failure and destroys capital through consumption. Capital destruction means falling productivity which leads to lower savings, slower or negative income growth, rising debt to fund both consumption and capital spending, and inevitably lower or falling levels in the standard of living and a slower growth of net wealth or even declining net worth. Socialism is a vicious cycle leading inevitably toward self destruction as prophesied in the quotes of our last article. The two graphs below show some of the effects of seventy years of socialism on the US.
As recently as 1980, the United States was the world's largest creditor; now we are the largest debtor. For the first time in fifty years the IRS has just reported two consecutive years of declines in total individual incomes for 2001 and 2002. Incomplete data for 2003 and 2004 indicate that wage increases are lagging inflation. Remember the headlines about the economic miracle of the nineties? Do the graphs above and the one below look like an economic miracle? Enron accounting? Or an economy in an advanced stage of socialistic decline?
Serious bleeding cannot be controlled with band-aids. It takes a tourniquet. The Federal Reserve act, passed in 1913 was a pre-requisite for inflation. Since socialism funds consumption, not savings and investment, rising taxes and inflation are the cash flow fountains needed to fund socialism. The next two graphs are thumbnail summaries that provide an explanation of the first three graphs.
As bad as the picture painted by these graphs is, Gokhale-Smetters tells us that even under the most optimistic models the growth of liabilities over the next forty years will exceed the growth of liabilities reflected in the charts above.
Ending socialism will not be easy. Apart from me, there may not be anyone else that has even considered that it might be possible at all. At the very least it will take a major political debate. Political debates begin at the grass roots or from the top of the heap. Logic says that the existing demographics and the time required virtually precludes this from being a grass roots effort. Hands down, the best debating platform in the US is the "bully pulpit." It is going to take leadership if we are to end socialism in the US before socialism ends us. It is going to take the kind of skillful use of the bully pulpit shown by Ronald Reagan. And it is going to take the kind of skillful Congressional leadership shown by Newt Gingrich's Contract with America. Where are we to find another Ronald Reagan when our conservative icons have been self destructing? If there is another Ronald Reagan out there, why hasn't he, she, or they come forward? There are three major deterrents to seeking elected public office. First, the private life of office seekers becomes fair game for public consumption. This is something that must simply be accepted. There is nothing that is going to change or prevent this from happening. Second, professional politicians are the problem. The cure will take a citizen willing to become a statesman for a limited time. We are looking for some one willing to make a sacrifice, not a career move. The third factor, campaign fund raising, is what dramatically reduces the number of citizens willing to become statesmen. It is the second and third factors, that I believe I know how to change. How many willing citizen statesmen might come forward if they knew they would never have to engage in campaign fund raising, but would have all of the funding they required in order to campaign effectively and successfully? If there are other potential Ronald Reagans out there, how many are deterred from seeking public office because of the onerous burden of perpetual campaign fund raising and what must be done to raise the funds? Professional politicians accept that this goes with their career turf; citizen-would-be-statesmen do not. How many are not elected because inadequate fund raising kept them from getting their message out? Could we elect enough conservatives to public office and maybe find another Ronald Reagan if a conservative independent group could be guaranteed of raising $600 million of campaign cash every two years that is over and above the cash raised by the Republican Party? This conservative independent group would provide this money to suitable conservative citizens willing to serve, but who were not willing to engage in campaign fund raising. The internet provides a simple way for these separate parties to identify each other as a means of getting together. Would Republican incumbents become more conservative if they knew they could be faced with a more conservative primary opponent that is better financed than they are? How many professional politicians would uphold a new Contract with America in each of our upcoming elections if faced with these facts? How many professional politicians that refused to accept new Contracts could be defeated and replaced by citizen-statesmen who would gladly embrace these ideas? I am suggesting that there is a way to reliably raise at least $2.4 billion dollars between now and 2012. This is money that is over and above what is raised by the Republican Party. This money would be raised outside the Republican Party and would not be under any control or subject to any influence by the Republican Party. If this money were to be spent electing Constitutional conservatives based on a series of Contracts with America, how much could we change America and how quickly. Our supported candidates would be seeking office at every local, state, and national level. This is not intended to be a new political party. Consider it more as a conservative extension of the Republican Party designed to shift the Republicans toward the Constitution. And we would be looking to entice conservative splinter parties or candidates back toward a much more conservative Republican Party. If we are to end socialism, our goal is to elect conservatives and to defeat socialists regardless of their party labels. If we could find one or more Reagan-like statesmen willing to serve, could we elect them and hold the campaign and bully pulpit debates needed to educate enough Americans about the difference between freedom and socialism? Could another Ronald Reagan explain to Americans the consequences of continuing socialism? Could another Ronald Reagan convince enough Americans that the correct choice is freedom? Could another Ronald Reagan convince the American people that freedom is the tool that they need "to make the most of their lives", if we just get government off their backs and out of their way? Could another Ronald Reagan convince the American people that ordinary citizens can manage "matters like health care and retirement security," far better and far more reliably than government? This series is about finding, funding, and electing Constitutional conservatives, and in particular about identifying and electing another Ronald Reagan. This series is not about finding the money. In truth, the money will seek out, find, and automatically flow to the independent group of Constitutional conservatives willing to serve in this capacity. This series is aimed at securing your help in forming this group. Invite your family, friends or anyone that is willing to spend a few seconds of their time over and above the time that it will take them to decide that this effort is worth a few minutes of their time. And it carries no financial or other risks of any kind. No one will ask your identity. No one will ask anybody for money. The most that will be asked of anyone, is to send one email and/or to make one phone call. I first began to think along these lines in the summer of 2000. Here is a glimpse of where I began, but as you can see from this series my thinking has advanced to another level. If you, your friends or your family have ever wanted to make a difference, invite them to read and follow this series. The more emails that are sent and the more phone calls that are made, the greater the likelihood that the Reagan Renaissance will become a reality. Thanks again to Market Observations, Mike Hodges at Grandfather's Economic Report, Financial Sense Online and the PUPLAVA'S.
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The
Comptroller of the Currency is already on record as saying that it is
not possible to grow the economy sufficiently to fund the unfunded and
growing liabilities projected by Gokhale-Smetters. History tells us that
unsustainable trends end. The Greeks, the Founding Fathers, Austrian
economists, and history all tell us that democracies end in bankruptcy
or hyperinflation when the public learns to vote themselves benefits
from the public treasury. The graphs above should be convincing evidence
to anyone that socialism is going to bankrupt the United States or our
government is going to be forced to destroy our currency. Ending
socialism is the only way to avoid these tragedies. Gokhale-Smetters
answers the question, "When?" Between 
