Monday, August 24, 2009

Is America Becoming Socialist?

The debate is raging in America today -- do we want socialism? Like most labels "socialism" is sometimes accurate, sometimes completely misleading. It's an old debate, by the way -- more on that later.

The attached picture is circulating around the Internet -- I saw it first after the 2008 presidential election. It seems the rabid Republicans I know are most responsible for passing it along again and again in their forwards. It obviously impugns the Democrats, and that's good in their mind, but I wonder if there isn't more to the story.

It's somewhat chilling to the minds of Libertarians, or Reagan conservatives if you must, to think an idea -- socialism -- so abhorrent to our grandfathers in 1944, could possibly be gaining so much traction today. Our Hoover-loving grandfathers would be saying, "I told you so." Some of us are so dulled, however, that we don't even care to make the distinction any more about what constitutes socialism and what constitutes liberty. More importantly, we are not drawing the important distinction between government intervention into the monetary supply versus intrusion into the free-enterprise system we prize so highly in America. Maybe some thoughts today on that topic will be helpful.

From the idea of a small federal government that handles defense and currency with a Bill of Rights vouched safe for everyone, leaving most decisions to the states and cities, we have moved a long, long way down the path from those founding fundamentals since 1776. There can be no doubt about it, but the thing I find interesting is the almost universal apathy about it. Our children and grandchildren are too young to have a meaningful conversation about it, and our grandfathers are dead. Until the push back evidenced at all the town hall meetings over ObamaCare, I was beginning to wonder if anyone even cared anymore.

I read today that the "Cash for Clunkers" program has been hailed as an "unprecedented success by any measure." Really? The numbers suggest that by the federal government directly interceding in the once publicly-owned automobile industry and allocating $3 billion that approximately 800,000 new autos have been sold in a little over two months since the bill passed. That number, of course, does not include the billions advanced to GM and Chrysler to keep them afloat, and despite the effort GM ended up in bankruptcy anyway. One could argue GM will emerge as stronger and more competitive with a new balance sheet that will assure its future success as a "leaner, meaner" competitor, but the government as a partner in all of it is, well frankly, just bone-chilling to some.

The federal government mandating limits on the executive compensation among banks and insurance companies that accepted rescue and bailout proceeds because of a few greedy, bad actors is another area of recent and unwelcome intrusion into free enterprise. Whereas in the past companies were allowed to fail, we now seem to have a mantra that some companies are "too big" to fail because of the systemic risk they may pose to the overall economy. Really? Failure to rein them in caused them to run rampant off the reservation. AIG instead of sticking to its knitting as an insurance company found a way to "enhance" its earnings as an investment banker. We were told only the federal government was big enough to save them. And of course the corollary is that the American taxpayer is really who stands behind the American government.

Recent estimates from last week revised the 10-year projection for the total federal government's deficit (not debt) upward to $9 TRILLION. As long as the gross domestic GNP continues to grow at a robust rate, it is thought there will be enough revenue and to spare to cover all the deficits currently amassed. That's a big assumption. Leading economic indicators have suggested, again as late as last week, that the recession has bottomed out and we are officially out of the recession now. Of course, it is government officials who are the source for the information. The conclusion: The government's swift and decisive action last fall has shortened the misery cycle. Translation: Socialism isn't so bad after all, now is it?

Our government's unprecedented interventions in the economy are evoking charges of "socialism" from people who should be just a little more careful with that word.

I just want to draw a line that apparently isn't clear to at least a few who have been carelessly tossing the word "socialism" around. Specifically, whenever one side of the bailout debate says it would be "socialism" not to let GM fail, the other side says "Well, it was 'socialism' to bail out financial folks, so stop complaining."

Good point, I guess — sort of — but let's not ignore one extremely important difference between keeping a financial firm afloat versus keeping a car company afloat. The ultimate responsibility for the integrity of the money side of our economy rests with the government -- always has, always will; but the ultimate responsibility for the real goods-and-services side in a capitalistic free-market economy is almost always the market.

Money is the lubricant for the real economy, and it moves in the opposite direction. When we buy soap, the money and the soap pass each other as they move in opposite directions. Money soundness is the ultimate responsibility of the sovereign government. Why? Because the sovereign is the only entity with the authority to define what "money" is, control its sources, and define how it's to be used. Free markets don't do that function.

In our recent crisis, it would have been highly desirable to allow the market to punish the financial idiots and gluttons who failed to do the jobs they were hired to do — if those failures had been compartmentalized sufficiently. But they weren't, and as a result the money side of the economy was threatened with collapse.

I was angered and wrote to our Utah Senator Bob Bennett about it. I was particularly miffed that as a member of the Senate Banking Committee Senator Bennett had not done more (my view) to oppose his Democrat cronies, especially Chairman Chris Dodd (D-Connecticut). I got a nice long letter back from Senator Bennett explaining every vote and documenting his stance on pending regulatory legislation that he says got steamrolled by his adversaries from the left. Glaringly absent from his letter, however, was any negligible response to my stated facts that he had accepted millions of dollars in political campaign contributions from the very institutions he was tasked (but failed) to oversee.

To his credit, however, Senator Bennett wisely stated in his letter that there was a distinction in his mind between saving the financial institutions and the goods and services side of the economy. He voted for the first round of bailouts for the banks and insurance companies, coincidentally his chief political benefactors -- and in fact, Bennett was the chief spokesman urging swift passage of that first $700 billion bailout package. But then he found his political "religion" again and voted no on subsequent bailouts after that. Still, most troubling is that Bennett in essence backed then-Treasury Secretary Pete Paulson's "pick and choose" collapses -- notably his two former competitors when he was chairman at Goldman Sachs -- Bear Stearns and Lehman Brothers.

Guess what a collapse of the money side of the economy would have done to the real goods and services side of the economy? (No hints are necessary, I hope). So Bennett backed the rescue of the financial institutions, having failed in the Congress to regulate them and keep them on the reservation, but refused to help out the real goods and services side, crying "socialism" along with every other conservative. I think it's safe to conclude that it's not so much a question any more about whether or not we are "socialist." Rather, it's more a matter of degree.

By the way, I agree with the distinction Bennett and others have drawn between the money side and the goods and services sides of the economy because I believe it is correct. I'm just frustrated over what could easily be branded as the "appearance of evil" by accepting donations from the very institutions you are tasked to regulate, then blaming your Democrat counterparts for the failure. Seems a little simplistic to me. If there is any statesmanship left to locate in either house of Congress that trumps political survival mentality, I'm eager to find it. Congressmen Bishop and Chaffetz come closest in my definition, but it's probably only because they have not been there as long as the rest of Utah's delegation. The corruption is widespread, I am afraid, and I consider myself an optimist. I hope for statesmanship, I pray for it, but it's just hard to find. That is why my vote for Senator in 2010 is still under consideration.

So, if "socialism" means government intervention where government really does not belong in a properly-functioning free-market system, the case for using that word is far weaker when the subject is the money side of the economy. That's a fundamental difference that should be getting more attention in debate about whether or not we are moving toward socialism.

Now let me put a fine point on it, just so you can have some perspective about how long this debate has been raging within the hierarchy of the LDS Church, for instance.

In October, 1936, President Heber J. Grant clearly stated the objectives of the Church Security Program [renamed Church Welfare Plan in 1938]:

"Our primary purpose in organizing the Church Security Plan was to set up a system under which the curse of idleness will be done away with, the evils of a dole abolished, and independence, industry, thrift, and self-respect be once more established among our people. The aim of the Church is to help the people to help themselves. Work is to be re-enthroned as the ruling principle of the lives of our Church members."

The last thing the Church wanted or felt it needed back then was the government creating some mirror image program to take the temporal welfare of its members out of the hands of priesthood, Relief Society and quorum leaders. Do you want to guess when the Social Security Act was passed by Congress?

The inauguration of President Franklin Delano Roosevelt in 1933, moved America toward a "blanket plan" for relief nationwide, realized with the passage of the 1935 Social Security Act. Under Roosevelt, the federal government commandeered the money and the will to mobilize the entire country's resources against the depression.

FDR had pledged "a new deal for the American people," temporary relief on a scale that quickly eclipsed Hoover's one-year appropriation, which had loaned relief funds to states through the Reconstruction Finance Corporation. Soon alphabetical agencies sprang up at the federal level to deal with every twist of the economic tangle. At first the Federal Emergency Relief Administration funded some direct relief as well as offered state governments one dollar for every three they raised for local employment projects. The Roosevelt administration also established the Public Works Administration, the Civilian Conservation Corps, the National Youth Administration, and the Civil Works Administration, succeeded in 1935 by the longer-lived Works Progress Administration (WPA). The agencies invented jobs for millions of Americans, building schools, hospitals, playgrounds, airports, and other public facilities across the country.

Among the Brethren in those days, the debate lines were clearly drawn -- resist the government's intrusions, or go along for fear of the Church being considered obstructionists.

There are clearly some guidelines based upon revelation that the Church has always embraced: Be loyal to the government under which you live, not that the government is infallible, just seek to have good and honorable men at the helm -- that's the best we can do. (See D&C 134).

By 1957, "Elder Harold B. Lee was grateful the [Welfare] program was retained, but he groaned inwardly at what he saw as modernization and liberalization of its original concepts.

"By August the growing issue of Federal Social Security Insurance coverage for Church employees was being raised. At the Welfare Finance Committee meeting, Brother Lee refused to go along with a motion to provide Social Security for the Deseret Clothing Factory employees. He thought it was moving a step away from original welfare program principles.

"His opposition soon became ineffective, however, because in September 1957, the First Presidency instructed the Presiding Bishopric to inaugurate government Social Security for all Church employees, in addition to the Church's own insurance program. This step caused sober reflection by the welfare plan pioneers.

"The pressures to conform were mounting in those days, but even after Elder Henry D. Moyle lined up and supported having the regional welfare coordinators and storehouse employees covered by government Social Security, Elder Lee wouldn't yield. This attitude is disclosed in a reference in his diary made on December 11, 1957:

"This morning Henry Moyle chided me because I was unwilling to join with him in recommending that our welfare workers be covered by government Social Security. He said he considered that we would be 'in rebellion should we refrain from doing so.' I took sharp disagreement with him and further information confirmed my feelings as being correct." (L. Brent Goates, Harold B. Lee: Prophet and Seer, 329).

And we all know how that debate ended -- the Church gradually gave way and submitted to the law of the land, as always.

When I was on a high council at one of the University of Utah married student stakes twenty-three years ago, legislation dubbed as the "WIC" program for young mothers had just been passed, providing dairy products (milk, cheese, baby formula, etc.) to poor families who qualified. I can't begin to tell you how many debates we had in that high council room about whether or not to advise our bishops and their ward members to enroll in the program or to assist them from fast offerings. And we all know how that debate ended.

So when someone tells you today that America is going down the road toward socialism, just keep it all in perspective -- it's not really a matter of "if," it's really more a matter of "in comparison to what?"

So where does the ObamaCare debate land with you after all that? Do you even care, or are you happy to go along to get along? We have yet to see how that debate will end, but if the past trends continue you'd better be prepared for what's coming next in the way of government intervention.

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