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Socialism Is Not Free

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Socialists who proudly proclaim the great success of the socialistic welfare state, including Social Security and Medicare, block out of their minds the fact that socialist programs are not free. The federal government is not an independent fountain of wealth or even an independent business operating alongside private businesses in the marketplace. Instead, the government is an entity that gets its money by taxing the private sector.

In effect, there are two segments of society — the private sector and the public (or government) sector.

In order to accumulate wealth, people in the private sector must produce a good or service that other people are willing to pay for. The process is entirely consensual and voluntary. If someone produces something that consumers don’t like, the producer cannot force people to buy it. Nor can the producer simply go out and forcibly take money away from people to fund his operation.

If a producer continues to satisfy consumer tastes, as manifested by sales of his product or service, his income rises. If he saves a portion of his income each year, his wealth increases. If consumers lose interest in what he is selling, his income drops and he ultimately goes out of business.

The federal government also provides goods and services. These include such things as mail delivery, courts, drug war, welfare, Social Security, Medicare, foreign aid, invasions, occupations, and the rebuilding of foreign nations.

However, unlike the private sector the government doesn’t depend on the voluntary decisions of consumers for its money. It forces the private sector to pay for its goods and services by simply confiscating (taxing) the income or wealth of people in the private sector. If someone refuses to pay his taxes, we all know what federal officials will do to him. The payment of taxes is not voluntary.

Obviously, the higher the income and wealth in a society, the more the government can confiscate. When everyone in the society is poor, the government will not be able to offer many goods and services because there isn’t very much income and wealth to confiscate to pay for such goods and services.

Welfare-state officials always want to spend much more money than what they are confiscating. One option, of course, is to simply increase the amount being confiscated, but that tends to get people upset. So, instead the government goes out and borrows the money.

But where does it borrow the money? From people in the private sector or from foreigner governments, such as China. When it takes it from the private sector, that means less money is available for capital projects in the private sector — that is, projects where private businesses wish to borrow money to expand their operations.

Today, the national debt — the total amount the federal government owes its creditors — is $11.6 trillion. That’s the amount of money that federal officials have borrowed, instead of taxing, to pay for their operations. That averages out to $38,000 per citizen. For a family of four, that comes to $152,000.

Then, of course, there are the unfunded liabilities, things like Social Security and Medicare. Those amount to $107 trillion — 10 times the amount of the national debt. Each year the government should have been setting aside a reserve fund to cover these expenses when they finally start coming due. It didn’t do that. Where is the government going to get the money to pay for those expenses? By confiscating the money from people in the private sector, or by piling on more debt, which ultimately is owed by the taxpayers.

What about simply printing the money to pay off all that debt and all those unfunded liabilities? Historically, that’s what governments do, in order to avoid having to directly confiscate people’s income and wealth. The confiscation takes place nonetheless but it’s indirect in that it reduces the value of people’s income and wealth through the debasement of the currency. Socialists inevitably blame the inflationary process on businessmen, speculators, greed, and free enterprise, never hinting that it’s the government that is actually behind the rapidly depreciating value of money.

Contrary to what the socialists tell you, socialism is not free. On the contrary, its financial price tag is always very high. Just calculate how much you pay in income taxes, Social Security taxes, and Medicare taxes. Then add how much you owe as your share of the $11.6 trillion in federal debt. And then calculate how much you’ll be paying as your share of those $107 trillion in unfunded liabilities coming down the pike.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.