Wednesday, October 29, 2008

Once more, with feeling...

Yes, I know I've already covered this. But for some reason, it just won't go away:

About half way through the interview, Barbara West quotes Karl Marx and asks "how is Obama not being a Marxist?" when he calls for changes in US tax policy. Later on she worries that Obama envisions turning America into a socialist country like Sweden.

Maybe some people are content with Barbara West's understanding of the history of economic thought. But for the rest of us, it's worth checking out the Concise Encyclopedia of Economics, a wonderful resource maintained by the Library of Economics and Liberty. According to them (and, well everyone else who actually knows what these terms mean), Socialism is "defined as a centrally planned economy in which the government controls all means of production". Examples of socialist countries throughout history include the Soviet Union, Cuba under Castro and China up to the mid to late 1970s. On the other hand, Social Welfare States like Sweden are not socialist, since they have private ownership of production.

This is not a minor technical issue. "Socialism" and "Marxism" are politically charged terms that evoke powerful images. Socialism failed as an economic model. Robert Heilbroner, himself a socialist for much of his life, was ultimately scathing in his appraisal of the idea:
"Socialism...was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty."
Clearly, linking Obama to the failures of Socialism is a powerful political strategy. But we can get lost in the rhetoric. The following chart from the Wall Street Journal shows proposed tax rates by both McCain and Obama, as well as under current law:

There are clear differences between the two candidates on tax policy. But to put this into context, Obama favors increasing the top marginal tax rate to 41%, roughly the same as during the Clinton years and lower than under Ronald Regan.

Serious people can debate the merits of Obama's tax policy. Gregory Mankiw, for example, has raised some interesting concerns about the effect on work incentives. But unfortunately much of our national debate isn't conducted by serious people; it's conducted by people like Barbara West.

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