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The Trump White House blasts socialism

Rick Newman
Senior Columnist
Alexandria Ocasio-Cortez. (Getty Images)

In one of its easier challenges, the Trump White House has issued a new report attacking the idea that Americans would be better off under socialist policies than capitalist ones.

“Socialism is making a comeback in American discourse,” Kevin Hassett, chairman of the White House Council of Economic Advisers, told reporters on Oct. 23. “Proposals like Medicare for all are very consistent with the designs of socialism.”

Hassett is referring to ideas popularized by Bernie Sanders during his 2016 presidential run, which are catching on with some Democrats. A number of prominent Dems favor some form of expanded Medicare, whether a full takeover of the U.S. health system or a more modest plugging of holes. Free college is another Sanders idea gaining adherents.

The surprise House primary win of avowed socialist Alexandria Ocasio-Cortez—who is favored to win in November, and take a seat in Congress—indicates that an American politician can run and win on collectivist ideas (though perhaps only in places like New York). And a recent Gallup poll shows that Democrats have a more favorable view of socialism than capitalism. Even 16% of Republicans say they have a positive view of socialism.

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The White House aims to change that. The new report, called “The Opportunity Costs of Socialism,” analyzes two types of socialism in modern history: Authoritarian socialism of the sort leading to Venezuela’s catastrophic decline, and the softer socialism practiced in Nordic countries such as Sweden and Denmark, where taxes are relatively high but college and health care costs are largely borne by the government. It’s easy to make the case against Venezuelan-style socialism, in which the government controls most of the economy and typically runs it into the ground. With no private property or lawful profit motive, resources go to waste and inefficiency chokes off prosperity. If you wanted a model for wasting oil wealth and other resources, Venezuela might be Exhibit A.

Better than Sweden?

The Nordic countries, by contrast, are prosperous free-market democracies with some socialistic policies that reformers occasionally cite as possible models for improvements to the American system. The White House paper argues the American way is better. It marshals data, for instance, showing that Americans enjoy more purchasing power, a lower overall tax burden, and better returns on investments in higher education. “By some measures,” the report says, “even poor American households have better living standards than the average person living in a Nordic country. There are significant opportunity costs of pursuing Nordic public policies.”

Economists have long debated the virtues of American-style capitalism, with minimal social-safety-nets, versus the more paternalistic systems of Europe and Scandinavia. That debate won’t end with one White House report. And there’s plenty of other evidence revealing where the U.S. system falls short.

A very flawed health care system

In the latest competitiveness rankings published by the World Economic Forum, the U.S. economy ranks first overall, with high marks for financial and labor markets, innovation and the sheer size of its market. But the United States ranks 34th out of 140 nations on macroeconomic stability, largely because of the large and growing federal debt. And the United States gets the worst marks for its health system, which ranks 47th, behind virtually every other advanced country in the world along with emerging nations such as Sri Lanka, Albania and Ecuador.

The United States spends far more on health per person than any other nation, yet gets considerably worse outcomes on key measures such as life expectancy and infant mortality. That’s because of a health care system – built around employer-provided coverage – that has a limited government backstop and provides unaffordable choices for people who aren’t covered through their job. The Affordable Care Act, passed in 2010, was meant to plug some of those holes. Yet huge problems remain.

Medicare for all is gaining adherents because nothing else seems to be making coverage more affordable for families on a budget. It would be enormously expensive, requiring at least a doubling of all federal taxes, if other spending remained the same. But the current system is also enormously expensive, with massive hidden costs that impede the competitiveness of American businesses, lock people into jobs they don’t like, depress the wage component of overall compensation and still leave millions of Americans unable to afford coverage. Declaring socialism bad won’t solve any of that. But it would be a start to acknowledge that capitalism hasn’t solved the problem.

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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman