SOCIAL CAPITALISM VS SOCIALISM

PART 1 Political socialistic capitalism

I write this as a lifelong registered Republican that is fiscally conservative and socially liberal.  The capitalists have wrangled tax breaks, to the extent they currently pay little or no taxes.  Trump’s tax bill allowed the tax rate for corporations to reduce from 35 to 21%.  This is the stated rate before deductions.  The actual tax rate is closer to 10% for corporations. Take Amazon, a company worth $900 billion and pays no taxes.  Think of the infrastructure Amazon utilizes, for which the taxpayer pays for highways, airports and other resources their shipping utilizes.  Everyone’s taxes pay for the building and maintenance of these resources, but not all taxpayers use Amazon.  The Republican mantra has been “trickle-down economics works!”.  This fallacy was promoted by the aptly named economist Laffer, during the Regan administration.  The basic idea was to reduce the tax burden on the corporations and the benefit would flow down to the worker in the form of jobs. In other words “voodoo economics”.  Capitalists believe corporations and small businesses drive the economy.

Corporations are made up of investors that take risks, with the expectation of winners and losers.  If a fire burns down the factory and there is no insurance, the shareholders lose out.  Corporate bailouts are an anathema to basic risk reward ethos of the corporation.  If a corporation did not pay taxes, but takes a profit, do they deserve to be bailed out?   Ten percent of the public controls 90% of the corporate value.  This ten percent makes up the top 1% in income.  Corporate bailouts also benefit the 35% of foreign investors that own U.S. equities.  Taxpayer bailout monies are going out of your pocket in the form of debt and being put into the pockets of foreigners and corporations that pay no U.S. taxes.  This is Social Political socialistic capitalism on steroids.  Is this action any better than Socialism?  Let us explore.

Take the tariffs and farm subsidies.  The big agra farms made out with the Trump bailout.  The soy crop is only profitable in large production cooperatives. Subsidies were given out and the administrations response to the small farmer was “go big or go home”.  This is a social capitalistic action at its worst.  The U.S. taxpayer has paid twice for this action. PS- this farm bailout was larger than Obama’s auto bailout loan, which was repaid.  This action also promoted the large farmer.  Had big agra failed in lieu of the bailout, the large farms may have been redistributed into smaller farms through natural selection-maybe?

Let me explain why the taxpayer pays twice. The first is the tariff Trump put on Chinese electronics.  This tariff is paid by the consumer for products without a domestic alternate product and therefore, the US consumer pays the tab.  As a result the Chinese targeted soybeans and whiskey.  These both have alternate sources and therefore by imposing an import tariff China uses alternate sources.  China wins Trump loses.  In the case of soybeans, Brazil came into the market to sell China, and as a result, Trump has made the taxpayer pay for the bailout.  This action is made more insidious by the fact that the Department of Agriculture bailed out a Brazilian company operating a soy farm in the US, with a $35 million bailout.

The second payment involves the taxpayer paying off the tab for the farm bailout.  This is a part of the trillion dollar debt incurred in 2019.  All this stupidity from the stable genius, or is it real genius.  The collection of tariffs inure to the treasury.  As you can see the monies flow from the taxpayer to the corporation, which I call social political socialistic capitalism.  The small family farm is failing at a record pace, and big agra is getting bigger as a result of the bailout.  Is that how big agra gains all their land? Through small farm foreclosures? There should be some kind of reciprocity.

Initially the Obama administration was hounded by Republicans when it came to the auto bailout with the mantra that basically stated: if you speculate and lose you should not be rewarded or the hand will always be out for failure.  That sentiment was the justification for the republican opposition to the Obama bailout of the Auto industry. The auto bailout was in the form of a loan and repaid. The Auto bailout was signifyingly less than the farm bailout, which will not be repaid by the farmer.  Political socialistic capitalism only works when the risk reward and failure episodes are not tampered with.  If disturbed, the potential of powerful political oligarchs, like the robber barons of the previous century, emerge.  The breakup of the robber barons was assisted by the great depression and anti-trust legislation.

Social Political socialistic capitalism has the impact of exacerbating the income disparity.  The bailouts interrupt the natural selection of success and failure.  The government then picks winners and losers in a corporate socialistic fashion.  Political socialistic capitalism should survive on its own. When it is bailed out, only the wealthy benefit.  Social political socialistic capitalism only helps the privileged.

Pure political socialistic capitalism in conjunction with some socialism in a balance is the ultimate goal of the constitutional experiment.

Part II Socialism

Now let us discuss Socialism.  Whereas Political socialistic capitalism is based on greed and avarice, Socialism is based on empathy, need, and the Christian ethic in the treatment of the lesser of these.  Socialism takes the attitude that you make the benefits inure to those in need first.  The adage, “a rising tide floats all boats” is the saying utilized by economists to describe how socialism works.  The Capitalist basically thinks the influx of monies and capital at the top will be the impetus for creating employment.  The Socialist knows that if you put the monies at the bottom you float the boat and eventually the money will wind up in the hands of the capitalist, however, they must earn it.  Which system is best?  Perhaps a combination of systems is the best movement forward.