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Posted by: thepinetree on 10/23/2018 08:30 PM Updated by: thepinetree on 10/23/2018 08:30 PM
Expires: 01/01/2023 12:00 AM

Council of Economic Advisers Issue Report on The Opportunity Costs of Socialism

Washington, DC...Today, the Council of Economic Advisers (CEA) released a report outlining the opportunity costs of socialism on the macro economy, including standards of living, and the impact on the Federal budget.  Coincident with the 200th anniversary of Karl Marx’s birth, socialism is making a comeback in American political discourse. Detailed policy proposals from self-declared socialists are gaining support in Congress and among much of the electorate.

This is the executive summary but you can read the full report here or by clicking the image above.

It is unclear, of course, exactly what a typical voter has in mind when he or she thinks of “socialism.” But economists generally agree about how to define socialism, and they have devoted enormous time and resources to studying its costs and benefits. With an eye on this broad body of literature, this report discusses socialism’s historic visions and intents, its economic features, its impact on economic performance, and its relationship with recent policy proposals in the United States.

We find that historical proponents of socialist policies and those in the contemporary United States share some of their visions and intents. They both characterize the distribution of income in market economies as the unjust result of “exploitation,” which should be rectified by extensive state control. The proposed solutions include single-payer systems, high tax rates (“from each according to his ability”), and public policies that hand out much of the Nation’s goods and services “free” of charge (“to each according to his needs”). Where they differ is that contemporary democratic socialists denounce state brutality and would allow individuals to privately own the means of production in many industries.

In assessing the effects of socialist policies, it is important to recognize that they provide little material incentive for production and innovation and, by distributing goods and services for “free,” prevent prices from revealing economically important information about costs and consumer needs and wants. To this end, as the then–prime minister of the United Kingdom, Margaret Thatcher (1976), once argued, “Socialist governments . . . always run out of other people’s money,” and thus the way to prosperity is for the state to give “the people more choice to spend their own money in their own way.”

Whether socialism delivers on its appealing promises is an empirical question. We begin our investigation by looking closely at the most highly socialist cases, which are typically agricultural economies, such as Maoist China, Cuba, and the Union of Soviet Socialist Republics (USSR). Their nondemocratic governments seized control of farming, promising to make food more abundant. The result was substantially less food production and tens of millions of deaths by starvation. Even if highly socialist policies are peacefully implemented under the auspices of democracy, the fundamental incentive distortions and information problems created by large state organizations and the centralized control of resources are also present in industrialized countries, as is currently the case in Venezuela. Lessons from poorly performing agricultural economies under socialist regimes carry over to government takeovers of other modern industries: They produce less rather than more.

These countries are examples of a more general pattern of socialism’s negative output effects. Such outcomes have also been observed in cross-country studies of the effect of greater economic freedom—quantified as an index of taxation and public spending, the extent of state-owned enterprises, economic regulation, and other factors—on real gross domestic product (GDP). This literature finds a strong association between greater economic freedom and better economic performance. It suggests that replacing U.S. policies with highly socialist policies, such as Venezuela’s, would reduce real GDP at least 40 percent in the long run, or about $24,000 per year for the average person.

Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards. In many respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism. For instance, they do not provide healthcare for “free”; Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes. The Nordic countries also tax capital income less and regulate product markets less than the United States does. However, the Nordic countries do regulate and tax labor markets somewhat more; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies. Living standards in the Nordic countries are at least 15 percent lower than in the United States.

It may well be that American socialists are envisioning moving our policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with economists’ traditional definition of socialism. We estimate that if the United States were to adopt these policies, its real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.

The Nordic and European versions of socialized medicine have been viewed as so desirable by modern U.S. socialists that they have proposed nationalizing payments for the healthcare sector (which makes up more than a sixth of the U.S. economy) through the recent “Medicare for All” proposal. This policy would distribute healthcare for “free” (i.e., without cost sharing) through a monopoly government health insurer that would centrally set all prices paid to suppliers such as doctors and hospitals. We find that if this policy were financed out of current Federal spending without borrowing or tax increases, then more than half the entire existing Federal budget would need to be cut. Or if it were financed through higher taxes, GDP would fall by 9 percent, or about $7,000 per person in 2022, due to high tax rates that would reduce incentives to supply the factors of production. Evidence on the productivity and effectiveness of single-payer systems suggests that “Medicare for All” would reduce both short- and long-run longevity and health despite increasing somewhat the population with health insurance.

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No Subject
Posted on: 2018-10-23 21:30:52   By: Anonymous
Socialism has worked nowhere, it is a pipe dream of non working low life's, supported by those that have much and get the rest of the a holes worked up to support their deranged cause! Look who profits off people when they gain power, millionaires, and maybe billionaires, Di Fi, The Clinton's, Nancy Pelosi, Lurch, just to name a few! They could care less about the average American, but the thrive on power given to them by a bunch of stupid people! Socialism is a tool of Satan, just like the Progressives, MOB RULE, VULGAR RESPOSES TO EVERYTHING, ABORTION OF CHILDREN UP TO 9 MOS. OF AGE, FREEBEES FOR EVERYONE THAT AGREES TO THEIR CAUSE, SCREAMING AT CITIZENS WHO ARE DINING IN RESTURANTS MINDING THEIR OWN BUSINESS, just to name a few! You try to install Socialism here and those of you that think that is cool will have the battle of your life on your hands, period!

[Reply ]

    Posted on: 2018-10-23 21:47:01   By: Anonymous
    & it's icky.

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      Posted on: 2018-10-24 03:55:13   By: Anonymous

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        Posted on: 2018-10-24 03:59:52   By: Anonymous

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      Posted on: 2018-10-24 04:02:51   By: Anonymous

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    Posted on: 2018-10-23 22:27:42   By: Anonymous


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      Posted on: 2018-10-23 23:43:02   By: Anonymous
      and you wonder why you lost in 2016 :)

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        Posted on: 2018-10-24 03:58:47   By: Anonymous

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          Posted on: 2018-10-24 04:09:07   By: Anonymous

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            Posted on: 2018-10-24 04:10:47   By: Anonymous

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      Posted on: 2018-10-24 00:37:34   By: Anonymous
      They have sharp barbs on their fins that'll stick you when you're trying to remove the hook.

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    Posted on: 2018-10-24 06:10:09   By: Anonymous
    phluck socialism it does not work.

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No Subject
Posted on: 2018-10-23 22:06:08   By: Anonymous
If you put a bunch of bananas in a paper bag & put them in a warm window for 2 weeks, they'll all rot on you.

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    Posted on: 2018-10-23 22:57:24   By: Anonymous
    I tried it with milk.

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Posted on: 2018-10-24 04:06:01   By: Anonymous

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No Subject
Posted on: 2018-10-24 04:25:11   By: Anonymous
Socialism is the product of the mush minds.

Anyone who thinks that stealing the product of ones labor or their possessions at the point of a gun, and giving it to another somehow makes the world a better place is an idiot or a criminal.

[Reply ]

No Subject
Posted on: 2018-10-24 08:20:24   By: Anonymous
John, this is just plain funny that you posted this here. Most readers would be unable to comprehend the level of this language. Also, they would bring their own prejudice to the article before reading two sentences.

[Reply ]

    Posted on: 2018-10-24 08:56:57   By: Anonymous
    and..that is what makes it fun...

    PS I would love to have health care for a reasonable say that 'medicare for all' would take 1/2 the federal budget is just not true

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      Posted on: 2018-10-24 09:25:08   By: Anonymous
      Enlighten us with your economic wizardry. Show us how incredibly smart and superior you are to us common dolts. Prove your point, make us believe you instead of the government economists that wrote the report. Prove to us how history is wrong and how Socialism will magically work today versus in the past. The burden of truth is upon you.
      Because remember, if government experts says it is true then it must be true. Can't be denied, right? You know, like global warming/climate change being caused solely by man, even though history proves that as false.

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        Posted on: 2018-10-24 10:13:04   By: Anonymous
        The height of ignorance is published above.
        Socialism examples-
        *Our military
        *Social Security
        *Our roads

        To demonize socialism as the radical capitalists do, shows the propaganda the Libertarians try to push.
        The Scandinavian countries show the highest rating of their people for their system. No cost education, health care , many other aspects of necessities which improves lives, and quality of life.

        Compare this to what the Libertarian Billionaires are pushing- cuts or elimination of health care for the poor , for profit schools, toll roads, a contracted military, police, all services you not receive with your taxes would be handed over to the for profit corporations, increasing their costs.
        An example- Medicare operates at a 3% cost for administration. The insurance Cos require a 20-30% profit margin increasing your health care costs.

        The Medicare for all program, even the Kochs approve of it,saves 30%+ over the for profit medical insurance model we have now, and covers all people , unlike what we have now.

        The choice is clear to anyone using their minds.


        [Reply ]

          Re: Ignorance
          Posted on: 2018-10-24 11:38:45   By: Anonymous
          Solar and other clean renewable energy is a good example.
          The old guard invested in the dirty old energies, have been resisting the future, this is another example of how the old money is slowing the future, and causing climate change.
          The solar and other clean renewable energy sector hires more people, and helps combat climate change, however the politicians owned by the old guard are slowing the future against the will of the people.

          Capitalism is a death cult, it profits from destruction of the earth.
          Socialism aims to make society a cleaner better future for everyone.

          [Reply ]

          Re: Ignorance
          Posted on: 2018-10-24 11:48:44   By: Anonymous
          The Scandinavian countries, as they are being invaded by freeloading "immigrants", are re-thinking their policies. Sharing only works when people share both the rewards and the burdens.

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          Re: Ignorance
          Posted on: 2018-10-24 16:04:04   By: Anonymous
          "The height of ignorance is published above."
          No disrespect intended, but that statement actually applies to your post. The founding documents make it clear that, besides a military, none of the things you listed are the federal governments job and they have no business in any of it.

          And for whatever reason you had Parks at the end, so I will single it out as well and inform you that the federal gov owning parks, forests, etc is absolutely unconstitutional.The Constitution allows the federal government to possess land in three forms: territories, enclaves and other property. Territories referred to land that was owned by the federal government but had not been formally made into states. Enclaves referred to land within a state that was owned by the federal government for essential purposes such as ‘Forts, Magazines, Arsenals, dock-Yards.’ Other property refers to land holdings for enumerated purposes, and gives the federal government limited discretion to possess land.

          However, the Constitution does not authorize permanent land-grabs by the federal government. It authorizes Congress to make “all needful Rules and Regulations” pertaining to land. ‘Needful’ was a word carefully chosen to indicate that the regulatory power only expanded to powers specifically enumerated in the Constitution. The feds were expected to sell off non-essential land and distribute the subsequent monies in ways that benefited the public good such as paying off the debt or tax cuts.

          The current regime of federal land management is blatantly unconstitutional. The founding fathers never intended to create a Republic where the feds could impose draconian fees on peaceful individuals and force them from the land. As a matter of fact, that is exactly the arrangement that the Constitution was written to prevent, as it clearly violates the principles of fiduciary government, sympathy and independence.

          When the historical record is examined, it makes it abundantly clear that the Republic has gone awry since the days of the founders. Systematic attacks on the property rights of Americans have been justified through deliberate misreadings of the Constitution. This will only be changed when the public wakes up, re-discovers their rights and takes action against unjust federal power.
          I can hardly blame you for thinking the way you do, being that schools and colleges don't really cover these basic and important facts about our federal government. Heck, most people say we are a democracy. Crazy talk, right?

          [Reply ]

          Re: Ignorance
          Posted on: 2018-10-24 16:29:01   By: Anonymous
          "There are two sides to the tax and spend argument. Liberals only want to talk about how this person or that is getting away with not paying "their fair share", which amount is never defined. Money that government takes to pay for government is taxes.

          When our government takes money from us, and gives it to our neighbors, that is NOT taxation, it is expropriation, which is a fancy word for theft. And it is this spending which threatens to bankrupt us."

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